Document:

exv10w17

Exhibit 10.17

CONSENT AND AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT

     This CONSENT AND AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT (“Amendment”) is dated as of
October 15, 2009, and is entered into by and among BroadSoft, Inc., a Delaware corporation
(“Parent”), BroadSoft International, Inc” a Delaware corporation (“International”), BroadSoft M6,
LLC, a Delaware limited liability company (“M6”), BroadSoft Sylantro, Inc., a Delaware corporation
(“Sylantro”; and together with Parent, International and M6, the “Existing Borrowers”, and each an
“Existing Borrower”), BroadSoft PacketSmart, Inc., a Delaware corporation (“PacketSmart”; and
together with Parent, International, M6, and Sylantro, the “Borrowers”, and each a “Borrower”), and
ORIX Venture Finance, LLC, a Delaware limited liability company (“Lender”). As described below, it
is anticipated that PacketSmart will merge with PacketIsland, Inc., a Delaware corporation (“Packet
Island”), with Packet Island surviving the merger and, effective upon the consummation of such
merger, changing its name to BroadSoft PacketSmart, Inc, (which will continue to be a Delaware
corporation), and which entity is being added as a new Borrower pursuant to the terms hereof, all
on the date hereof as described below.

WITNESSETH:

          WHEREAS, Existing Borrowers and Lender are parties to that certain Loan and Security Agreement
dated as of September 26, 2008 (as amended from time to time being referred to herein as the “Loan
Agreement”; capitalized terms not otherwise defined herein have the definitions provided therefore
in the Loan Agreement);

          WHEREAS, Existing Borrowers have informed Lender that, for purposes of effectuating the
“Merger” (as defined below), Parent formed a new wholly-owned Subsidiary, PacketSmart, and that
PacketSmart has had no operations to date;

          WHEREAS, Existing Borrowers have informed Lender that Parent desires to effect a merger of
PacketSmart with and into Packet Island, pursuant to the terms of that certain Agreement and Plan
of Merger and Reorganization (the “Merger Agreement”) among Parent, PacketSmart, Packet Island and
certain other parties as identified therein, a copy of which is attached hereto as Exhibit
A (the “Merger”), with Packet Island being the surviving entity of such merger and, immediately
after giving effect thereto, changing its name to BroadSoft PacketSmart, Inc. (the “New Borrower”);

          WHEREAS, in the absence of the prior written consent of Lender, the Merger would constitute a
Default under Sections 4.5(i) and 4.5(ii) of the Loan Agreement and a corresponding Event of
Default under Section 6.1 (d) of the Loan Agreement; and

          WHEREAS, Existing Borrowers have requested that Lender (a) consent to the Merger, (b) amend
the Loan Agreement to add PacketSmart as a “Borrower” under the Loan Agreement and (c) amend the
Loan Agreement in certain other respects as set forth herein.

          NOW THEREFORE, in consideration of the mutual conditions and agreements set forth in the Loan
Agreement and this Amendment, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

 

          1. Joinder. Subject to the satisfaction of the conditions set forth in Section 6
below, and in reliance on the representations set forth in Section 7 below, the parties hereto
agree that PacketSmart is hereby joined to the Loan Agreement and the other Loan Documents as a
“Borrower” and PacketSmart hereby agrees to be bound by all of the terms and conditions (including
without limitation all of the representations and warranties and covenants) of the Loan Agreement
and the other Loan Documents, as a “Borrower”, in each case as if PacketSmart were a direct
signatory thereto. In furtherance of the preceding sentence, without limiting any provision of the
Loan Agreement or any other Loan Document to which PacketSmart is now becoming a party as a
“Borrower”, and in accordance with the terms of the Loan Agreement and the other Loan Documents,
PacketSmart (i) agrees to be jointly and severally liable with each other Borrower for the Loans
and other Obligations; (ii) grants a lien in all Collateral to secure all of the Loans and other
Obligations; and (iii) acknowledges and agrees that it has become a guarantor under and pursuant to
the provisions of Section 9 of the Loan Agreement and has agreed to the terms and conditions
regarding the “Suretyship Waivers” set forth in Exhibit C to the Loan Agreement.

          While the Loan described in Section 1 of the Schedule to the Loan Agreement was made on or
around September 26, 2008 to certain of the Existing Borrowers (and not to PacketSmart), to limit
the number of changes to the Loan Agreement and other Loan Documents necessary to subject
PacketSmart to all of the terms and conditions thereof (including those described in the first
paragraph of this Section 1) the term “Borrower” is used to include PacketSmart even though such
Loan was not made to PacketSmart. PacketSmart unconditionally guaranties, and is jointly and
severally liable for, such Loan and all of the other Obligations.

          2. Consent. Subject to the satisfaction of the conditions set forth in Section 6
below, and in reliance on the representations set forth in Section 7 below, Lender hereby consents
to the consummation of the Merger pursuant to the terms of the Merger Agreement. The foregoing is a
limited consent and shall not constitute a consent to or waiver of any other Defaults or Events of
Default that are now in existence or that may hereafter occur.

          3. Amendments. Subject to the satisfaction of the conditions set forth in Section 6
below, and in reliance on the representations set forth in Section 7 below. the Loan Agreement is
amended as follows:

          (a) The defined term “Representations” set forth in Section 7 to the Loan Agreement is hereby
amended and restated ill its entirety as follows:

     “Representations” means the (i) written Representations and Warranties
previously delivered by Parent to ORIX dated September 23, 2008; (ii) the written
Representations and Warranties delivered by Sylantro to ORIX dated December 15, 2008; and
(iii) the written Representations and Warranties regarding Packet Island, Inc, delivered by
Packet Island to ORIX dated October 8, 2009.

          4. Collateral Assignment of Undertakings under Merger Agreement. To induce Lender to
enter into this Amendment, Borrowers hereby agree that:

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          (a) each of Parent and PacketSmart hereby collaterally assigns and grants to Lender, as
additional security for the payment and performance in full of the Obligations, a security interest
in all of its rights and remedies with respect to any and all of the representations, warranties,
covenants, indemnification agreements and other agreements made, and certain rights granted, in its
favor pursuant to the Merger Agreement (collectively, the “Undertakings”);

          (b) each of Parent and PacketSmart agrees to (i) promptly notify Lender of each and every
material dispute with, and material claim against, any person or entity for which it has a claim
under the Merger Agreement; (ii) diligently enforce each such claim (unless Parent and PacketSmart
determine reasonably and in good faith that it would not be commercially reasonable to enforce any
such claim); and (iii) promptly provide Lender with copies of all material notices, demands,
requests and other material communications sent or received by it pursuant to the Merger Agreement
as well as prior written notice of its intention to exercise any power, right or remedy pursuant to
the Merger Agreement;

          (c) in no event shall either Parent or PacketSmart, without the prior written consent of
Lender (such consent not to be unreasonably withheld, delayed or conditioned), waive, release or
discharge any person or entity with respect to any Undertaking or compromise or settle any claim or
dispute with respect to any such Undertaking, and no such waiver, release, discharge, compromise or
settlement shall be effective without the prior written consent of Lender;

          (d) each of Parent and PacketSmart hereby irrevocably authorizes and empowers Lender as its
agent at any time after the occurrence and during the continuance of an Event of Default to (i)
either directly or its behalf, assert any claims and demands and enforce any rights and remedies as
it may have, from time to time, with respect to the Undertakings, as Lender may deem proper, and
(ii) receive and collect any and all proceeds, awards or amounts due under the Merger Agreement and
apply all such amounts on account of the Obligations in the manner described in Loan Agreement;

          (e) each of Parent and PacketSmart hereby irrevocably makes, constitutes and appoints Lender
(and all officers, employees or agents designated by Lender) as its true and lawful attorney (and
agent-in-fact) for the purpose of enabling Lender or its agent to assert, at any time after the
occurrence and during the continuance of an Event of Default, any claims and demands or enforce any
rights and remedies and receive and collect such proceeds, awards and amounts and to apply such
monies to the Obligations in the manner described in Loan Agreement; and

          (f) Lender shall not be deemed to have assumed any of the obligations or liabilities of either
Parent or PacketSmart under the Merger Agreement by reason of this Section 4 or otherwise,
and Borrowers further agree to indemnify, protect, defend and hold Lender harmless from and with
respect to any claims or demands thereunder other than to the extent arising from the gross
negligence or willful misconduct by Lender as determined by a court of competent jurisdiction.

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          5. Post-Closing Deliveries. As a condition of Lender’s agreements hereunder, the
following terms and provisions shall apply (it being agreed that the violation by Borrowers of any
of the following provisions shall constitute an immediate Event of Default):

          (a) If Lender determines that a landlord agreement is desirable to obtain regarding the leased
property where PacketSmart maintains any Collateral, Borrower shall comply with Section 4.9 of the
Loan Agreement with respect thereto;

          (b) Within ten (10) days after the date hereof, PacketSmart shall cause New Borrower to
execute and deliver to Lender an intellectual property security agreement in substantially the same
form of agreement as other Borrowers have executed and delivered to ORIX previously;

          (c) Within thirty (30) days after the date hereof, Borrowers shall deliver to Lender evidence,
in form and substance satisfactory to Lender, that (i) PacketSmart has insured all of its tangible
Collateral, and carries such other business insurance, with an insurer reasonably acceptable to
Lender, and that such insurance policies name Lender as an additional loss payee thereunder and
contain a lenders loss payee endorsement in form and substance satisfactory to Lender, or (ii)
Existing Borrowers’ current insurance policies, including without limitation business interruption
insurance, have been revised to provide coverage of PacketSmart and all of its tangible Collateral,
in form and amounts reasonably satisfactory to Lender; and

          (d) Immediately after effectiveness of the Merger, New Borrower shall enter into and execute
an assumption agreement, which shall be in form and substance acceptable to Lender. In connection
therewith, New Borrower shall covenant, in favor of Lender, not to maintain more than $50,000 at
any and all bank accounts at Comerica Bank while the Loan Agreement remains in force and effect or
there otherwise remain outstanding any Obligations thereunder.

          6. Conditions to Effectiveness. The effectiveness of Sections 2 and 3 of this
Amendment is subject to the following conditions precedent, each to be in form and substance
satisfactory to Lender:

          (a) Lender shall have received a fully executed copy of this Amendment;

          (b) Lender shall have received evidence that the Certificate of Merger of PacketSmart into
Packet Island (the “Certificate of Merger”) has been submitted for filing with, and has been
accepted by, the Secretary of State of Delaware;

          (c) Borrowers shall have delivered to Lender tri-party agreements (or amendments to any such
existing agreements), acceptable to Lender, with respect to each of PacketSmart’s Deposit Accounts
maintained at Comerica Bank and Silicon Valley Bank pursuant to which such bank acknowledges the
security interest and control of Lender in such Deposit Accounts and agrees to limit its set-off
rights on terms satisfactory to Lender, fully executed by each party thereto;

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          (d) Lender shall have received final and executed copies of all agreements and documents to be
executed and delivered in connection with the closing of the Merger (including without limitation,
all schedules and exhibits thereto);

          (e) Lender shall have been reimbursed for all reasonable costs, fees and expenses incurred by
Lender in connection with the preparation and execution of this Amendment;

          (f) PacketSmart shall have delivered to Lender a corporate authorizing resolution in form and
substance acceptable to Lender;

          (g) all proceedings taken in connection with the transactions contemplated by this Amendment
and all documents, instruments and other legal matters incident thereto shall be satisfactory to
Lender and its legal counsel;

          (h) Borrowers shall execute and deliver such other documents and agreements as Lender may
determine are necessary or desirable in connection herewith or otherwise in order to effectuate the
purpose of adding PacketSmart as a Borrower and a grantor to Lender of a security interest and lien
in its assets pursuant to the provisions of the Loan Agreement; and

          (i) no Default or Event of Default shall have occurred and be continuing.

          7. Representations and Warranties. To induce Lender to enter into this Amendment,
Borrowers, jointly and severally, represent and warrant to Lender that:

          (a) the execution, delivery and performance of this Amendment has been duly authorized by all
requisite corporate action on the part of each Borrower and that this Amendment has been duly
executed and delivered by each Borrower;

          (b) each of the representations and warranties set forth in the Loan Agreement and all other
Loan Documents, in each case as amended by this Amendment, are true and correct in all material
respects (but without duplication of any existing materiality qualifiers) as of the date hereof
(except to the extent they relate to an earlier date, in which case they are true and correct in
all material respects as of such earlier date);

          (c) no Default or Event of Default has occurred and is continuing; and

          (d) concurrently with the effectiveness of this Amendment, the Certificate of Merger has been
submitted for filing with the Secretary of State of Delaware (and upon acceptance thereof by the
Secretary of State of Delaware, the Merger will be consummated in accordance with the Merger
Agreement and in compliance with all requirements of applicable Law), and, to the Borrower’s
knowledge, the conditions precedent of Parent and PacketSmart to effect the Merger set forth in
Section 7 of the Merger Agreement have been satisfied.

          8. Release. In consideration of the agreements of Lender contained herein and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
each Borrower, on behalf of itself and its successors, assigns, and other legal representatives,
hereby absolutely, unconditionally and irrevocably releases, remises and forever

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discharges Lender and its successors and assigns, and its present and former shareholders,
Affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees,
agents and other representatives (Lender and all such other Persons being hereinafter referred to
collectively as the “Releasees” and individually as a “Releasee”), of and from all demands,
actions, causes of action, suits, covenants, contracts, controversies, agreements, promises, sums
of money, accounts, bills, reckonings, damages and any and all other claims, counterclaims,
defenses, rights of set-off, demands and liabilities whatsoever (individually, a “Claim” and
collectively, “Claims”) of every name and nature, known or unknown, suspected or unsuspected, both
at law and in equity, which such Borrower or any of its successors, assigns, or other legal
representatives may now or hereafter own, hold, have or claim to have against the Releasees or any
of them for, upon, or by reason of any circumstance, action, cause or thing whatsoever which arises
at any time on or prior to the day and date of this Amendment, including, without limitation, for
or on account of, or in relation to, or in any way in connection with any of the Loan Agreement, or
any of the other Loan Documents or transactions thereunder or related thereto. Each Borrower
understands, acknowledges and agrees that the release set forth above may be pleaded as a full and
complete defense and may be used as a basis for an injunction against any action, suit or other
proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such
release. Each Borrower agrees that no fact, event, circumstance, evidence or transaction which
could now be asserted or which may hereafter be discovered shall affect in any manner the final,
absolute and unconditional nature of the release set forth above.

          9. Severability. Any provision of this Amendment held by a court of competent
jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this
Amendment and the effect thereof shall be confined to the provision so held to be invalid or
unenforceable.

          10. References. Any reference to the Loan Agreement contained in any document,
instrument or Loan Agreement executed in connection with the Loan Agreement shall be deemed to be a
reference to the Loan Agreement as modified by this Amendment.

          11. Counterparts. This Amendment may be executed in one or more counterparts, each of
which shall constitute an original, but all of which taken together shall be one and the same
instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile
or other electronic transmission shall be effective as delivery of a manually executed counterpart
of this Amendment.

          12. Ratification. The terms and provisions set forth in this Amendment shall modify
and supersede all inconsistent terms and provisions of the Loan Agreement and the other Loan
Documents and shall not be deemed to be a consent to the modification or waiver of any other term
or condition of the Loan Agreement or any other Loan Document. Except as expressly modified and
superseded by this Amendment, the terms and provisions of the Loan Agreement and each other Loan
Document are ratified and confirmed and shall continue in full force and effect.

          13. Governing Law. This Amendment shall be a contract made under and governed by the
laws of the State of New York, without regard to conflict of laws principles that would require the
application of laws other than those of the state of New York. Whenever

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possible each provision of this Amendment shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Amendment shall be
prohibited by or invalid under such law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision or the remaining
provisions of this Amendment.

[Signature Page Follows]

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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed under
seal and delivered by their respective duly authorized officers on the date first written above.

