Document:

exv10w1

 

EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

by and between

TEKELEC

and

NICE-SYSTEMS LTD.

dated as of April 27, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	ARTICLE I DEFINITIONS
	 	 	1	 
	1.1 Certain Definitions
	 	 	1	 
	1.2 Terms Generally
	 	 	7	 
	 
	 	 	 	 
	ARTICLE II PURCHASE AND SALE OF THE SHARES
	 	 	8	 
	 
	 	 	 	 
	2.1 Purchase and Sale
	 	 	8	 
	2.2 Consideration
	 	 	8	 
	2.3 Post-Closing Date Purchase Price Adjustment
	 	 	8	 
	2.4 Closing
	 	 	10	 
	2.5 Deliveries by Seller at the Closing
	 	 	10	 
	2.6 Deliveries by Buyer
	 	 	11	 
	 
	 	 	 	 
	ARTICLE III RELATED MATTERS
	 	 	11	 
	 
	 	 	 	 
	3.1 Books and Records of the Company
	 	 	11	 
	3.2 Distributions
	 	 	12	 
	 
	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER
	 	 	12	 
	 
	 	 	 	 
	4.1 Organization
	 	 	12	 
	4.2 Authorization
	 	 	12	 
	4.3 Common Stock
	 	 	13	 
	4.4 Ownership of the Shares
	 	 	13	 
	4.5 Consents and Approvals; No Violations
	 	 	13	 
	4.6 Financial Statements
	 	 	14	 
	4.7 No Undisclosed Liabilities
	 	 	14	 
	4.8 Product Warranties and Product Liability
	 	 	15	 
	4.9 Absence of Certain Developments
	 	 	15	 
	4.10 Real Property
	 	 	16	 
	4.11 Personal Property
	 	 	16	 
	4.12 Intellectual Property
	 	 	17	 
	4.13 Litigation
	 	 	21	 
	4.14 Compliance with Applicable Law; Permits
	 	 	21	 
	4.15 Certain Contracts and Arrangements
	 	 	22	 
	4.16 Labor Relations
	 	 	23	 
	4.17 Employment Benefit Plans; ERISA
	 	 	24	 
	4.18 Taxes
	 	 	25	 
	4.19 Accounts Receivable
	 	 	27	 
	4.20 Environmental Matters
	 	 	27	 
	4.21 Insurance
	 	 	28	 
	4.22 Certain Fees
	 	 	28	 
	4.23 Corporate Records
	 	 	28	 
	4.24 Transactions with Affiliates
	 	 	28	 

i

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	4.25 Certain Payments
	 	 	28	 
	4.26 Banks; Powers of Attorney; Guarantees
	 	 	29	 
	4.27 Books and Records
	 	 	29	 
	4.28 Customers and Suppliers
	 	 	29	 
	4.29 Export Control
	 	 	29	 
	4.30 Disclosure
	 	 	30	 
	 
	 	 	 	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
	 	 	30	 
	 
	 	 	 	 
	5.1 Organization and Authority of Buyer
	 	 	30	 
	5.2 Consents and Approvals; No Violations
	 	 	30	 
	5.3 Availability of Funds
	 	 	31	 
	5.4 Investment Representation
	 	 	31	 
	5.5 Litigation
	 	 	31	 
	5.6 Investigation by Buyer
	 	 	31	 
	5.7 Certain Fees
	 	 	32	 
	 
	 	 	 	 
	ARTICLE VI COVENANTS
	 	 	32	 
	 
	 	 	 	 
	6.1 Conduct of the Company’s Business
	 	 	32	 
	6.2 Access to Information
	 	 	33	 
	6.3 Consents
	 	 	34	 
	6.4 Reasonable Efforts
	 	 	34	 
	6.5 Covenant to Satisfy Conditions
	 	 	34	 
	6.6 Public Announcements
	 	 	35	 
	6.7 Use of “Tekelec” Name
	 	 	35	 
	6.8 Employees; Employee Benefits
	 	 	35	 
	6.9 Certain Tax Matters
	 	 	38	 
	6.10 Exclusivity
	 	 	40	 
	6.11 Disclosure Schedule
	 	 	40	 
	6.12 Non-Competition; Non-Solicitation
	 	 	41	 
	6.13 Remittances of Receivables
	 	 	42	 
	6.14 Termination of Certain Contracts
	 	 	42	 
	6.15 Audited Financial Statements
	 	 	42	 
	6.16 Blue Pumpkin Software License
	 	 	42	 
	 
	 	 	 	 
	ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE PARTIES
	 	 	43	 
	 
	 	 	 	 
	7.1 Conditions to Each Party’s Obligation
	 	 	43	 
	7.2 Conditions to Obligations of Seller
	 	 	43	 
	7.3 Conditions to Obligations of Buyer
	 	 	44	 
	 
	 	 	 	 
	ARTICLE VIII TERMINATION; AMENDMENT; WAIVER
	 	 	45	 
	 
	 	 	 	 
	8.1 Termination
	 	 	45	 
	8.2 Procedure and Effect of Termination
	 	 	46	 

ii

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	Page
	ARTICLE IX SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
	 	 	46	 
	 
	 	 	 	 
	9.1 Survival of Representations, Warranties and Agreements
	 	 	46	 
	9.2 Seller’s Agreement to Indemnify
	 	 	47	 
	9.3 Buyer’s Agreement to Indemnify
	 	 	47	 
	9.4 Notice of Claims
	 	 	47	 
	9.5 General Limitations; Exclusive Remedy
	 	 	48	 
	9.6 Third Party Indemnification
	 	 	48	 
	9.7 Indemnity Payments
	 	 	49	 
	 
	 	 	 	 
	ARTICLE X MISCELLANEOUS
	 	 	50	 
	 
	 	 	 	 
	10.1 Fees and Expenses
	 	 	50	 
	10.2 Further Assurances
	 	 	50	 
	10.3 Notices
	 	 	50	 
	10.4 Severability
	 	 	51	 
	10.5 Binding Effect; Assignment
	 	 	51	 
	10.6 No Third Party Beneficiaries
	 	 	52	 
	10.7 Interpretation.
	 	 	52	 
	10.8 Jurisdiction and Consent to Service
	 	 	52	 
	10.9 Attorneys’ Fees
	 	 	52	 
	10.10 Governing Law
	 	 	53	 
	10.11 Specific Performance
	 	 	53	 
	10.12 Entire Agreement
	 	 	53	 
	10.13 Amendment, Modification and Waiver
	 	 	53	 
	10.14 Counterparts
	 	 	53	 

	 	 	 
	Exhibits	 	 
	 
	Exhibit A

	 	Form of Transition Services Agreement
	Exhibit B

	 	Form of Legal Opinion of Counsel to Seller
	Exhibit C

	 	Form of Guarantee

iii

 

Disclosure Schedules

	 	 	 
	Schedule 1.1

	 	Knowledge
	Schedule 2.3(b)

	 	Accounting Principles
	Schedule 4.5

	 	Consents; Approvals
	Schedule 4.6

	 	Financial Statements
	Schedule 4.7

	 	No Undisclosed Liabilities
	Schedule 4.8(a)

	 	Product Warranties and Product Liability
	Schedule 4.8(b)

	 	Product Claims
	Schedule 4.9(b)

	 	Absence of Certain Developments
	Schedule 4.10(b)

	 	Leases for Real Property
	Schedule 4.11(c)

	 	Personal Property Leases
	Schedule 4.12(a)

	 	Ownership of Technology and Intellectual Property Rights
	Schedule 4.12(b)

	 	Company Intellectual Property Rights
	Schedule 4.12(c)(i)

	 	Certain Contracts Related to Company Technology or
Company Intellectual Property Rights
	Schedule 4.12(c)(ii)

	 	Transfers of Intellectual Property Rights
	Schedule 4.12(e)

	 	Necessary or Material Intellectual Property Rights
	Schedule 4.12(f)

	 	Proprietary Rights, Etc.
	Schedule 4.12(g)(i)

	 	Registered Intellectual Property Rights
	Schedule 4.12(g)(ii)

	 	Actions or Claims Related to Registered Intellectual Property
Rights
	Schedule 4.12(h)

	 	Indemnity
	Schedule 4.12(j)

	 	Licenses
	Schedule 4.12(l)

	 	Development of Intellectual Property Rights
	Schedule 4.12(m)

	 	Enforceability
	Schedule 4.12(o)

	 	Open Source Components
	Schedule 4.13

	 	Litigation
	Schedule 4.15

	 	Certain Contracts and Arrangements
	Schedule 4.16

	 	Company Employees
	Schedule 4.17(a)

	 	Employee Benefit Plans
	Schedules 4.18(a) & (b)

	 	Taxes
	Schedule 4.18(k)

	 	Foreign Taxes
	Schedule 4.21

	 	Insurance Policies
	Schedule 4.24

	 	Affiliate Transactions
	Schedule 4.26

	 	Bank Accounts; Powers of Attorney
	Schedule 4.28(a)

	 	Significant Customers
	Schedule 4.28(b)

	 	Significant Suppliers
	Schedule 6.1(b)

	 	Conduct of the Company’s Business
	Schedule 6.8(c)

	 	Severance Policy
	Schedule 7.3(f)

	 	Consents, Approvals

iv

 

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is entered into as of April 27, 2006,
by and between Tekelec, a California corporation (“Seller”), and NICE-Systems Ltd., a
company limited by shares organized under the laws of the State of Israel (“Buyer”).

RECITAL

     WHEREAS, pursuant to the terms and conditions of this Agreement, Seller desires to sell to
Buyer, and Buyer desires to purchase from Seller, 100 shares (the “Shares”) of Common
Stock, par value $0.01 per share (the “Common Stock”), of IEX Corporation, a Nevada
corporation (the “Company”), representing all of the issued and outstanding capital stock
of the Company;

     NOW THEREFORE, in consideration of the premises and the respective representations,
warranties, covenants, agreements and conditions set forth below, and intending to be legally bound
hereby, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

          1.1 Certain Definitions

          For purposes of this Agreement, the following terms shall
have the respective meanings set forth below:

          “Acquiror” shall have the meaning set forth in Section 6.12(c).

          “Affiliate” shall have the meaning set forth in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended.

          “Agreement” has the meaning set forth in the preamble of this Agreement.

          “Arbiter” has the meaning set forth in Section 2.3(c).

          “Audited Financial Statements” has the meaning set forth in Section 6.15.

          “Blue Pumpkin Cross-License Agreement” has the meaning set forth in Section 6.16.

          “Blue Pumpkin Licensed Patents” has the meaning set forth in Section 6.16.

          “Business Day” means any day other than Saturday, Sunday or a day on which banking
institutions in New York, New York are required to be closed.

          “Buyer” has the meaning set forth in the preamble of this Agreement.

 

 

          “Buyer Flexible Benefits Plan” has the meaning set forth in Section 6.8(e).

          “Buyer Indemnitees” has the meaning set forth in Section 9.2.

          “Cash” means cash and cash equivalents (including marketable securities and short-term
investments) calculated in accordance with GAAP.

          “Closing” has the meaning set forth in Section 2.4.

          “Closing Balance Sheet” has the meaning set forth in Section 2.3(b).

          “Closing Date” has the meaning set forth in Section 2.4.

          “Closing Working Capital” has the meaning set forth in Section 2.3(b).

          “Closing Working Capital Statement” has the meaning set forth in Section 2.3(b).

          “COBRA” has the meaning set forth in Section 4.17(e).

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Common Stock” has the meaning set forth in the Recital to this Agreement.

          “Company” has the meaning set forth in the preamble of this Agreement.

          “Company Charter Documents” has the meaning set forth in Section 4.1.

          “Company Employees” has the meaning set forth in Section 4.16.

          “Company Intellectual Property Rights” means all Intellectual Property Rights owned by
the Company and used in the current operation of the Company’s business, including without
limitation all Company Registered IP and all Intellectual Property Rights in the Products
(including the Technology embodied therein).

          “Company Permits” has the meaning set forth in Section 4.14(b).

          “Company Registered IP” has the meaning set forth in Section 4.11(g).

          “Company Technology” means all Technology owned by the Company and used in the current
operation of the Company’s business.

          “Confidentiality Agreement” has the meaning set forth in Section 6.2(c).

          “Contract” means any contract, agreement, indenture, note, bond, mortgage, loan,
instrument, lease, license, commitment or other arrangement, understanding, undertaking or
obligation, whether written or oral.

2

 

          “Damages” has the meaning set forth in Section 9.2.

          “Disabling Procedures” has the meaning set forth in Section 4.12(n).

          “Disclosure Schedule” has the meaning set forth in Article IV.

          “Distributions” has the meaning set forth in Section 3.2.

          “Employee” has the meaning set forth in Section 6.8(a).

          “Environmental Laws” has the meaning set forth in Section 4.20(a).

          “Environmental Permits” has the meaning set forth in Section 4.20(b).

          “ERISA” has the meaning set forth in Section 4.17(a).

          “ERISA Affiliate” has the meaning set forth in Section 4.17(a).

          “GAAP” means generally accepted accounting principles, as in effect in the United
States from time to time, applied on a basis consistent with the accounting methods, principles or
practices, policies and standards of the Company.

          “Governmental Authority” means any foreign, domestic, federal, territorial, state or
local governmental authority, quasi-governmental authority, court, commission, board, bureau,
agency or instrumentality, or any regulatory, administrative or other department, agency, or any
political or other subdivision, department or branch of any of the foregoing.

          “Hazardous Substances” has the meaning set forth in Section 4.20(a).

          “H-S-R Act” has the meaning set forth in Section 4.5.

          “Income Taxes” has the meaning set forth in Section 4.18(m)(i).

          “Indebtedness” means with respect to any Person, all obligations contingent or
otherwise, in respect of: (1) borrowed money; (ii) indebtedness evidenced by notes, debentures or
similar instruments; (iii) capitalized lease obligations; (iv) the deferred purchase price of
properties, assets, services or securities (other than ordinary trade accounts payable or employee
compensation); (v) conditional sale or other title retention agreements; (vi) any letter of credit,
banker’s acceptance or similar credit reimbursement obligation; (vii) interest rate or currency
swap transactions (valued at the termination value thereof); (viii) all obligations of the types
referred to in clauses (i) through (vi) for the payment of which such Person is responsible or
liable, directly or indirectly, as obligor, guarantor, surety or otherwise, or secured by Lien on
any property or asset of such Person; and (i) interest, premium, penalties and other amounts owing
in respect of the items described in the foregoing clauses (i) through (v).

          “Indemnifying Party” has the meaning set forth in Section 9.4(a).

3

 

          “Indemnity Period” has the meaning set forth in Section 9.1.

          “Injured Party” has the meaning set forth in Section 9.4(a).

          “Intellectual Property Rights” means any or all of the following and all statutory
and/or common law rights in, arising out of, or associated therewith, arising under the laws of the
United States (i) all Patents; (ii) all inventions (whether patentable or not), invention
disclosures and improvements, all trade secrets, proprietary information, know how and other
Technology; (iii) all works of authorship, including derivative works, within the meaning of the
United States Copyright Act, 17 U.S.C. §§ 101 et seq., copyrights, mask works, copyright and mask
work registrations and applications therefor; (iv) all industrial designs and any registrations and
applications therefor; (v) all Trademarks and Internet domain names; (vi) all databases and data
collections (including knowledge databases, customer lists and customer databases); (vii) all
rights in Software; (viii) all other rights in or to any Technology; (ix) any similar,
corresponding or equivalent rights to any of the foregoing; (x) all goodwill associated with any of
the foregoing; and (xi) the right and power to assert, defend and recover title thereto and the
right to sue for and recover damages for past, present and future infringement, misuse,
misappropriation or other violation thereof.

          “IRS” has the meaning set forth in Section 4.17(b).

          “Leased Real Property” has the meaning set forth in Section 4.10(c).

          “Leases” has the meaning set forth in Section 4.10(b).

          “Liability” means any debt, loss, damage, adverse claim, fine, penalty, liability or
obligation (whether direct or indirect, known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, matured or unmatured, determined or determinable, liquidated or
unliquidated, or due or to become due, and whether in contract, tort, strict liability or
otherwise.

          “License In Agreements” has the meaning set forth in Section 4.12(j).

          “Licensed Intellectual Property Rights” means all Intellectual Property Rights
licensed by the Company from third parties and used in the current operation of the Company’s
business.

          “Licensed Technology” means all Technology licensed by the Company from third parties
and used in the current operation of the Company’s business.

          “Lien” means any lien, pledge, mortgage, deed of trust, security interest, claim,
lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or
agreement, transfer restriction under any shareholder or similar agreement, encumbrance or any
other restriction or limitation whatsoever.

4

 

          “Material Adverse Effect” means a material adverse effect on the business, results of
operations or financial condition of the Company taken as a whole, other than changes (a) relating
to generally applicable economic conditions or to the Company’s industry in general (unless the
Company is disproportionately affected thereby) or (b) resulting from the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.

          “Most Recent Balance Sheet” has the meaning set forth in Section 4.6.

          “Non-Income Taxes” has the meaning set forth in Section 4.18(m)(ii).

          “Notice of Claim” has the meaning set forth in Section 9.4(a).

          “Ordinary Course of Business” means the ordinary course of business of the Company,
consistent with past practice and custom.

          “Patents” means patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part thereof.

          “Permits” means any approvals, authorizations, franchises, consents, licenses, permits
or certificates of a Governmental Authority.

          “Permitted Liens” means: (i) Liens for current taxes or assessments due but not yet
payable or being contested in good faith by appropriate proceedings, (ii) servitudes, easements,
restrictions, rights-of-way, encroachments and other similar rights in real property or any
interest therein, (iii) Liens that constitute mechanics’, carriers’, workers’ or similar liens
arising in the Ordinary Course of Business, and (iv) Liens which individually or in the aggregate
are not material.

          “Person” means an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an unincorporated organization and a government or any department of
agency thereof.

          “Personal Property Leases” has the meaning set forth in Section 4.11(c).

          “Plan” has the meaning set forth in Section 4.17(a).

          “Post-Closing Tax Period” has the meaning set forth in Section 4.18(m)(iii).

          “Pre-Closing Tax Period” has the meaning set forth in Section 4.18(m)(iv).

          “Products” means the Company’s TotalView® Workforce Management product and TotalNet®
Call Routing product.

5

 

          “PTO” means the United States Patent and Trademark Office, and any successor thereto.

          “Purchase Price” has the meaning set forth in Section 2.2.

          “Reasonable Efforts” means with respect to a given goal, the efforts that a reasonable
person in the position of the promisor would use under the circumstances so as to achieve the goal
as expeditiously as reasonably possible; provided, however, that Reasonable Efforts does not
require a material expenditure of funds or the incurrence of a material liability on the part of
the obligated party and does not require such party to take actions that would result in a material
adverse change in the benefits to such party of this Agreement and the transactions contemplated
hereby.

          “Registered Intellectual Property Rights” means Patents; Trademark registrations and
applications for Trademark registrations; copyright registrations and applications for copyright
registrations; and Internet domain names.

          “Restricted Business” has the meaning set forth in Section 6.12(a).

          “Review Period” has the meaning set forth in Section 3.1(b).

          “Securities Act” has the meaning set forth in Section 5.4.

          “Seller” has the meaning set forth in the preamble of this Agreement.

          “Seller Flexible Benefit Plan” has the meaning set forth in Section 6.8(e).

          “Seller Indemnitees” has the meaning set forth in Section 9.3.

          “Shares” has the meaning set forth in the recital to this Agreement.

          “Software” means any computer software and code, including assemblers, applets,
compilers, source code, object code, data (including image and sound data), design tools and user
interfaces, in any form or format, however fixed including source code listings and documentation.

          “Straddle Period” has the meaning set forth in Section 4.18(m)(v).

          “Target Working Capital” has the meaning set forth in Section 2.3(a).

          “Tax” has the meaning set forth in Section 4.18(m)(vii).

          “Tax Return” has the meaning set forth in Section 4.18(m)(vi).

          “Taxing Authority” means any governmental authority (domestic or foreign) responsible
for the administration or collection of any Tax.

6

 

          “Technology” means, collectively, designs, formulas, algorithms, procedures, routines,
ideas, concepts, models, methods, processes, techniques, know-how, Software, tools, data,
databases, confidential and proprietary information, inventions (whether patentable or not),
creations, improvements, and works of authorship, including derivative works, within the meaning of
the United States Copyright Act, 17 U.S.C. §§ 101 et seq., and all recordings, graphs, drawings,
reports, analyses, other writings, and any other embodiment of the above, in any form whether or
not specifically listed herein, and all related technology, that are used in, incorporated in,
embodied in or displayed by any of the foregoing, or used or useful in the design, development,
reproduction, maintenance or modification of any of the foregoing.

          “To the knowledge” and similar phrases shall mean the actual knowledge of the persons
listed on Schedule 1.1.

          “Trademarks” means trademarks, service marks, trade names, logos and registrations
thereof and applications therefor.

          “Transaction Documents” has the meaning set forth in Section 4.2.

          “Treasury Regulations” means the rules and regulations promulgated under the Code.

          “Unaudited Financial Statements” has the meaning set forth in Section 4.6.

          “WARN” has the meaning set forth in Section 4.16.