	 	 	 	 	 	 	 	 	 	 	 
	Borrowers:	 	Lender:
	 
	 	 	 	 	 	 	 	 	 	 
	BROADSOFT, INC.	 	ORIX VENTURE FINANCE, LLC
	 
	 	 	 	 	 	 	 	 	 	 
	By	 	/s/ Mary Ellen Seravalli	 	By	 	/s/ Kevin P. Sheehan
	 

	 	 
	 	 
	 	 	 	 
	 	 
	 

	 	Its
	 	VP, General Counsel & Secretary
	 	 	 	Its
	 	President & CEO
	 
	 	 	 	 	 	 	 	 	 	 
	BROADSOFT INTERNATIONAL, INC.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By	 	/s/ Mary Ellen Seravalli	 	 	 	 	 	 
	 

	 	Its
	 	Vice President & Secretary	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BROADSOFT M6, LLC.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By	 	/s/ Mary Ellen Seravalli	 	 	 	 	 	 
	 

	 	Its
	 	Vice President & Secretary	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BROADSOFT SYLANTRO, INC.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By	 	/s/ Mary Ellen Seravalli	 	 	 	 	 	 
	 

	 	Its
	 	Vice President & Secretary	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	BROADSOFT PACKETSMART, INC.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By	 	/s/ Mary Ellen Seravalli	 	 	 	 	 	 
	 

	 	Its
	 	Vice President & Secretary	 	 	 	 	 	 

 

 

EXHIBIT A

MERGER AGREEMENT

EXECUTION VERSION

AGREEMENT AND PLAN

OF MERGER AND REORGANIZATION

     This Agreement and Plan of Merger and Reorganization is made and entered into as
of October 6, 2009 (the “Agreement”), by and among: BroadSoft, Inc., a Delaware
corporation (“Parent”); BroadSoft PacketSmart, Inc., a Delaware corporation and
wholly-owned subsidiary of Parent (“Merger Sub”); Packet Island, Inc., a Delaware
corporation (the “Company”); the parties identified on Exhibit A-1 (the “Signing Noteholders”); the
parties identified on Exhibit A-2 (the “Carve-Out Recipients”); and Jim Andelman as the
Agent for the Signing Noteholders and Carve-Out Recipients (the “Agent”). Certain capitalized
terms used in this Agreement are defined in Exhibit B.

Recitals

     A. Parent, Merger Sub and the Company intend to effect a merger of Merger Sub into the Company
in accordance with this Agreement and the DGCL (the “Merger”). Upon consummation of the Merger,
Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of Parent.

     B. This Agreement has been approved by the respective boards of directors of Parent, Merger
Sub and the Company.

     C. Prior to the date of this Agreement, Parent’s board of directors and stockholders have
approved and adopted the Parent’s Eighth Restated Certificate of Incorporation, in the form
attached as Exhibit C (the “Parent Restated Charter”), and the Parent Restated Charter has been
filed with and declared effective by the Secretary of State of the State of Delaware.

Agreement

     The parties to this Agreement agree as follows:

SECTION 1. Description of Transaction

     1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, Merger Sub shall be merged with and into the
Company, and the separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the “Surviving Corporation”).

     1.2 Effect of the Merger. The Merger shall have the effects set forth in this Agreement and
in the applicable provisions of the DGCL.

1.

 

     1.3 Closing; Effective Time. The consummation of the transactions contemplated by this
Agreement (the “Closing”) shall take place at the offices of Cooley Godward Kronish LLP,
One Freedom Square, Reston Town Center, 11951 Freedom Drive, Reston, Virginia 20190 at 10:00 a.m.
Eastern time on the second business day following the satisfaction (or, to the extent permitted by
law, waiver by the appropriate party) of all of the conditions set forth in Sections 7 and 8, or at
such other place, time and date as shall be agreed in writing between the Parent and the Company.
The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.
Subject to the provisions of this Agreement, a certificate of merger satisfying the applicable
requirements of the DGCL (the “Certificate of Merger”) shall be duly executed by the Company and,
concurrently with or as soon as practicable following the Closing, delivered to the Secretary of
State of the State of Delaware for filing. The Merger shall become effective upon the date and time
that the Certificate of Merger is filed with the Secretary of State of the State of Delaware (the
“Effective Time”). Each of the Company and the Parent shall be entitled to deliver an updated
Disclosure Schedule prior to the Closing to reflect events and circumstances arising after the date
of this Agreement.

     1.4 Certificate of Incorporation and Bylaws; Directors and Officers. Unless otherwise agreed
by Parent and the Company prior to the Closing, at the Effective Time:

          (a) the certificate of incorporation of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the certificate of incorporation of the Merger Sub,
as in effect immediately prior to the Effective Time, except that the name of the Surviving
Corporation shall be “BroadSoft PacketSmart, Inc.”;

          (b) the bylaws of the Surviving Corporation shall be amended and restated as of the Effective
Time to conform to the bylaws of Merger Sub as in effect immediately prior to the Effective Time;
and

          (c) the directors and officers of the Surviving Corporation immediately after the Effective
Time shall be the individuals identified on Exhibit D.

     1.5 Treatment of Shares and Notes in the Merger. Subject to Sections 1.9(c) and 1.10, and
subject to adjustment as set forth in Section 1.11, at the Effective Time, by virtue of the Merger
and without any further action on the part of Parent, Merger Sub, the Company, the Signing
Noteholders or any stockholder of the Company:

          (a) Each share of the common stock (par value $0.01 per share) of Merger Sub outstanding
immediately prior to the Effective Time shall be converted into one share of common stock of the
Surviving Corporation.

          (b) All shares of any class of capital stock of the Company held by the Company as treasury
stock shall automatically be cancelled and shall cease to exist, and no consideration shall be
delivered or deliverable in exchange therefor.

          (c) Each share of Company Series A Preferred Stock issued and outstanding immediately prior to
the Effective Time shall automatically be cancelled and shall cease to exist, and no consideration
shall be delivered or deliverable in exchange therefor.

2.

 

          (d) Each Company Warrant issued and outstanding immediately prior to the Effective Time shall
automatically be cancelled and shall cease to exist in accordance with the terms of each such
Company Warrant, and no consideration shall be delivered or deliverable in exchange therefor.

          (e) Each share of Company Common Stock issued and outstanding immediately prior to the
Effective Time shall automatically be cancelled and shall cease to exist, and no consideration
shall be delivered or deliverable in exchange therefor.

          (f) As of the signing of this Agreement, each holder of Class A-1 Notes agrees that the
principal of their Class A-1 Note shall be held in escrow and shall be released, contingent upon
the Closing, effective immediately prior to the Closing. In the event that the Closing does not
occur within 60 days of the date of this Agreement, each holder of Class A-1 Notes shall receive
back the principal of their Class A-1 Note. Each Class A-1 Note shall automatically be cancelled
and converted into the right to receive a portion of the Note Consideration as set forth opposite
each such Class A-1 Note listed on Exhibit A-1 attached hereto.

          (g) Subject to Section 10.2, each Class A-2 Note shall automatically be cancelled and
converted into the right to receive a portion of the Note Consideration as set forth opposite each
such Class A-2 Note listed on Exhibit A-1 attached hereto.

          (h) Subject to Section 10.2, each Class B Note shall automatically be cancelled and converted
into the right to receive a portion of the Note Consideration as set forth opposite each such Class
B Note listed on Exhibit A-1 attached hereto.

     1.6 Treatment of Carve-Out Plan. At the Effective Time and subject to Section 10.2, Parent
shall issue the Carve-Out Payment to the Carve-Out Recipients, in accordance with each such
Carve-Out Recipient’s Carve-Out Plan Percentage as set forth opposite each Carve-Out Recipient
listed on Exhibit A-2 attached hereto. The payment of the Carve-Out Payment to the Carve-Out
Recipients represents payment in full of all obligations of the Company and Parent under the
Carve-Out Plan at and after the Effective Time.

     1.7 Treatment of Stock Options and Warrants.

          (a) Parent is not assuming or continuing the Company Equity Plan or any equity plans
applicable to the employees or other service providers of the Company or its affiliates. Parent is
not continuing, assuming or substituting for any Company Options or other convertible securities
granted under the Company Equity Plan. At or immediately prior to the Effective Time, and in
accordance with the terms of the Company Equity Plan and resolutions adopted by the Company’s board
of directors prior to the date hereof, the vesting and exercisability of all outstanding Company
Options granted under the Company Equity Plan shall be accelerated in full, and any such Company
Options that are not exercised in accordance with procedures established by the Company prior to
the Effective Time shall be terminated and cancelled without the payment of any additional
consideration to the holders of such Company Options.

3.

 

          (b) At or prior to the Effective Time, the board of directors of the Company shall adopt any
resolutions, in form and substance reasonably satisfactory to Parent, and take any actions which
are necessary, to effectuate the provisions of this Section 1.7, including the adoption of
resolutions terminating the Company Equity Plan and terminating and cancelling any outstanding
Company Options granted thereunder without additional consideration as of the Effective Time.

          (c) Parent is not continuing, assuming or substituting for any Company Warrants. At the
Effective Time, each outstanding unexercised Company Warrant (and the right to purchase securities
upon exercise thereof) shall terminate in accordance with its terms, without the payment of any
additional consideration to the holder of such Company Warrant. The board of directors of the
Company shall adopt any resolutions, in form and substance reasonably satisfactory to Parent, and
take any actions which are necessary, including the providing of any requisite notice to each
holder of a Company Warrant prior to the Effective Time, to effectuate the provisions of this
Section 1.7(c).

     1.8 Closing of the Company’s Transfer Books. At the Effective Time, holders of certificates
representing shares of the Company’s capital stock that were outstanding immediately prior to the
Effective Time (“Company Capital Stock”) shall cease to have any rights as stockholders of the
Company, and the stock transfer books of the Company shall be closed with respect to all shares of
such capital stock outstanding immediately prior to the Effective Time. No further transfer of any
such shares of Company Capital Stock shall be made on such stock transfer books after the Effective
Time. If, after the Effective Time, a valid certificate previously representing any of such shares
of Company Capital Stock (a “Company Stock Certificate”) is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled.

     1.9 Exchange of Notes; Full Satisfaction of Obligations.

          (a) At or as soon as practicable after the Effective Time, Parent will send to the holders of
Company Notes instructions for use in effecting the surrender of Company Notes in exchange for
certificates representing Parent Series E-1 Preferred. Upon surrender of a Company Note to Parent
for exchange, with such other documents as may be reasonably required by Parent, the holder of such
Company Note shall be entitled to receive in exchange therefor a certificate representing the
number of whole shares of Parent Series E-1 Preferred that such holder has the right to receive
pursuant to the provisions of this Section 1. Until surrendered as contemplated by this Section
1.9, each Company Note shall be deemed, from and after the Effective Time, to represent only the
right to receive upon such surrender a certificate representing shares of Parent Series E-1
Preferred (and cash in lieu of any fractional share of Parent Series E-1 Preferred) as contemplated
by this Section 1. If any Company Note shall have been lost, stolen or destroyed, Parent may, in
its discretion and as a condition precedent to the issuance of any certificate representing shares
of Parent Series E-1 Preferred, require the owner of such lost, stolen or destroyed Company Note to
provide an appropriate affidavit and to deliver a bond (in such sum as Parent may reasonably
direct) as indemnity against any claim that may be made against Parent or the Surviving Corporation
with respect to such Company Note.

4.

 

          (b) No dividends or other distributions declared or made with respect to Parent Series E-1
Preferred with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Company Note with respect to the shares of Parent Series E-1 Preferred represented
thereby, and no cash payment in lieu of any fractional share shall be paid to any such holder,
until such holder surrenders such Company Note in accordance with this Section 1.9 (at which time
such holder shall be entitled to receive all such dividends and distributions and such cash
payment).

          (c) No fractional shares of Parent Series E-1 Preferred shall be issued in connection with the
Merger, and no certificates for any such fractional shares shall be issued. In lieu of such
fractional shares, any holder of a Company Note who would otherwise be entitled to receive a
fraction of a share of Parent Series E-1 Preferred (after aggregating all fractional shares of
Parent Series E-1 Preferred issuable to such holder) shall, upon surrender of such holder’s Company
Note(s), be paid in cash the dollar amount (rounded to the nearest whole cent), without interest,
determined by multiplying such fraction by $1.00.

          (d) Parent and the Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable to any holder or former holder of Company Notes
pursuant to this Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state, local or foreign tax
law. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the Person to whom such amounts would
otherwise have been paid.

          (e) Neither Parent nor the Surviving Corporation shall be liable to any holder or former
holder of Company Notes for any shares of Parent Series E-1 Preferred (or dividends or
distributions with respect thereto), or for any cash amounts, delivered to any public official
pursuant to any applicable abandoned property, escheat or similar law.

          (f) The issuance of the shares of Parent Series E-1 Preferred upon cancellation and conversion
of the Company Notes at the Effective Time shall constitute full satisfaction of the Company’s and
Parent’s obligations under the Company Notes, and, at the Effective Time: (i) this Agreement shall
be deemed to amend and terminate each of the Company Notes, each of which shall be cancelled and of
no further force or effect as of the Effective Time; (ii) any and all obligations, liabilities,
claims, expenses, liens, actions, rights and interests the holders of the Company Notes have or may
have in the future arising under or related to the Company Notes or any agreement associated
therewith, including, without the limitation, the Note Purchase Agreements, are waived to the
fullest extent of the law and the Company and Parent (including any of their respective officers,
directors, employees, affiliates and successors and assigns) are hereby released from the same to
the fullest extent of the law; (iii) this Agreement shall be deemed to terminate all agreements
relating to the Company Notes, including, without limitation, the Note Purchase Agreements, which
agreements shall be of no further force or effect as of the Effective Time; and (iv) each of the
holders of the Company Notes hereby agrees to promptly take any further action and to execute any
and all additional documents or instruments requested by the Company or Parent to release the
Company and Parent (including any of their respective officers, directors, employees, affiliates
and successors and assigns) from their obligations under the Company Notes and any agreement
associated

5.

 

therewith, including, without limitation, the Note Purchase Agreements, and terminate any
liens or security interests that may have arisen in connection with the Company Notes. Effective
upon the Effective Time, each of the holders of Company Notes hereby authorizes the Company or
Parent or their respective agents to file any and all appropriate UCC termination statements and
any and all appropriate termination statements with the United States Patent and Trademark Office.

     1.10 Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, any share
of Company Capital Stock that is issued and outstanding immediately prior to the Effective Time and
which is held by a stockholder who did not consent to or vote in favor of the approval of this
Agreement, which stockholder complies with all of the provisions of Section 262 of the DGCL and, if
applicable by virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL, relevant to the exercise
of dissenters’ rights (such share being a “Dissenting Share,” and such stockholder being a
“Dissenting Stockholder”), shall not be entitled to receive any consideration pursuant to the terms
set forth in Section 1.5, but shall be converted into the right to receive such consideration as
may be determined to be due with respect to such Dissenting Share pursuant to Section 262 of the
DGCL and, if applicable by virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL. If any
Dissenting Stockholder fails to perfect such stockholder’s dissenters’ rights under Section 262 of
the DGCL and, if applicable by virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL, or
effectively withdraws or otherwise loses such rights with respect to any Dissenting Shares, such
Dissenting Shares shall not be entitled to receive any consideration pursuant to the terms set
forth in Section 1.5. The Company shall give Parent (a) prompt notice of any demand for payment of
the fair value of any shares of Company Capital Stock or any attempted withdrawal of any such
demand for payment and any other instrument served pursuant to Section 262 of the DGCL and, if
applicable by virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL, and received by the
Company relating to any stockholder’s dissenters’ rights, and (b) the opportunity to participate in
all negotiations and Legal Proceedings with respect to any such demands for payment under Section
262 of the DGCL and, if applicable by virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL.
The Company shall not voluntarily make any payment with respect to, or settle or make a binding
offer to settle, any such demand for payment at any time prior to the Closing, unless the Company
shall have first obtained Parent’s prior written consent.

     1.11 Aggregate Merger Consideration Adjustment.

          (a) On the Closing Date, and subject to the terms and conditions contained herein (including,
without limitation, Section 7.14), the Aggregate Merger Consideration shall be subject to
adjustment in accordance with this Section 1.11. On the Closing Date, the Company will have (i) at
least $800,000 in Cash and (ii) at least $788,000 in Net Assets, each as of immediately prior to
the Effective Time, before giving effect to the Merger, but after payment of all fees, costs and
expenses of the type contemplated by Sections 2.23 (and Part 2.23 of the Company Disclosure
Schedule), 7.8(d), 7.8(e) and 11.3(b).