          “Working Capital” has the meaning set forth in Section 2.3(a).

          1.2 Terms Generally

          The definitions in Section 1.1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words “include,”
“includes” and “including” shall be deemed to be followed by the phrase “without limitation” even
if not followed actually by such phrase unless the context expressly provides otherwise. All
references herein to Sections, paragraphs and Exhibits and Schedules shall be deemed references to
Sections or paragraphs of or Exhibits or Schedules to this Agreement unless the context shall
otherwise require. Unless otherwise expressly defined, terms defined in this Agreement shall have
the same meanings when used in any Exhibit or Schedule. The words “herein,” “hereof,” “hereto” and
“hereunder” and other words of similar import refer to this Agreement as a whole and not to any
particular provision of this Agreement. References herein to “days,” unless otherwise indicated,
are to consecutive calendar days.

7

 

ARTICLE II

PURCHASE AND SALE OF THE SHARES

          2.1 Purchase and Sale

          Upon and subject to the terms and conditions of this
Agreement, at the Closing, Seller will sell, transfer and deliver to Buyer, and Buyer will
purchase, acquire and accept from Seller, the Shares.

          2.2 Consideration

          Subject to the terms and conditions of this Agreement, in
consideration of the aforesaid sale, transfer and delivery of the Shares, Buyer will deliver or
cause to be delivered to Seller at the Closing $200,000,000 (such amount is hereinafter referred to
as the “Purchase Price”), in cash by wire transfer of immediately available funds to such
bank account as shall be designated by Seller.

          2.3 Post-Closing Date Purchase Price Adjustment.

          (a) The target working capital of the Company as of the Closing Date is $0 (such target
working capital, the “Target Working Capital”). “Working Capital” means the current assets
of the Company minus all current liabilities of the Company; provided, however, that the following
shall be excluded from the calculation of Working Capital: (i) all intercompany payables and
receivables except to the extent any such specific intercompany payables are expressly assumed by
Buyer at the Closing (e.g., accrued bonuses and related benefit costs, Seller funded infrastructure
costs, etc.); (ii) deferred revenues; and (iii) income taxes, whether prepaid, paid, owing or
deferred. Notwithstanding anything to the contrary herein, for purposes of this Section 2.3,
Working Capital shall include any income tax liability related to deferred revenues which originate
after December 31, 2005 and which remain on the Closing Balance Sheet, but only to the extent
Seller has received cash for such deferred revenues, and such income tax liability shall be
calculated using a combined overall tax rate of 40% for Federal and state income tax purposes.

          (b) Within 90 days following the Closing Date, Buyer shall deliver to Seller a balance sheet
of the Company as of the open of business on the Closing Date (the “Closing Balance Sheet”)
and a statement setting forth a reasonably detailed calculation of Working Capital as of the
Closing Date (“Closing Working Capital”), prepared in accordance with the books and records
of the Company (the “Closing Working Capital Statement”). The Closing Balance Sheet and
the Closing Working Capital Statement shall be prepared in accordance with GAAP applied using the
same accounting methods, practices, principles, policies and procedures, with consistent
classifications, judgments and valuation and estimation methodologies that were used in the
preparation of the Company’s Unaudited Financial Statements. The Closing Working Capital shall be
consistent with the calculation set forth in Section 2.3(b) of the Disclosure Schedule of
Working Capital as of December 31, 2005.

8

 

          (c) Acceptance of Statements; Dispute Procedures. The Closing Balance Sheet and the
Closing Working Capital Statement (and the computation of Closing Working Capital indicated
thereon) delivered by Buyer to Seller shall be conclusive and binding upon the parties unless
Seller, within 30 days after delivery to the Seller of the Closing Balance Sheet and the Closing
Working Capital Statement, notifies Buyer in writing that Seller disputes any of the amounts set
forth therein, specifying in reasonable detail the nature of the dispute and the basis therefor.
The parties shall in good faith attempt to resolve any dispute and, if the parties so resolve such
dispute, the Closing Balance Sheet and the Closing Working Capital Statement (and the computation
of Closing Working Capital indicated thereon), as amended to the extent necessary to reflect the
resolution of the dispute, shall be conclusive and binding on the parties. If the parties do not
reach agreement in resolving the dispute within 60 days after notice is given by Seller to Buyer
pursuant to the second preceding sentence, the parties shall submit the dispute to a partner at the
New York office of Deloitte & Touche LLP (the “Arbiter”) for resolution. If the parties
cannot agree on the selection of a partner to act as Arbiter, the parties shall request the
American Arbitration Association to appoint such a partner, and such appointment shall be
conclusive and binding on the parties. Promptly, but no later than 30 days after acceptance of his
or her appointment as Arbiter, the Arbiter shall determine (it being understood that in making such
determination, the Arbiter shall be functioning as an expert and not as an arbitrator), based
solely on written submissions by Buyer and Seller, and not by independent review, only those issues
in dispute and shall render a written report as to the resolution of the dispute and the resulting
computation of the Closing Working Capital which shall be conclusive and binding on the parties.
In resolving any disputed item, the Arbiter (x) shall be bound by the provisions of this
Section 2.3 and (y) may not assign a value to any item greater than the greatest value for
such items claimed by either party or less than the smallest value for such items claimed by either
party. The fees, costs and expenses of the Arbiter shall be allocated to and borne by Buyer and
Seller based on the inverse of the percentage that the Arbiter’s determination (before such
allocation) bears to the total amount of the total items in dispute as originally submitted to the
Arbiter. For example, should the items in dispute total in amount to $1,000 and the Arbiter awards
$600 in favor of Seller’s position, 60% of the costs of its review would be borne by Buyer and 40%
of the costs would be borne by Seller.

          (d) Payment. Upon final determination of Closing Working Capital as provided in
Section 2.3(c) above, (A) if Closing Working Capital is greater than Target Working
Capital, the Purchase Price shall be increased by the excess of Closing Working Capital over Target
Working Capital and Buyer shall promptly, but no later than five business days after such final
determination, pay the amount of such difference to Seller, and (B) if Closing Working Capital is
less than Target Working Capital, the Purchase Price shall be decreased by the excess of Target
Working Capital over Closing Working Capital and Seller shall promptly, but no later than five
business days after such final determination, pay to Buyer the amount of such difference.

9

 

          2.4 Closing

          The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Bryan Cave LLP, 120 Broadway, Suite 300, Santa Monica CA 90401,
at 9:00 a.m., local time, on the second Tuesday of June, 2006 or, if the conditions to the Closing
are not then satisfied, on such other date as the parties may agree after the satisfaction or
waiver of all conditions to the obligations of the parties to consummate the transactions
contemplated hereby, which date shall be no later than the fifth day after the satisfaction or
waiver of such conditions. The date of the Closing is sometimes referred to herein as the
“Closing Date.”

          2.5 Deliveries by Seller at the Closing

          At the Closing, Seller will deliver or cause
to be delivered to Buyer (unless delivered previously) the following:

          (a) The stock certificate or certificates (or similar evidence of ownership) representing the
Shares, accompanied by stock powers duly executed in blank or duly executed stock transfer forms or
instruments of transfer;

          (b) The resignations of all members of the Board of Directors of the Company;

          (c) The resignations of officers of the Company designated in writing by Buyer;

          (d) The stock books, minute books and corporate seal of the Company;

          (e) A certificate dated within five days prior to the Closing Date issued by the Secretary of
State of the State of Nevada certifying that the Company has legal existence and is in good
standing in the State of Nevada;

          (f) A certificate dated the Closing Date executed by the Secretary of Seller certifying (i)
the names of the officers of Seller authorized to sign this Agreement and the other agreements,
documents and instruments executed by Seller pursuant hereto, together with the true signatures of
such officers, and (ii) as to copies of resolutions adopted by the Board of Directors of Seller
authorizing the appropriate officers of Seller to execute and deliver this Agreement and all
agreements, documents and instruments executed by Seller pursuant hereto, and to consummate the
transactions contemplated hereby and thereby, and that such resolutions are still in effect and
have not been amended, modified, rescinded or revoked;

          (g) The Transition Services Agreement, in the form attached hereto as Exhibit A, duly
executed by Seller;

          (h) A certification described in Treasury Regulation Section 1.1445-2(b)(2)(i) certifying that
Seller is not a “foreign person”; and

10

 

          (i) All other documents, instruments and writings required to be delivered by Seller at or
prior to the Closing pursuant to this Agreement or otherwise reasonably requested by Buyer in
connection herewith.

          2.6 Deliveries by Buyer

          At the Closing, Buyer will deliver or cause to be delivered
to Seller (unless previously delivered) the following:

          (a) The Purchase Price referred to in Section 2.2 hereof;

          (b) A certificate dated within five days prior to the Closing Date issued by the Companies
Registrar of the State of Israel certifying that Buyer has legal existence in the State of Israel;

          (c) A certificate dated the Closing Date executed by the Secretary or comparable officer of
Buyer certifying (i) the names of the officers of Buyer authorized to sign this Agreement and the
other agreements, documents and instruments executed by Buyer pursuant hereto, together with the
true signatures of such officers, and (ii) as to copies of resolutions adopted by the Board of
Directors or other governing body of Buyer authorizing the appropriate officers of Buyer to execute
and deliver this Agreement and all agreements, documents and instruments executed by Buyer pursuant
hereto, and to consummate the transactions contemplated hereby and thereby, and that such
resolutions are still in effect and have not been amended, modified, rescinded or revoked;

          (d) The Transition Services Agreement in the form attached hereto as Exhibit A, duly
executed by Buyer; and

          (e) All other documents, instruments or writings required to be delivered by Buyer at or prior
to the Closing pursuant to this Agreement or otherwise reasonably requested by Seller in connection
herewith.

ARTICLE III

RELATED MATTERS

          3.1 Books and Records of the Company.

          (a) Seller agrees to deliver to Buyer at or as soon as practicable after the Closing, as
requested by Buyer, all books and records of the Company (including correspondence, memoranda,
books of account, personnel and payroll records and the like), provided that Seller may
retain a copy of all such books and records.

          (b) Buyer shall not, for a period (the “Review Period”) of four years after the
Closing Date or such longer period as retention thereof is required by applicable law or by any
record retention agreements entered into with any Taxing Authority, dispose of or destroy any of
the business records and files of the Company relating to the period prior to the Closing Date
without first offering to turn over possession thereof to Seller by written notice to Seller at
least 90 days prior to the proposed date of such

11

 

disposition or destruction. During the Review Period, Buyer shall permit, and shall take such
actions as may be necessary to cause any of its successors or assigns to permit, Seller and its
authorized representatives to have reasonable access to, and examine and make copies of, all such
books and records as reasonably requested by Seller.

          3.2 Distributions

          The parties agree that Seller shall have the right, at or prior to
the Closing, to cause the Company to distribute intercompany amounts (as described in the next
sentence) and the intellectual property described in Section 6.9(a) and to distribute Cash out of
funds legally available therefor, to Seller, by one or more cash dividends, repurchase of existing
stock and/or other distributions (collectively, the “Distributions”). In addition, the
parties agree that on or prior to the Closing, Seller and the Company shall settle all intercompany
amounts owed to each other by way of dividend, distribution or otherwise, except to the extent that
any such amount is expressly assumed by Buyer at the Closing.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

     Seller represents and warrants to Buyer, that except as set forth in the Disclosure Schedule
delivered by Seller to Buyer on the date hereof and attached hereto (the “Disclosure
Schedule”), each of the following representations, warranties and statements is true and
correct as of the date hereof and will be true and correct as of the Closing Date:

          4.1 Organization

          Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of Nevada. The
Company has all requisite corporate and other power and corporate authority to own, lease and
operate its properties and to carry on its operations as now being conducted. The Company is duly
qualified, authorized or licensed to do business as a foreign corporation and is in good standing
in each jurisdiction in which the property owned, leased or operated by the Company or the nature
of the business conducted by the Company makes such qualification necessary, except in any such
jurisdiction where the failure to be so duly qualified, authorized or licensed and in good standing
would not have a Material Adverse Effect. The Company has previously made available to Buyer
complete and correct copies of the Company’s Articles of Incorporation and Bylaws of the Company,
as currently in effect (the “Company Charter Documents”). The Company has no direct or
indirect subsidiaries or any other equity interest in any Person.

          4.2 Authorization

          Seller has the requisite corporate power and authority to execute
and deliver this Agreement and each other agreement, document, instrument or certificate

12

 

contemplated hereby or to be executed and delivered by Seller in connection with the
consummation of the transactions contemplated by this Agreement (the “Transaction
Documents”) and consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and each of the Transaction Documents, and the consummation of the
transactions contemplated hereby and thereby, have been duly authorized and approved by all
necessary corporate action on the part of Seller. This Agreement has been duly executed and
delivered by Seller and constitutes, and, when executed and delivered, each of the Transaction
Documents will constitute (assuming in each case the valid authorization, execution and delivery of
such agreement by Buyer), the legal valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except that (a) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or
hereafter in effect, relating to or limiting creditors’ rights generally and (b) the remedy of
specific performance and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor may be brought.

          4.3 Common Stock

          The authorized capital stock of the Company consists solely of
20,000,000 shares of Common Stock, par value $0.01 per share, of which the Shares are the only
shares issued and outstanding. All of the Shares are duly authorized, validly issued, fully paid
and non assessable and were not issued in violation of any law or any preemptive or similar rights.
There are no outstanding securities convertible into, exchangeable for, or carrying the right to
acquire, equity securities of the Company, nor are there any subscriptions, warrants, options,
rights or other arrangements or commitments (other than this Agreement) which could obligate the
Company to issue or Seller to sell any shares of Common Stock. There are no obligations,
contingent or otherwise, of the Company to (i) repurchase, redeem or otherwise acquire any shares
of capital stock or other equity of the Company, or (ii) provide material funds to, or make any
material investment in (in the form of a loan, capital contribution or otherwise), or provide any
guarantee with respect to the obligations of, any Person. There are no outstanding share
appreciation, phantom shares, profit participation or similar rights of the Company. There are no
voting agreements, voting trusts, irrevocable proxies or other contracts or understandings to which
the Company is a party or is bound with respect to the voting of any shares of capital stock or
other equity of the Company.

          4.4 Ownership of the Shares

          Seller is the sole record and beneficial owner of the
Shares and the Shares constitute all of the capital stock of the Company owned by Seller. Seller
has good title to such Shares, free and clear of all Liens.

          4.5 Consents and Approvals; No Violations

          Except for applicable requirements of the
Hart Scott Rodino Antitrust Improvement Act of 1976, as amended (the “H-S-R Act”), neither
the execution and

13

 

delivery of this Agreement or the Transaction Documents nor the consummation by Seller of the
transactions contemplated hereby will (a) conflict with or result in any breach of any provision of
the Company Charter Documents or the Articles of Incorporation or Bylaws of Seller; (b) require any
filing with, or the obtaining of any Permit, order, authorization, consent or approval of, any
Governmental Authority; (c) except as set forth in Section 4.5 of the Disclosure Schedule,
violate, conflict with or result in a default (or any event that, with notice or lapse of time or
both, would constitute a default) under, or give rise to any right of termination, cancellation or
acceleration under, any of the terms, conditions or provisions of any Contract to which the Company
or Seller is a party or by which the Company or Seller or any of their assets may be bound; or (d)
violate any judgment, order, injunction, decree, ruling, writ, assessment or arbitration applicable
to the Company or Seller, excluding from the foregoing clauses (b), (c) and (d), such requirements,
conflicts, defaults, rights or violations which, individually or in the aggregate, would not have
or be reasonably likely to have a Material Adverse Effect and would not adversely affect or be
reasonably likely to adversely affect the ability of Seller to consummate the transactions
contemplated by this Agreement.

          4.6 Financial Statements

          Attached (except as noted below) as Section 4.6 of the
Disclosure Schedule are copies of the Company’s unaudited balance sheets as of December 31,
2005 (the “Most Recent Balance Sheet”), 2004 and 2003, statements of income for the twelve
months ended December 31, 2005, 2004 and 2003 and (to be delivered to Buyer no later than seven (7)
days following the date of this Agreement) statements of cash flows for the twelve months ended
December 31, 2005, 2004 and 2003 (the financial statements referred to are referred to herein
collectively as the “Unaudited Financial Statements”). The Unaudited Financial Statements
(i) were prepared in accordance with GAAP, except as indicated therein and except that the
footnotes required by GAAP are not included, (ii) were prepared in accordance with the books and
records of the Company and (iii) present fairly, in all material respects, the financial position
of the Company as of the date thereof, and the results of operations of the Company for the period
indicated. Buyer acknowledges that the Unaudited Financial Statements are carve-out financial
statements and that corporate costs are allocated in accordance with Rule 3-05 of Regulation S-X.

          4.7 No Undisclosed Liabilities

          The Company has no material Indebtedness or
Liabilities (whether or not required under GAAP to be reflected on a balance sheet or the notes
thereto) other than those (i) specifically reflected on and fully reserved against in the Most
Recent Balance Sheet, (ii) incurred in the Ordinary Course of Business since the Most Recent
Balance Sheet, or (iii) disclosed in Section 4.7 of the Disclosure Schedule.

14

 

          4.8 Product Warranties and Product Liability

          (a) Set forth in Section 4.8(a) of the Disclosure Schedule are the standard forms of
product warranties and guarantees used by the Company as of the date hereof.

          (b) Except as set forth in Section 4.8(b) of the Disclosure Schedule, since the date
of the Most Recent Balance Sheet, no claim or allegation of personal injury, death or property or
economic damages in connection with any Product has been asserted in writing against the Company,
except for claims and allegations which would not, individually or in the aggregate, have a
Material Adverse Effect.

          4.9 Absence of Certain Developments

          (a) Since the date of the Most Recent Balance Sheet: (1) the Company has not suffered any
Material Adverse Effect; and (2) there has been no material change in the condition, assets or
business of the Company other than in the Ordinary Course of Business.

          (b) Since the date of the Most Recent Balance Sheet, except as set forth in Section 4.9(b)
of the Disclosure Schedule, the Company has not, other than in the Ordinary Course of Business:

               (1) (x) increased the compensation (including bonuses) payable or level of benefits provided,
or to become payable or provided, to any director, executive officer or employee of the Company,
(y) awarded or paid any bonuses with respect to the fiscal year ended December 31, 2005, except to
the extent accrued in the Unaudited Financial Statements, or (z) amended or entered into any
employment, deferred compensation, bonus or other incentive compensation, severance, retention,
termination, change in control or similar agreement;

               (2) declared or paid any dividends, issued, purchased or redeemed any shares of its capital
stock or any convertible securities into or exchangeable for any of its capital stock, or made any
other distributions to its shareholders;

               (3) granted any options or other rights to purchase or obtain (including upon conversion,
exchange or exercise) any of its capital stock;

               (4) incurred, assumed, or guaranteed any material Liabilities or Indebtedness other than trade
payables incurred in the Ordinary Course of Business;

               (5) amended the Company Charter Documents;

               (6) disposed of any material assets;

               (7) changed or rescinded any election in respect of Taxes, changed any accounting or Tax
reporting principle, method or policy in respect of Taxes, or settled or compromised any claim in
respect of Taxes;

15

 

               (8) made an investment in any Person;

               (9) subjected any material assets to any Lien (other than Permitted Liens) or pledged or
mortgaged any material assets;

               (10) made any capital expenditure in excess of $100,000 individually or $250,000 in the
aggregate;

               (11) instituted or settled any material legal proceedings; or

               (12) agreed or committed to do anything set forth in this Section 4.9(b).

          4.10 Real Property

          (a) The Company owns no real property.

          (b) Section 4.10(b) of the Disclosure Schedule lists, as of the date hereof, all real
property leases and subleases for space occupied by the Company (collectively, the
“Leases”). Copies of the Leases and all written amendments and agreements relating thereto
have been made available to Buyer. All of the Leases are legal, valid, binding and enforceable in
accordance with their terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditor rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and neither the Company nor, to the knowledge of Seller, the other
party to any Lease is in default in any material respect thereunder, and, to the knowledge of
Seller, no event has occurred and no circumstance exists which, if not remedied, and whether with
or without notice or the passage of time or both, would result in such a default under such Lease.

          (c) To the knowledge of Seller, the property the subject of the Leases (the “Leased Real
Property”) and their present uses, do not violate or conflict in any material respect with any
zoning or building restrictions, or any other material covenants, conditions or restrictions
applicable to the Leased Real Property. To the knowledge of Seller, the Leased Real Property is
not subject to any leases, rights of first refusal, options to purchase or rights of occupancy,
except the Leases.

          4.11 Personal Property

          (a) Except as may otherwise be set forth in Section 4.12 hereof, the Company has sufficiently
good and valid title to all of the personal property it purports to own, free and clear of all
Liens, other than Permitted Liens.

16

 

          (b) All items of machinery, equipment and the tangible assets material to the operation of the
Company’s business currently being used by the Company are in good operational condition and
repair, normal wear and tear excepted, other than items currently under, or scheduled for, salvage,
repair or construction.

          (c) Section 4.11(c) of the Disclosure Schedule sets forth all leases of personal
property (“Personal Property Leases”) involving annual payments in excess of $100,000
relating to personal property used in the business of the Company or to which the Company is a
party or by which the properties or assets of the Company is bound, except those that are
terminable by the Company without penalty on 60 or fewer days notice. All of the items of personal
property under the Personal Property Leases are in good condition and repair (ordinary wear and
tear excepted) and are suitable for the purposes used, and such property is in all material
respects in the condition required of such property by the terms of the lease applicable thereto
during the term of the lease. Seller has made available to Buyer true, correct and complete copies
of the Personal Property Leases, together with all amendments, modifications or supplements
thereto.

          (d) The Company has a valid and enforceable leasehold interest under each of the Personal
Property Leases under which it is a lessee, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditor rights and remedies generally and
subject, as to enforceability, to general principles of equity (regardless of whether enforcement
is sought in a proceeding at law or in equity). Each of the Personal Property Leases is in full
force and effect and the Company has not received or given notice of any default or event that, to
the knowledge of Seller, with notice or lapse of time, or both, would constitute a default by the
Company under any Personal Property Leases and, to the knowledge of Seller, no other party is in
material default thereof, and no party to the Personal Property Leases has exercised any
termination rights with respect thereto.

          4.12 Intellectual Property

          (a) Except as set forth in Section 4.12(a) of the Disclosure Schedule, the Company
owns, licenses or otherwise possesses legally enforceable rights in the U.S. to use all Technology
and Intellectual Property Rights used in the conduct of the business and operations of the Company
as presently conducted in the U.S., including, without limitation, the design, development,
manufacture, use, importation, marketing, sale, distribution, and provision of Products, Technology
and services.

          (b) Except as set forth in Section 4.12(b) of the Disclosure Schedule, the Company
owns and possesses all right, title and interest in and to all Company Intellectual Property Rights
and Company Technology and, to the knowledge of Seller, no other party has any rights thereto.
Each item of Company Intellectual Property Rights and Company Technology is free and clear of any
Liens other than Permitted Liens. The Company has not, since January 1, 2000, transferred
ownership of any foreign patents or

17

 

patent applications or any foreign registered trademarks or applications to register
trademarks, excluding any transfers of ownership by implication or operation of law.

          (c) Section 4.12(c)(i) of the Disclosure Schedule lists all Contracts to which the
Company is a party with respect to the ownership or licensing of any Company Technology or Company
Intellectual Property Rights other than non-exclusive Software licenses granted to end-user
customers in the Ordinary Course of Business pursuant to the Company’s standard customer
agreements. Except as set forth in Section 4.12(c)(ii) of the Disclosure Schedule, the
Company has not (i) transferred ownership of, (ii) granted any exclusive license of or right to
use, (iii) authorized the retention of any exclusive rights to use, or (iv) authorized joint
ownership of any Intellectual Property Rights that constitute Company Intellectual Property Rights.

          (d) No Company Intellectual Property Right or Company Technology is subject to any proceeding
or outstanding decree, order, judgment, or stipulation that, to the knowledge of Seller, either has
adversely affected or is reasonably likely to adversely affect the validity, use or enforceability
of the Company Intellectual Property Rights or the Company Technology.

          (e) Except as set forth in Section 4.12(e) of the Disclosure Schedule, the Company
Intellectual Property Rights, the Company Technology, the Licensed Intellectual Property Rights and
the Licensed Technology constitute all Intellectual Property Rights and Technology that are
necessary or material to the conduct of the business and operations of the Company immediately
following the Closing in substantially the same manner as currently conducted by the Company.

          (f) Except as set forth in Section 4.12(f) of the Disclosure Schedule, the Company has
exercised reasonable care, including taking all reasonable steps, to protect the Company’s
proprietary rights, confidential information and trade secrets associated with or related to the
Company Intellectual Property Rights and the Company Technology. Except as set forth in
Section 4.12(f) of the Disclosure Schedule, to the extent required in the exercise of the
Company’s reasonable care, all current and former employees, consultants and contractors of the
Company who have participated in the creation of any Intellectual Property Rights that are used by
the Company in the conduct of its business have entered into proprietary information,
confidentiality and assignment agreements substantially in the Company’s standard forms (which have
previously been provided to Buyer). The Company has not disclosed, nor is the Company under any
contractual or other obligation to disclose, to another Person any trade secrets of the Company,
except pursuant to an enforceable confidentiality agreement or undertaking, and, to the knowledge
of Seller, no Person has materially breached any such agreement or undertaking.

          (g) Section 4.12(g)(i) of the Disclosure Schedule lists all Company Intellectual
Property Rights that are Registered Intellectual Property Rights (“Company Registered IP”)
and all material unregistered copyrights, trademarks and service marks. All Company Registered IP
is currently in compliance with formal legal requirements (including payment of filing, examination
and maintenance fees and proofs of use) and is

18

 

not subject to any unpaid maintenance fees or taxes or actions due within 90 days after the
Closing Date. There are no proceedings or actions pending or, to the knowledge of Seller,
threatened before any court or tribunal (including the PTO or equivalent authority) related to any
such Company Registered IP other than those set forth in Section 4.12(g)(ii) of the Disclosure
Schedule. Seller is not aware of any reasonable basis for any assertions by any third party
that any Company Registered IP is not valid and enforceable.

          (h) Neither the Company nor Seller is aware of any claim currently being asserted by any
Person or of any facts that cause Seller to believe, that any aspects of the Business, the Company
Intellectual Property Rights, the Company Technology, the Licensed Intellectual Property Rights or
the Licensed Technology, or the use thereof in connection with the conduct of the business and
operations of the Company infringe or misappropriate the Intellectual Property Rights of any Person
or constitute unfair competition or trade practices under the laws of any jurisdiction, and to the
knowledge of Seller, the conduct of the business and operations of the Company (including the
development, manufacture, sale and distribution of Products) does not infringe or misappropriate,
and has not infringed or misappropriated, the Intellectual Property Rights of any Person. 
Section 4.12(h) of the Disclosure Schedule lists all agreements pursuant to which the Company
has agreed to indemnify any third party against any charge of infringement or misappropriation of
any Intellectual Property Rights.

          (i) To the knowledge of Seller, no Person is infringing or misappropriating any Company
Intellectual Property Rights.

          (j) The Company has the right to use, pursuant to valid licenses, all Licensed Intellectual
Property Rights and Licensed Technology that are material to the Business as currently conducted by
the Company. Except with respect to licenses of Software generally available for an annual license
fee of no more than $25,000, Section 4.12(j) of the Disclosure Schedule sets forth a
complete and accurate list of all contracts, licenses and agreements pursuant to which the Company
licenses or otherwise is authorized to use any Technology or Intellectual Property Rights used in
the businesses of the Company, (“License In Agreements”). Neither the execution and
delivery of this Agreement nor the consummation by Seller of the transactions contemplated hereby
will violate, conflict with or result in a default (or any event that, with notice or lapse of time
or both, would constitute a default) under, or give rise to any right of termination or
cancellation under, any of the terms, conditions or provisions of any such material License In
Agreement, excluding such violations, conflicts, defaults and rights which become applicable as a
result of the business or activities in which Buyer is or proposes to be engaged or as a result of
any acts or omissions by, or the status of or any facts pertaining to, Buyer. Except with respect
to licenses of Software generally available for an annual license fee of no more than $25,000 and
the licenses set forth on Section 4.12(j) of the Disclosure Schedule, the Company is not
required, obligated, or under any liability under any agreements to make any payments by way of
royalties, fees or otherwise to any third party with respect to use of any Intellectual Property
Rights or Technology used in the business of the Company. No loss or expiration of any
Intellectual Property Rights licensed to the Company under any License In Agreement is

19

 

pending or reasonably foreseeable or, to the knowledge of Seller, threatened other than
pursuant to the scheduled expiration of the term of any License In Agreement in the ordinary
course. The execution, delivery and performance by the Company or Seller of this Agreement, and
the consummation of the transactions contemplated hereby, will not result in the loss or impairment
of, or give rise to any right of any third party to terminate or reprice or otherwise modify any of
the Company’s rights or obligations under any License In Agreement.

          (k) There are no Contracts between the Company and any other Person with respect to the
Company Intellectual Property Rights, the Company Technology, the Licensed Intellectual Property
Rights or the Licensed Technology under which there is, to the knowledge of Seller, any dispute or
any threatened dispute regarding the scope of such Contract or performance under such Contract.

          (l) Except as set forth in Section 4.12(l) of the Disclosure Schedule, no government
funding, facilities of a university, college, other educational institution or research center or
funding from third parties was used in the development of any Intellectual Property Rights owned by
the Company. Except as set forth in Section 4.12(l) of the Disclosure Schedule, no
current or former employee, consultant or independent contractor of the Company who was involved
in, or who contributed to, the creation or development of any Intellectual Property Rights owned by
the Company has performed services for a government or a university, college, or other educational
institution or research center such that such government, university, college or other educational
institution or research center currently has any right, title or interest in or to the Company
Intellectual Property Rights or Company Technology.

          (m) Except as set forth in Section 4.12(m) of the Disclosure Schedule, Seller has no
knowledge of any facts or circumstances that would render any Intellectual Property Rights owned by
the Company invalid or unenforceable, or would adversely affect any pending application or
registration with respect to any Intellectual Property Rights owned by the Company.

          (n) The Software owned by the Company operates substantially as described in the user manuals
and does not contain any program routine, device, or other undisclosed feature, including, without
limitation, a time bomb, virus, software lock, drop-dead device, malicious logic, worm, trojan
horse, bug, error, defect or trap door, that is capable of deleting, disabling, deactivating,
interfering with, or otherwise harming the Software or Buyer’s hardware, data, or computer programs
or codes, or that is capable of providing access or produce modifications not authorized by Buyer
(collectively, “Disabling Procedures”). Such representation and warranty applies
regardless of whether such Disabling Procedures are authorized by Seller to be included in the
Software.

          (o) Except as disclosed in Section 4.12(o) of the Disclosure Schedule, none of the
Company’s products, in whole or in part, incorporates or is distributed with any Open Source
Software. None of the Software incorporated in any of the Company’s products (including any
proprietary Software developed by the Company without the use of any Open Source Software), by
reason of the manner in which such Software is linked

20

 

or otherwise integrated with any Open Source Software, is, in whole or in part, subject to the
terms of any license under which such Open Source Software was made available such that the
proprietary Software owned by the Company would be required to (x) be disclosed or distributed in
source code form, (y) be licensed for the purpose of making derivative works, or (z) be
redistributable at no charge. The term “Open Source Software” means (a) any Software that
contains, or is derived in any manner (in whole or in part) from, any Software that is distributed
as free Software, open source Software (e.g., Linux) or similar licensing or distribution models;
and (b) any Software that requires as a condition of use, modification and/or distribution of such
Software that such Software or other Software incorporated into, derived from or distributed with
such Software (i) be disclosed or distributed in source code form, (ii) be licensed for the purpose
of making derivative works, or (iii) be redistributable at no charge, including without limitation
Software licensed or distributed under GNU’s General Public License (GPL) or Lesser/Library GPL
(LGPL) or the Apache Software license.

          4.13 Litigation

          Except as set forth in Section 4.13 of the Disclosure
Schedule, there is no claim, action, suit, proceeding or governmental investigation pending or,
to the knowledge of Seller, threatened against Seller or the Company, by or before any Governmental
Authority or in arbitration, mediation or other means of alternative dispute resolution. The
Company is not subject to any material judgment, order, injunction or decree of any court,
governmental or regulatory authority.

          4.14 Compliance with Applicable Law; Permits

          (a) The Company is in compliance in all material respects with all applicable laws, statutes,
ordinances, directives, rules and regulations of any Governmental Authority applicable to the
Company and its operations (other than any Environmental Laws, which are covered by Section 4.20).

          (b) The Company has all Permits which are required for the operation of the business of the
Company as currently conducted and as currently intended to be conducted (“Company
Permits”), other than those the failure of which to possess would not have and would not
reasonably be expected to have a material adverse effect on the Company. The Company is not in
default under or in violation of any of the Company Permits, and there are no pending or, to the
knowledge of Seller, threatened proceedings which could result in the revocation, cancellation or
inability of the Company to renew any Company Permit that is significant.

21

 

          4.15 Certain Contracts and Arrangements

          (a) Set forth in Section 4.15 of the Disclosure Schedule, is a list of all
Contracts of the types described below in effect as of the date hereof to which the Company is a
party:

     (i) all employment and consulting Contracts (other than offer letters);

     (ii) all sales representative, agency, distributorship or franchise Contracts;

     (iii) all Contracts relating to Indebtedness;

     (iv) all indemnities or powers of attorney involving outstanding, contingent
or continuing obligations of or to the Company;

     (v) all Contracts with any present or former director, officer or shareholder
of the Company or any Affiliate of any such Person;

     (vi) any other Contract for the furnishing of services, goods or products by
or to the Company after the date hereof (A) with firm commitments having a value in
excess of $250,000 on an annual basis or (B) having a term which is greater than
six months and which is not terminable by the Company on 90 days’ or less notice;

     (vii) all Contracts (or group of related Contracts) pursuant to which the
Company (i) possesses or uses, or has agreed to acquire or lease, any property or
asset and (ii) is required to make payments, accrue expenses or incur charges in
excess of $100,000 per year;

     (viii) all Contracts (or group of related Contracts), plans or programs that
involve payments in excess of $100,000 per year pursuant to which payments, or an
acceleration of or increase in benefits, may be required upon or after a change of
control of the Company;

     (ix) all Contracts that prohibit the Company from engaging in competition or
soliciting to hire any person with respect to employment, or Contracts of any other
Person not to compete with the Company;

     (x) all Contracts for joint ventures, strategic alliances, partnerships,
licensing arrangements or sharing of profits or proprietary information;

     (xi) all Contracts relating to the acquisition (by merger, purchase of stock
or assets or otherwise) by the Company of any operating business or material assets
or the capital stock of any other Person; and

     (xii) all purchase Contracts from vendors giving rise to Liabilities of the
Company in excess of $100,000.

22

 

          (b) The Company has heretofore made available to Buyer a true, complete and correct copy of
each of the Contracts described above, each as in effect on the date hereof, and all amendments and
supplements thereto and all waivers thereunder. Each of the Contracts is in full force and effect
and is the legal, valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that (x) such enforcement may be subject to any
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or
hereafter in effect, relating to or limiting creditors’ rights generally, and (y) the remedy of
specific performance and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor may be brought.
Neither the Company nor Seller has received written notice that any party to any of the Contracts
intends to cancel or terminate such Contract. Neither the Company, nor, to Seller’s knowledge, any
other party is in default under, or in breach or violation of, nor has an event occurred that (with
or without notice, lapse of time or both) would constitute a default by the Company under any
Contract in any material respect, other than such defaults, breaches and violations as would not
have or be reasonably expected to have a material adverse effect on the Company.

          4.16 Labor Relations

          The Company does not directly employ most employees and most
employees who perform services for the Company are employed directly by Seller. Section 4.16
of the Disclosure Schedule lists each employee of the Company and each employee of Seller who
primarily works on matters for the Company as of the date hereof (“Company Employees”).
Seller shall update such Schedule immediately before the Closing (and such updated Schedule shall
consist of the Company Employees as of the Closing). Neither the Company nor Seller is a party to
any collective bargaining agreement covering any Company Employee, and no collective bargaining
agreement with respect to any Company Employees as of the date of this Agreement is currently being
negotiated by the Company, nor is there is any union organization activity involving any of the
Company Employees, pending or, to the knowledge of Seller, threatened, nor has there ever been
union representation involving any of the Company Employees in the last five years. There has been
no strike or other material work stoppage during the five years immediately preceding the date of
this Agreement. The Company and the Seller are in compliance in all material respects with all
laws, regulations and orders relating to the employment of the Company Employees, including all
such laws, regulations and orders relating to wages, hours, the Fair Labor Standards Act, the
Worker Adjustment and Retraining Notification Act and any similar state or local “mass layoff” or
“plant closing” law (“WARN”), collective bargaining, discrimination, civil rights, safety
and health, workers’ compensation and the collection and payment of withholding and/or social
security taxes and any similar tax. There has been no “mass layoff” or “plant closing” as defined
by WARN with respect to the Company or the Seller within ninety (90) days prior to the date hereof.

23

 

          4.17 Employment Benefit Plans; ERISA

          (a) Section 4.17(a) of the Disclosure Schedule lists each “employee benefit plan” (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)), and all other employee benefit arrangements or payroll practices, including
bonus and fringe benefit plans, employment, consulting or other compensation agreements, incentive,
equity or equity-based compensation, or deferred compensation arrangements, change in control,
termination or severance plans or arrangements, stock purchase, severance pay, sick leave, vacation
pay, salary continuation for disability, hospitalization, medical insurance, life insurance and
scholarship plans and programs maintained for the benefit of, or contributed to by the Company or
any trade or business, whether or not incorporated (an “ERISA Affiliate”), that, together
with the Company would be deemed a “single employer” within the meaning of Section 4001 of ERISA,
for the benefit of any Company Employee or any former employee of the Company, or with respect to
which the Company has any liability, contingent or direct (a “Plan” and collectively, the
“Plans”). The Company has made available to Buyer correct and complete copies to the
extent applicable of (i) each of the Plans including all amendments to date (ii) the most recent
IRS determination letter; and (iii) summary plan descriptions.

          (b) Each of the Plans has been administrated in compliance in all material respects with the
applicable provisions thereof and with all applicable provisions of ERISA, the Code (including
rules and regulations thereunder) and other federal and state laws and regulations, and each of the
Plans intended to be “qualified” within the meaning of Section 401(a) of the Code, has been
determined by the Internal Revenue Service (the “IRS”) to be so qualified and Seller knows
of no fact or set of circumstances that would adversely affect such qualification. None of the
Plans is subject to Title IV of ERISA and neither Seller, the Company nor any of their ERISA
Affiliates have within the past 6 years maintained, sponsored, contributed to or been obligated to
contribute to any “employee benefit plan” (as defined in Section 3(3) of ERISA) subject to Title IV
of ERISA, including any multiemployer plan (as defined in Section 3(37) of ERISA). No Plan
maintained by the Company is an “employee benefit plan” (as defined in Section 3(3) of ERISA).
There are no pending or, to the knowledge of Seller, threatened material claims (other than routine
claims for benefits) by, on behalf of or against any of the Plans or any trusts related thereto.

          (c) All contributions (including all employee contributions and employee salary reduction
contributions) which are due have been paid to each Plan which is an “employee benefit pension
plan” as defined in Section 3(2) of ERISA, except where the failure to make such contributions
would not be material.

          (d) Except as provided in Section 6.8(i) hereof, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby, by itself or in combination
with any additional or subsequent event, other than by reason of actions taken by Buyer or the
Company following the Closing, will (i) result in any payment becoming due to any employee
(current, former or retired) of the Company, (ii) increase any benefits otherwise payable under any
Plan or (iii) result in the acceleration of the time of payment or vesting of any such benefits
under any such plan.

24

 

          (e) None of the Plans provide for post-employment life or health insurance, benefits or
coverage for any participant or any beneficiary of a participant, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) and at the
expense of the participant or the participant’s beneficiary.

          4.18 Taxes

          (a) Except as set forth in Schedule 4.18(a) of the Disclosure Schedule, all Tax
Returns (as defined below) required to be filed with any Taxing Authority on or before the Closing
Date (taking into account any extension of a required filing date) by, or with respect to, the
Company have been or will be timely filed on or before the Closing Date in accordance with all
applicable laws. All such Tax Returns required to be filed by, or with respect to, the Company are
or will be (when filed) true, correct and complete in all material respects.

          (b) Except as set forth in Schedule 4.18(b) of the Disclosure Schedule, the Company
has timely paid all Taxes it is required to have paid.

          (c) The Company is not a party to or bound by any Tax allocation, sharing, indemnity or
similar agreement or arrangement.

          (d) The Company has not received any written notice of deficiency or assessment from any
Taxing Authority with respect to Taxes that have not been fully paid or finally settled. There are
no audits or investigations by any Taxing Authority in progress, nor has the Company received any
written notice from any Taxing Authority that it intends to conduct such an audit or investigation.
There are no waivers of statutes of limitation in effect with respect to the Company.

          (e) There are no liens for Taxes (except for Taxes not yet due) on any of the assets of the
Company, and no action, proceeding or, to the knowledge of Seller, investigation has been
instituted against the Company in which there is a reasonable probability of an adverse
determination that would result in any such lien.

          (f) The Company has not been granted any extension or waiver of the statute of limitations
period applicable to any Tax Returns, which period (after giving effect to such extension or
waiver) has not expired.

          (g) Seller is not a “foreign person” within the meaning of Section 1445 of the Code.

          (h) There is no contract, agreement, plan or arrangement covering any person that,
individually or collectively, could give rise to the payment of any amount that would not be
deductible by Buyer, the Company or any of their respective Affiliates by reason of Section 280G of
the Code.

25

 

          (i) The Company has no liability for Taxes of any Person under Treasury Regulation Section
1.1502-6 (or any comparable provision of state, local or foreign law) other than liability for
Taxes of the group of which Seller is the common parent.

          (j) The Company has not engaged in a ‘reportable transaction’ as set forth in Treas. Reg.
Section 1.6011-4(b).