          (b) Not later than three calendar days prior to the Closing Date, the Company will prepare and
deliver to Parent a balance sheet setting forth the Company’s good faith estimate of Cash and Net
Assets, as of immediately prior to the Effective Time, before giving effect to the Merger, but
after payment of all fees, costs and expenses of the type contemplated

6.

 

by Sections 2.23 (and Part 2.23 of the Company Disclosure Schedule), 7.8(d), 7.8(e) and
11.3(b) (the “Estimated Balance Sheet”) and a statement setting forth a detailed calculation of the
Estimated Balance Sheet Adjustment (as defined below) (collectively, the “Estimated Balance Sheet
Adjustment Statement”). The Estimated Balance Sheet Adjustment Statement will be prepared in
accordance with GAAP. As promptly as practicable, but not later than one calendar day prior to the
Closing Date, Parent shall notify the Company of any adjustments that it reasonably believes are
required to the Estimated Balance Sheet or the Estimated Balance Sheet Adjustment. Parent and the
Company shall use their reasonable best efforts to promptly resolve any dispute regarding such
adjustments prior to Closing, after which the Company will deliver a revised Estimated Balance
Sheet Adjustment Statement reflecting any agreed upon adjustments to the Estimated Balance Sheet or
Estimated Balance Sheet Adjustment. In the event that the Estimated Balance Sheet reflects Net
Assets in excess of $788,000, then, subject to Section 1.11(d) and Section 1.11(e) below, the
Aggregate Merger Consideration shall be increased, by the amount of such excess, by one share of
Parent Series E-1 Preferred for every one dollar of the excess (including fractions thereof, but
subject to Section 1.9(c)). “Estimated Balance Sheet Adjustment” means the amount of the total
excess as contemplated in the immediately preceding sentence which results in an increase to the
Aggregate Merger Consideration in accordance with this Section 1.11(b). Any additional shares of
Parent Series E-1 Preferred to be issued with respect to the Estimated Balance Sheet Adjustment
pursuant to this Section 1.11(b) shall be held in escrow by Parent pending the determination of the
Final Balance Sheet Adjustment pursuant to Sections 1.11 (c) and (d) below.

          (c) Within sixty (60) days after the Closing Date, Parent shall prepare and deliver to the
Agent a statement setting forth the actual Cash and Net Assets, as of immediately prior to the
Effective Time, before giving effect to the Merger (the “Final Balance Sheet”) and a statement
setting forth a detailed calculation of the Final Balance Sheet Adjustment (as defined below)
(collectively, the “Closing Balance Sheet Adjustment Statement”). The Closing Balance Sheet
Adjustment Statement will be prepared in accordance with GAAP. The Agent may, upon reasonable
request, review the work papers used in Parent’s preparation of the Closing Balance Sheet
Adjustment Statement, and Parent shall make available to the Agent all such work papers or other
documents and information related thereto as may be reasonably requested by the Agent, subject to
the Agent’s execution of any access or similar letters reasonably requested by service providers
engaged by Parent in connection with Parent’s preparation of the Closing Balance Sheet Adjustment
Statement. If within ten (10) days following delivery of the Closing Balance Sheet Adjustment
Statement, the Agent has not given Parent notice of its objection to the Closing Balance Sheet
Adjustment Statement (such notice must contain a statement of the basis of the Agent’s objection),
then the Closing Balance Sheet Adjustment Statement will be used in computing the Final Balance
Sheet Adjustment. If the Agent gives such notice of objection, with a statement of the basis of
such objection, within such 10-day period, then Parent and the Agent shall meet promptly in an
attempt to resolve such objection. If Parent and the Agent are unable to resolve the Agent’s
objection in the 10-day period following Parent’s receipt of notice of the Agent’s objection, then
the issues in dispute will be submitted to a nationally recognized independent public accounting
firm that has not represented Parent or the Company (or any of their respective affiliates) in the
past five years as shall be agreed upon by Parent and the Agent or if Parent and the Agent cannot
agree, then Parent’s accountants and the Agent’s accountants shall select such independent public
accounting firm (the “Firm”) for resolution. If issues in dispute are submitted to the Firm for

7.

 

resolution, (i) each party will furnish to the Firm such work papers and other documents and
information relating to the disputed issues as the Firm may reasonably request and are available to
that party or its subsidiaries (or its independent public accountants), and will be afforded the
opportunity to present to the Firm any material relating to the determination and to discuss the
determination with the Firm; (ii) the determination by the Firm, as set forth in a notice delivered
to Parent and the Agent by the Firm, will be binding and conclusive on the parties; and (iii)
Parent and the Agent will each bear one-half of the fees of the Firm for such determination. In
deciding any issues in dispute, the Firm shall be bound by the provisions of this Section 1.11 and
may not assign a value to any item greater than the highest value for such item claimed by either
Parent or the Agent or less than the lowest value for such item claimed by Parent or the Agent.
The term “Final Balance Sheet Adjustment Statement” will mean the definitive Closing Balance Sheet
Adjustment Statement agreed to by Parent and the Agent in accordance with this Section 1.11(c) or
resulting from the determination made by the Firm in accordance with this Section 1.11(c).

          (d) In the event that the Final Balance Sheet reflects Net Assets less than the Net Assets
reflected on the Estimated Balance Sheet, then, subject to Section 1.11(e) below, the Aggregate
Merger Consideration (including any increase thereto as previously determined pursuant to Section
1.11(b) above) shall be decreased by the amount of such shortfall, by one share of Parent Series
E-1 Preferred for every one dollar of the shortfall (including fractions thereof, but subject to
Section 1.9(c)). In the event that the Final Balance Sheet reflects Net Assets in excess of the
Net Assets reflected on the Estimated Balance Sheet, then, subject to Section 1.11(e) below, the
Aggregate Merger Consideration (including any increase thereto as previously determined pursuant to
Section 1.11(b) above) shall be increased by the amount of such excess, by one share of Parent
Series E-1 Preferred for every one dollar of the excess (including fractions thereof, but subject
to Section 1.9(c)). Any additional shares of Parent Series E-1 Preferred to be issued by Parent in
accordance with this Section 1.11, shall be issued to the holders of Class B Notes and the
Carve-Out Recipients on a pro rata basis in accordance with each such party’s pro rata portion of
the Aggregate Merger Consideration as set forth on Exhibits A-1 and A-2 attached hereto (and with
15% of such additional shares to be deposited into escrow pursuant to Section 10.2 below). “Final
Balance Sheet Adjustment” means the total amount of the excess or shortfall as contemplated above
which results in an increase or decrease, as the case may be, to the Aggregate Merger Consideration
(including any increase thereto as previously determined pursuant to Section 1.11(b) above) in
accordance with this Section 1.11(d) and subject to Section 1.11 (e) below.

          (e) Notwithstanding the foregoing provisions of this Section 1.11, the aggregate amount of
additional shares of Parent Series E-1 Preferred issued pursuant to this Section 1.11 with respect
to the Estimated Balance Sheet Adjustment and the Final Balance Sheet Adjustment shall in no event
exceed a total of 100,000 shares of Parent Series E-1 Preferred, and in no event shall any decrease
in shares of Parent Series E-1 Preferred determined in accordance with Section 1.11(d) above,
result in an Aggregate Merger Consideration less than 1,500,000 shares of Parent Series E-1
Preferred.

     1.12 Further Action. If, at any time after the Effective Time, any further action is
determined by Parent to be necessary or desirable to carry out the purposes of this Agreement or to
vest the Surviving Corporation or Parent with full right, title and possession of and to all rights

8.

 

and property of Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.

SECTION 2. Representations and Warranties of the Company

          The Company represents and warrants, to and for the benefit of the Parent Indemnitees, as
follows. Except with regard to Sections 2.1, 2.2, 2.3, 2.4 and 2.5, for purposes of this Section
2, unless the context clearly requires otherwise, all references to the Company shall include any
and all Company Subsidiaries.

     2.1 Due Organization; Subsidiaries; Etc.

          (a) The Company is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all necessary power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted; (ii) to own and use its
assets in the manner in which its assets are currently owned and used; and (iii) to perform its
obligations under all Company Contracts.

          (b) The Company is in good standing as a foreign corporation in each of the jurisdictions
identified in Part 2.1(b) of the Company Disclosure Schedule. The Company is not required to be
qualified, authorized, registered or licensed to do business as a foreign corporation in any
jurisdiction other than the jurisdictions identified in Part 2.1(b) of the Company Disclosure
Schedule, except where the failure to be so qualified, authorized, registered or licensed has not
had and will not have a Material Adverse Effect on the Company.

          (c) Except as set forth on Part 2.1(c) of the Company Disclosure Schedule, the Company does
not own, beneficially or otherwise, any shares or other securities of, or any direct or indirect
equity interest in, any Entity, and except as set forth on Part 2.1(c) of the Company Disclosure
Schedule, the Company has never owned, beneficially or otherwise, any shares or other securities
of, or any direct or indirect equity interest in, any Entity. All Entities identified on Part
2.1(c) of the Company Disclosure Schedule are referred to as “Company Subsidiaries”. The Company
has not agreed and is not obligated to make any future investment in or capital contribution to any
Entity. The Company has not guaranteed and is not responsible or liable for any obligation of any
of the Entities in which it owns or has owned any equity interest.

     2.2 Certificate of Incorporation and Bylaws; Records.

          (a) The Company has delivered to Parent or made available on the Datasite accurate and
complete copies of: (i) the Company’s Certificate of Incorporation and bylaws, including all
amendments thereto; (ii) the stock records of the Company; and (iii) the minutes and other records
of the meetings and other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders of the Company, the board of directors of the Company and
all committees of the board of directors of the Company. There have been no formal meetings or
other proceedings of the stockholders of the Company, the board of directors of the Company or any
committee of the board of directors of the Company that are not fully reflected in such minutes or
other records. There has not been any material violation of any of the provisions of the Company’s
Certificate of Incorporation or bylaws, and

9.

 

the Company has not taken any action that is inconsistent in any material respect with any
resolution adopted by the Company’s stockholders, the Company’s board of directors or any committee
of the Company’s board of directors. The books of account, stock records, minute books and other
records of the Company are accurate, up-to-date and complete in all material respects.

          (b) Part 2.2(b) of the Company Disclosure Schedule accurately sets forth (i) the names of the
members of the Company’s board of directors and (ii) the names and titles of the Company’s
officers.

          (c) Except as set forth in Part 2.2(c) of the Company Disclosure Schedule, the Company has not
conducted any business under or otherwise used, for any purpose or in any jurisdiction, any
fictitious name, assumed name, trade name or other name, other than the name “Packet Island, Inc.”

     2.3 Capitalization, Etc.

          (a) As of the date of this Agreement, the authorized capital stock of the Company consists of:
(i) 29,250,000 shares of Company Common Stock, of which 8,659,000 shares are issued and
outstanding; and (ii) 13,375,000 shares of Company Series A Preferred Stock, 12,238,394 of which
are issued and outstanding. All of the issued and outstanding shares of Company Common Stock and
Company Series A Preferred Stock have been duly authorized and validly issued, and are fully paid
and non-assessable.

          (b) As of the date of this Agreement, the Company has reserved: (a) 6,151,964 shares of
Company Common Stock for issuance under the Company Equity Plan, of which (i) 509,000 shares of
Company Common Stock have been issued pursuant to restricted stock purchase agreements and/or the
exercise of outstanding options, (ii) options to purchase 4,408,185 shares have been granted and
are currently outstanding, and (iii) 1,234,779 shares remain available for future issuances of
restricted stock agreements or grants of options to directors, officers, employees and consultants
of the Company (collectively, the “Company Options”), and (b) 2,998,095 shares of Series A
Preferred Stock issuable upon exercise of outstanding warrants (collectively, the “Company
Warrants”).

          (c) Part 2.3(c) of the Company Disclosure Schedule accurately sets forth, with respect to each
Company Option and Company Note that is outstanding as of the date of this Agreement: (i) the name
of the holder of such Company Option or Company Note and (ii) the total number of shares of Company
Common Stock or Company Series A Preferred Stock that are subject to such Company Option or Company
Note and, if a Company Option, the number of shares of Company Common Stock with respect to which
such Company Option is currently exercisable. Except as set forth above in Section 2.3(b), or in
Part 2.3(c) of the Company Disclosure Schedule, there is no: (A) outstanding subscription, option,
call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital
stock or other securities of the Company; (B) outstanding security, instrument or obligation that
is or may become convertible into or exchangeable for any shares of the capital stock or other
securities of the Company; (C) Contract under which the Company is or may become obligated to sell
or otherwise issue any shares of its capital stock or any other securities; or (D) to the Company’s

10.

 

Knowledge, condition or circumstance that may give rise to or provide a basis for the
assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive
any shares of capital stock or other securities of the Company.

          (d) None of the provisions of Section 1.7 will violate the terms of the Company Equity Plan or
any agreement pursuant to which stock options have been issued under the Company Equity Plan.

          (e) All outstanding shares of Company Common Stock and Company Series A Preferred Stock, and
all outstanding Company Options and Company Notes, have been issued in compliance with (i) all
applicable securities laws and other applicable Legal Requirements, and (ii) all requirements set
forth in applicable Contracts.

          (f) Except as set forth in Part 2.3(f) of the Company Disclosure Schedule, the Company has
never repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities
of the Company. All securities so reacquired by the Company were reacquired in compliance with (i)
the applicable provisions of the DGCL and all other applicable Legal Requirements, and (ii) all
requirements set forth in applicable restricted stock purchase agreements and other applicable
Contracts.

          (g) Praveen Kumar Prabhakaran and Andy Aczel constitute all Persons who have any rights under
the Carve-Out Plan. Each of Praveen Kumar Prabhakaran and Andy Aczel is entitled to receive fifty
percent (50%) of the Carve-Out Payment.

     2.4 Company Subsidiaries.

          (a) Each Company Subsidiary is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation and has all necessary power and authority to (i) conduct
its business in the manner in which its business is currently being conducted and (ii) to own and
use its assets in the manner in which its assets are currently owned and used.

          (b) None of the Company Subsidiaries is required to be qualified, authorized, registered or
licensed to do business in any jurisdiction other than the jurisdictions set forth in Part 2.4(b)
of the Company Disclosure Schedule, except where the failure to be so qualified, authorized,
registered or licensed has not had and will not have a Material Adverse Effect on the Company.
Each Company Subsidiary is in good standing in each of the jurisdictions identified in Part 2.4(b)
of the Company Disclosure Schedule, except where the failure to be in good standing has not had and
will not have a Material Adverse Effect on the Company.

          (c) The authorized and issued capital stock (or comparable equity interests) of each Company
Subsidiary is set forth on Part 2.4(c) of the Company Disclosure Schedule (collectively, the
“Subsidiary Shares”). Except as set forth on Part 2.4(c) of the Company Disclosure Schedule, all
of the Subsidiary Shares are duly authorized, validly issued, fully paid and nonassessable, and are
owned by the Company free and clear of any Encumbrances. Except as set forth on Part 2.4(c) of the
Company Disclosure Schedule, other than the Subsidiary Shares, none of the Company Subsidiaries has
any outstanding capital stock or any other equity securities. There are no outstanding options,
warrants, rights, agreements or contracts that could

11.

 

obligate any Company Subsidiary to issue additional shares of the capital stock or other
equity securities of such Company Subsidiary to any Person other than the Company.

          (d) The Company has delivered to Parent or made available on the Datasite accurate and
complete copies of: (i) each Company Subsidiary’s organizational documents, including all
amendments thereto, (ii) stock or share records of each Company Subsidiary, and (iii) minutes and
other records of the meetings and other proceedings (including actions taken by written consent or
otherwise without a meeting) of the stockholders (or comparable equity holders) of each Company
Subsidiary, the board of directors (or comparable organizational body) of each Company Subsidiary
and committees of the board of directors (or comparable organizational body) of each Company
Subsidiary, as applicable. There have been no organizational actions taken at any meetings or
other proceedings of the stockholders (or comparable equity holders) of each Company Subsidiary,
the board of directors (or comparable organizational body) of each Company Subsidiary or any
committee of the board of directors (or comparable organizational body) of each Company Subsidiary
that are not reflected in such minutes or other records. None of the Company Subsidiaries is in
material violation of any of the provisions of such Company Subsidiary’s organizational documents
or of any resolution adopted by such Company Subsidiary’s stockholders (or comparable equity
holders), such Company Subsidiary’s board of directors (or comparable organizational body) or any
committee thereof. The books of account, stock records, minute books and other records of each
Company Subsidiary are accurate, up-to-date and complete in all material respects.