          (k) Except as set forth in Schedule 4.18(k) of the Disclosure Schedule, the Company is
not subject to tax in any jurisdiction other than the United States.

          (l) The Company has no liability pursuant to any escheat or similar laws with respect to
uncollected funds.

          (m) As used in this Agreement:

     (i) “Income Taxes” means any federal, state, local or foreign tax
imposed upon or measured by net income or gross income (excluding any Tax based
solely on gross receipts) including any interest, penalty, or additions thereto.

     (ii) “Non-Income Taxes” means any Taxes other than Income Taxes.

     (iii) “Post-Closing Tax Period” means any Tax period beginning after
the Closing Date and the portion of Straddle Period beginning after the Closing
Date.

     (iv) “Pre-Closing Tax Period” means any Tax period ending on or before
the Closing Date and any portion of any Straddle Period ending on the Closing Date.

     (v) “Straddle Period” means any Tax period that includes (but does not
end on) the Closing Date.

     (vi) “Tax Return” means any return, declaration, statement, report,
form or similar statement (including any attached schedules) filed or required to
be filed with any Taxing Authority with respect to Taxes, including any information
statement, any claims for refunds of Taxes, declarations of estimated Tax and any
amendments or supplements of any of the foregoing.

     (vii) “Tax” means any tax, governmental fee or other like assessment
or charge of any kind whatsoever (including any tax imposed under the Code and any
net income, alternative or add on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid to or by the Company, payroll, employment, excise, severance, stamp,
capital stock,

26

 

occupation, property, environmental or windfall profit tax, premium, custom,
duty or other tax together with any interest, penalty, addition to tax or
additional amount due from, or in respect of, the Company imposed by any Taxing
Authority.

          4.19 Accounts Receivable

          All of the accounts receivable of the Company set forth on
the Most Recent Balance Sheet and those that have arisen between the date of the Most Recent
Balance Sheet and the Closing Date arose or will have arisen in the Ordinary Course of Business.

          4.20 Environmental Matters

          (a) The Company is in compliance with all applicable Environmental Laws (as defined below)
except where the failure to be in compliance would not reasonably be expected to have a Material
Adverse Effect. “Environmental Laws” means all applicable Federal, state, municipal and
local laws, statutes, ordinances, codes, orders, decrees, judgments or injunctions, and regulations
rendered by, in or with any Governmental Authority, department or administrative or regulatory
agency relating to pollution, quality or protection of the environment or the presence, treatment,
exposure to persons, generation, use, processing, release, remediation, storage, disposal,
transport or handling of Hazardous Substances (as defined below). “Hazardous Substances”
means any element, compound, chemical mixture, contaminant, pollutant material, waste or other
substance which is regulated or defined as hazardous, radioactive or toxic under any Environmental
Law or the release of which is prohibited or materially restricted under any Environmental Law.

          (b) The Company has or has applied for all material permits, registrations, approvals and
licenses required under Environmental Laws for the operation of the business of the Company as
presently conducted (the “Environmental Permits”) and there are no violations, and no
pending or threatened investigations or proceedings with respect to such Environmental Permits
except where the failure to have such Environmental Permits or where the violation, investigation
or proceeding relating thereto would not reasonably be expected to have a Material Adverse Effect.

          (c) Seller has made available to Buyer any environmental assessments, studies or similar
documents in its possession with respect to the Leased Real Property.

          (d) There have been no material releases by the Company or, to the knowledge of Seller, by any
other person of any Hazardous Substances at, on, from or under any Leased Real Property, property
formerly owned or leased by the Company or property to which the Company has sent waste for
disposal.

          (e) This Section 4.20 contains the sole and exclusive representations and warranties of Seller
with respect to any Environmental Laws.

27

 

          4.21 Insurance

          A summary of all policies of insurance now held by or for the benefit
of the Company are set forth in Section 4.21 of the Disclosure Schedule. All such policies
are in full force and effect, all premiums due thereon have been paid and Seller and the Company
have complied in all material respects with the provisions of such policies. To the knowledge of
Seller, there has been no threatened termination of, premium increase with respect to or material
alteration of coverage under, any such policies. Set forth in Section 4.21 of the Disclosure
Schedule is a description of any claims made by or on behalf of the Company under such
policies.

          4.22 Certain Fees

          Except for the engagement of Houlihan Lokey Howard & Zukin, the
fees and expenses of which will be the sole responsibility of Seller, no financial advisor, finder,
broker, agent or other intermediary, acting on behalf of Seller or the Company, is or will become
entitled to a commission, fee or other compensation in connection with this Agreement or the
transactions contemplated hereby.

          4.23 Corporate Records

          The minute books of the Company previously made available to
Buyer contain true, correct and complete records of all meetings and accurately reflect in all
material respects all the actions of Seller and the board of directors (or other governing body and
including committees thereof) of the Company. The stock certificate books and stock transfer
ledgers of the Company previously made available to Buyer are true, correct and complete in all
material respects. All stock or interest transfer taxes levied, if any, or payable with respect to
all transfers of shares of the Company prior to the date hereof have been paid and appropriate
transfer tax stamps affixed.

          4.24 Transactions with Affiliates

          Section 4.24 of the Disclosure Schedule
sets forth a list of all significant relationships between the Company on the one hand and Seller,
Affiliates of Seller, any officers or directors of the Company or Seller or, to Seller’s knowledge,
any of such officer’s or director’s Affiliates on the other hand. Except as set forth in
Section 4.24 of the Disclosure Schedule, the Company is not indebted or otherwise obligated
to any such Person, and no such Person owns any property or right, tangible or intangible, that is
used or held for use in connection with the operation of the business of the Company.

          4.25 Certain Payments

          Neither the Company nor, to Seller’s knowledge, any director,
officer or employee of the Company or Seller has, for or on behalf of the Company, made any offer,
payment or gift in violation of the Foreign Corrupt Practices Act of 1977, as amended.

28

 

          4.26 Banks; Powers of Attorney; Guarantees

          Section 4.26 of the Disclosure Schedule contains a complete and correct list of the
names and locations of all banks in which the Company has accounts or safe deposit boxes and the
names of all Persons authorized to draw thereon or to have access thereto. Except as set forth in
Section 4.26 of the Disclosure Schedule, no Person holds a power of attorney to act on
behalf of the Company. The Company has no obligation to act under any outstanding power of
attorney or any obligation or liability, either accrued, accruing or contingent, as guarantor,
surety, co-signor, endorser (other than for purposes of collection in the Ordinary Course of
Business), co-make or indemnitor in respect of the obligation of any Person.

          4.27 Books and Records

          The books, records and accounts of the Company are in all
material respects true and correct.

          4.28 Customers and Suppliers

          (a) The Company has no outstanding material dispute concerning its goods and/or services with
any customer who, in the year ended December 31, 2005, was one of the ten largest sources of
revenue for the Company based on amounts paid or payable by such customer (each, a “Significant
Customer”). Each Significant Customer is listed in Schedule 4.28(a) of the Disclosure
Schedule. The Company has not received any written notice from any Significant Customer that
such customer intends to terminate its relationship with the Company or that any such customer
desires to terminate or materially modify any existing contract with the Company.

          (b) The Company has no outstanding material dispute concerning goods and/or services provided
by any supplier who, in the year ended December 31, 2005, was one of the five largest suppliers of
goods and/or services to the Company based on amounts paid or payable (each, a “Significant
Supplier”). The Company’s only material supplier is listed in Schedule 4.28(b) of the
Disclosure Schedule. The Company has not during the six months prior to the date of this
Agreement received any written notice of termination or interruption of any existing contracts with
any Significant Supplier.

          4.29 Export Control

          To the knowledge of Seller, since 2002, the Company has acted
without violation of any export control laws, orders or regulations, including without limitation
the Export Administration Regulations administered by the U.S. Department of Commerce, as amended
from time to time, and without violation and in compliance with any required export or reexport
licenses or authorizations granted under such laws, regulations or orders, except violations which
would not reasonably be expected to have a Material Adverse Effect.

29

 

          4.30 Disclosure

          The representations and warranties made by Seller in this Agreement (as qualified and
modified by the Disclosure Schedule), when read together as a whole, do not contain any untrue
statement of material fact or omit a material fact necessary to make each statement contained
therein, in light of the circumstances under which they were made, not misleading.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer represents and warrants to Seller that each of the following representations, warranties
and statements is true and correct as of the date hereof and each of which shall be true and
correct as of the Closing Date:

          5.1 Organization and Authority of Buyer

          (a) Buyer is a company limited by shares duly organized, validly existing and in good standing
under the laws of the State of Israel. Buyer has previously delivered to Seller complete and
correct copies of its Amended and Restated Memorandum of Association and Amended and Restated
Articles of Association, as currently in effect. Buyer has the corporate power and authority to
execute and deliver this Agreement and each other Transaction Document to which it is a party and
to consummate the transactions contemplated hereby. The execution and delivery of this Agreement
and the Transaction Documents to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly and authorized and approved by all necessary
corporate action on the part of Buyer.

          (b) This Agreement has been duly executed and delivered by Buyer and constitutes, and, when
executed and delivered, each of the Transaction Documents will constitute the legal, valid and
binding obligation of Buyer (in each case, assuming the valid authorization, execution and delivery
of such agreement by Seller and the Company, if applicable), enforceable against Buyer in
accordance with its terms, except that (i) such enforcement may be subject to any bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other laws, now or hereafter in
effect, relating to or limiting creditors’ rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor may be brought.

          5.2 Consents and Approvals; No Violations

          Except for applicable requirements of the
H-S-R Act, neither the execution and delivery of this Agreement or the Transaction Documents nor
the consummation by Buyer of the transactions contemplated hereby will (a) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws of Buyer; (b) except
for filings with the Securities and Exchange Commission and the Israeli Securities Authority,
require any filing with, or the obtaining of any Permit, order,

30

 

authorization, consent or approval of, any Governmental Authority; (c) violate, conflict with
or result in a default (or any event which, with notice or lapse of time or both, would constitute
a default) under, or give rise to any right of termination, cancellation or acceleration under, any
of the terms, conditions or provisions of any Contract to which Buyer is a party or by which Buyer
or any of its assets may be bound; or (d) violate any judgment, order, injunction, decree, ruling,
writ, assessment or arbitration applicable to Buyer, excluding from the foregoing clauses (b), (c)
and (d), such requirements, violations, conflicts, defaults, rights or violations which,
individually or in the aggregate, would not have or be reasonably likely to have a material adverse
effect on Buyer and would not adversely affect or be reasonably likely to adversely affect the
ability of Buyer to consummate the transactions contemplated by this Agreement.

          5.3 Availability of Funds

          Buyer has sufficient immediately available funds on hand
or available pursuant to unconditional commitments to pay the Purchase Price and to pay any other
amounts payable pursuant to this Agreement and to effect the transactions contemplated hereby.

          5.4 Investment Representation

          Buyer is acquiring the Shares for its own account, for
investment and without any view to resale or distribution of the Shares or any portion thereof.
Buyer acknowledges that the Shares have not been registered or qualified under the provisions of
the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of
any state and that the Shares may not be resold by Buyer except pursuant to registration or
qualification under the Securities Act and any applicable state securities law or a valid exemption
therefrom.

          5.5 Litigation

          There is no claim, action, suit, proceeding or governmental
investigation pending or, to the knowledge of Buyer, threatened against Buyer, by or before any
Governmental Authority or in arbitration, mediation or other means of alternative dispute
resolution which (a) challenges the validity of this Agreement, or (b) which seeks to enjoin or
impair or to obtain damages in respect of the consummation of the transactions contemplated hereby.

          5.6 Investigation by Buyer

          Buyer has conducted its own independent review and
analysis of the business, operations, technology, assets, liabilities, results of operations,
financial condition and prospects of the Company and acknowledges that Seller has provided Buyer
with access to the personnel, properties, premises and records of the Company for this purpose.
Buyer acknowledges that neither Seller nor the Company nor any of the Company’s directors,
officers, employees, Affiliates, controlling persons, agents or representatives makes or has made
any representation or warranty, either express or

31

 

implied, as to the accuracy or completeness of any of the information provided or made
available to Buyer or any of its directors, officers, employees, Affiliates, controlling persons,
agents or representatives, except as and only to the extent expressly set forth herein with respect
to such representations and warranties and subject to the limitations and restrictions contained in
this Agreement.

          5.7 Certain Fees

          Except for Banc of America Securities LLC, the fees and expenses of
which shall be the sole responsibility of Buyer, no financial advisor, finder, broker, agent or
other intermediary, acting on behalf of Buyer or any of its Affiliates, is or will become entitled
to a commission, fee or other compensation in connection with this Agreement or the transactions
contemplated hereby.

ARTICLE VI

COVENANTS

          6.1 Conduct of the Company’s Business

          Seller agrees that, during the period from the
date of this Agreement to the Closing, except as otherwise set forth in Section 6.1(b) of the
Disclosure Schedule or as contemplated by this Agreement, including the making of the
Distributions permitted under Section 3.2 and the provisions of Section 6.8(i), or consented to by
Buyer (which consent shall not be unreasonably withheld or delayed):

          (a) Seller shall cause the Company to conduct its business in all material respects in the
Ordinary Course of Business; and

          (b) Without limiting the generality of the foregoing, Seller shall cause the Company: to (i)
not sell or dispose of any of its material properties or assets, except in the Ordinary Course of
Business; (ii) maintain: (A) all of the material assets, properties, machinery and equipment owned,
leased or used by the Company in their current condition, ordinary wear and tear accepted, and (B)
insurance upon all of the properties and assets of the Company in such amounts and of such kinds
comparable to that in effect on the date hereof; (iii) not, except in the Ordinary Course of
Business: (A) amend, modify or terminate any Contract set forth in Section 4.15 of the
Disclosure Schedule or (B) enter into any Contract that would have been required to be
disclosed in Section 4.15 of the Disclosure Schedule had it been in effect on the date
hereof; (iv) not enter into any written employment agreement with any employee or increase in any
manner the compensation of any of the officers or other key employees of the Company, except for
such increases as are granted in the Ordinary Course of Business in accordance with customary
practices (which shall include normal periodic performance reviews and related compensation and
benefit increases) or as required by a pre-existing commitment; (v) not adopt, grant, extend or
increase the rate or terms of any bonus, insurance, pension or other employee benefit plan, payment
or arrangement made to, for or with any such officers or employees of the Company, except increases
required by any applicable law, rule or regulation or as required by a pre-existing commitment;
(vi) not materially change

32

 

or rescind any election in respect of Taxes, materially change any accounting or Tax reporting
principle, method or policy in respect of Taxes, or settle or compromise any claim in respect of
Taxes (vii) not incur any material Indebtedness payable to any third party, including Seller or any
of its Affiliates; (viii) not amend the Company’s Charter or Bylaws or issue or agree to issue
shares of capital stock including securities exchangeable for a convertible into capital stock of
the Company or merge, consolidate, recapitalize or reorganize; (ix) not license any Intellectual
Property Rights (other than non-exclusive licenses to customers in the Ordinary Course of Business;
(x) not hire any employee unless such hire is contemplated by the budget for the Company previously
provided by Seller to Buyer; and (xi) use its Reasonable Efforts to (A) preserve its relationships
with its material suppliers, customers, licensors, licensees and others having business
relationships with the Company and (B) to preserve the present business operations, organization
and goodwill of the Company.

          6.2 Access to Information

          (a) Until the Closing, Seller shall cause the Company to (i) give Buyer and its authorized
representatives reasonable access to all books, records, offices and other facilities and
properties of the Company; (ii) permit Buyer to make such inspections thereof as Buyer may
reasonably request; and (iii) furnish or cause the officers of the Company to furnish Buyer with
such financial and operating data and other information with respect to the business and properties
of the Company as Buyer may from time to time reasonably request; provided,
however, that Buyer shall in each instance give reasonable prior notice to Seller and that
any such investigation shall be conducted during normal business hours under the supervision of
Seller’s or the Company’s personnel and in such a manner as to maintain the confidentiality of this
Agreement and the transactions contemplated hereby and shall not interfere unreasonably with the
business operations of the Company; and, provided, further, that any such
disclosure shall not be required if it would violate any laws or the terms or conditions of any
contracts or adversely affect the ability of Seller or the Company to assert attorney-client,
attorney work product or other similar privilege.

          (b) Any disclosure whatsoever during such investigation by Buyer shall not constitute an
enlargement of or additional representations or warranties of Seller beyond those specifically set
forth in Article IV of this Agreement.

          (c) All information concerning the Company and/or Seller furnished or provided by the Company
or Seller to Buyer or its representatives (whether furnished before or after the date of this
Agreement) shall be held subject to a confidentiality agreement among the Company, Seller and Buyer
dated as of December 5, 2005 (the “Confidentiality Agreement”).

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          6.3 Consents

          (a) Each of Seller and Buyer shall cooperate, and use its Reasonable Efforts, to make all
filings and obtain all licenses, Permits, consents, approvals, authorizations, qualifications and
orders of Governmental Authorities necessary to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, Seller and Buyer shall (i) make any
and all notifications and filings required to be made to any court, administrative agency or
commission or other governmental agency, authority or instrumentality having supervisory or
regulatory authority with respect to the relevant party or parties to this Agreement in connection
with the transactions contemplated by this Agreement; and (ii) file any Notification and Report
Forms and related material that such party may be required to file with the Federal Trade
Commission and the Antitrust Division of the United States Department of Justice under the H-S-R
Act, use its Reasonable Efforts to cause the early termination of the waiting period(s) and to
respond to any request for additional information and documentary material, as may be necessary,
proper or advisable in connection therewith. Any and all filing fees in respect of such filings
shall be paid by Buyer. Notwithstanding the foregoing, neither Buyer nor any of its Affiliates
shall be required, in connection with the matters set forth in this Section 6.3, to hold separate
(including by trust or otherwise) or divest any of their respective businesses, product lines or
assets.

          (b) Seller shall use and shall cause the Company to use its Reasonable Efforts to obtain any
third party consents or approvals that Buyer may reasonably request in connection with the
consummation of the transactions contemplated by this Agreement. Buyer agrees to provide such
assurances as to financial capability, resources and creditworthiness as may be reasonably
requested by any third party whose consent or approval is sought hereunder.

          (c) With respect to any agreements for which any required consent or approval is not obtained
prior to the Closing, Seller and Buyer shall each use its Reasonable Efforts to obtain any such
consent or approval after the Closing Date until such consent or approval has been obtained.

          6.4 Reasonable Efforts

          Each of Seller and Buyer shall cooperate, and use its
Reasonable Efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement (including satisfaction, but not waiver, of the closing
conditions set forth herein).

          6.5 Covenant to Satisfy Conditions

          Seller will use its Reasonable Efforts to ensure
that the conditions set forth in Article VII hereof are satisfied, insofar as such matters are
within the control of Seller. Buyer will use its Reasonable Efforts to ensure that the conditions
set forth in Article VII hereof are satisfied, insofar as such matters are within the control of
Buyer. Notwithstanding the foregoing, none of the parties to this Agreement shall be required to
waive any condition herein to its obligations at the Closing or to incur any substantial

34

 

cost not otherwise required under this Agreement. Seller and Buyer further covenant and
agree, with respect to a threatened or pending preliminary or permanent injunction or other order,
decree or ruling or statute, rule, regulation or executive order that would adversely affect the
ability of the parties hereto to consummate the transactions contemplated hereby, to use all
Reasonable Efforts to prevent or lift the entry, enactment or promulgation thereof, as the case may
be. Notwithstanding the foregoing, neither Buyer nor any of its Affiliates shall be required, in
connection with the matters set forth in this Section 6.5, to hold separate (including by trust or
otherwise) or divest any of their respective businesses, product lines or assets.

          6.6 Public Announcements

          Prior to the Closing, except as otherwise agreed to by the
parties and except for disclosures made by Buyer to its lenders or potential lenders pursuant to
customary confidentiality provisions, the parties shall not issue any report, statement or press
release or otherwise make any public statements with respect to this Agreement and the transactions
contemplated hereby without obtaining the prior approval of the other party hereto, which approval
will not be unreasonably withheld or delayed, unless, in the reasonable judgment of the party
intending to make such release, disclosure is otherwise required by applicable law or by the
applicable rules of any stock exchange on which such party or its Affiliates lists securities,
provided, that, to the extent required by applicable law, the party intending to make such
release shall use its Reasonable Efforts consistent with such applicable law to consult with the
other party with respect to the text thereof. Upon the Closing, Seller and Buyer will consult with
each other with respect to the issuance of a joint report, statement or press release with respect
to this Agreement and the transactions contemplated hereby.

          6.7 Use of “Tekelec” Name

          From and after the Closing, Buyer agrees not to use and
shall cause the Company and Buyer’s affiliates not to use the “Tekelec” name in any manner
in any part of the world as part of their company names or in any manner in connection with their
respective businesses.