          (e) Part 2.4(e) of the Company Disclosure Schedule accurately sets forth, for each Company
Subsidiary, (i) the jurisdiction of organization of such Company Subsidiary, (ii) all fictitious
names, assumed names, trade names or other names used in any jurisdiction by such Company
Subsidiary, (iii) the names of the members of such Company Subsidiary’s board of directors (or
comparable organizational body), and (iv) the names and titles of such Company Subsidiary’s
officers.

     2.5 Authority; Binding Nature of Agreement. Subject to the receipt of the Required Company
Stockholder Approval, the Company has the corporate power and authority to enter into and to
perform its obligations under this Agreement; and the execution, delivery and performance by the
Company of this Agreement have been duly authorized by all necessary action on the part of the
Company and its board of directors. The board of directors of the Company has (a) duly approved
this Agreement and the transactions contemplated hereby, (b) unanimously determined that the terms
of the Merger are advisable and in the best interests of the stockholders of the Company and (c)
recommended the approval of the Merger and the adoption of this Agreement and the consummation of
the transactions contemplated hereby to the stockholders of the Company. Subject to the receipt of
the Required Company Stockholder Approval, this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

     2.6 Non-Contravention; Consents. Except as set forth in Part 2.6 of the Company Disclosure
Schedule and subject to the receipt of the Required Company Stockholder Approval, neither the
execution, delivery or performance of this Agreement or any of the other agreements

12.

 

referred to in this Agreement, nor the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with or without notice or
lapse of time):

          (a) contravene, conflict with or result in a violation of (i) any of the provisions of the
Company’s Certificate of Incorporation or bylaws, or (ii) any resolution adopted by the Company’s
board of directors or any committee of the Company’s board of directors or by the Company’s
stockholders;

          (b) contravene, conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which the Company, or any of the assets owned or used by the
Company, is subject; or

          (c) contravene, conflict with or result in a violation or breach of, or result in a default
under, any provision of any Company Contract that is or would constitute a Material Contract, or
give any Person the right to (i) declare a default or exercise any remedy under any such Company
Contract, (ii) accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract.

Except as set forth in Part 2.6 of the Company Disclosure Schedule, other than the Required Company
Stockholder Approval, the Company is not and will not be required to make any filing with or give
any notice to, or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements referred to in this
Agreement, or (y) the consummation of the Merger or any of the other transactions contemplated by
this Agreement.

     2.7 Financial Statements.

          (a) The Company has delivered to Parent or made available on the Datasite the following
financial statements (collectively, the “Company Financial Statements”):

               (i) The unaudited consolidated balance sheets of the Company as of December 31, 2006, 2007 and
2008, and the related unaudited consolidated income statements and statements of cash flows of the
Company for the years then ended; and

               (ii) the unaudited consolidated balance sheet of the Company as of September 20, 2009 (such
date, the “Interim Balance Sheet Date”, and such balance sheet, the “Company Unaudited Interim
Balance Sheet”), and the related unaudited consolidated income statement of the Company for the
nine months and twenty days then ended.

          (b) The Company Financial Statements are accurate and complete in all material respects and
present fairly the financial position of the Company as of the respective dates thereof and the
results of operations and cash flows of the Company for the periods covered thereby. The Company
Financial Statements have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered except that the Company

13.

 

Financial Statements do not contain footnotes and are subject to normal and recurring year-end
audit adjustments, which will not, individually or in the aggregate, be material in magnitude).

          (c) On the Closing Date, the Company will have (i) at least $800,000 in Cash and (ii) at least
$788,000 in Net Assets, each as of immediately prior to the Effective Time, before giving effect to
the Merger, but after payment of all fees, costs and expenses of the type contemplated by Sections
2.23 (and Part 2.23 of the Company Disclosure Schedule), 7.8(d), 7.8(e) and 11.3(b).

          (d) The Company maintains and complies in all material respects with a system of accounting
controls sufficient to provide reasonable assurances that: (i) the Company’s business is operated
in accordance with management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of the consolidated financial statements of the Company in
conformity with GAAP, and to maintain accountability for items therein; (iii) access to properties
and assets is permitted only in accordance with management’s general or specific authorization; and
(iv) the Company’s control accounts (including its cash accounts) are reconciled with the ledgers
of the Company at regular intervals and appropriate actions are taken with respect to any
differences. Neither the Company, any Company Subsidiary nor, to the Company’s Knowledge, any
current or former employee, consultant, director or manager of the Company or any Company
Subsidiary or the Company’s independent accountants has identified or been made aware of any fraud
that involves the Company’s management or other current employees, consultants, directors or
management of the Company or any Company Subsidiary who have a role in the preparation of the
financial statements or the internal accounting controls utilized by the Company or the Company
Subsidiaries, or any claim or allegation regarding any of the foregoing. To the Company’s
Knowledge, there is and has been no material complaint, allegation, assertion or claim, whether
written or oral, in each case regarding deficient accounting or auditing practices, procedures,
methodologies or methods of the Company or any Company Subsidiary or their respective internal
accounting controls or any material inaccuracy in the Company Financial Statements. At the Interim
Balance Sheet Date, there were no material loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 (“Statement No. 5”) issued by the Financial Accounting
Standards Board in March 1975) that are not adequately provided for in the Company Unaudited
Interim Balance Sheet as required by said Statement No. 5.

     2.8 Absence of Changes. Except as set forth in Part 2.8 of the Company Disclosure Schedule,
and except as contemplated by this Agreement, since the Interim Balance Sheet Date:

          (a) there has not been any material adverse change in the Company’s business, condition,
assets, liabilities, operations, or financial performance, and, to the Company’s Knowledge, no
event has occurred that will, or would reasonably be expected to, have a Material Adverse Effect on
the Company;

          (b) there has not been any material loss, damage or destruction to, or any material
interruption in the use of, any of the Company’s assets (whether or not covered by insurance);

14.

 

          (c) the Company has not declared, accrued, set aside or paid any dividend or made any other
distribution in respect of any shares of capital stock;

          (d) the Company has not amended or waived any of its rights under, or permitted the
acceleration of vesting under, (i) any provision of the Company Equity Plan, (ii) any provision of
any agreement evidencing any outstanding Company Option, or (iii) any restricted stock purchase
agreement;

          (e) there has been no amendment to the Company’s Certificate of Incorporation or bylaws, and
the Company has not effected or been a party to any recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;

          (f) the Company has not made any capital expenditure which, when added to all other capital
expenditures made on behalf of the Company since the Interim Balance Sheet Date, exceeds $10,000;

          (g) the Company has not (i) entered into or permitted any of the assets owned or used by it to
become bound by any Contract that is or would constitute a Material Contract, or (ii) amended or
prematurely terminated, or waived any material right or remedy under, any Material Contract;

          (h) the Company has not (i) acquired, leased or licensed any right or other asset from any
other Person, (ii) sold or otherwise disposed of, or leased or licensed, any right or other asset
to any other Person (other than non-exclusive licenses of the Company’s Intellectual Property
Rights entered in the ordinary course of business consistent with past practice), or (iii) waived
or relinquished any right, except for immaterial rights or other immaterial assets acquired,
leased, licensed or disposed of in the ordinary course of business and consistent with the
Company’s past practices;

          (i) the Company has not written off as uncollectible, or established any extraordinary reserve
with respect to, any account receivable or other indebtedness;

          (j) the Company has not (i) lent money to any Person (other than pursuant to routine travel
advances made to employees in the ordinary course of business), or (ii) incurred or guaranteed any
indebtedness for borrowed money;

          (k) the Company has not (i) established or adopted any Company Employee Plan, (ii) paid any
bonus or made any profit-sharing or similar payment to, or increased the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees, or (iii) hired any new employee;

          (l) the Company has not changed any of its methods of accounting or accounting practices;

          (m) the Company has not made any Tax election;

          (n) the Company has not commenced or settled any Legal Proceeding;

15.

 

          (o) the Company has not entered into any material transaction or taken any other material
action outside the ordinary course of business or inconsistent with its past practices; and

          (p) the Company has not agreed or committed to take any of the actions referred to in clauses
“(c)” through “(o)” above.

     2.9 Title to Assets. The Company owns, and has good, valid and marketable title to, all
assets purported to be owned by it. All of said assets are owned by the Company free and clear of
any Encumbrances, except for (a) any lien for current taxes not yet due and payable, and (b) minor
liens that have arisen in the ordinary course of business and that do not (in any case or in the
aggregate) materially detract from the value of the assets subject thereto or materially impair the
operations of the Company.

     2.10 Bank Accounts; Receivables.

          (a) Part 2.10(a) of the Company Disclosure Schedule provides accurate information with respect
to the names and locations of all banks and other financial institutions at which the Company or
any Company Subsidiary maintains accounts of any nature and the account numbers thereof and names
of all persons authorized to draw thereon or make withdrawals therefrom.

          (b) Part 2.10(b) of the Company Disclosure Schedule provides an accurate and complete
breakdown and aging of all accounts receivable, notes receivable and other receivables of the
Company as of September 4, 2009. Except as set forth in Part 2.10(b) of the Company Disclosure
Schedule, all existing accounts receivable of the Company (including those accounts receivable
reflected on the Company Unaudited Interim Balance Sheet that have not yet been collected and those
accounts receivable that have arisen since the Interim Balance Sheet Date and have not yet been
collected) (i) represent valid obligations of customers of the Company arising from bona fide
transactions entered into in the ordinary course of business and (ii) are current and will be
collected in full when due, without any counterclaim or set off (net of the allowance for doubtful
accounts specified in the Company Unaudited Interim Balance Sheet).

     2.11 Equipment; Inventory; Leaseholds.

          (a) All material items of equipment and other tangible assets owned by or leased to the
Company are in good condition and repair (ordinary wear and tear excepted). Part 2.11(a) of the
Company Disclosure Schedule accurately identifies all equipment, materials, prototypes, tools,
supplies, furniture, fixtures, improvements and other tangible assets owned by the Company and used
for the conduct of the Company’s business, with an individual book value in excess of $500.

          (b) Part 2.11(b) of the Company Disclosure Schedule provides an accurate and complete
breakdown of all inventory (including raw materials, work in process and finished goods) of the
Company as of the Interim Balance Sheet Date. All of the Company’s existing inventory (including
all inventory that is reflected on the Company Unaudited Interim Balance Sheet and that has not
been disposed of by the Company since the Interim Balance Sheet Date):

16.

 

               (i) is of such quality and quantity as to be usable and saleable by the Company in the
ordinary course of business;

               (ii) has been priced at the lower of cost or market value using the “last-in, first-out”
method; and

               (iii) is free of any defect or deficiency.

The inventory levels maintained by the Company are (i) not excessive in light of the Company’s
normal operating requirements and (ii) adequate for the conduct of the Company’s operations in the
ordinary course of business.

          (c) Part 2.11(c) of the Company Disclosure Schedule identifies all assets that are material to
the business of the Company and that are being leased or licensed to the Company.

          (d) The Company does not own any real property or any interest in real property, except for
the leaseholds created under the real property leases identified in Part 2.11(d) of the Company
Disclosure Schedule. Part 2.11(d) of the Company Disclosure Schedule provides an accurate and
complete description of the premises covered by said leases and the facilities located on such
premises.

     2.12 Intellectual Property.

          (a) Products and Services. Part 2.12(a) of the Company Disclosure Schedule accurately
identifies each Company Product currently being designed, developed, manufactured, marketed,
distributed, provided, licensed, or sold by the Company.

          (b) Registered IP. Part 2.12(b) of the Company Disclosure Schedule accurately
identifies: (i) each item of Registered IP in which the Company has or purports to have an
ownership interest of any nature (whether exclusively, jointly with another Person, or otherwise);
(ii) the jurisdiction in which such item of Registered IP has been registered or filed and the
applicable registration or serial number; and (iii) any other Person that has an ownership interest
in such item of Registered IP and the nature of such ownership interest. The Company has provided
to Parent or made available on the Datasite complete and accurate copies of all applications,
correspondence with any Governmental Body, and other material documents related to each such item
of Registered IP.

          (c) Inbound Licenses. The Company has no Contracts pursuant to which any Intellectual
Property Right or Intellectual Property is or has been licensed, sold, assigned, or otherwise
conveyed or provided to the Company (other than (i) agreements between the Company and its
employees in the Company’s standard form thereof, (ii) non-exclusive licenses to third-party
software that are not incorporated into, or used in the development, manufacturing, testing,
distribution, maintenance, or support of, any Company Product and that are not otherwise material
to the Company’s business, (iii) license agreements pertaining to commercial off-the-shelf computer
software products, and (iv) Open Source Code license agreements identified on Part 2.12(p) of the
Company Disclosure Schedule).

17.

 

          (d) Outbound Licenses. Part 2.12(d) of the Company Disclosure Schedule accurately
identifies each Contract pursuant to which the Company has granted to any Person any license under
or other interest in (whether or not currently exercisable), any Company IP. The Company is not
bound by, and no Company IP is subject to, any Contract containing any covenant or other provision
that in any way limits or restricts the ability of the Company to use, exploit, assert, or enforce
any Company IP anywhere in the world.

          (e) Royalty Obligations. Part 2.12(e) of the Company Disclosure Schedule contains a
complete and accurate list and summary of all royalties, fees, commissions, and other amounts
payable by the Company to any other Person (other than sales commissions payable to employees of
the Company) upon or for the manufacture, sale, or distribution of any Company Product or the use
of any Company IP.

          (f) Standard Form IP Agreements. The Company has provided to Parent or made available
on the Datasite a complete and accurate copy of each standard form of Company IP Contract used by
the Company at any time since January 1, 2006, including each standard form of (a) employee
agreement containing any assignment or license of Intellectual Property Rights; (b) consulting or
independent contractor agreement containing any intellectual property assignment or license of
Intellectual Property Rights; and (c) confidentiality or nondisclosure agreement. The Company has
no agreement with any employee, consultant, or independent contractor in which the employee,
consultant, or independent contractor expressly reserved or retained rights in any Intellectual
Property or Intellectual Property Rights incorporated into or used in connection with any Company
Product or otherwise related to the Company’s business, research, or development.

          (g) Ownership Free and Clear. The Company exclusively owns all right, title, and
interest to and in the Company IP free and clear of any Encumbrances (other than licenses and
rights granted pursuant to the Contracts identified in Part 2.12(d) of the Company Disclosure
Schedule).

          (h) Sufficiency. The Company owns or otherwise has, and after the Closing, Parent
will have, all Intellectual Property Rights needed to conduct the Company’s business as currently
conducted.

          (i) Valid and Enforceable. All Company IP is valid, subsisting, and
enforceable. Without limiting the generality of the foregoing:

               (i) Legal Requirements and Deadlines. Each item of Company IP that is Registered IP
is and at all times has been in compliance with all legal requirements and all filings, payments,
and other actions required to be made or taken to maintain such item of Company IP in full force
and effect have been made by the applicable deadline. No application for a patent or a copyright,
mask work, or trademark registration or any other type of Registered IP filed by or on behalf of
the Company has been abandoned, allowed to lapse, or rejected. No actions, filings, or payments
must be taken or made on or before the date that is 120 days after the date of this Agreement to
maintain such item of Company IP in full force and effect.

18.

 

               (ii) Interference Proceedings and Similar Claims. No interference, opposition,
reissue, reexamination, or other Legal Proceeding is pending or, to the Company’s Knowledge,
threatened, in which the scope, validity, or enforceability of any Company IP is being, has been,
or could reasonably be expected to be contested or challenged. To the Company’s Knowledge, there
is no basis for a claim that any Company IP is invalid or unenforceable.

          (j) Third-Party Infringement of Company IP. To the Company’s Knowledge, no Person has
infringed, misappropriated, or otherwise violated, and no Person is currently infringing,
misappropriating, or otherwise violating, any Company IP. No letter or other written or electronic
communication or correspondence has been sent or otherwise delivered by or to the Company or any
representative of the Company regarding any actual, alleged, or suspected infringement or
misappropriation of any Company IP.

          (k) Effects of This Transaction. Neither the execution, delivery, or performance of
this Agreement (or any of the ancillary agreements) nor the consummation of any of the transactions
contemplated by this Agreement (or any of the ancillary agreements) will, with or without notice or
lapse of time, result in, or give any other Person the right or option to cause or declare, (a) a
loss of, or Encumbrance on, any Company IP; (b) a breach of or default under any Company IP
Contract; (c) the release, disclosure, or delivery of any Company IP by or to any escrow agent or
other Person; or (d) the grant, assignment, or transfer to any other Person of any license or other
right or interest under, to, or in any of the Company IP.

          (l) No Infringement of Third Party IP Rights. The Company has never infringed
(directly, contributorily, by inducement, or otherwise), misappropriated, or otherwise violated or
made unlawful use of any Intellectual Property Right of any other Person or engaged in unfair
competition. No Company Product, and no method or process used in the manufacturing of any Company
Product, infringes, violates, or makes unlawful use of any Intellectual Property Right of, or
contains any Intellectual Property misappropriated from, any other Person. Without limiting the
generality of the foregoing:

               (i) Infringement Claims. No infringement, misappropriation, or similar claim or Legal
Proceeding is pending or, to the Company’s Knowledge, threatened against the Company or against any
other Person who is or may be entitled to be indemnified, defended, held harmless, or reimbursed by
the Company with respect to such claim or Legal Proceeding. The Company has never received any
notice or other communication (in writing or otherwise) relating to any actual, alleged, or
suspected infringement, misappropriation, or violation by the Company, any of their employees or
agents, or any Company Product of any Intellectual Property Rights of another Person, including any
letter or other communication suggesting or offering that the Company obtain a license to any
Intellectual Property Right of another Person.

               (ii) Other Infringement Liability. The Company is not bound by any Contract to
indemnify, defend, hold harmless, or reimburse any other Person with respect to, or otherwise
assumed or agreed to discharge or otherwise take responsibility for, any existing or potential
intellectual property infringement, misappropriation, or similar claim (other than

19.

 

indemnification obligations under Company IP Contracts that are substantially similar to the
indemnification provisions in the Company’s standard forms of Company IP Contracts).

               (iii) Infringement Claims Affecting In-Licensed IP. To the Company’s Knowledge, no
claim or Legal Proceeding involving any Intellectual Property or Intellectual Property Right
licensed to the Company is pending or has been threatened, except for any such claim or Legal
Proceeding that, if adversely determined, would not adversely affect (a) the use or exploitation of
such Intellectual Property or Intellectual Property Right by the Company, or (b) the design,
development, manufacturing, marketing, distribution, provision, licensing or sale of any Company
Product.

          (m) Bugs. The Company has provided to Parent a complete and accurate list of all
known bugs, defects, and errors in each version of the Company Software.

          (n) Harmful Code. To the Company’s Knowledge, no Company Software contains any “back
door,” “drop dead device,” “time bomb,” “Trojan horse,” “virus,” or “worm” (as such terms are
commonly understood in the software industry) or any other code designed or intended to have, or
capable of performing, any of the following functions: (i) disrupting, disabling, harming, or
otherwise impeding in any manner the operation of, or providing unauthorized access to, a computer
system or network or other device on which such code is stored or installed; or (ii) damaging or
destroying any data or file without the user’s consent.

          (o) Source Code. No source code for any Company Software has been delivered,
licensed, or made available to any escrow agent or other Person who is not, as of the date of this
Agreement, an employee of the Company. The Company has no duty or obligation (whether present,
contingent, or otherwise) to deliver, license, or make available the source code for any Company
Software to any escrow agent or other Person. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or could reasonably be
expected to, result in the delivery, license, or disclosure of the source code for any Company
Software to any other Person.

          (p) Part 2.12(p) of the Company Disclosure Schedule accurately identifies and describes (i)
each item of Open Source Code that is contained in, distributed with, or used in the development of
the Company Products or from which any part of any Company Product is derived, (ii) the applicable
license terms for each such item of Open Source Code, and (iii) the Company Product or Company
Products to which each such item of Open Source Code relates.

          (q) No Company Product contains, is derived from, is distributed with, or is being or was
developed using Open Source Code that is licensed under any terms that (i) impose or could impose a
requirement or condition that any Company Product or part thereof (A) be disclosed or distributed
in source code form, (B) be licensed for the purpose of making modifications or derivative works,
or (C) be redistributable at no charge, or (ii) otherwise impose or could impose any other material
limitation, restriction, or condition on the right or ability of the Company to use or distribute
any Company Product.

     2.13 Contracts.

          (a) Part 2.13(a) of the Company Disclosure Schedule accurately identifies:

20.

 

               (i) each Company Contract relating to the employment of, or the performance of services by,
any employee which provides for payment of any severance or other payments upon termination of
employment or as a result of the transactions contemplated by this Agreement;

               (ii) each consultant or independent contractor agreement involving annual obligations in
excess of $25,000, and with respect to each consultant or independent contractor of the Company,
any Governmental Authorization that is held by such consultant or independent contractor and that
relates to or is useful in connection with the Company’s business;

               (iii) each Company Contract relating to the acquisition, transfer, use, development, sharing
or license of any technology or any Intellectual Property or Intellectual Property Right (other
than (A) agreements between the Company and its employees that are comparable in all material
respects to the Company’s standard form thereof and (B) non-exclusive licenses to third-party
software that are not incorporated into, embedded into, distributed with, or installed with any
Company Product and that are not otherwise material to the Company’s business);

               (iv) each Company Contract relating to the lease or license of real estate;

               (v) each Company Contract imposing any restriction on the Company’s right or ability to (A)
compete with any other Person, (B) acquire any product or other asset or any services from any
other Person, to sell any product or other asset to or perform any services for any other Person or
to transact business or deal in any other manner with any other Person, (C) develop or distribute
any technology, or (D) hire or solicit any Person as an employee, consultant or independent
contractor;

               (vi) each Company Contract creating or involving any agency relationship, distribution
arrangement or franchise relationship;

               (vii) each Company Contract relating to the acquisition, issuance or transfer of any
securities other than pursuant to the exercise of Company Options pursuant to the Company Equity
Plan;

               (viii) each Company Contract relating to indebtedness for money borrowed or the creation of
any Encumbrance with respect to any asset of the Company;

               (ix) each Company Contract involving or incorporating any guaranty, any pledge, any
performance or completion bond or any surety arrangement;

               (x) each Company Contract creating or relating to any partnership or joint venture or any
sharing of revenues, profits, losses, costs or liabilities;

               (xi) each Company Contract involving any customer “volume purchase” or similar obligations
(and, for each, identifying remaining customer purchase or

21.

 

product delivery obligations of the Company and the deadlines for such purchases or delivery);
and

               (xii) any other Company Contract that contemplates or involves (A) the payment or delivery of
cash or other consideration in an amount or having a value in excess of $15,000 in the aggregate,
or (B) the performance of services having a value in excess of $15,000 in the aggregate.

(Contracts in the respective categories described in clauses “(i)” through “(xii)” above are
referred to in this Agreement as “Material Contracts.”)

          (b) The Company has delivered to Parent or made available on the Datasite accurate and
complete copies of all written Contracts identified in Part 2.13(a) of the Company Disclosure
Schedule, including all amendments thereto. Part 2.13(a) of the Company Disclosure Schedule
provides an accurate description of the terms of each Company Contract that is not in written form.
Each Contract identified in Part 2.13(a) of the Company Disclosure Schedule is valid and in full
force and effect, and, to the Company’s Knowledge, is enforceable by the Company in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.

          (c) (i) The Company has not violated or breached, or committed any default under, any Company
Contract, and, to the Company’s Knowledge, no other Person has violated or breached, or committed
any default under, any Company Contract, in either case, which has had or would reasonably be
expected to have a Material Adverse Effect on the Company; (ii) to the Company’s Knowledge, no
event has occurred, and no circumstance or condition exists, that (with or without notice or lapse
of time) will, or would reasonably be expected to, (A) result in a violation or breach of any of
the provisions of any Company Contract, (B) give any Person the right to declare a default or
exercise any remedy under any Company Contract, (C) give any Person the right to accelerate the
maturity or performance of any Company Contract, or (D) give any Person the right to cancel,
terminate or modify any Company Contract; and (iii) since December 31, 2008, the Company has not
received any notice or other communication regarding any actual or possible violation or breach of,
or default under, any Company Contract.

          (d) Part 2.13(d) of the Company Disclosure Schedule identifies and provides a brief
description of each proposed Contract as to which any bid, offer, award, written proposal, term
sheet or similar document involving the Company is presently pending.

     2.14 Liabilities. The Company has no accrued, contingent or other liabilities of any nature,
either matured or unmatured (whether or not required to be reflected in financial statements in
accordance with GAAP, and whether due or to become due), except for: (a) liabilities identified as
such in the “liabilities” column of the Company Unaudited Interim Balance Sheet and (b) accounts
payable or accrued salaries that have been incurred by the Company since the Interim Balance Sheet
Date in the ordinary course of business and consistent with the Company’s past practices.

22.

 

     2.15 Compliance with Legal Requirements. The Company is, and has at all times since January
1, 2006 been, in compliance with all applicable Legal Requirements, except where the failure to
comply with such Legal Requirements has not had and will not have a Material Adverse Effect on the
Company. Except as set forth in Part 2.15 of the Company Disclosure Schedule, since January 1,
2006, the Company has not received any notice or other communication (in writing or otherwise) from
any Governmental Body, citizens group, employee or otherwise, regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.

     2.16 Governmental Authorizations. Part 2.16 of the Company Disclosure Schedule identifies
each material Governmental Authorization held by the Company, and the Company has delivered to
Parent or made available on the Datasite accurate and complete copies of all Governmental
Authorizations identified in Part 2.16 of the Company Disclosure Schedule. The Governmental
Authorizations identified in Part 2.16 of the Company Disclosure Schedule are valid and in full
force and effect, and collectively constitute all Governmental Authorizations necessary to enable
the Company to conduct its business in the manner in which its business is currently being
conducted. The Company is, and at all times since January 1, 2006 has been, in substantial
compliance with the terms and requirements of the respective Governmental Authorizations identified
in Part 2.16 of the Company Disclosure Schedule. Since January 1, 2006, the Company has not
received any written notice from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any Governmental Authorization,
or (b) any actual or possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.

     2.17 Tax Matters.

          (a) The Company has filed all Tax Returns that it was required to file under applicable Legal
Requirements. All such Tax Returns were correct and complete in all respects and have been
prepared in substantial compliance with all applicable Legal Requirements. All Taxes due and owing
by the Company (whether or not shown on any Tax Return) have been paid. The Company is not
currently the beneficiary of any extension of time within which to file any Tax Return. No claim
has ever been made by an authority in a jurisdiction where the Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of the Company.

          (b) The Company has withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.

          (c) No Legal Proceedings are pending or being conducted with respect to Tax matters of the
Company. The Company has not received from any Governmental Body any (i) notice indicating an
intent to open an audit or other review, (ii) request for information related to Tax matters, or
(iii) notice of deficiency or proposed adjustment of or any amount of Tax proposed, asserted, or
assessed by any Governmental Body against the Company.

23.

 

          (d) Part 2.17(d) of the Company Disclosure Schedule lists all Tax Returns filed with respect
to the Company for taxable periods ended on or after December 31, 2006, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the subject to audit.
The Company has delivered to Parent or made available on the Datasite correct and complete copies
of all federal income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company filed or received since December 31, 2006.

          (e) The Company has not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.

          (f) The Company has not filed a consent under section 341(f) of the Code concerning
collapsible corporations. The Company is not a party to any Contract that has resulted or would
reasonable be expected to result, separately or in the aggregate, in the payment of (i) any “excess
parachute payment” within the meaning of section 280G of the Code (or any corresponding provisions
of state, local or foreign Tax law) and (ii) any amount that will note be fully deductible as a
result of section 162(m) of the Code (or any corresponding provisions of state, local or foreign
Tax law). The Company has not been a United States real property holding corporation within the
meaning of section 897(c)(2) of the Code during the applicable period specified in section
897(c)(1)(A)(ii) of the Code. The Company has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of federal income Tax
within the meaning of section 6662 of the Code. The Company is not a party to or bound by any Tax
allocation or sharing agreement. The Company has (A) not been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the common parent of which was
the Company) or (B) no liability for the Taxes of any Person (other than the Company) under
regulation 1.1502-6 of the Code (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.

          (g) The unpaid Taxes of the Company (i) did not, as of the date of the Company Unaudited
Interim Balance Sheet, exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) set forth on the
Company Unaudited Interim Balance Sheet, and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past custom and practice of the
Company in filing its Tax Returns. Since the Interim Balance Sheet Date, the Company has not
incurred any liability for Taxes arising from extraordinary gains or losses, determined in
accordance with GAAP, outside the ordinary course of business.

          (h) The Company will not be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion there) ending after the Closing
Date as a result of any: (i) change in method of accounting for taxable period ending on or prior
to the Closing Date; (ii) “closing agreement” as described in section 7121 of the Code (or any
corresponding or similar provision of state, local or foreign income Tax law) executed on or prior
to the Closing Date; (iii) intercompany transactions or any excess loss account described in
Treasury Regulations under section 1502 of the Code (or any corresponding or similar provisions of
state, local or foreign income Tax law); (iv) installment sale or open

24.

 

transaction disposition made on or prior to the Closing Date; or (v) prepaid amount received
on or prior to the Closing Date.

          (i) The Company has not distributed stock of another Person, or has had its stock distributed
by another Person, in a transaction that was purported or intended to be governed in whole or in
part by section 355 or section 361 of the Code.

          (j) The Company has not participated in a “listed transaction” within the meaning of Treasury
Regulation Section 1.6011-4, other than a transaction exempted from the reporting requirements of
such Regulation.

     2.18 Employee and Labor Matters; Benefit Plans.

          (a) Part 2.18(a) of the Company Disclosure Schedule accurately sets forth, with respect to
each employee of the Company (including any employee of the Company who is on a leave of absence or
on layoff status):

               (i) the name of such employee and the date as of which such employee was originally hired by
the Company;

               (ii) such employee’s title;

               (iii) the aggregate dollar amount of the compensation (including wages, salary, commissions,
director’s fees, fringe benefits, bonuses, profit-sharing payments and other payments or benefits
of any type) received by such employee from the Company with respect to services performed in 2008
and 2009;

               (iv) such employee’s annualized compensation (including bonus opportunity) as of the date of
this Agreement;

               (v) each Company Employee Plan in which such employee participates or is eligible to
participate; and

               (vi) any Governmental Authorization that is held by such employee and that relates to or is
useful in connection with the Company’s business.

          (b) Part 2.18(b) of the Company Disclosure Schedule accurately identifies each former employee
of the Company who is receiving or is scheduled to receive (or whose spouse or other dependent is
receiving or is scheduled to receive) any benefits (whether from the Company or otherwise) relating
to such former employee’s employment with the Company, and Part 2.18(b) of the Company Disclosure
Schedule accurately describes such benefits.

          (c) The Company has never been a party to or bound by any union contract, collective
bargaining agreement or similar Contract.

          (d) Except as set forth in Part 2.18(d) of the Company Disclosure Schedule, the employment of
each of the Company’s employees is terminable by the Company at will. The Company has delivered to
Parent accurate and complete copies of all employee manuals and

25.

 

handbooks, disclosure materials, policy statements and other materials relating to the
employment of the current and former employees of the Company.

          (e) To the Company’s Knowledge, no employee of the Company is a party to or is bound by any
confidentiality agreement, noncompetition agreement or other Contract (with any Person) that may
have an adverse effect on: (i) the performance by such employee of any of his or her duties or
responsibilities as an employee of the Company; or (ii) the Company’s business or operations.

          (f) None of the current or former independent contractors of the Company could be reclassified
as an employee. No independent contractor of the Company is eligible to participate in any Company
Employee Plan other than the Company Equity Plan.