          6.8 Employees; Employee Benefits

          (a) Prior to the Closing Date, Seller shall transfer the employment of all Company Employees
to the Company. Seller shall be solely responsible for any Liability incurred in connection with
such transfers of employment (including, without limitation, any Liabilities under any Plan or
under the WARN Act or any other applicable law). In connection with such transfers of employment,
Seller shall obtain federal and state taxpayer identification numbers for the Company, activate
income and employment tax accounts, and report and remit appropriate taxes with respect to
compensation earned by Company Employees prior to the Closing Date, as well as ensure that the
Company Employees receive workers’ compensation coverage (or, to the extent it is not possible to

35

 

complete such actions before the Closing Date, the Seller shall use Reasonable Efforts to
initiate such actions). Because the Company does not directly employ most employees, and most
employees who perform services for the Company are employed directly by Seller, certain
Intellectual Property Rights and Technology used in the current operation of the Company’s business
may be owned by Seller pursuant to confidentiality, nondisclosure and invention assignment
agreements between Seller and the Company Employees listed on Section 4.16 of the Disclosure
Schedule and by virtue of the employer—employee relationship between Seller and the Company
Employees. Prior to the Closing, Seller shall assign to the Company all of the Seller’s right,
title and interest to all Intellectual Property Rights and Technology (other than the intellectual
property and associated rights comprising and related to the Company’s ASi 4000 technology) used in
the current operations of the Company’s business that was developed or created by the Company
Employees, and Seller shall assign to the Company all of Seller’s right, title and interest under
such agreements between Seller and such Company Employees. The covenants set forth in Section
4.12(a) of the Disclosure Schedule are hereby incorporated into this Agreement in their
entirety.

          (b) Buyer agrees that prior to the Closing, it will not require or request of Seller or the
Company that Seller or the Company terminate any Company Employees. For a one-year period
following the Closing, Buyer shall, or shall cause the Company to, provide each Company Employee
who continues as an employee of the Company (an “Employee”) with benefits that are at least
substantially comparable in the aggregate to those benefits provided to similarly situated
employees of Buyer (other than equity and performance based compensation). Buyer shall give full
credit for all service with the Company or any Affiliate thereof, and any predecessor thereto to
the extent that service with such predecessor entity was recognized under the applicable Plan of
the Company or any Affiliate, to each Employee for purposes of vesting and eligibility, including
waiting periods relating to preexisting conditions under medical plans (except for purposes of
determining the amount of any benefit under any defined benefit pension plan and eligibility for
early retirement or any subsidized benefit), any employee benefit plan (including any “employee
benefit plan” as defined in Section 3(3) of ERISA) maintained by Buyer or its subsidiaries
(including any vacation or accrued sick pay plan or policy) in which the Employees participate on
or after the Closing Date. Prior to the Closing, the Company shall furnish Buyer with a list of
the length of service with the Company or its Affiliates for each of the Employees. For purposes
of computing deductible amounts (or like adjustments or limitations on coverage) under any employee
welfare benefit plan (including any “employee welfare benefit plan” as defined in Section 3(1) of
ERISA), expenses and claims previously recognized for similar purposes under the applicable welfare
benefit plan of the Company or any Affiliate shall be credited or recognized under the comparable
plan maintained after the Closing Date by Buyer or its subsidiaries in which the Employees
participate.

          (c) Notwithstanding anything in paragraph (a) of this Section to the contrary, if any Employee
is discharged by the Company on or within 12 months after the Closing Date, then the Company shall
be responsible for severance for such discharged Employee, such severance payable to be determined
at the greater of the Company’s

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severance policy as set forth in Section 6.8(c) of the Disclosure Schedule or Buyer’s
then current severance policy, giving effect to the provisions of Section 6.8(b). The Company
shall be responsible and assume all liability for all notices or payments due to any Employee, and
all notices, payments, fines or assessments due to any government authority, pursuant to any
applicable foreign, Federal, state or local law, common law, statute, rule or regulation with
respect to the employment, discharge or layoff of employees by the Company after the Closing,
including WARN and any rules or regulations as have been issued in connection with the foregoing.

          (d) Buyer shall cause the Company to indemnify, defend and hold harmless the officers,
directors and employees of the Company to the same extent that such persons are entitled to
indemnification as of the date hereof pursuant to the Company’s Articles of Incorporation, Bylaws
and any agreements between such persons and the Company, for any acts or omissions prior to the
Closing Date. Until the seventh anniversary of the Closing Date, Buyer shall provide policies of
officers’ and directors’ liability insurance with reputable and financially sound carriers of at
least the same coverage and amount and containing terms and conditions that are no less favorable
in respect of acts or omissions occurring prior to the Closing Date covering each such person
currently covered by such policies in effect of the date hereof.

          (e) Seller shall retain all liabilities for claims incurred by an Employee (and his or her
eligible spouse and dependents) on or prior to the Closing Date under the Plans that are welfare
benefit plans within the meaning of Section 3(1) or ERISA and all short term disability and salary
continuation plans or arrangements (the “Welfare Plans”). For this purpose claims under
any medical, dental, vision or prescription drug plan will be deemed to be incurred on the date
that the service giving rise to such claim is performed and not when such claim is made; provided,
however, that with respect to claims relating to hospitalization the claim will be deemed to be
incurred on the first day of such hospitalization and not on the date that such services are
performed. Claims for disability under any long or short term disability plan or arrangement will
be incurred on the date the Employee is first absent from work because of the condition giving rise
to such disability and not when the Employee is determined to be eligible for benefits under the
applicable Welfare Plan or other arrangement. Seller will provide any continuation coverage
required under COBRA to each “qualified beneficiary” (as defined in COBRA) whose first “qualifying
event” (as defined in COBRA) occurs on or prior to the Closing Date. The Company shall be
responsible for the continuation of health plan coverage, in accordance with the requirements of
COBRA for any Employee or a qualified beneficiary under a Company health plan who first has a
qualifying event after the Closing Date.

          (f) Effective as of the Closing Date, Seller shall transfer, or cause to be transferred, to
Buyer an amount, in cash, equal to the excess, if any, of the aggregate 2006 contributions of all
Employees then participating in Seller’s or its Affiliate’s flexible benefits plan (the “Seller
Flexible Benefits Plan”), over the aggregate 2006 reimbursements to all Employees under such
plan. Buyer shall cause such amounts to be credited to each such employee’s accounts under Buyer’s
(or one of its affiliate’s) corresponding flexible benefit plan (the “Buyer Flexible Benefits
Plan”) which shall be established and in effect for such employees as of the Closing Date, and
all claims for

37

 

reimbursement which have not been paid as of the date of the transfer to Buyer and credited
under the Buyer Flexible Benefits Plan shall be paid pursuant to and under the terms of the Buyer
Flexible Benefits Plan. In connection with such transfer, Buyer shall deem that such employees’
deferral elections made under the Seller Flexible Benefits Plan for the 2006 calendar year shall
continue in effect under the Buyer Flexible Benefits Plan for the remainder of the 2006 calendar
year following the Closing Date.

          (g) Buyer shall cause the Company to recognize and provide all accrued but unused vacation and
personal days as of the Closing Date to the extent reflected on the Most Recent Balance Sheet.

          (h) On the date of this Agreement, Buyer and each of the key Company Employees designated by
Buyer shall enter into agreements which shall provide for the terms of such employees employment
after the Closing Date.

          (i) To the extent Seller and the Company deem advisable, Company Employees shall become fully
vested in their accounts under the Tekelec 401(k) Plan.

          6.9 Certain Tax Matters

          (a) Seller shall accurately prepare and file all federal Income Tax Returns and all other
Income Tax Returns with respect to the Company for all periods ending on or prior to the Closing
Date. Such Tax Returns shall include any gain or income recognized by the Company as a result of:
(i) the distribution by the Company of shares of stock of Santera Systems Inc. to Seller in
November, 2003; (ii) the distribution by the Company to Seller of intellectual property and
associated rights comprising and related to the ASi 4000 technology on or before the Closing Date;
and (iii) the balance in the deferred revenue account of the Company on December 31, 2005
determined pursuant to Revenue Procedure 2004-34. Seller shall be responsible for the payment of
all Taxes with respect to such Tax Returns. Seller shall also be responsible for (i) the accurate
preparation of all Non-Income Tax Returns that are required to be filed with respect to the Company
that are due before the Closing Date and (ii) for the payment of all Taxes payable with respect
thereto. Buyer and its authorized representatives shall have the right to review and audit all
Income Tax Returns of the Company that are required to be filed after the Closing Date, provided
that in the case of the federal Income Tax Return, such review and audit shall be limited to the
portions that relate to the Company and the supporting detail and work papers. Buyer and Seller
agree to consult and resolve in good faith any issues arising as a result of the review and audit
of such Tax Return by Buyer or its authorized representative. If, after the Closing Date, Buyer or
the Company pays any such Taxes for which Seller is responsible, Seller shall reimburse Buyer or
the Company within 5 days after the date Seller is notified by Buyer or the Company that such Taxes
were paid. The covenants set forth in Section 4.18(a) of the Disclosure Schedule are
hereby incorporated into this Agreement in their entirety.

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          (b) Buyer or the Company shall accurately prepare and file all Non-Income Tax Returns for the
Company for all periods ending prior to the Closing Date that are required to be filed after the
Closing Date. Seller shall cooperate with Buyer in filing and causing to be filed such Tax
Returns. Seller shall be responsible for payment of, and shall pay when due, any Non-Income Taxes
shown due on such returns or that are otherwise payable with respect to such Tax Returns. If,
after the Closing Date, Buyer or the Company pays any such Non-Income Taxes for which Seller is
responsible, Seller shall reimburse Buyer or the Company within 5 days after the date Seller is
notified by Buyer or the Company that such Taxes were paid.

          (c) Buyer shall prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company for all Straddle Periods. All Taxes with respect to the Company attributable to
Pre-Closing Periods shall be allocated to and paid by Seller, except to the extent such Taxes have
been previously paid by Seller including amounts paid in respect of estimated Taxes, and all Taxes
with respect to the Company attributable to Post-Closing Periods shall be allocated to and paid by
Buyer. In the case of any Taxes with respect to the Company for a Straddle Period, the portion of
such Taxes that are allocated to the Pre-Closing Period shall (x) be deemed to be the amount that
would be payable if the relevant Tax period ended as of the Closing Date pursuant to an interim
closing of the books in the case of all Income Taxes with respect to the Company and any Non-Income
Taxes with respect to the Company not described in (y) below and (y) in the case of Non-Income
Taxes with respect to the Company that cannot be allocated based upon an interim closing of the
books (e.g., property or net worth taxes), be deemed to the amount of such Taxes for the entire
Taxable period multiplied by a fraction, the numerator of which is the total number of days in that
portion of such Taxable period ending on the Closing Date and the denominator of which is the total
number of days in such Tax period. Seller shall pay to Buyer within 5 days after the date Seller
is notified that Taxes with respect to the Company attributable to a Straddle Period were paid by
Buyer an amount equal to the portion of such Taxes attributable to the Pre-Closing Period and shall
indemnify Buyer against such portion of such Taxes. All determination necessary to give effect to
the foregoing allocations shall be made in a manner consistent with prior practice of Seller.

          (d) With respect to any Tax Return of the Company required to be filed by Buyer or the Company
after the Closing Date for Pre-Closing Periods or Straddle Periods, Seller and its authorized
representatives shall have the right to review and audit such Tax Returns prior to filing of the
Tax Returns. Buyer and Seller agree to consult and resolve in good faith any issues arising as a
result of the review and audit of such Tax Return by Seller or its authorized representative.

          (e) Buyer covenants that without the prior consent of Seller, which shall not be unreasonably
withheld, it will not, and will not cause or permit the Company or any Affiliate of Buyer, to make
or change any Tax election, amend any Tax Return or take any Tax position on any Tax Return, that
results in any increased Tax liability of the Company or Seller in respect of any Pre-Closing Tax
Period. Notwithstanding the foregoing, consent of Seller shall not be required to the extent any
foregoing action by Buyer or Company is required by applicable law.

39

 

          (f) Buyer and Seller agree to furnish or cause to be furnished to each other, upon written
request, as promptly as practicable, such information (including access to books and records) and
assistance relating to the Company as is reasonably necessary for the filing of any Tax Return, for
the preparation for any audit, and for the prosecution or defense of any claim, suit or proceeding
relating to any proposed adjustment. Buyer and Seller shall cooperate with each other in the
conduct of any audit or other proceedings involving the Company for any Tax purposes and each shall
execute and deliver such powers of attorney and other documents as are necessary to carry out the
intent of this subsection. Any Tax audit or other Tax proceeding shall be deemed to be a third
party claim subject to the procedures set forth in Section 9.6 of this Agreement.

          (g) Buyer shall promptly pay or shall cause prompt payment to be made to Seller of all refunds
of Taxes and interest thereon received by, or credited against the Tax liability of Buyer, any
Affiliate of Buyer or the Company attributable to Taxes paid by Seller or the Company with respect
to any Pre-Closing Tax Period or any portion of the Straddle Period prior to the Closing Date. If,
with respect to a Tax Return required to be filed by the Company, Seller reasonably determines that
the Company is entitled to file a claim for refund or an amended Tax Return with respect to a
Pre-Closing Tax Period, Buyer shall, upon Seller’s reasonable request, cause the Company to file
all such claims or amended Tax Returns; provided that Buyer shall not be required to cause the
Company to file any such claim or amended Tax Return if so doing (i) could have the effect of
increasing the Tax liability of Buyer or the Company in any Post-Closing Tax Period or (ii) in
Buyer’s reasonable judgment is contrary to applicable law. Seller shall reimburse Buyer and
Company for all reasonable expenses incurred to comply with Seller’s request, including any third
party professional, legal or accounting fees.

          (h) Notwithstanding any other provisions of this Agreement to the contrary, all transfer,
documentary, sales, use, stamp, registration, and other such Taxes and fees (including any
penalties and interest) incurred in connection with the transactions contemplated by this Agreement
shall be paid by Buyer. Buyer shall at its own expense accurately file or cause to be filed all
necessary Tax Returns and other documentation with respect such Taxes and timely pay all such
Taxes.

          6.10 Exclusivity

          From and after the date of this Agreement until the earlier of the
Closing Date or termination of this Agreement pursuant to Article VIII, Seller shall not, directly
or indirectly, solicit offers from, or in any manner initiate or encourage the submission of any
proposal of, or enter into negotiations or agreement with any third party relating to the
acquisition of all or substantially all of the Company’s capital stock or assets, including any
acquisition structured as a tender offer, exchange offer, merger, consolidation, recapitalization
or share exchange.

          6.11 Disclosure Schedule

          Notwithstanding any specific reference to the disclosure of
any matter pursuant to any Section of the Disclosure Schedule, all disclosures made pursuant to any

40

 

Section hereunder or on the Disclosure Schedule shall be deemed made for all other Sections to
which such disclosure may apply to the extent its relevance to such other Sections is reasonably
apparent, and any headings or captions on any Section herein or therein are for convenience of
reference only.

          6.12 Non-Competition; Non-Solicitation

          (a) For a period of three years from and after the Closing Date, Seller shall not, and shall
cause its majority owned subsidiaries not to, directly or indirectly, own, manage, engage in,
operate, control, work for, consult with, render services for, do business with, maintain any
interest in (proprietary, financial or otherwise) or participate in the ownership, management,
operation or control of, any business, whether in witness corporate, proprietorship or partnership
form or otherwise, engaged in the work force management call center contact business as currently
conducted by the Company (a “Restricted Business”); provided, however, that
the restrictions contained in this Section 6.12(a) shall not restrict the acquisition by Seller,
directly or indirectly, of less than 5% (in the aggregate) of the outstanding capital stock of any
publicly traded company engaged in a Restricted Business.

          (b) For a period of two years from and after Closing Date, except with Buyer’s consent, Seller
shall not, and shall cause its directors, officers, employees and majority owned subsidiaries not
to, directly or indirectly (i) cause, solicit, induce or encourage any employees of the Company to
leave such employment or hire, employ or otherwise engage any such individual; or (ii) cause,
induce or encourage any material actual or prospective client, customer, supplier or licensor of
the Company (including any former customer of the Company and any Person that becomes a customer of
the Company after the Closing) or any other Person who has a material business relationship with
the Company to terminate or modify any such actual or prospective relationship.

          (c) For the avoidance of doubt, and as a material inducement to Seller to enter into this
Agreement, the parties agree that, notwithstanding anything to the contrary in the foregoing
provisions of Section 6.12, in the event that a person, firm, corporation or other business
acquires Seller or any of its majority-owned subsidiaries by merger, consolidation or otherwise
(any such person, firm, corporation or other business, an “Acquiror”), such Acquiror and its
Affiliates (other than Seller) shall not be deemed to be in breach, default or violation of any of
the covenants set forth in Section 6.12 above unless, in taking any actions that would constitute a
breach or violation of the obligation of Seller under the provisions of Section 6.12, such Acquiror
or any of its Affiliates (other than Seller) uses: (a) the Company’s corporate name or trademarks
in existence as of the Closing Date; (b) any Company Technology or Company Intellectual Property
Rights in existence as of the Closing Date; or (c) the services of any individuals who are
employees of the Company as of the Closing Date.

          (d) The covenants and undertakings contained in this Section 6.12 relate to matters which are
of a special, unique and extraordinary character and a

41

 

violation of any of the terms of this Section 6.12 will cause
irreparable injury to Buyer, the amount of which will be impossible
to estimate or determine and which cannot be adequately compensated.
Accordingly, the remedy at law of any breach of this Section 6.13
will be inadequate. Therefore, Buyer will be entitled to seek a
temporary and permanent injunction, restraining order or other
equitable relief from any court of competent jurisdiction in the
event of any breach of this Section 6.12 without the necessity of
proving actual damage or posting any bond whatsoever. The rights and
remedies provided this Section 6.12 are cumulative and in addition to
any other rights and remedies which Buyer may have hereunder or at
law or in equity.

	violation of any of the terms of this Section 6.12 will cause irreparable injury to Buyer, the
amount of which will be impossible to estimate or determine and which cannot be adequately
compensated. Accordingly, the remedy at law of any breach of this Section 6.13 will be inadequate.
Therefore, Buyer will be entitled to seek a temporary and permanent injunction, restraining order
or other equitable relief from any court of competent jurisdiction in the event of any breach of
this Section 6.12 without the necessity of proving actual damage or posting any bond whatsoever.
The rights and remedies provided this Section 6.12 are cumulative and in addition to any other
rights and remedies which Buyer may have hereunder or at law or in equity.

          6.13 Remittances of Receivables

          After the Closing, if Seller or any of its
Affiliates receive any accounts receivables or other amounts that are otherwise properly due and
owing to the Company or Buyer, Seller shall remit, or shall cause to be remitted, such amount to
Buyer within 5 Business Days of receipt of such funds.

          6.14 Termination of Certain Contracts

          On or prior to the Closing Date, Seller agrees
to terminate, or cause to be terminated, all Contracts set forth in Section 4.24 of the Disclosure
Schedules.

          6.15 Audited Financial Statements

          At least five Business Days prior to the Closing,
Seller shall deliver to Buyer audited balance sheets for the fiscal years ended December 31, 2005,
2004 and 2003, and the related statements of income, changes in stockholders’ equity and cash flow
for the fiscal years ended December 31, 2005, 2004 and 2003 (the “Audited Financial
Statements”). The Audited Financial Statements shall (i) be prepared in accordance with GAAP
and the books and records of the Company and (ii) present fairly, in all material respects, the
financial position of the Company as of the date thereof, and the results of operations of the
Company for the period indicated.

          6.16 Blue Pumpkin Software License

          On or prior to the Closing Date, the Company
shall assign to Buyer all of its rights and obligations under the license granted to it under the
Blue Pumpkin Licensed Patents, as defined below, pursuant to the Confidential Settlement and Cross
License Agreement dated as of April 6, 2006 by and between Blue Pumpkin Software LLC, Blue Pumpkin
Software, Inc. and the Company (the “Blue Pumpkin Cross-License Agreement”); provided,
however, that Buyer acknowledges and agrees that the Company may assign, on or prior to the
Closing Date, its right to receive royalty payments under Section 6 of the Blue Pumpkin
Cross-License Agreement to Seller. “Blue Pumpkin Licensed Patents” shall have the meaning
set forth in Section 1.5 of the Blue Pumpkin Cross-License Agreement.

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ARTICLE VII

CONDITIONS TO OBLIGATIONS OF THE PARTIES

          7.1 Conditions to Each Party’s Obligation

          The respective obligation of each party to
consummate the transactions contemplated herein is subject to the satisfaction at or prior to the
Closing of the following conditions:

          (a) No statute, rule or regulation shall have been enacted, entered, promulgated or enforced
by any court or Governmental Authority which prohibits or restricts the consummation of the
transactions contemplated hereby;

          (b) There shall not be in effect any judgment, order, injunction or decree of any court of
competent jurisdiction enjoining the consummation of the transactions contemplated hereby;

          (c) There shall not be any suit, action, investigation, inquiry or other proceeding
instituted, pending or threatened by any Governmental Authority which seeks to enjoin or otherwise
prevent consummation of the transactions contemplated hereby; and

          (d) All necessary regulatory notices, consents, authorizations and other approvals required
for the consummation of the transactions contemplated herein shall have been obtained and any
waiting periods applicable to the transactions contemplated by this Agreement under applicable U.S.
antitrust or trade regulation laws and regulations, including under the H-S-R Act, shall have
expired or been terminated.