          (g) Part 2.18(g) of the Company Disclosure Schedule contains an accurate and complete list as
of the date hereof of each Company Employee Plan and each Company Employee Agreement. The Company
does not intend nor has it committed to establish or enter into any new Company Employee Plan or
Company Employee Agreement, or to modify any Company Employee Plan or Company Employee Agreement
(except to conform any such Company Employee Plan or Company Employee Agreement to the requirements
of any applicable Legal Requirements, in each case as previously disclosed to Parent in writing or
as required by this Agreement).

          (h) The Company has delivered to Parent or made available on the Datasite: (i) correct and
complete copies of all documents setting forth the terms of each Company Employee Plan and each
Company Employee Agreement, including all amendments thereto and all related trust documents; (ii)
the three most recent annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with each Company
Employee Plan; (iii) if the Company Employee Plan is subject to the minimum funding standards of
Section 302 of ERISA, the most recent annual and periodic accounting of Company Employee Plan
assets; (iv) the most recent summary plan description together with the summaries of material
modifications thereto, if any, required under ERISA with respect to each Company Employee Plan; (v)
all material written Contracts relating to each Company Employee Plan, including administrative
service agreements and group insurance contracts; (vi) all written materials provided to any
Company Employee relating to any Company Employee Plan and any proposed Company Employee Plans, in
each case, relating to any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events that would result in any
liability to the Company or any Company Affiliate; (vii) all correspondence to or from any
Governmental Body relating to any Company Employee Plan; (viii) all COBRA forms and related
notices; (ix) all insurance policies in the possession of the Company or any Company Affiliate
pertaining to fiduciary liability insurance covering the fiduciaries for each Company Employee
Plan; (x) all discrimination tests required under the Code for each Company Employee Plan intended
to be qualified under Section 401(a) of the Code for the three most recent plan years; and (xi) the
most recent IRS determination or opinion letter issued with respect to each Company Employee Plan
intended to be qualified under Section 401(a) of the Code.

26.

 

          (i) The Company and each of the Company Affiliates have performed all obligations required to
be performed by them under each Company Employee Plan and are not in default or violation of, and
to the Company’s Knowledge there are no defaults or violations by any other party to, the terms of
any Company Employee Plan, and each Company Employee Plan has been established and maintained
substantially in accordance with its terms and in substantial compliance with all applicable Legal
Requirements, including ERISA and the Code. Any Company Employee Plan intended to be qualified
under Section 401(a) of the Code has obtained a favorable determination letter (or opinion letter,
if applicable) as to its qualified status under the Code. No “prohibited transaction,” within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Company Employee Plan. There are no
claims or Legal Proceedings pending, or, to the Company’s Knowledge, threatened (other than routine
claims for benefits), against any Company Employee Plan or against the assets of any Company
Employee Plan. Each Company Employee Plan (other than any Company Employee Plan to be terminated
prior to the Closing in accordance with this Agreement) can be amended, terminated or otherwise
discontinued after the Closing in accordance with its terms, without liability to Parent, the
Company or any Company Affiliate (other than ordinary administration expenses). There are no
audits, inquiries or Legal Proceedings pending or, to the Company’s Knowledge, threatened by the
IRS, DOL, or any other Governmental Body with respect to any Company Employee Plan. Neither the
Company nor any Company Affiliate has ever incurred any penalty or tax with respect to any Company
Employee Plan under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code. The Company
and each Company Affiliates have made all contributions and other payments required by and due
under the terms of each Company Employee Plan.

          (j) Neither the Company nor any Company Affiliate has ever maintained, established, sponsored,
participated in, or contributed to any: (i) Company Pension Plan subject to Title IV of ERISA; or
(ii) “multiemployer plan” within the meaning of Section (3)(37) of ERISA. Neither the Company nor
any Company Affiliate has ever maintained, established, sponsored, participated in or contributed
to, any Company Pension Plan in which stock of the Company or any Company Affiliate is or was held
as a plan asset. The fair market value of the assets of each funded Foreign Plan, the liability of
each insurer for any Foreign Plan funded through insurance, or the book reserve established for any
Foreign Plan, together with any accrued contributions, is sufficient to procure or provide in full
for the accrued benefit obligations, with respect to all current and former participants in such
Foreign Plan according to the actuarial assumptions and valuations most recently used to determine
employer contributions to and obligations under such Foreign Plan, and no transaction contemplated
by this Agreement shall cause any such assets or insurance obligations to be less than such benefit
obligations.

          (k) No Company Employee Plan provides (except at no cost to the Company or any Company
Affiliate), or reflects or represents any liability of the Company or any Company Affiliate to
provide, retiree life insurance, retiree health benefits or other retiree employee welfare benefits
to any Person for any reason, except as may be required by COBRA or other applicable Legal
Requirements. Other than commitments made that involve no future costs to the Company or any
Company Affiliate, neither the Company nor any Company Affiliate has ever represented, promised or
contracted (whether in oral or written form) to any Company Employee (either individually or to
Company Employees as a group) or any other

27.

 

Person that such Company Employee(s) or other person would be provided with retiree life
insurance, retiree health benefit or other retiree employee welfare benefits, except to the extent
required by applicable Legal Requirements.

          (l) Except as expressly required or provided by this Agreement, neither the execution of this
Agreement nor the consummation of the transactions contemplated hereby will (either alone or upon
the occurrence of any additional or subsequent events) constitute an event under any Company
Employee Plan, Company Employee Agreement, trust or loan that will or may result (either alone or
in connection with any other circumstance or event) in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits
or obligation to fund benefits with respect to any Company Employee.

          (m) The Company and each of the Company Affiliates: (i) are, and at all times have been, in
substantial compliance with all applicable Legal Requirements respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case, with respect to
Company Employees, including the health care continuation requirements of COBRA, the requirements
of FMLA, the requirements of HIPAA and any similar provisions of state law; (ii) have withheld and
reported all amounts required by applicable Legal Requirements or by Contract to be withheld and
reported with respect to wages, salaries and other payments to Company Employees; (iii) are not
liable for any arrears of wages or any taxes or any penalty for failure to comply with the Legal
Requirements applicable of the foregoing; and (iv) are not liable for any payment to any trust or
other fund governed by or maintained by or on behalf of any Governmental Body with respect to
unemployment compensation benefits, social security or other benefits or obligations for Company
Employees (other than routine payments to be made in the normal course of business and consistent
with past practice). There are no pending or, to the Company’s Knowledge, threatened claims or
Legal Proceedings against the Company or any Company Affiliate under any worker’s compensation
policy or long-term disability policy.

     2.19 Insurance. Part 2.19 of the Company Disclosure Schedule identifies all insurance
policies maintained by, at the expense of or for the benefit of the Company and identifies any
material claims made thereunder, and the Company has delivered to Parent accurate and complete
copies of the insurance policies identified on Part 2.19 of the Company Disclosure Schedule. Each
of the insurance policies identified in Part 2.19 of the Company Disclosure Schedule is in full
force and effect. Since January 1, 2009, the Company has not received any notice or other
communication regarding any actual or possible (a) cancellation or invalidation of any insurance
policy, (b) refusal of any coverage or rejection of any claim under any insurance policy, or (c)
material adjustment in the amount of the premiums payable with respect to any insurance policy.

     2.20 Related Party Transactions. Except as set forth in Part 2.20 of the Company Disclosure
Schedule, there are no obligations of the Company to officers, directors, stockholders, or
employees of the Company other than (a) for payment of salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the board of directors of the

28.

 

Company). None of the officers, directors or, to the Company’s Knowledge, key employees or
stockholders of the Company or any members of their immediate families, is indebted to the Company
or has any direct or indirect ownership interest in any Person with which the Company is affiliated
or with which the Company has a business relationship, or any firm or corporation that competes
with the Company, other than (i) passive investments in publicly traded companies (representing
less than 1% of such company) which may compete with the Company and (ii) service as a board member
of a company due to a person’s affiliation with a venture capital fund or similar institutional
investor in such company. No officer, director or stockholder, or to the Company’s Knowledge, any
member of their immediate families, is, directly or indirectly, interested in any Material Contract
with the Company (other than such contracts as relate to any such person’s ownership of capital
stock or other securities of the Company).

     2.21 Legal Proceedings; Orders.

          (a) There is no pending Legal Proceeding, and to the Company’s Knowledge no Person has
threatened to commence any Legal Proceeding: (i) that involves the Company or any of the assets
owned or used by the Company or any Person whose liability the Company has or may have retained or
assumed, either contractually or by operation of law; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with, the Merger or any of
the other transactions contemplated by this Agreement.

          (b) There is no order, writ, injunction, judgment or decree to which the Company, or any of
the assets owned or used by the Company, is subject. To the Company’s Knowledge, no officer or
other employee of the Company is subject to any order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any conduct, activity or
practice relating to the Company’s business.

     2.22 Customers. The Company has no outstanding material dispute concerning its goods and/or
services with any customer who, in the year ended December 31, 2008 or the eight (8) months ended
August 31, 2009, was (or would be in the absence of such dispute) a source of at least $10,000 of
revenue, based on amounts paid or payable, for such period (each, a “Significant Customer”). Each
Significant Customer is listed on Part 2.22 of the Company Disclosure Schedule. The Company has
not received any written information or notice from any Significant Customer that such customer
will not continue as a customer of the Company after the Closing or that any such customer intends
to terminate or materially modify existing Contracts with the Company or materially reduce the
amount paid to the Company for products or services.

     2.23 Brokers. Except as set forth in Part 2.23 of the Company Disclosure Schedule, no broker,
investment banker, financial advisor or other person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the Merger based upon
arrangements made by or on behalf of the Company.

     2.24 Full Disclosure. To the Company’s Knowledge, this Agreement (including the Company
Disclosure Schedule) does not, and the Company Closing Certificate will not, contain any
representation, warranty or information that is false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the representations, warranties

29.

 

and information contained, and to be contained, herein and therein (in the light of the
circumstances under which such representations, warranties and information were or will be made or
provided), not false or misleading.

SECTION 3. Representations and Warranties of The Signing Noteholders and Carve-Out Recipients

          Each Signing Noteholder and Carve-Out Recipient, severally and not jointly, represents and
warrants, to and for the benefit of the Parent Indemnitees, as follows:

     3.1 Authority; Binding Nature of Agreement. Such Signing Noteholder or Carve-Out Recipient
has the absolute and unrestricted right, power and authority to perform his, her or its obligations
under this Agreement. This Agreement constitutes the legal, valid and binding obligation of such
Signing Noteholder or Carve-Out Recipient, enforceable against him, her or it in accordance with
its terms, subject to (a) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (b) rules of law governing specific performance, injunctive relief and other
equitable remedies.

     3.2 Consents. Such Signing Noteholder or Carve-Out Recipient is not and will not be required
to make any filing with or give any notice to, or to obtain any Consent from, any Person in
connection with (a) the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (b) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.

     3.3 Investment Representations.

          (a) Such Signing Noteholder or Carve-Out Recipient is an “accredited investor” as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act.

          (b) Such Signing Noteholder or Carve-Out Recipient has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and risks of its
investment in the Parent Series E-1 Preferred and is able to bear the economic risks of such
investment.

          (c) Such Signing Noteholder or Carve-Out Recipient understands that the shares of Parent
Series E-1 Preferred to be issued pursuant to this Agreement have not been, and will not be,
registered under the Securities Act, by reason of a specific exemption from the registration
provisions of the Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Signing Noteholder’s or Carve-Out Recipient’s
representations as expressed herein. Such Signing Noteholder or Carve-Out Recipient understands
that the shares of Parent Series E-1 Preferred to be issued pursuant to this Agreement are
“restricted securities” under applicable United States federal and state securities laws and that,
pursuant to these laws, such Signing Noteholder or Carve-Out Recipient must hold the shares of
Parent Series E-1 Preferred indefinitely unless they are registered with the SEC and qualified by
state authorities, or an exemption from such registration and qualification requirements is
available. Such Signing Noteholder or Carve-Out Recipient acknowledges that the Parent has no
obligation to register or qualify the shares of Parent Series E-1 Preferred to be issued pursuant
to this Agreement, or the shares of Parent Common Stock into which they may

30.

 

be converted, for resale except as set forth in the Parent Registration Rights Agreement as it
will be amended by the Parent Registration Rights Agreement Amendment.

          (d) Such Signing Noteholder or Carve-Out Recipient understands that no public market now
exists for the shares of Parent Series E-1 Preferred, and that the Parent and the Merger Sub have
made no assurances that a public market will ever exist for the shares of Parent Series E-1
Preferred.

          (e) The shares of Parent Series E-1 Preferred to be acquired by such Signing Noteholder or
Carve-Out Recipient will be acquired for investment for such Signing Noteholder’s or Carve-Out
Recipient’s own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and such Signing Noteholder or Carve-Out Recipient has no present
intention of selling, granting any participation in, or otherwise distributing the same. Such
Signing Noteholder or Carve-Out Recipient does not presently have any contract, undertaking,
agreement or arrangement with any Person to sell, transfer or grant participations to such Person
or to any third Person with respect to any of the shares of Parent Series E-1 Preferred.

          (f) Such Signing Noteholder or Carve-Out Recipient understands that the shares of Parent
Series E-1 Preferred and any securities issued in respect of or exchange for the shares of Parent
Series E-1 Preferred, may bear one or all of the following legends:

               (i) “These securities have not been registered under the Securities Act of 1933, as amended.
They may not be sold, offered for sale, pledged or hypothecated in the absence of a registration
statement in effect with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless sold pursuant to Rule
144 or Rule 144A of such Act.”

               (ii) Any legend required by the laws of any other applicable jurisdiction.

     3.4 Claims Against the Company. Except for claims that may arise in connection with the
Merger and such Signing Noteholder’s or Carve-Out Recipient’s right to receive a portion of the
Aggregate Merger Consideration under this Agreement, such Signing Noteholder or Carve-Out Recipient
does not have any past, present, or contemplated claims, nor any liabilities, demands, causes of
action, costs, reimbursements, damages, indemnities or obligations of any kind or nature, in law,
at equity, or otherwise, disclosed or undisclosed, relating to any (a) Company Note, in the case of
a Signing Noteholder, held by such Signing Noteholder, (b) claims or rights under the Carve-Out
Plan, in the case of a Carve-Out Recipient, or (c) other claims or rights of ownership in, or to
acquire capital stock of, the Company.

SECTION 4. Representations and Warranties of Parent and Merger Sub

          Parent and Merger Sub, jointly and severally, represent and warrant to the Company as follows:

     4.1 Due Organization; Subsidiaries; Etc.

31.

 

          (a) Parent is a corporation, duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate power and authority to own its properties and
assets and to conduct its businesses as currently conducted.

          (b) Merger Sub is a corporation, duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate power and authority to own its properties
and assets and to conduct its businesses as currently conducted.

          (c) Except as set forth on Part 4.1(c) of the Parent Disclosure Schedule, and except for
Merger Sub, the Parent does not own, beneficially or otherwise, any shares or other securities of,
or any direct or indirect equity interest in, any Entity.

          (d) Merger Sub is a wholly-owned subsidiary of Parent, was incorporated and organized on and
as of September 30, 2009 for the sole purpose of engaging in the transactions provided for in this
Agreement, has engaged in no other business or activity, and has conducted its operations only as
contemplated hereby.

     4.2 Capitalization, Etc.

          (a) As of the date of this Agreement, the authorized capital stock of Parent consists of: (i)
139,100,000 shares of common stock, having a par value of $0.01 per share (“Parent Common
Stock”), of which, as of September 30, 2009, 37,715,483 shares are issued and outstanding; and (ii)
80,364,939 shares of preferred stock, having a par value of $0.01 per share (“Parent Preferred
Stock”) of which (A) 9,000,000 shares of Series A Preferred Stock are authorized, all of which
shares are issued and outstanding; (B) 3,533,200 shares of Series B-1 Convertible Preferred Stock
are authorized, all of which are issued and outstanding; (C) 58,904,320 shares of Series C-1
Convertible Preferred Stock are authorized, 58,628,599 of which are issued and outstanding; (D)
4,827,419 shares of Series D Convertible Preferred Stock are authorized, all of which are issued
and outstanding; (E) 2,500,000 shares of Series E Convertible Preferred Stock are authorized,
2,499,980 of which are issued and outstanding; and (F) 1,600,000 shares of Series E-1 Convertible
Preferred Stock are authorized, none of which are issued and outstanding. All of the outstanding
shares of Parent Common Stock and Parent Preferred Stock have been duly authorized and validly
issued, and are fully paid and non-assessable.

          (b) As of the date of this Agreement, Parent has reserved 29,715,756 shares of Parent Common
Stock for issuance under its 1999 Stock Incentive Plan, as amended, and its 2009 Equity Incentive
Plan (collectively, the “Parent Equity Plans”), of which, as of September 30, 2009, (i) 8,725,536
shares have been issued pursuant to restricted stock purchase agreements and/or the exercise of
outstanding options, (ii) options to purchase 18,231,002 shares have been granted and are currently
outstanding, (iii) 980,000 shares are reserved for issuance related to outstanding restricted stock
units, and (iv) 1,779,218 shares remain available for future issuances of restricted stock
agreements or grants of options to directors, officers, employees and consultants of Parent under
the Parent Equity Plans (collectively, the foregoing options, stock purchase agreements and
restricted stock units referred to in the foregoing clauses (i) — (iv), the “Parent Options”). As
of the date of this Agreement, Parent has reserved a total of (y) 275,721 shares of its Series C-1
Preferred Stock for purchase upon exercise of warrants granted to certain lenders, and (z) 699,301
shares of Parent Common Stock for purchase upon exercise of a warrant

32.

 

issued to ORIX Finance Equity Investors, LP (collectively, such warrants referred to in the
foregoing clauses (y) — (z), the “Parent Warrants”). Except as set forth in this Section 4.2(b),
or in Part 4.2(b) of the Parent Disclosure Schedule, there is no: (A) outstanding subscription,
option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of Parent; (B) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of the capital stock or other
securities of Parent; (C) Contract under which Parent is or may become obligated to sell or
otherwise issue any shares of its capital stock or any other securities; or (D) to the Parent’s
Knowledge, condition or circumstance that may give rise to or provide a basis for the assertion of
a claim by any Person to the effect that such Person is entitled to acquire or receive any shares
of capital stock or other securities of Parent.

          (c) All outstanding shares of Parent Common Stock and Parent Preferred Stock, and all
outstanding Parent Options and Parent Warrants, have been issued and granted in compliance with (i)
all applicable securities laws and other applicable Legal Requirements, and (ii) all requirements
set forth in applicable Contracts.

          (d) The Parent’s stockholders have taken all action required to waive any rights of first
offer or refusal or other preemptive rights and any antidilution or conversion price adjustments
which may apply in connection with the issuance of the Parent Series E-1 Preferred to the Signing
Noteholders and Carve-Out Recipients.

          (e) The shares of Parent Series E-1 Preferred to be issued in the Merger will, when issued in
accordance with the provisions of this Agreement, be validly issued, fully paid and nonassessable.

     4.3 Authority; Binding Nature of Agreement. Parent has the corporate power and authority to
enter into and to perform its obligations under this Agreement, and the execution, delivery and
performance by Parent of this Agreement have been duly authorized by all necessary action on the
part of Parent and its board of directors and stockholders. This Agreement constitutes the legal,
valid and binding obligation of Parent, enforceable against Parent in accordance with its terms,
subject to (a) laws of general application relating to bankruptcy, insolvency and the relief of
debtors, and (b) rules of law governing specific performance, injunctive relief and other equitable
remedies.

     4.4 Non-Contravention; Consents. Except as set forth in Part 4.4 of the Parent Disclosure
Schedule, neither the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, nor the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with or without notice or
lapse of time):

          (a) contravene, conflict with or result in a violation of (i) any of the provisions of the
Parent’s Certificate of Incorporation or bylaws, or (ii) any resolution adopted by the Parent’s
board of directors or any committee of the Parent’s board of directors or by Parent’s stockholders;

33.

 

          (b) contravene, conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge any of the transactions contemplated by this Agreement or to
exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ,
injunction, judgment or decree to which Parent, or any of the assets owned or used by Parent, is
subject;

          (c) contravene, conflict with or result in a violation of any of the terms or requirements of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify,
any Governmental Authorization that is held by Parent or that otherwise relates to Parent’s
business or to any of the assets owned or used by Parent;

          (d) contravene, conflict with or result in a violation or breach of, or result in a default
under, any provision of any material Contract to which Parent is a party or by which it is bound,
or give any Person the right to (i) declare a default or exercise any remedy under any such
Contract, (ii) accelerate the maturity or performance of any such Contract, or (iii) cancel,
terminate or modify any such Contract; or

          (e) result in the imposition or creation of any Encumbrance upon or with respect to any asset
owned or used by Parent (except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially impair the operations
of Parent).

Except as set forth in Part 4.4 of the Parent Disclosure Schedule, Parent is not and will not be
required to make any filing with or give any notice to, or to obtain any Consent from, any Person
in connection with (x) the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.

     4.5 Financial Statements.

          (a) Parent has delivered to the Company the following financial statements and notes
(collectively, the “Parent Financial Statements”):

               (i) The audited consolidated balance sheets of the Parent as of December 31, 2006, 2007 and
2008, and the related audited consolidated income statements, statements of stockholders’ equity
and statements of cash flows of Parent for the years then ended, together with the notes thereto
and the report and opinion of PricewaterhouseCoopers LLP relating thereto; and

               (ii) the unaudited consolidated balance sheet of the Parent as of the Interim Balance Sheet
Date (the “Parent Unaudited Interim Balance Sheet”), and the related unaudited consolidated income
statement and statement of cash flows of the Company for the seven months then ended.

          (b) The Parent Financial Statements are accurate and complete in all material respects and
present fairly the financial position of Parent as of the respective dates thereof and the results
of operations and cash flows of the Parent for the periods covered thereby. The Parent Financial
Statements have been prepared in accordance with GAAP applied on a consistent basis

34.

 

throughout the periods covered (except that the financial statements referred to in Section
4.5(a)(ii) do not contain footnotes and are subject to normal and recurring year-end audit
adjustments, which will not, individually or in the aggregate, be material in magnitude).

     4.6 Absence of Changes. Except as set forth in Part 4.6 of the Parent Disclosure Schedule and
except as contemplated by this Agreement, since the Interim Balance Sheet Date:

          (a) there has not been any material adverse change in Parent’s business, condition, assets,
liabilities, operations, or financial performance, and, to the Parent’s Knowledge, no event has
occurred that will, or would reasonably be expected to, have a Material Adverse Effect on Parent;

          (b) there has not been any material loss, damage or destruction to, or any material
interruption in the use of, any of the Parent’s assets (whether or not covered by insurance);

          (c) Parent has not declared, accrued, set aside or paid any dividend or made any other
distribution in respect of any shares of capital stock, and has not repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities;

          (d) Parent has not sold, issued or authorized the issuance of (i) any capital stock or other
security, (ii) any option or right to acquire any capital stock or any other security (except for
Parent Options and Parent Warrants described in Section 4.2(b) above or in Part 4.2(b) of the
Parent Disclosure Schedule), or (iii) any instrument convertible into or exchangeable for any
capital stock or other security;

          (e) there has been no amendment to Parent’s Certificate of Incorporation or bylaws, and Parent
has not effected or been a party to any recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;

          (f) Parent has not formed any subsidiary or acquired any equity interest or other interest in
any other Entity other than Merger Sub;

          (g) Parent has not written off as uncollectible, or established any extraordinary reserve with
respect to, any material account receivable or other indebtedness;

          (h) Parent has not made any pledge of any of its assets or otherwise permitted any of its
assets to become subject to any Encumbrance;

          (i) Parent has not changed any of its methods of accounting or accounting practices in any
respect; and

          (j) Parent has not agreed or committed to take any of the actions referred to in clauses “(c)”
through “(i)” above.

     4.7 Title to Assets. The Parent owns, and has good, valid and marketable title to, all assets
purported to be owned by it. Except as set forth in Part 4.7 of the Parent Disclosure Schedule,
all of said assets are owned by the Parent free and clear of any Encumbrances, except

35.

 

for (a) any lien for current taxes not yet due and payable, and (b) minor liens that have
arisen in the ordinary course of business and that do not (in any case or in the aggregate)
materially detract from the value of the assets subject thereto or materially impair the operations
of the Parent.

     4.8 Intellectual Property. To the Parent’s Knowledge, (a) the Parent has the right to use,
free and clear of claims or rights of others (other than rights of Persons to whom Parent has
granted a license), all Intellectual Property Rights required for the business of the Parent, (b)
the Parent is not using and has not used any confidential information, trade secrets, or computer
software (not licensed to the Parent) required for its products of any former employer of any of
its past or present employees and (c) the Parent does not infringe (directly, contributorily, by
inducement or otherwise) or otherwise violate or make unlawful use of any Intellectual Property
Rights of any other Person.

     4.9 Liabilities. The Parent has no accrued, contingent or other liabilities of any nature,
either matured or unmatured, and whether due or to become due, that would be required to be
reflected in financial statements in accordance with GAAP, except for: (a) liabilities identified
as such in the “liabilities” column of the Parent Unaudited Interim Balance Sheet; (b) accounts
payable or accrued salaries that have been incurred by the Parent since the Interim Balance Sheet
Date in the ordinary course of business and consistent with the Parent’s past practices; and (c)
the liabilities identified in Part 4.9 of the Parent Disclosure Schedule.

     4.10 Compliance with Legal Requirements. The Parent is, and has at all times since January 1,
2006 been, in compliance with all applicable Legal Requirements, except where the failure to comply
with such Legal Requirements has not had and will not have a Material Adverse Effect on the Parent.
Except as set forth in Part 4.10 of the Parent Disclosure Schedule, since January 1, 2006, the
Parent has not received any notice or other communication from any Governmental Body regarding any
actual or possible violation of, or failure to comply with, any Legal Requirement.

     4.11 Tax Matters. There are no Taxes due and payable by the Parent which have not been
accrued for or paid. The provision for Taxes in the balance sheets included in the Parent
Financial Statements are sufficient for the payment of all accrued and unpaid Taxes of the Parent,
whether or not assessed or disputed, as of the date of such balance sheet. Since January 1, 2006,
and except as otherwise set forth in Part 4.11 of the Parent Disclosure Schedule, there have been
no examinations or audits of any Tax returns or reports of the Parent by any Governmental Body.
The Parent has duly filed all Tax returns required to have been filed by it (or obtained an
extension of any filing deadline) that are material to its operations, and there are in effect no
waivers of applicable statutes of limitations with respect to Taxes for any year.

     4.12 Employee and Labor Matters. To the Parent’s Knowledge, except as set forth in Part 4.12
of the Parent Disclosure Schedule: (a) no employee of Parent is in violation of any term of any
employment contract, patent or other proprietary information disclosure agreement or any other
contract or agreement relating to the right of any such employee to be employed by Parent because
of the nature of the business conducted or proposed to be conducted by Parent or any other reason,
and the continued employment by Parent of its respective present employees will not result in any
such violation; and (b) no officer of the Parent has any present intention of

36.

 

terminating his or her employment therewith nor does the Parent have any present intention of
terminating any such employment. The Parent is not a party to any collective bargaining agreement
and, to the Parent’s Knowledge, no organizational efforts are presently being made with respect to
any of its employees.

     4.13 Insurance. The Parent maintains in full force and effect such types and amounts of
insurance issued by insurers of recognized responsibility insuring Parent with respect to its
business and properties, in such amounts and against such losses and risks as are carried by
similarly situated companies.

     4.14 Legal Proceedings; Orders.

          (a) Except as set forth in Part 4.14 of the Parent Disclosure Schedule, there is no pending
Legal Proceeding, and to the Parent’s Knowledge no Person has threatened to commence any Legal
Proceeding: (i) that involves the Parent or any of the assets owned or used by the Parent or any
Person whose liability the Parent has or may have retained or assumed, either contractually or by
operation of law; or (ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement.

          (b) There is no order, writ, injunction, judgment or decree to which the Parent, or any of the
assets owned or used by the Parent, is subject. To the Parent’s Knowledge, no officer or other
employee of the Parent is subject to any order, writ, injunction, judgment or decree that prohibits
such officer or other employee from engaging in or continuing any conduct, activity or practice
relating to the Parent’s business.

     4.15 Brokers. Except as set forth in Part 4.15 of the Parent Disclosure Schedule, no broker,
investment banker, financial advisor or other person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the Merger based upon
arrangements made by or on behalf of the Parent.

     4.16 Full Disclosure. To the Parent’s Knowledge, this Agreement (including the Parent
Disclosure Schedule) does not, and the Parent Closing Certificate will not, contain any
representation, warranty or information that is false or misleading with respect to any material
fact, or omit to state any material fact necessary to make the representations, warranties and
information contained, and to be contained herein and therein (in the light of the circumstances
under which such representations, warranties and information were or will be made or provided), not
false or misleading.

SECTION 5. Certain Covenants of the Company, the Signing Noteholders and the Carve-Out Recipients

     5.1 Access and Investigation. During the period from the date of this Agreement through the
Effective Time (the “Pre-Closing Period”), the Company shall, and shall cause its Representatives
to: (a) provide Parent and Parent’s Representatives with reasonable access to the Company’s
Representatives, personnel and assets and to all existing books, records, Tax Returns, work papers
and other documents and information relating to the Company; and (b) provide Parent and Parent’s
Representatives with copies of such existing books, records, Tax

37.

 

Returns, work papers and other documents and information relating to the Company, and with
such additional financial, operating and other data and information regarding the Company, as
Parent may reasonably request.

     5.2 Operation of the Company’s Business. During the Pre-Closing Period, the Company shall
(and shall cause each of the Company Subsidiaries to):

          (a) conduct its business and operations in the ordinary course and in substantially the same
manner as such business and operations have been conducted prior to the date of this Agreement;

          (b) use reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and maintain its relations and good
will with all suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company and the Company Subsidiaries;

          (c) keep in full force all insurance policies identified in Part 2.19 of the Company
Disclosure Schedule;

          (d) cause its officers to report regularly (but in no event less frequently than weekly) to
Parent concerning the status of the business of the Company and the Company Subsidiaries;

          (e) not declare, accrue, set aside or pay any dividend or make any other distribution in
respect of any shares of capital stock, and shall not repurchase, redeem or otherwise reacquire any
shares of capital stock or other securities;

          (f) not sell, issue or authorize the issuance of (i) any capital stock or other security, (ii)
any option or right to acquire any capital stock or other security, or (iii) any instrument
convertible into or exchangeable for any capital stock or other security (except that the Company
shall be permitted to (A) issue Company Common Stock to employees upon the exercise of outstanding
Company Options and (B) issue shares of Company Common Stock upon the conversion of shares of
Company Series A Preferred Stock);

          (g) except as required pursuant to this Agreement, not amend or waive any of its rights under,
or permit the acceleration of vesting under, (i) any provision of the Company Equity Plan, (ii) any
provision of any agreement evidencing any outstanding Company Option, or (iii) any provision of any
restricted stock purchase agreement;

          (h) not amend or permit the adoption of any amendment to its respective Certificate of
Incorporation or bylaws (or similar organizational documents), or effect or permit itself become a
party to any Acquisition Transaction (other than pursuant to this Agreement), recapitalization,
reclassification of shares, stock split, reverse stock split or similar transaction;

          (i) not form any subsidiary or acquire any equity interest or other interest in any other
Entity;

38.

 

          (j) not make any capital expenditure, except for capital expenditures that, when added to all
other capital expenditures made on behalf of the Company during the Pre-Closing Period, do not
exceed $10,000;

          (k) not (i) enter into, or permit any of the assets owned or used by it to become bound by,
any Contract that is or would constitute a Material Contract, or (ii) amend or prematurely
terminate, or waive any material right or remedy under, any such Contract;

          (l) not (i) acquire, lease or license any right or other asset from any other Person, (ii)
sell or otherwise dispose of, or lease or license, any right or other asset to any other Person, or
(iii) waive or relinquish any right, except for assets acquired, leased, licensed or disposed of by
the Company pursuant to Contracts that are not Material Contracts;

          (m) not (i) lend money to any Person (except that the Company may make routine travel advances
to employees in the ordinary course of business), or (ii) incur or guarantee any indebtedness for
borrowed money;

          (n) not (i) establish, adopt or amend any Company Employee Plan, (ii) pay any bonus or make
any profit-sharing payment, cash incentive payment or similar payment to, or increase the amount of
the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees, or (iii) hire any new employee;

          (o) not change any of its methods of accounting or accounting practices;

          (p) not make any Tax election;

          (q) not commence or settle any material Legal Proceeding; and

          (r) not agree or commit to take any of the actions described in clauses “(e)” through “(q)”
above.