          7.2 Conditions to Obligations of Seller

          The obligations of Seller to consummate the
transactions contemplated hereby are further subject to the satisfaction (or waiver) at or prior to
the Closing of the following conditions:

          (a) The representations and warranties of Buyer contained in Article V of this Agreement shall
be true and correct in all material respects at the date hereof and as of the Closing as if made at
and as of such time, except for (i) representations and warranties which are as of a specific date,
which representations and warranties will have been true as of such date and (ii) for
representations and warranties qualified by materiality, which representations and warranties will
be true and correct in all respects as of such date;

          (b) Buyer shall have performed in all material respects its obligations under this Agreement
required to be performed by it at or prior to the Closing pursuant to the terms hereof;

          (c) Buyer shall have delivered to Seller those items set forth in Section 2.6 hereof; and

43

 

          (d) Buyer shall have delivered to Seller a Certificate executed by an executive officer of
Buyer, dated as the Closing Date, to the effect that the conditions set forth in Sections 7.2(a)
and (b) have been satisfied.

          7.3 Conditions to Obligations of Buyer.

          The obligations of Buyer to consummate the
transactions contemplated hereby are further subject to the satisfaction (or waiver) at or prior to
the Closing of the following conditions:

          (a) The representations and warranties of Seller contained in Article IV of this Agreement
shall be true and correct in all material respects at the date hereof and as of the Closing as if
made at and as of such time, except for (i) representations and warranties which are as of a
specific date, which representations and warranties will have been true as of such date and (ii)
for representations and warranties qualified by materiality or Material Adverse Effect, which
representations and warranties will be true and correct in all respects as of such date;

          (b) Seller shall have performed in all material respects its obligations under this Agreement
required to be performed by it at or prior to the Closing pursuant to the terms hereof;

          (c) Seller shall have delivered to Buyer those items set forth in Section 2.5 hereof;

          (d) Seller shall have delivered to the Buyer a Certificate executed by an executive officer of
Seller, dated as the Closing Date, to the effect that the conditions set forth in Sections 7.3(a)
and (b) have been satisfied;

          (e) There shall not have been a Material Adverse Effect since the date of this Agreement;

          (f) The consents, approvals, waivers and notices set forth in Section 7.3(f) of the
Disclosure Schedule shall have been obtained;

          (g) Buyer shall have received an opinion dated as of the Closing Date of Bryan Cave LLP,
counsel to Seller, substantially in the form attached hereto as Exhibit B;

          (h) Seller shall have completed and delivered to Buyer the Audited Financial Statements, and
such Audited Financial Statements shall not be materially adversely different from the Unaudited
Financial Statements; and

          (i) The Contracts set forth in Section 4.24 of the Disclosure Schedule shall have
been terminated.

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ARTICLE VIII

TERMINATION; AMENDMENT; WAIVER

          8.1 Termination

          This Agreement may be terminated and the transactions contemplated
hereby may be abandoned prior to the Closing as follows:

          (a) At any time, by mutual written consent of Seller and Buyer;

          (b) By Buyer, on the one hand, or by Seller, on the other hand, if any court of competent
jurisdiction in the United States or any United States governmental body shall have issued a final
and non appealable judgment, order, injunction, decree, or ruling permanently restraining,
enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;
provided that no party hereto affiliated with the person who brought the action seeking the
permanent enjoinment of the transactions contemplated hereby may seek termination of this Agreement
pursuant to this Section 8.1(b);

          (c) If the transactions contemplated hereby or any of the conditions to Closing hereunder
become impossible to perform or obtain, as applicable, provided that no party hereto who caused
such impossibility may seek termination of this Agreement pursuant to this Section 8.1(c);

          (d) Buyer may terminate this Agreement by giving written notice to Seller at any time prior to
the Closing in the event (i) Seller has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, Buyer has notified Seller and the Company of
the breach, and the breach has continued without cure for a period of ten business days after the
notice of breach or (ii) there has been a Material Adverse Effect;

          (e) Seller may terminate this Agreement by giving written notice to Buyer at any time prior to
the Closing in the event Buyer has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, Seller has notified Buyer of the breach, and
the breach has continued without cure for a period of ten business days after the notice of breach;
or

          (f) At any time on or after September 1, 2006 (or such later date as Seller and Buyer shall
have agreed in writing), by either Seller, on the one hand, or Buyer, on the other hand, if the
Closing shall not have occurred on or prior to such date (or such later date as Seller and Buyer
shall have agreed in writing); provided that no party hereto may seek termination of this
Agreement pursuant to this Section 8.1(f) if the failure of any condition precedent under Article
VII results primarily from such party breaching any representation, warranty or covenant contained
in this Agreement.

45

 

          8.2 Procedure and Effect of Termination

          In the event of the termination of this Agreement and the abandonment of the transactions
contemplated hereby pursuant to Section 8.1 hereof, written notice thereof shall forthwith be given
by the party so terminating to the other party and this Agreement shall terminate and the
transactions contemplated hereby shall be abandoned, without further action by Seller, on the one
hand, or Buyer, on the other hand. If this Agreement is terminated pursuant to Section 8.1 hereof:

          (a) Each party shall redeliver all documents, work papers and other materials of the other
parties relating to the transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same, and all confidential information received by
any party hereto with respect to the other party shall be treated in accordance with the
Confidentiality Agreement and Section 6.2(b) hereof;

          (b) All filings, applications and other submissions made pursuant hereto shall, at the option
of Seller, and to the extent practicable, be withdrawn from the agency or other person to which
made; and

          (c) There shall be no liability or obligation hereunder on the part of Seller or Buyer or any
of their respective Affiliates, except that Seller or Buyer, as the case may be, may have liability
to the other party if the basis of termination is a willful, material breach by Seller or Buyer, as
the case may be, of one or more of the provisions of this Agreement, and except that the
obligations provided for in Sections 6.2(c), 8.2(a), 8.2(b) and 10.1 hereof shall survive any such
termination.

ARTICLE IX

SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION

          9.1 Survival of Representations, Warranties and Agreements

          The representations and
warranties of the parties contained in this Agreement shall survive the Closing through and
including the 12-month anniversary of the Closing Date; provided, however, that (a)
the representations and warranties contained in Sections 4.4 (Ownership of the Shares), 4.18
(Taxes), 4.22 (Certain Fees), 5.1 (Organization and Authority of Buyer) and 5.7 (Certain Fees)
shall survive the Closing until the expiration of the applicable statute of limitations and (b) the
covenants and agreements of the parties contained in this Agreement which by their terms require
performance after the Closing Date shall survive until sixty (60) days after the end of the period
of performance thereunder (in each case, as applicable, the “Indemnity Period”);
provided, however, that any obligations under Sections 9.2 and 9.3 shall not
terminate with respect to any Damages as to which the Person to be indemnified shall have given
notice (stating in reasonable detail the basis of the claim for indemnification) to the
indemnifying party in accordance with Section 9.4 before the termination of the applicable
Indemnity Period.

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          9.2 Seller’s Agreement to Indemnify

          Subject to the terms and conditions set forth herein, from and after the Closing, Seller
shall indemnify and hold harmless Buyer and its directors, officers, employees, Affiliates,
controlling persons, agents and representatives and their successors and assigns (collectively, the
“Buyer Indemnitees”) from and against all liability, demands, claims, actions or causes of
action, assessments, losses, damages, costs and expenses (including the reasonable fees and
expenses of attorneys and experts) (collectively “Damages”) asserted against or incurred by
any Buyer Indemnitee, and pay to the applicable Buyer Indemnitee, the amount of all Damages,
whether or not involving a third party claim, resulting from or arising out of (i) any breach or
inaccuracy in any representation or warranty made by Seller under this Agreement, or (ii) any
breach or violation of any covenant or agreement made in this Agreement by Seller.

          9.3 Buyer’s Agreement to Indemnify

          Subject to the terms and conditions set forth
herein, from and after the Closing, Buyer shall indemnify and hold harmless Seller and its
directors, officers, employees, Affiliates, controlling persons, agents and representatives and
their successors and assigns (collectively, the “Seller Indemnitees”) from and against all
Damages asserted against or incurred by any Seller Indemnitee, and pay to the applicable Seller
Indemnitee the amount of all Damages, whether or not involving a third party claim, resulting from
or arising out of (i) any breach or inaccuracy in any representation or warranty made by Buyer
under this Agreement, or (ii) a breach or violation of any covenant or agreement made in this
Agreement by Buyer.

          9.4 Notice of Claims

          (a) Upon obtaining knowledge of any Damages, the party entitled to indemnification (the
“Injured Party”) shall promptly deliver written notice (a “Notice of Claim”) to the
party liable for such indemnification (the “Indemnifying Party”) which Notice of Claim
shall set forth in reasonable detail and to the extent then known the basis of the claim for
Damages and, to the extent reasonably practicable, a reasonable estimate of the amount thereof.
The failure of an Injured Party to timely deliver a Notice of Claim to the Indemnifying Party shall
not release the Indemnifying Party from its indemnity obligations under this Article IX, except to
the extent that the Indemnifying Party is materially prejudiced in its ability to defend such
claim.

          (b) The Injured Party and Indemnifying Party shall attempt for not less than 30 days to
negotiate a mutually satisfactory resolution of the matter set forth in a Notice of Claim. In the
event such parties are not able to agree on a mutually satisfactory resolution, either party may
seek to resolve the depute by litigation in any court of competent jurisdiction in accordance with
the provision of Section 10.8 hereof.

47

 

          9.5 General Limitations; Exclusive Remedy

          (a) Each Indemnifying Party shall be obligated to indemnify the Injured Party only for those
claims giving rise to Damages as to which the Injured Party has given to the Indemnifying Party
written notice thereof prior to the end of the applicable Indemnity Period.

          (b) The provisions of this Article IX shall constitute the exclusive remedy for money damages
of the parties with respect to any and all Damages resulting from or arising out of any breach of
any representation, warranty, covenant or other provision of this Agreement, or otherwise resulting
from or arising out of the transactions contemplated hereby and which may be asserted on or after
the Closing (other than any claim relating to fraud).

          (c) Seller’s obligations to indemnify the Buyer Indemnitees pursuant to Section 9.2 hereof
with respect to a breach of a representation, warranty, covenant or agreement (excluding the
covenants and agreements set forth in Sections 2.3, 3.2 and 6.9(a)) contained in this Agreement are
subject to the following limitations:

     (i) No indemnification shall be made by Seller unless the aggregate amount of
Damages exceeds $2,000,000 and, in such event, indemnification shall be made by
Seller from first dollar provided that such limitation shall not apply to Damages
related to breaches of Sections 4.2 (Authorization), 4.3 (Common Stock), 4.4
(Ownership of the Shares) or 4.18 (Taxes);

     (ii) In no event shall Seller’s aggregate obligation to indemnify the Buyer
Indemnitees exceed 20% of the Purchase Price, provided that such aggregate
obligation shall not apply to Damages related to breaches of Sections 4.2
(Authorization), 4.3 (Common Stock), 4.4 (Ownership of the Shares) or 4.18 (Taxes).

          (d) The amount of any Damages that may be subject to indemnification hereunder shall be
reduced by any amount actually recovered by an Injured Party under insurance policies with respect
to such Damages.

          (e) Solely for purposes of calculating any Damages hereunder as a result of any breach or
inaccuracy in any representation or warranty or breach or violation of any covenant or agreement
made in this Agreement, any materiality or Material Adverse Effect qualifications in the
representations, warranties, covenants and agreements shall be disregarded.

          9.6 Third Party Indemnification

          (a) If the Injured Party settles or compromises any third-party claims, or initiates action
which is for the purpose in whole or in part of causing a claim to be asserted, prior to giving a
Notice of Claim to the Indemnifying Party, the Indemnifying Party shall be released from its
indemnity obligation.

48

 

          (b) With respect to any action or any claim set forth in a Notice of Claim relating to a
third-party claim, the Indemnifying Party may defend, in good faith and at its expense, any such
claim or demand, and the Injured Party, at its expense, shall have the right, but not the
obligation, to participate in (but not control) at its expense in the defense of any such
third-party claim so long as (i) the Indemnifying Party shall have acknowledged in writing to the
relevant Injured Party its obligation to indemnify such Injured Party as provided hereunder, (ii)
the third-party claim involves primarily money damages and (iii) the Indemnifying Party conducts
the defense of the third-party claim actively and diligently. So long as the Indemnifying Party is
defending any such third-party claim, the Injured Party shall not settle or compromise such
third-party claim without the consent of the Indemnifying Party. If such claim is settled by the
Injured Party without the Indemnifying Party’s consent, the Injured Party shall be deemed to have
waived all rights hereunder for money damages arising out of such claim. The Indemnifying Party
may settle or compromise such third-party claim without the consent of the Injured Party, if the
settlement or compromise involves only the payment of monetary damages and included in such
settlement or compromise as an unconditional term thereof is the delivery to Injured Party of a
written release from all liability in respect of such third-party claim. Otherwise, the
Indemnifying Party may not settle or compromise such third-party claim without the consent of the
Injured Party, which consent shall not be unreasonably withheld. The Injured Party shall make
available to the Indemnifying Party or its representatives all records and other materials
reasonably required for use in contesting any third-party claim. The Injured Party shall cooperate
fully with the Indemnifying Party in the defense of all such claims.

          (c) If the Indemnifying Party fails to assume the defense of any such third-party claims,
within thirty (30) days after receipt of a Notice of Claim (or such shorter period of time that the
Injured Party may be required to respond to any suit or governmental action), the Injured Party
shall have the right to undertake the defense, settle or compromise any such third-party claim at
the risk and expense of the Indemnifying Party, subject to the right of the Indemnifying Party to
assume the defense of such claim at any time prior to settlement, compromise or final determination
thereof. The failure of the Indemnifying Party to respond in writing to the aforesaid notice of
the Injured Party with respect to such third-party claim within thirty (30) days after receipt
thereof shall be deemed an election not to defend same. The Indemnifying Party will not, however,
be responsible for any Damages if and to the extent that they arise from action taken or omitted to
be taken by the Injured Party in bad faith, fraudulently, negligently or as a result of a breach of
this Agreement by the Injured Party.

          9.7 Indemnity Payments

          Except as provided by applicable law, for Tax purposes any
indemnification payments shall be treated as adjustments to purchase price.

49

 

ARTICLE X

MISCELLANEOUS

          10.1 Fees and Expenses

          Except as otherwise provided herein, each of Seller, on the one hand, and Buyer, on the
other hand, shall pay all fees and expenses incurred by, or on behalf of, such party in connection
with, or in anticipation of, this Agreement and the consummation of the transactions contemplated
hereby, including fees and expenses of attorneys, accountants and financial advisors, except any
fees or expenses incurred to obtain the third party consents, approvals, waivers and notices set
forth in Section 7.3(f) of the Disclosure Schedule shall be borne by Seller. In addition,
each of Seller, on the one hand, and Buyer, on the other hand, shall indemnify and hold harmless
the other party from and against any and all claims or liabilities for financial advisory and
finders’ fees incurred by reason of any action taken by such party or otherwise arising out of the
transactions contemplated by this Agreement by any person claiming to have been engaged by such
party.

          10.2 Further Assurances

          From time to time after the Closing Date, at the reasonable
request of another party hereto and at the expense of the party so requesting, each of the parties
hereto shall execute and deliver to such requested party such documents and take such other action
as such requesting party may reasonably request in order to consummate more effectively the
transactions contemplated hereby. Seller shall not, in connection therewith or as a result
thereof, incur any legal liability beyond that provided for in this Agreement.

          10.3 Notices

          All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and may be given by any
of the following methods: (a) personal delivery; (b) facsimile transmission; (c) registered or
certified mail, postage prepaid, return receipt requested; or (d) overnight delivery service.
Notices shall be sent to the appropriate party at its address or facsimile number given below (or
at such other address or facsimile number for such party as shall be specified by notice given
hereunder):

If to Buyer to:

c/o NICE-Systems Ltd.

8 Hapnina Street POB 690

Ra’anana 43107 Israel

Attention: General Counsel

Facsimile: (972) 9-743-3520

50

 

with a copy to:

Gibson, Dunn & Crutcher LLP

200 Park Avenue

New York, NY 10166-0193

Attention: Barbara L. Becker

Facsimile: (212) 351-6202

Telephone: (212) 351-4062

If to Seller to:

Tekelec

5200 Paramount Parkway

Morrisville, NC 27560

Attn: General Counsel

Facsimile: (919) 461-6845

Telephone: (919) 460-5500

with a copy to:

Bryan Cave LLP

120 Broadway, Suite 300

Santa Monica, CA 90401

Attn: Katherine F. Ashton

Facsimile: (310) 576-2200

Telephone: (310) 576-2100

All such notices, requests, demands waivers and communications shall be deemed received upon (i)
actual receipt thereof by the addressee, (ii) actual delivery thereof to the appropriate address or
(iii) in the case of facsimile transmission, upon transmission thereof by the sender and issuance
by the transmitting machine of a confirmation slip that the number of pages constituting the notice
have been transmitted without error.

          10.4 Severability

          Should any provision of this Agreement for any reason be declared
invalid or unenforceable, such decision shall not affect the validity or enforceability of any of
the other provisions of this Agreement, which remaining provisions shall remain in full force and
effect and the application of such invalid or unenforceable provision to persons or circumstances
other than those as to which it is held invalid or unenforceable shall be valid and enforced to the
fullest extent permitted by law.

          10.5 Binding Effect; Assignment

          This Agreement and all of the provisions hereof
shall be binding upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Neither this Agreement nor any of the rights, interests or
obligations

51

 

hereunder shall be assigned, directly or indirectly, including by operation of law, by any
party hereto without the prior written consent of the other party hereto; provided however that
Buyer may assign its rights and obligations hereunder to any subsidiary of Buyer. In the event
that Buyer exercises its right to assign this Agreement, Buyer shall deliver an executed guarantee
to Seller in the form of Exhibit C hereto.

          10.6 No Third Party Beneficiaries

          This Agreement is solely for the benefit of
Seller, and its successors and permitted assigns, with respect to the obligations of Buyer under
this Agreement, and for the benefit of Buyer, and its respective successors and permitted assigns,
with respect to the obligations of Seller, under this Agreement, and this Agreement shall not be
deemed to confer upon or give to any other third party any remedy, claim, liability, reimbursement,
cause of action or other right, except for the parties entitled to the benefits of Sections 6.8(c),
9.2 and 9.3.

          10.7 Interpretation

          (a) The article and section headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any way affect the meaning
or interpretation of this Agreement.

          (b) The parties have participated substantially in the negotiation and drafting of this
Agreement and agree that no ambiguity herein should be construed against the draftsman.

          10.8 Jurisdiction and Consent to Service

          Each of Seller and Buyer (a) agrees that
any suit, action or proceeding arising out of or relating to this Agreement may be brought solely
in the state courts having competent jurisdiction within the County of New York in the State of New
York or Federal courts having competent jurisdiction within the southern district of New York; (b)
consents to the exclusive jurisdiction of each such court in any suit, action or proceeding
relating to or arising out of this Agreement; (c) waives any objection which it may have to the
laying of venue in any such suit, action or proceeding in any such court; and (d) agrees that
service of any court paper may be made in such manner as may be provided under applicable laws or
court rules governing service of process.

          10.9 Attorneys’ Fees

          In the event that litigation arises in connection with
enforcement of any provision of this Agreement, the prevailing party in such litigation shall be
entitled to recover its reasonable attorneys’ fees and expenses, in addition to any other relief to
which it may be deemed entitled.

52

 

          10.10 Governing Law

          This Agreement shall be governed by and construed in accordance with the laws of the State
of New York (regardless of the laws that might otherwise govern under applicable principles of
conflicts of laws thereof) as to all matters, including but not limited to matters of validity,
construction, effect, performance and remedies.

          10.11 Specific Performance

          The parties acknowledge and agree that any breach of the
terms of this Agreement would give rise to irreparable harm for which money damages would not be an
adequate remedy and accordingly the parties agree that, in addition to any other remedies, each
shall be entitled to enforce the terms of this Agreement by a decree of specific performance
without the necessity of proving the inadequacy of money damages as a remedy.

          10.12 Entire Agreement

          This Agreement, the Confidentiality Agreement and the
Disclosure Schedule and other documents referred to herein or delivered pursuant hereto which form
a part hereof constitute the entire agreement among the parties with respect to the subject matter
hereof and supersede all other prior agreements and understandings, both written and oral, between
the parties or any of them with respect to the subject matter hereof.

          10.13 Amendment, Modification and Waiver

          This Agreement may be amended, modified or
supplemented at any time by written agreement of Seller and Buyer. Any failure of Seller or Buyer
to comply with any term or provision of this Agreement may be waived, with respect to the Buyer, on
the one hand, by Seller, and with respect to Seller, on the other hand, by Buyer, by an instrument
in writing signed by or on behalf of the appropriate party, but such waiver of failure to insist
upon strict compliance with such term or provision shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure to comply.

          10.14 Counterparts

          This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but which together shall constitute one and the same agreement.

* * * * * * * *

(signatures appear on next page)

53

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first above written.

	 	 	 	 	 
	Seller:	 TEKELEC

 	 
	 	By: /s/ William H. Everett	 
	 	 
	 
	 	Name:
Title:
 	 	William H. Everett
Senior Vice President 	 
	 	 	 	and Chief Financial Officer 	 
	 
	Buyer:	 NICE-SYSTEMS LTD.

 	 
	 	By: /s/ Haim Shani	 
	 	 
	 
	 	Name:	 	Haim Shani 	 
	 	Title:	 	Chief Executive Officer 	 
	 
	 	 	 
	 	By: /s/ Ran Oz	 
	 	 
	 
	 	Name:	 	Ran Oz 	 
	 	Title:	 	Chief Financial Officer 	 
	 

54

 

EXHIBIT A

FORM OF TRANSITION SERVICES AGREEMENT

     THIS TRANSITION SERVICES AGREEMENT (this “Agreement”) is made and entered into
effective as of the                      day of                     , 2006, by and between Tekelec, a California
corporation with its principal executive offices located at 5200 Paramount Parkway, Morrisville,
North Carolina 27560 (“Seller”), and [Nice-Systems Ltd.,] a                                                              corporation with its
principal executive offices located                     (“Buyer”).

RECITALS

     A. Buyer and Seller are parties to that certain Stock Purchase Agreement dated as of                     ,
2006 (the “Purchase Agreement”), pursuant to which Buyer is acquiring
from Seller all of the issued and outstanding shares of capital stock of its wholly owned
subsidiary, IEX Corporation, a Nevada corporation (the “Company”). All terms not otherwise
defined in this Agreement shall have the meanings ascribed to them in the Purchase Agreement.

     B. Seller has historically performed certain services for the benefit of and in connection
with the business of the Company (the “IEX Business”) and, in order to facilitate an
orderly transition to Buyer of the IEX Business following the closing of the transactions
contemplated by the Purchase Agreement (the “Closing”), Buyer has requested Seller to
perform, and Seller has agreed to perform, certain services for Buyer and the Company, all on the
terms and conditions set forth herein.

     NOW, THEREFORE, in consideration of the above and the mutual covenants contained herein, the
parties agree as follows:

          Provision of Transition Services by Seller.

     (a) Transition Services. During the term of this Agreement and in accordance with the
terms and conditions set forth herein, Seller shall make available and provide to Buyer certain
services performed by Seller for the benefit of and in connection with the IEX Business prior to
the Closing and certain other services, all as described in the Transition Service Schedules
attached hereto (collectively, the “Transition Services”). Each Transition Service
Schedule shall set forth, among other things, (i) the time period during which the Services set
forth therein will be provided; (ii) a reasonably detailed description of the Services to be
provided; (iii) the fees and charges or methodology for determining the fees and charges, if any,
to be paid by Buyer to Seller for the performance of the Services covered thereby; and (iv) any
other terms applicable thereto.

     (b) Duration of Transition Services. Seller shall provide the Transition Services
subject to a Transition Services Schedule for a period of up to the term specified therein, subject
to earlier termination as provided in Section 4.

     (c) Additional Services. After the Closing, the parties may agree upon services,
other than those described in the Transition Service Schedules attached hereto on the Closing Date,
that Seller will provide to Buyer pursuant to the terms of this Agreement. Notwithstanding the

 

 

foregoing, nothing in this Agreement shall obligate Seller to agree to provide any such
additional services under this Agreement. In the event that the parties agree upon any such
services, the parties shall execute and attach hereto additional Transition Service Schedules in
substantially the form of Exhibit A attached hereto, whereupon such additional services
shall be deemed included in the Transition Services.

     (d) Seller Employees. For the purpose of providing the Transition Services hereunder,
Seller agrees to make available to Buyer such employees of or consultants to Seller as shall be
necessary or appropriate, as determined by Seller in its sole and reasonable discretion, for the
performance by Seller of the Transition Services hereunder. Seller shall be responsible for and
shall timely pay any and all compensation and benefits payable to the employees of and consultants
to Seller who perform Transition Services hereunder, and such personnel shall not be entitled to
any of the benefits available to employees of Buyer.

     (e) Third Party Providers. Seller shall reasonably enforce its rights against any
third party providers that are engaged by Seller to provide transition services hereunder in the
event that such third party providers fail to provide such services in breach of their obligations
to do so.

     (f) Location of Performance of Services. Except as otherwise provided herein or as
otherwise agreed by the parties in writing, all employees of and consultants to Seller who perform
Transition Services hereunder shall perform such services from the premises of Seller (or its
affiliates) and not at the premises of the IEX Business and shall be available to perform such
services during their regular working hours as may reasonably be requested by Buyer and subject to
reasonable limitations on availability due to their other responsibilities as employees of or
consultants to Seller.

     (g) Program Managers. Seller and Buyer shall each designate a Program Manager who
shall be the primary point of contact between them for all matters relating to this Agreement. The
initial Program Managers are Don Anderson for Seller and Aviram Hadar for Buyer. Either party may
change its Program Manager by advance written notice to the other party hereto, provided the other
party approves such new Program Manager, which approval shall not be unreasonably withheld, delayed
or conditioned.

     (h) Status Meetings. During the term of this Agreement, at such time or times as the
Program Managers shall agree (and in any event at least once every month if so requested by Buyer),
Seller and Buyer shall hold status meetings (telephonically or in person, as the case may be). The
agenda for each such meeting shall include, without limitation, a review of (i) the status of the
transitioning of the conduct of the IEX Business to Buyer and of the Transition Services; (ii) the
Transition Services completed to date; and (iii) incomplete tasks and the expected dates of
completion.

          Standard of Care; Limitation of Liability.

     (a) Standard of Care. Seller shall perform all Transition Services hereunder in
accordance with the recent historical practices of Seller and shall exercise at least the same
degree of care as is exercised by Seller in performing the same or similar functions in the

2

 

ordinary course of its other businesses with the intention of transferring the operations of
the IEX Business to Buyer without any material interruption of or adverse effect on the IEX
Business.

     (b) Limitation of Liability; No Consequential Damages. THE LIABILITY OF SELLER TO
BUYER FOR ANY LOSS OR DAMAGE ARISING IN CONNECTION WITH PROVIDING THE TRANSITION SERVICES HEREUNDER
SHALL NOT EXCEED THE AMOUNT OF FEES, IF ANY, BILLED OR BILLABLE TO BUYER UNDER THIS AGREEMENT. IN
NO EVENT SHALL SELLER BE LIABLE TO BUYER FOR INDIRECT, SPECIAL, CONSEQUENTIAL (INCLUDING WITHOUT
LIMITATION BUSINESS INTERRUPTION) OR INCIDENTAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF
PROFITS OR DAMAGE TO OR LOSS OF USE OF ANY PROPERTY.

     (c) No Other Warranty. Except as may be expressly set forth in this Agreement, Seller
makes no representation or warranty whatsoever, express or implied, including, but not limited to,
any representation or warranty as to merchantability or fitness for a particular purpose, in
connection with this Agreement or the Transition Services provided under this Agreement.

               Fees and Expenses.

     (a) Fees. Seller acknowledges and agrees that except as provided in a Transition
Service Schedule attached hereto and subject to Section 3(b) with respect to the reimbursement of
out of pocket expenses, the consideration received by Seller under the Purchase Agreement includes
adequate consideration to Seller for the Transition Services to be performed by Seller hereunder.

     (b) Expenses. Buyer shall reimburse Seller for all out of pocket expenses that are
incurred by Seller and its employees in performing Transition Services under this Agreement. To
the extent such reimbursable expenses in any calendar month exceed the total amount of $25,000,
such expenses shall be required to have been approved in advance in writing by Buyer.

     (c) Invoicing. Within 30 days following the end of each calendar month during the
term hereof (and within 30 days following the termination or expiration of this Agreement if such
termination or expiration occurs other than at the end of a calendar month), Seller shall provide
to Buyer a written statement accounting in reasonable detail for fees (if any) reimbursable
expenses for the prior calendar month. Each statement shall have been approved and signed by
Seller’s Program Manager and shall be accompanied by any documentation that Buyer may reasonably
require, including, without limitation, receipts for each reimbursable expense in excess of
$100.00. Buyer shall reimburse all properly invoiced amounts within 45 days following Buyer’s
receipt of the statement therefor.

          Term and Termination.

     (a) Term. The term of this Agreement shall begin on the date hereof and shall expire
on the [one-year] anniversary of the date of this Agreement unless earlier terminated in accordance
with this Section 4 or unless the parties agree to earlier terminate this Agreement or to extend
such term in a writing signed by each of the parties hereto. This Agreement may be extended with
respect to one or more of the Services; provided, however, that any such extension

3

 

shall only apply to the Services for which this Agreement is specifically extended. The
parties may agree on an expiration date for a specific Service that is sooner than the scheduled
expiration of this Agreement by specifying such date in the Transition Service Schedule for that
Service.

     (b) Termination. Either party may terminate this Agreement, effective immediately,
upon written notice to the other party if such other party is in material breach or default with
respect to any material term or provision hereof and fails to cure the same within 30 days
following receipt from the non breaching party of written notice of said breach or default. Buyer
may terminate all or any portion of the Transition Services to be provided by Seller under this
Agreement for any or no reason at any time, effective immediately, upon written notice to Seller.
The termination of this Agreement shall not relieve Seller of its duty to cooperate with Buyer or
to perform any obligations pursuant to the terms of the Purchase Agreement.

     (c) Rights and Duties of Parties upon Expiration or Termination. Upon expiration or
other termination of this Agreement in accordance with the terms hereof, the parties shall
cooperate in the orderly termination of the Transition Services hereunder, including, without
limitation, the transfer and delivery to Buyer of any work product or other materials produced or
created by Seller in the course of performing the Transition Services hereunder.

          Confidentiality. Each party shall hold and shall cause its directors, officers,
employees, agents, consultants and advisors, including, without limitation, the employees of such
party who are involved in the performance or receipt of Transition Services hereunder, as
applicable, (i) to hold in strict confidence all information concerning the other party disclosed
in connection with the performance by Seller of the Transition Services hereunder and (ii) not to
use such information except to the extent reasonably necessary to effect and complete the
performance of the Transition Services and, in the case of Seller, to perform the Transition
Services hereunder; provided, however, that the foregoing shall not apply to the extent that such
information can be shown to have been (a) in the public domain through no fault of such party, (b)
possessed by such party at the time of disclosure without restrictions on confidentiality, (c)
later lawfully acquired on a non-confidential basis from other sources by the party to which it was
furnished or (d) compelled by judicial or administrative process or by other requirements of law,
provided that the receiving party gives notice thereof to the other party as far in advance of the
compelled disclosure as is reasonably possible. Neither party shall release or disclose such
information to any other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors who shall be advised of and directed to comply with the provisions
of this Section 5. This Agreement does not grant to either party any right or license to use any
confidential information of the other party for any purpose outside the scope of this Agreement.

          Agreements with Seller Employees and Consultants. Seller shall have valid and
enforceable written agreements with each employee of and consultant to Seller who performs
Transition Services hereunder on behalf of Seller. Such agreements shall contain nondisclosure and
non-use provisions comparable in scope to those provided in Section 5 hereof.

          Corporate Records. During the term of this Agreement, Buyer agrees to provide Seller
with access to the books, records and personnel of Buyer and the Company to the extent

4

 

reasonably necessary or appropriate in order to allow Seller to perform the Transition
Services hereunder.

          Force Majeure. Each party shall be excused from its obligations (other than the
payment of money) hereunder while and to the extent that its performance of such obligations is
prevented by fire, drought, explosion, flood, invasion, rebellion, earthquake, civil commotion,
governmental or military authority, act of God, mechanical failure, default of third parties, or
any other event or casualty beyond the reasonable control of such party (other than strikes and
labor disturbances), whether similar or dissimilar to those enumerated in this Section 8. In the
event of such casualty, Buyer shall be responsible for making its own alternate arrangements with
respect to the services provided to it which were interrupted.

          Miscellaneous.

     (a) Good Faith Cooperation. The parties will use good faith efforts to cooperate with
each other in all reasonable respects in all matters relating to the provision and receipt of the
Transition Services.

     (b) Amendment, Modification and Waiver. This Agreement may be amended, modified or
supplemented at any time by written agreement of Seller and Buyer. Any failure of Seller or Buyer
to comply with any term or provision of this Agreement may be waived, with respect to the Buyer, on
the one hand, by Seller, and with respect to Seller, on the other hand, by Buyer, by an instrument
in writing signed by or on behalf of the appropriate party, but such waiver of failure to insist
upon strict compliance with such term or provision shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure to comply.

     (c) Notices. All notices and communications under this Agreement shall be made in
accordance with and shall be subject to the notice provisions of Section 10.3 of the Purchase
Agreement.

     (d) Severability. Should any provision of this Agreement for any reason be declared
invalid or unenforceable, such decision shall not affect the validity or enforceability of any of
the other provisions of this Agreement, which remaining provisions shall remain in full force and
effect and the application of such invalid or unenforceable provision to persons or circumstances
other than those as to which it is held invalid or unenforceable shall be valid and enforced to the
fullest extent permitted by law.

     (e) Counterparts. This Agreement and any Transition Service Schedule hereto may be
executed in counterparts, each of which shall be deemed an original and which together shall
constitute one and the same instrument.

     (f) Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof) as to all matters, including but not limited to
matters of validity, construction, effect, performance and remedies.

5

 

     (g) Dispute Resolution.

          (i) The parties agree that any controversy, claim or dispute arising under, out of, or in
relation to this Agreement, its formation, performance or termination (each, a “Dispute” and
collectively, the “Disputes”) shall initially be referred to a committee (the “Dispute
Resolution Committee”) consisting of two individual representatives of each party.

          (ii) If the Dispute Resolution Committee cannot resolve the Dispute within thirty (30) days of
referral, the Dispute shall be referred to senior executives from both parties, who shall meet and
attempt to resolve the dispute. If the Dispute has still not been resolved within fourteen (14)
days of such referral, either party may institute proceedings in accordance with this Section 9(g).

          (iii) The dispute resolution procedure set forth in Sections 9(g)(i) and (ii) is mandatory,
and neither party shall institute legal proceedings until it has been exhausted.

          (iv) Disputes that have not been resolved in accordance with the above shall be finally and
conclusively determined by a bench trial in a court of competent jurisdiction subject to the
provisions of Section 9(i).

          (v) Seller and Buyer hereby irrevocably waive, to the fullest extent permitted by applicable
law, any and all right such Party has to a trial by jury in any litigation between them arising
under, out of, or in relation to this Agreement, its formation, performance or termination.

          (vi) Neither party shall make any public announcement or press release concerning any Dispute
without the prior written consent of the other party, unless such announcement or release is
required by applicable law, by government agency or by the rules of any stock exchange or quotation
system on which securities of such party are listed.

     (h) Interpretation.

          (i) The section headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.

          (ii) The parties have participated substantially in the negotiation and drafting of this
Agreement and agree that no ambiguity herein should be construed against the draftsman.

     (i) Jurisdiction and Consent to Service. Each of Seller and Buyer (a) agrees that any
suit, action or proceeding arising out of or relating to this Agreement may be brought solely in
the state courts having competent jurisdiction within the County of New York in the State of New
York or Federal courts having competent jurisdiction within the southern district of New York; (b)
consents to the exclusive jurisdiction of each such court in any suit, action or proceeding
relating to or arising out of this Agreement; (c) waives any objection which it may have to the
laying of venue in any such suit, action or proceeding in any such court; and (d) agrees that
service of any court paper may be made in such manner as may be provided under applicable laws or
court rules governing service of process.

6

 

     (j) Attorneys’ Fees. In the event that litigation arises in connection with
enforcement of any provision of this Agreement, the prevailing party in such litigation shall be
entitled to recover its reasonable attorneys’ fees and expenses, in addition to any other relief to
which it may be deemed entitled.

     (k) No Assignment. Neither this Agreement nor either party’s rights or obligations
hereunder may be assigned without the other party’s prior written consent, which consent may be
granted or withheld by such party in its sole discretion, and any assignment without such consent
shall be void; provided, however, that either party (or its permitted successive
assignees) may assign this Agreement as a whole without consent to an entity that succeeds to all
or substantially all of such party’s business or assets to which this Agreement relates. This
Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their
respective permitted successors and assigns.

     (l) Third Party Beneficiaries. This Agreement is solely for the benefit of Seller,
and its successors and permitted assigns, with respect to the obligations of Buyer under this
Agreement, and for the benefit of Buyer, and its respective successors and permitted assigns, with
respect to the obligations of Seller, under this Agreement, and this Agreement shall not be deemed
to confer upon or give to any other third party any remedy, claim, liability, reimbursement, cause
of action or other right. Nothing in this Agreement, express or implied, is intended to or shall
confer upon any person, including without limitation any member of the Transition Team, any right,
benefit or remedy of any nature whatsoever under or by virtue of this Agreement.

     (m) Relationship of the Parties. Each party shall act solely as an independent
contractor, and nothing in this Agreement shall be construed to give either the power or authority
to enter into or incur any commitments, expenses or liabilities whatsoever on behalf of the other
party. Nothing herein shall be construed to create the relationship of a partnership, principal
and agent or joint venturer between the parties, other than as expressly set forth herein.

     (n) Survival of Terms. Any provision required to interpret and enforce the parties’
rights and obligations under this Agreement shall survive to the extent necessary for the full
observation and performance of the obligations contained herein.

     (o) Entire Agreement. This Agreement, together with the Purchase Agreement,
constitutes the entire agreement between the parties with respect to the subject matter hereof and
supersedes any and all prior or contemporaneous agreements or understandings, written or oral, with
respect to such subject matter. The Transition Services Schedules shall be deemed included within
the definition of this “Agreement” and incorporated herein wherever reference to this Agreement is
made.

[INTENTIONAL END OF PAGE; SIGNATURE PAGE FOLLOWS]

7

 

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the
day and year first above written.

	 	 	 	 	 	 	 
	 

	 	TEKELEC
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	NICE-SYSTEMS LTD.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

8

 

EXHIBIT A

Form of Transition Service Schedule to Transition Services Agreement

	 	 	 	 	 	 	 	 	 	 	 
	1.	 	Transition Service Schedule No.:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.

	 	Functional Area:	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Summary of Services:	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

	 	 	 
	Service Name
	 	Description
	 
	 	 
	 	 	 
	 	 	 

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	4.

	 	Fees:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	5.

	 	Term:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 	 	 	 
	 

	 	TEKELEC	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

 

 

Transition Service Schedule to Transition Services Agreement

	 	 	 	 	 	 	 	 	 	 	 
	1.	 	Transition Service
Schedule No.: 	 	 	1	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.

	 	Functional Area:	 	     Information Technology (IT) — Data Transition	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Summary of Services:	 	 	 	 

	 	 	 
	 Service Name	 	Description
	File Backup and Retrieval

	 	As required.
	 
	 	 
	Answers to Queries

	 	Seller will respond by email or telephone to
all relevant and reasonable queries from
Buyer regarding IT matters relating to
conduct of the IEX Business at the Closing.
	 
	 	 
	Data Transfer/Conversion

	 	To the extent that there is any data related
to the IEX Business that exists in Seller’s
databases, file servers and/or associated
applications that will be transferred to the
Company, Seller will be prime in the
extraction of such data for use in
conjunction with the equivalent Buyer
databases and/or associated applications.
Seller will use Reasonable Efforts to
transfer Accounts Receivable, Accounts
Payable and Accrual Reports upon Closing.
On the Closing Date, Seller to ensure group
directories and items pertinent only to the
	 
	 	 
	Shared Archive Data Retrieval

	 	IEX Business are transitioned to Buyer.

	 	 	 	 	 
	4.

	 	Fees:
	 	Buyer to reimburse Seller in full for actual costs of labor
and expenses, including without limitation costs of third
party service providers, incurred in performing the
Services. Total fees are estimated to be approximately
$32,000 during the term of this Schedule based on
approximately 320 man-hours billed at approximately $100
per hour. Total out of pocket expenses to be incurred by
Seller during the term of this Schedule are estimated to be
approximately $8,000.
	 
	 	 	 	 
	5.

	 	Term:
	 	Through July 31, 2006 (except that Seller’s obligations
with respect to “Answers to Queries” above shall continue
through the end of the term of the Transition Services
Agreement)

 

 

Transition Service Schedule to Transition Services Agreement

	 	 	 	 	 	 	 	 	 
	1.	 	Transition Service
Schedule No.: 	 	   2	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	2.

	 	Functional Area: 	     Information Technology (IT) — Network Services and Cutover
	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	3.	 	Summary of Services:	 	 

	 	 	 
	Service Name	 	Description
	E-mail Service and Routing

	 	Company’s employees will be able
to use Seller email system.

Changes to email (such as auto
reply, forward and addresses
loading), as specified by Buyer,
to be implemented upon Closing.
	 
	Support Transition from Seller to Buyer
Network

	 	
Beginning on the Closing Date,
Seller to use Reasonable Efforts
to ensure that there is not a
loss of communications
capabilities (internet
connectivity, remote access,
phone service, etc.) during the
transition per a network support
and detailed cutover plan to be
jointly developed and agreed between the Program Managers for
Buyer and Seller.

	 	 	 	 	 
	4.

	 	Fees:
	 	Buyer to reimburse Seller in full for actual costs of labor
and expenses, including without limitation costs of third
party service providers, incurred in performing the
Services. Total fees are estimated to be approximately
$47,000 per full month during the term of this Schedule.
	 
	 	 	 	 
	5.

	 	Term:
	 	Through August 31, 2006

 

 

Transition Service Schedule to Transition Services Agreement

	 	 	 	 	 	 	 	 	 	 	 
	1.	 	Transition Service Schedule No.:	 	                3	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.

	 	Functional Area:	 	     Administration, Finance and Accounting	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Summary of Services:	 	 	 	 

	 	 	 
	Service Name	 	Description
	Answers to Queries

	 	Seller will respond by email or telephone to all
relevant and reasonable queries from Buyer regarding
administrative, finance and accounting matters relating
to Buyer’s conduct of the IEX Business after the
Closing.
	 
	 	 
	Payroll

	 	Handle post-Closing payroll for one payroll cycle (and
additional payroll cycles if requested by Buyer and
agreed by Seller).

	 	 	 	 	 
	4.

	 	Fees:
	 	$7,500 per payroll cycle
	 
	 	 	 	 
	5.

	 	Term:
	 	Through closing of the applicable payroll cycles (except
that Seller’s obligations with respect to “Answers to
Queries” above shall continue through the end of the term
of the Transition Services Agreement)

 

 

Transition Service Schedule to Transition Services Agreement

	 	 	 	 	 	 	 	 	 	 	 
	1.	 	Transition
Service Schedule No.: 	           4	 	 
	 

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.

	 	Functional Area: 	 	     Human Resources and Employee Benefits	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Summary of Services:	 	 	 	 

	 	 	 
	Service Name	 	Description
	Answers to Queries

	 	Seller will respond by email or telephone to all
relevant and reasonable queries from Buyer regarding
human resource matters and matters arising as a result
of the transitioning of employee benefits.

	 	 	 	 	 
	4.

	 	Fees:
	 	None
	 
	 	 	 	 
	5.

	 	Term:
	 	Through the end of the term of the Transition Services Agreement

 

 

Transition Service Schedule to Transition Services Agreement

	 	 	 	 	 	 	 	 	 	 	 
	1.	 	Transition Service
Schedule No.: 5
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	2.

	 	Functional Area: General Business Guidance and Support
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	3.	 	Summary of Services:	 	 	 	 

	 	 	 
	Service Name	 	Description
	Answers to Queries

	 	Seller will respond by email or telephone to all
relevant and reasonable queries from Buyer relating to
Buyer’s conduct of the IEX Business after the Closing.

	 	 	 	 	 
	4.

	 	Fees:
	 	None
	 
	 	 	 	 
	5.

	 	Term:
	 	Though the end of the term of the Transition Services Agreement

 

 

EXHIBIT B

                     , 2006

NICE-Systems Ltd.

8 Hapnina Street POB 690

Ra’anana 43107 Israel

	 	 	 
	Re:

	 	Stock Purchase Agreement by and between Tekelec and NICE-Systems Ltd.
dated April 27, 2006

Ladies and Gentlemen:

     We have acted as counsel to Tekelec, a California corporation (the “Seller”), and IEX
Corporation, a Nevada corporation (the “Company”), in connection with the Stock Purchase Agreement
dated April 27, 2006 (the “Agreement”), between the Seller and NICE-Systems Ltd., a company limited
by shares organized under the laws of the State of Israel (the “Buyer”). This opinion letter is
being furnished to you pursuant to Section 7.3(g) of the Agreement. All capitalized terms used in
this opinion letter and not otherwise defined shall have the respective meanings set forth in the
Agreement.

     In order to render the following opinions, we have reviewed and examined the Agreement, the
Articles of Incorporation of the Seller as certified by the Secretary of State of the State of
California on                     , 2006, the Bylaws of the Seller as certified by the Secretary of the
Seller, the Articles of Incorporation of the Company as certified by the Secretary of State of the
State of Nevada on                     , 2006, the Bylaws of the Company as certified by the Secretary of
the Company, the records of actions taken by the Seller’s Board of Directors at meetings or by
written consent presented to us by the Seller, the records of actions taken by the Company’s Board
of Directors and sole shareholder at meetings or by written consent presented to us by the Company,
and the Transition Services Agreement (the “TSA”) dated as of the date hereof between the Seller
and the Buyer (the TSA, together with the Agreement, the “Transaction Documents”).

     In rendering the opinions set forth herein, we have relied upon, and assumed the accuracy and
completeness of, statements of officers of the Seller and of the Company regarding certain factual
matters set forth in officers’ certificates dated as of the date hereof (the “Officers’
Certificates”) and executed by officers of the Seller and of the Company on behalf of the Seller
and the Company, respectively. In rendering the opinions set forth herein, we also have relied
upon, and assumed the accuracy and completeness of, statements of representatives of the Seller and
of the Company and, to the extent specified herein, public officials, representations and
warranties made by parties (other than the Seller) in the Transaction Documents and, as to factual
matters, the representations and warranties of the Seller in the Transaction Documents.

 

 

                     ,2006 

Page 2

     In rendering the following opinions, we have assumed that (i) all signatures on all documents
reviewed by us are genuine, (ii) all documents submitted to us as originals are true and complete,
(iii) all documents submitted to us as copies are true and complete copies of the originals
thereof, (iv) each natural person signing any document reviewed by us had the legal capacity to do
so, (v) each person signing any document reviewed by us in a representative capacity had authority
to sign in such capacity (other than representatives of the Seller with respect to the Transaction
Documents), (vi) all formalities and requirements of the laws of any relevant jurisdiction (other
than Applicable Law (as defined below)) and of any regulatory authority therein, applicable to the
execution, delivery, performance and enforceability of the Transaction Documents have been or will
be duly complied with, and (vii) the Transaction Documents have been duly executed and delivered by
each party thereto (other than the Seller) and constitute valid, binding and enforceable
obligations of such parties.

     Based upon the foregoing, and subject to the assumptions, qualifications, limitations and
exceptions stated herein, it is our opinion that:

     1. The Seller is a corporation duly incorporated, validly existing and in good standing under the
laws of the State of California. The Seller has all requisite corporate power to execute, deliver
and perform its obligations under the Transaction Documents.

     2. The Company is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Nevada. The Company has all requisite corporate power to own, lease and
operate its assets and to carry on its business as it is now being conducted.

     3. Each of the Transaction Documents to which the Seller is a party has been duly authorized by
all corporate action necessary on the part of the Seller. Each of the Transaction Documents to
which the Seller is a party has been duly executed and delivered by the Seller and each constitutes
the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance
with its terms.

     4. The authorized capital stock of the Company as of the Closing Date consists of 20,000,000
shares of common stock, par value $0.01 per share (the “Common Stock”), of which 100 shares (the
“Shares”) are issued and outstanding. The Shares have been duly and validly authorized and issued
and are fully paid and nonassessable, and none of them has been issued in violation of any
statutory preemptive right or, to our knowledge, any similar contractual preemptive right of any
shareholder of the Company contained in the Company’s Articles of Incorporation or Bylaws. The
Seller has full record and, to our knowledge, beneficial ownership of the Shares.

     5. To our knowledge, there are no bonds, debentures, notes or other indebtedness, issued or
outstanding, which have the right to vote (or convertible or exercisable into securities having the
right to vote) on any matter on which the Company’s shareholders may vote. To our knowledge, there
are no options, warrants, calls or other rights (including subscription rights or registration
rights), agreements, proxies, voting rights agreements, voting trusts, arrangements or commitments
of any character, presently outstanding, which (i) obligate the Company to issue, deliver or sell

 

 

                     ,2006

Page 3

shares of its capital stock or debt securities, (ii) obligate the Company to grant, extend or enter
into any such option, warrant, call or other such right, agreement, arrangement or commitment, or
(iii) obligate the Company to purchase, redeem or otherwise acquire any shares of Common Stock.

     6.The execution and delivery by the Seller of the Transaction Documents do not, and the
performance by the Seller of its obligations thereunder will not, (a) result in a violation of the
Articles of Incorporation or the Bylaws of the Seller or the Company, (b) to our knowledge, result
in any violation by the Seller of Applicable Law (as defined below), or (c) to our knowledge,
result in any violation of any order, writ, judgment or decree of any U.S. federal or California
court or U.S. governmental authority or regulatory body having jurisdiction over the Seller or the
Company or any of their respective properties or by which any of their respective properties may be
bound.

     7. The execution and delivery by the Seller of the Transaction Documents do not, and the
performance by the Seller of its obligations thereunder will not, require that the Seller or the
Company obtain the approval of, or make any filing with, any governmental authority under
Applicable Law (as defined below), except those that have been obtained or made.

     The foregoing opinions are subject to the following assumptions, qualifications, limitations
and exceptions:

     (a) In rendering the opinion set forth in paragraph 1 above as to the existence and
good standing of the Seller under the laws of the State of California, we have relied solely on a
certificate of the Secretary of State of the State of California dated                     , 2006.

     (b) In rendering the opinion set forth in paragraph 2 above as to the existence and
good standing of the Company under the laws of the State of Nevada, we have relied solely on a
certificate of the Secretary of State of the State of Nevada dated                     , 2006 [and on an
opinion of counsel which is attached hereto as Attachment A].

     (c) The enforceability of the Transaction Documents may be limited by (i) principles of good
faith and fair dealing, (ii) bankruptcy, insolvency, reorganization, receivership, moratorium,
fraudulent transfer or conveyance, preference and equitable subordination or other laws affecting
creditor’s rights and remedies generally, and (iii) principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).

     (d) We express no opinion with respect to the following provisions to the extent that they are
included in any of the Transaction Documents:

     (i) any provision concerning choice of law, selection of venue, consent to jurisdiction
or service of process;

     (ii) any provision purporting to specify remedies after default or as to the
availability of any specific or equitable relief of any kind;

     (iii) provisions purporting to waive rights to notices, objections, demands or other
benefits or rights that cannot be waived under Applicable Law;

 

 

                     ,2006 

Page 4

     (iv) provisions purporting to restrict competition, including without limitation
covenants not to compete, covenants not to interfere with business or employee relations,
covenants not to solicit customers and covenants not to solicit and hire employees;

     (v) provisions purporting to waive or limit the right to a trial by jury;

     (vi) provisions releasing, exculpating or exempting a party from, or requiring
indemnification of a party for, liability for its own action or inaction, to the extent the
same are inconsistent with public policy;

     (vii) provisions purporting to establish evidentiary standards for suits or proceedings
to enforce the Transaction Documents;

     (viii) provisions that decisions by a party are conclusive or may be made in its sole
discretion; and

     (ix) provisions relating to powers of attorney, severability or set-offs.

     (e) The opinions expressed above are limited solely to (w) the laws of the State of New York
as currently in effect and as applied by courts located in New York, (x) the California General
Corporation Law, (y) applicable United States federal law as currently in effect and (z) with
respect to the opinion in paragraphs 2 and 4 above only, the corporation laws of the State
of Nevada and, in each case, which in our experience are normally applicable to transactions of the
type provided in the Agreement (collectively, the “Applicable Law”), and we express no opinion with
respect to the application or effect of any other laws. The opinions set forth herein are made as
of the date hereof and are subject to, and may be limited by, future changes in the factual matters
set forth herein, and we undertake no duty to advise you of the same. The opinions expressed
herein are based upon the law in effect (and published or otherwise generally available) on the
date hereof, and we assume no obligation to revise or supplement these opinions should such law be
changed by legislative action, judicial decision or otherwise. In rendering our opinions, we have
not considered, and hereby disclaim any opinion as to, the application or impact of any laws,
cases, decisions, rules or regulations of any other jurisdiction, court or administrative agency.
The term “Applicable Law” does not include, and we express no opinion with regard to (i) any United
States federal or New York or Nevada law, rule or regulation relating to (A) pollution or
protection of the environment, (B) zoning, land use, building, construction and other laws, rules
and regulations of local jurisdictions, and (C) labor, employee rights and benefits, including the
Employment Retirement Income Security Act of 1974, as amended, (ii) the regulation of utilities,
(iii) antitrust laws, (iv) tax laws, rules and regulations, and (v) state or federal securities
laws.

     (f) In rendering the opinions expressed in paragraph 6 above, we have not undertaken
any independent examination of facts or the records of any court, tribunal or other body, but have
based our opinion in sole reliance upon the Officers’ Certificates.

     (g) In rendering the opinion set forth in paragraph 4 above, we have reviewed and
relied without further investigation on (a) the Articles of Incorporation of the Company, (b)
minute books and stock records in our possession relating to meetings and written actions of the
Board of Directors

 

 

                     ,2006

Page 5

and sole shareholder of the Company presented to us by the Company, and (c)
statements in the Officers’ Certificates, including statements to the effect that the Company has
received the consideration approved by its Board of Directors for all of the issued shares of
capital stock of the Company and statements relating to the capitalization of the Company. The
Company has represented to us and we have assumed that these records are complete and accurate and
constitute all of the Company’s documents with respect to the issuance of shares of its capital
stock.

     (h) Wherever this opinion letter refers to matters “known to us,” or to “our knowledge,” or
words of similar import, such reference means that, during the course of our representation of the
Seller and the Company, we have requested information of the Seller or the Company concerning the
transactions contemplated by the Agreement and no information has come to the attention of (as a
result of such request for information) the attorneys currently employed by our Firm who are
performing legal services for the Seller or the Company, which has given us actual knowledge of the
existence (or absence) of facts to the contrary. Except as otherwise stated herein, we have
undertaken no independent investigation or verification of such matters, and no inference should be
drawn to the contrary from the fact of our representation of the Seller or the Company.

     We express no opinion as to any matter other than as expressly set forth above, and no opinion
on any other matter may be inferred or implied herefrom. The opinions expressed herein are for the
sole use and benefit of, and may only be relied upon by, the Buyer and are not to be used,
circulated, quoted or otherwise referred to in connection with any transaction other than those
contemplated by the Agreement, or by or to any other person without our prior written consent.

Very truly yours,

 

 

EXHIBIT C

                     , 2006

Tekelec

5200 Paramount Parkway

Morrisville, NC 27560

     The undersigned, NICE-Systems Ltd. (“Nice”), hereby absolutely guarantees the punctual
payment and performance of all obligations due and owing by                     , its wholly owned
subsidiary (“Buyer”), under the Stock Purchase Agreement, dated as of April ___, 2006,
between Buyer and Tekelec (the “Agreement”), and each other agreement, document, instrument
and certificate executed or to be executed by Buyer in connection with the consummation of the
transactions contemplated by the Agreement (collectively, the “Obligations”).

     NICE hereby waives notice of any extension, modification, renewal, or amendment of any of the
terms of the Agreement or any other document relating to the Obligations.

     This letter agreement shall terminate upon the termination of the Agreement in accordance with
the terms therewith (other than with respect to any payments of Buyer that are due with respect to
such termination).

     Each of NICE and Tekelec (a) agrees that any suit, action or proceeding arising out of or
relating to this letter agreement may be brought solely in the state courts having competent
jurisdiction within the County of New York in the State of New York or Federal courts having
competent jurisdiction within the southern district of New York; (b) consents to the exclusive
jurisdiction of each such court in any suit, action or proceeding relating to or arising out of
this letter agreement; (c) waives any objection which it may have to the laying of venue in any
such suit, action or proceeding in any such court; and (d) agrees that service of any court paper
may be made in such manner as may be provided under applicable laws or court rules governing
service of process.

     This letter agreement is governed by the internal law, and not the law of conflicts, of the
State of New York and embodies the complete agreement and understanding among the parties and
supersedes and preempts any prior understandings, agreements or representations by or

 

 

Tekelec

                     ,2006 

Page 2.

among the parties, written or oral, which may have related to the subject matter hereof (i.e., the
guarantee) in any way. This letter agreement may be executed in separate counterparts, each of
which is deemed to be an original and all of which taken together constitute one and the same
agreement.

	 	 	 	 	 
	 	 	NICE-SYSTEMS LTD.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:

Title:

	 	 	 	 	 
	ACKNOWLEDGED & AGREED
	 
	 	 	 	 
	TEKELEC
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

	 	 
	 

	 	Name:	 	 
	 

	 	Title:exv4w2

 

EXHIBIT
4.2

REGISTRATION RIGHTS AGREEMENT

JOINDER AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT JOINDER AGREEMENT (this “Agreement”) is entered
into, as of [___], by and among Franklin Bank Corp. (the “Company”), and [___] (the
“New Holder”).

     WHEREAS, the Company and Ranieri & Co., Inc. (“Ranieri & Co.”) are parties to a Stock
Option Agreement, dated as of November 4, 2002 (the “Stock Option Agreement”), pursuant to
which the Company granted to Ranieri & Co. an irrevocable, ten-year option (the “Option”)
to purchase 570,000 shares of common stock (formerly classified as Class A common Stock), par value
$.01 per share, of the Company (the “Option Shares”) at a purchase price of $10,00 per
share;

     WHEREAS, pursuant to purchase and repurchase agreements, dated as of January 2, 2003 between,
(i) for purchase agreements, Ranieri & Co. and the purchasers listed in ANNEX I hereto (the
“New Holders”), and (ii) for repurchase agreements, Lewis S. Ranieri and the New Holders
(with the exception of Lewis. S. Ranieri) (collectively, the “Transfer Agreements”), and in
accordance with Section 9(f) of the Stock Option Agreement, Ranieri & Co. transferred, on June 10,
2003, a portion of the Option representing 552,900 Option Shares in the aggregate to the New
Holders in the amounts set forth in ANNEX I (the New Holder’s amount is hereinafter referred to as
the “New Option” and “New Option Shares,” respectively, and collectively, as the
“New Securities”);

     WHEREAS, the Company is a party to a Registration Rights Agreement, dated as of November 4,
2002, with Friedman, Billings, Ramsey & Co., Inc. (“FBR”) for the benefit of FBR and purchasers of
shares of the Company’s common stock (formerly classified as Class A. common stock) in a 2002
private offering by the Company of 8,000,000 shares of such stock, and their respective direct and
indirect transferees (the “Registration Rights Agreement”);

     WHEREAS, the Company is required under the Registration Rights Agreement to file with the
Securities and Exchange Commission (“SEC”) a registration statement (the “Shelf
Registration Statement”) relating to the resale from time to time by holders thereof of shares
of common stock of the Company covered by Registration Rights Agreement that were not registered
under and distributed pursuant to the registration statement relating to the Company’s 2003 initial
public offering;

     WHEREAS, the Company, having considered the intent of the relevant parties at the time the
Stock Option Agreement and the Registration Rights Agreement were entered into, the effect that the
inclusion of the Option Shares in the Shelf Registration Statement might have on the trading price
of its common stock and on the perception of the Company among its public investors, the
contribution that Ranieri & Co. and the New Holders have made to the Company, the additional cost
involved in including the Option Shares in the Shelf Registration Statements, and the agreement of
Ranieri & Co. and the New Holders not to transfer the Option and the Option Shares except as set
forth in this Agreement, has agreed to include the Option Shares in the Shelf Registration
Statement and, in connection therewith, to extend to Ranieri &. Co. and the New Holders the
benefits of the Registration Rights Agreement (subject to compliance with the terms and conditions
thereof) with respect to such shares;

     NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties to this Agreement hereby agree as follows:

     1. Registration Rights Agreement Joinder. The parties hereby agree that, with respect
to the New Option Shares, upon execution hereof, the New Holder shall be entitled to all the rights
and benefits, and be subject to all the covenants, terms, conditions and limitations, of a Holder
under (and as defined in) the Registration Rights Agreement, and shall be treated for all purposes
as a Holder thereunder, and the New Option Shares shall be treated for all purposes as Registration
Shares thereunder; provider, however, that Section 4(a)(iii) of the Registration
Rights Agreement shall not apply with respect to the Option Shares.

 

 

     2. Transfers. The New Holder hereby agrees that it shall not, without the prior
written consent of the Company (and subject to the provisions of the Stock Option Agreement,
including without limitation Section 9(f) thereof), sell, transfer, pledge, hypothecate or
otherwise dispose of any of the New Securities, except (i) pursuant to the repurchase provisions of
the applicable Transfer Agreement, or (ii) in the case of the New Option Shares pursuant to a
Registration Statement filed pursuant to the Registration Rights Agreement.

     3. Representations and Warranties. The New Holder hereby confirms that, as of the date
of the transfer of the New Securities to such New Holder pursuant to the applicable Transfer
Agreement: (i) such New Holder purchased the New Securities for his, her or its own account, for
investment only and not with a view to distribution thereof; (ii) the New Holder had access to
information regarding the Company and the New Securities of a character similar to that which would
be disclosed in a registration statement filed with the SEC, (iii) the New Holder had such
knowledge and experience in financial and business matters that he, she or it was capable of
evaluating the merits and risks, and he, she or it was able to bear the economic risk, of an
investment in the New Securities; and (iv) the New Holder was an employee, officer, director,
member, partner, stockholder or other equity interest holder of Ranieri & Co. or its “affiliates”
(defined as any person or entity who controls, is controlled by, or is under common control with,
Ranieri & Co.).

     4. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which together shall constitute
one and the same instrument.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above
written.

	 
	FRANKLIN BANK CORP.

	 

	 

	 

	Name:

	Title:

	 

	 

	 

	Name:

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