     5.3 Notification; Updates to Company Disclosure Schedule.

          (a) During the Pre-Closing Period, the Company shall promptly notify Parent in writing of:

               (i) the discovery by the Company of any event, condition, fact or circumstance that occurred
or existed on or prior to the date of this Agreement and that caused or constitutes an inaccuracy
in or breach of any representation or warranty made by the Company or any of the Signing
Noteholders or Carve-Out Recipients in this Agreement;

               (ii) any event, condition, fact or circumstance that occurs, arises or exists after the date
of this Agreement and that would cause or constitute an inaccuracy in or breach of any
representation or warranty made by the Company or any of the Signing Noteholders or Carve-Out
Recipients in this Agreement if (A) such representation or warranty had been made as of the time of
the occurrence, existence or discovery of such event, condition,

39.

 

fact or circumstance, or (B) such event, condition, fact or circumstance had occurred, arisen
or existed on or prior to the date of this Agreement;

               (iii) any breach of any covenant or obligation of the Company or any of the Signing
Noteholders or Carve-Out Recipients; and

               (iv) any event, condition, fact or circumstance that would make the timely satisfaction of any
of the covenants set forth in this Section 5 or Section 6, or the conditions set forth in Section
7, impossible or unlikely.

          (b) If any event, condition, fact or circumstance that is required to be disclosed pursuant to
Section 5.3(a) requires any change in the Company Disclosure Schedule, or if any such event,
condition, fact or circumstance would require such a change assuming the Company Disclosure
Schedule were dated as of the date of the occurrence, existence or discovery of such event,
condition, fact or circumstance, then the Company shall promptly deliver to Parent an update to the
Company Disclosure Schedule specifying such change. No such update shall be deemed to supplement
or amend the Company Disclosure Schedule for the purpose of (i) determining the accuracy of any of
the representations and warranties made by the Company or any of the Signing Noteholders or
Carve-Out Recipients in this Agreement, or (ii) determining whether any of the conditions set forth
in Section 7 has been satisfied.

     5.4 No Negotiation. During the Pre-Closing Period, neither the Company nor any of the Signing
Noteholders or Carve-Out Recipients shall, directly or indirectly:

          (a) solicit or encourage the initiation of any inquiry, proposal or offer from any Person
(other than Parent) relating to a possible Acquisition Transaction;

          (b) participate in any discussions or negotiations or enter into any agreement with, or
provide any non-public information to, any Person (other than Parent) relating to or in connection
with a possible Acquisition Transaction; or

          (c) consider, entertain or accept any proposal or offer from any Person (other than Parent)
relating to a possible Acquisition Transaction.

The Company shall promptly notify Parent in writing of any material inquiry, proposal or offer
relating to a possible Acquisition Transaction that is received by the Company or any of the
Signing Noteholders or Carve-Out Recipients during the Pre-Closing Period.

     5.5 Required Company Stockholder Approval. The Company shall obtain executed written
consents, in the form attached hereto as Exhibit E, from Company Stockholders constituting the
Required Company Stockholder Approval, and shall deliver to Parent copies of such executed written
consents promptly upon receipt of the same. Parent shall hold such consents during the term of
this Agreement, and in the event this Agreement is terminated in accordance with the provisions of
Section 9.1, then Parent shall promptly destroy or redeliver to the Company such written consents.
Prior to the Closing and within ten (10) days after the Required Company Stockholder Approval is
obtained, pursuant to Section 262(d) of the DGCL and Section 1301 of the California Corporations
Code, the Company shall mail to each

40.

 

stockholder of the Company who does not approve the Merger, a notice of the approval of the
Merger.

     5.6 Stockholder Approval. Prior to the Closing, the Company will satisfy the stockholder
approval requirements set forth in Section 280G(b)(5)(B) of the Code so that no payments received
by any person will result in any excess parachute payment as defined in Section 280G(b)(1) of the
Code.

     5.7 Release of Claims by Signing Noteholders and Carve-Out Recipients.

          (a) Except for claims that may arise in connection with the Merger and each Signing
Noteholder’s and Carve-Out Recipient’s right to receive a portion of the Aggregate Merger
Consideration pursuant to this Agreement, effective as of the Effective Time, each Signing
Noteholder and Carve-Out Recipient, on behalf of himself, herself or itself, and on behalf of his,
her or its officers, directors, affiliates, agents, heirs and assigns, releases and discharges the
Company, Parent, Merger Sub and their affiliates and agents, present and former, and their
successors and assigns from any and all claims, liabilities, demands, causes of action, costs,
reimbursements, damages, indemnities and obligations of every kind and nature, in law, at equity,
or otherwise, known and unknown, disclosed and undisclosed relating to any (i) Company Note, in the
case of a Signing Noteholder, held by such Signing Noteholder, (ii) claims or rights under the
Carve-Out Plan, in the case of a Carve-Out Recipient, or (iii) other claims or rights of ownership
in, or to acquire capital stock of, the Company (collectively, “Released Claims”).

          (b) Each Signing Noteholder and Carve-Out Recipient executes this Agreement freely and
voluntarily and not under duress. Each Signing Noteholder and Carve-Out Recipient acknowledges
that he, she or it has been advised to consult with counsel of his, her or its choice about the
legal effects of making the release set forth in Section 5.7(a) above.

          (c) Each Signing Noteholder and Carve-Out Recipient understands and agrees that as to the
Released Claims contained herein, such Released Claims extend to all such claims of any nature and
kind, known or unknown, suspected or unsuspected, concealed or hidden. Each Signing Noteholder and
Carve-Out Recipient acknowledges that he, she or it has read, considered and understands the
provisions of Section 1542 of the California Civil Code which reads as follows:

A general release does not extend to claims which the creditor does not know
or suspect to exist in his or her favor at the time of executing the
release, which if known by him or her must have materially affected his or
her settlement with the debtor.

     5.8 Waiver of Notice by Holders of Company Warrants. The Signing Noteholders, who
collectively hold at least 50% of the Company Series A Preferred Stock issuable upon the exercise
of the Company Warrants purchased pursuant to that certain Senior Convertible Note and Warrant
Purchase Agreement, between the Company and each of the purchasers listed on Exhibit A thereto,
dated as of November 30, 2007, as amended on July 16, 2008 and September 3, 2009, hereby waive, on
behalf of all holders of Company Warrants, the

41.

 

requirement of notice set forth in Section 7 thereof that would otherwise be applicable to the
Merger and the transactions contemplated by this Agreement.

     5.9 Packet Island India. Prior to the Closing, the Company will (a) enter into a share
transfer consent agreement regarding the purchase by the Company of all shares of capital stock of
Packet Island Technologies Pvt. Ltd., an STPI registered company in Chennai, India (“Packet Island
India”) held by Mrs. Saradha Prabhakaran, the minority shareholder of such entity, for a purchase
price not to exceed INR (India Rupees) 10,000, in a manner that fully complies with all applicable
laws, Contracts and the memorandum of association of Packet Island India, (b) pay the purchase
price for such purchase to the individual account of Mrs. Saradha Prabhakaran and (c) cause the
board of directors of Packet Island India to officially approve such share transfer consent
agreement and purchase, assuming the Reserve Bank of India provides its consent to such transaction
in the form executed. In connection with this purchase, the Company shall, and shall cause Packet
Island India to, disclose all information necessary to properly effectuate such purchase in
compliance with all applicable laws, and the Company shall not, and shall cause Packet Island India
not to, make any misrepresentation with respect to any material fact, or omit to state any material
fact necessary to make the information disclosed (in the light of the circumstances under which
such disclosures are made) not false or misleading.

     5.10 Class A-1 Notes. Immediately prior to the Closing, the parties to this Agreement listed
on Exhibit A-1 as “Class A-1 Noteholders” (such individuals, “Class A-1 Noteholders”) hereby agree
to consummate the transactions contemplated by the Senior Secured Convertible Note Purchase
Agreement between such parties and the Company, and related documents, and shall have paid the
principal amount of such Class A-1 Notes to the Company, in the amount set forth opposite such
party’s name in Exhibit A-1.

SECTION 6. Additional Covenants of the Parties

     6.1 Filings and Consents. As promptly as practicable after the execution of this Agreement,
each party to this Agreement (a) shall make all filings (if any) and give all notices (if any)
required to be made and given by such party in connection with the Merger and the other
transactions contemplated by this Agreement, and (b) shall use all commercially reasonable efforts
to obtain all Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the Merger and the other
transactions contemplated by this Agreement. Each of the Parent and the Company shall (upon
request) promptly deliver to the other party a copy of each such filing made, each such notice
given and each such Consent obtained by Parent or the Company, as applicable, during the
Pre-Closing Period.

     6.2 Public Announcements. After the execution of this Agreement, Parent may issue a press
release or make any public statement regarding this Agreement or the Merger, or regarding any of
the other transactions contemplated by this Agreement, and, prior to the issuance of such press
release or public statement, the Company may review such press release or public statement and
provide reasonable comments thereto.

42.

 

     6.3 Best Efforts. During the Pre-Closing Period, (a) the Company, the Signing Noteholders and
the Carve-Out Recipients shall use their best efforts to cause the conditions set forth in Section
7 to be satisfied on a timely basis, and (b) Parent and Merger Sub shall use their best efforts to
cause the conditions set forth in Section 8 to be satisfied on a timely basis.

     6.4 Termination of Agreements. Prior to the Closing, the Company shall enter into agreements
with its stockholders, reasonably satisfactory in form and substance to Parent (and conditioned and
effective upon the Closing), terminating all of the Company’s obligations under the following
agreements, each dated as of June 21, 2006: (a) Investor Rights Agreement, by and among the Company
and the investors listed on Schedule A thereto; (b) Voting Agreement, by and among the Company,
certain holders of the Company Common Stock listed on Exhibit A thereto and the Persons listed on
Exhibit B thereto; (c) Right of First Refusal and Co-Sale Agreement, by and among the Company, the
stockholders listed on Schedule A thereto and the purchasers of the Company Series A Preferred
Stock listed on Schedule B thereto; (d) the Series A Preferred Stock Purchase Agreement, by and
among the Company and the investors listed on Schedule A thereto; (e) Management Rights Letter
between the Company and Startup Capital Ventures, L.P.; (f) Management Rights Letter between the
Company and Rincon Venture Partners, L.P.; (g) Management Rights Letter between the Company and
Garage California Entrepreneurs Fund, L.P.; and (h) Management Rights Letter between the Company
and Garage Technology Ventures I, L.P. (collectively, the “Company Stockholder Agreements”).

     6.5 FIRPTA Matters. At the Closing, (a) the Company shall deliver to Parent a statement (in
such form as may be reasonably requested by counsel to Parent) conforming to the requirements of
Section 1.897 — 2(h)(1)(i) of the United States Treasury Regulations, and (b) the Company shall
deliver to the IRS the notification required under Section 1.897 — 2(h)(2) of the United States
Treasury Regulations.

     6.6 Limitations on Disposition.

          (a) Each Signing Noteholder and Carve-Out Recipient agrees not to make any disposition of all
or any portion of the shares of Parent Series E-1 Preferred to be issued hereunder, or the shares
of Parent Common Stock issuable upon conversion thereof, unless and until:

               (i) There is then in effect a registration statement under the Securities Act covering such
proposed disposition and such disposition is made in accordance with such registration statement
and all applicable state securities laws; or

               (ii) Such Signing Noteholder or Carve-Out Recipient shall have notified the Parent of the
proposed disposition and shall have furnished the Parent with (A) a statement of the circumstances
surrounding the proposed disposition, and (B) an opinion from counsel, reasonably satisfactory to
the Parent, that such disposition will not require registration of such shares under the Securities
Act and that all requisite action has been or will be, on a timely basis, taken under any
applicable state securities laws in connection with such disposition.

          (b) Notwithstanding the provisions of Section 6.6(a) above, no such registration statement or
opinion of counsel shall be necessary for a transfer by any Signing

43.

 

Noteholder or Carve-Out Recipient: (i) to a partner, member, subsidiary, stockholder or
affiliate of such Signing Noteholder or Carve-Out Recipient, (ii) if such Signing Noteholder or
Carve-Out Recipient is a natural person, by gift or bequest or through inheritance to any of such
Signing Noteholder’s or Carve-Out Recipient’s spouse, father, mother, brothers, sisters and lineal
descendants and ancestors (collectively, the “Noteholder’s or Carve-Out Recipient’s Immediate
Family”), (iii) to a trust for the benefit of any member or members of such Noteholder’s or
Carve-Out Recipient’s Immediate Family or (iv) to a trust in respect of which such Signing
Noteholder or Carve-Out Recipient serves as trustee (provided, however, that the trust instrument
governing such trust shall provide that such Signing Noteholder or Carve-Out Recipient, as trustee,
shall retain sole and exclusive control over the voting and disposition of such shares until the
termination of the Parent Registration Rights Agreement and the Parent Stockholders’ Agreement), if
the transferee agrees in writing to be subject to the terms hereof to the same extent as if such
transferee were an original Signing Noteholder or Carve-Out Recipient hereunder.

     6.7 Tax Matters.

          (a) Parent shall cause to be prepared and timely filed all Tax Returns of the Company and each
Company Subsidiary that are filed after the Closing Date. The Company shall prepare and timely
file all Tax Returns of the Company and each Company Subsidiary that are due on or prior to the
Closing Date, provided that the Company shall provide Parent and its advisors at least twenty (20)
days to review and comment on each such Tax Return prior to the due date for filing and shall make
such changes to such Tax Returns as are reasonably requested by Parent.

          (b) Parent and the Agent shall cooperate fully, as and to the extent reasonably requested by
the other party, in connection with any Tax Contest and the preparation and filing of each Tax
Return. Such cooperation shall include, upon either party’s request, providing records and
information that are reasonably relevant to such Tax Contest or Tax Return, making employees
available on a mutually convenient basis to provide additional information, and explaining any
materials provided. The parties shall not destroy or dispose of any Tax workpapers, schedules or
other materials and documents supporting Tax Returns of the Company and the Company Subsidiaries
for Pre-Closing Tax Periods until the fifth (5th) anniversary of the Closing Date,
without the prior written consent of the other party, and before any disposition or destruction of
such materials at any time, the party in possession of such materials will provide the other party
the opportunity to take possession of such materials and documents.

          (c) The Indemnifying Parties shall be liable for all transfer, value added, excise, stock
transfer, stamp, recording, registration and any similar Taxes (“Transfer Taxes”) that become
payable in connection with the Merger and other transactions contemplated hereby. Parent will
cooperate in filing such forms and documents as may be necessary to permit any such Transfer Tax to
be assessed and paid on or prior to the Closing Date in accordance with any available pre-sale
filing procedure, and to obtain any exemption or refund of any such Transfer Tax.

SECTION 7. Conditions Precedent to Obligations of Parent and Merger Sub

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          The obligations of Parent and Merger Sub to effect the Merger and otherwise consummate the
transactions contemplated by this Agreement are subject to the satisfaction, at or prior to the
Closing, of each of the following conditions:

     7.1 Accuracy of Representations. Each of the representations and warranties made by the
Company, the Signing Noteholders and the Carve-Out Recipients in this Agreement and in each of the
other agreements and instruments delivered to Parent in connection with the transactions
contemplated by this Agreement shall have been accurate as of the date of this Agreement, and shall
continue to be accurate in all material respects as of the Closing Date as if made at the Closing
Date (without giving effect to any update to the Company Disclosure Schedule, and without giving
effect to any “Material Adverse Effect” or other materiality qualifications contained or
incorporated directly or indirectly in such representations and warranties).

     7.2 Performance of Covenants. All of the covenants and obligations that the Company, the
Signing Noteholders and the Carve-Out Recipients are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all material respects.

     7.3 Company Stockholder Approval. This Agreement and the transactions contemplated hereby
(including the allocation of the Aggregate Merger Consideration) shall have been duly approved by
the Required Company Stockholder Approval.

     7.4 Consents. The Consents identified in Schedule 7.4 shall have been obtained and shall be
in full force and effect.

     7.5 Dissenters. Holders of not more than one percent (1%) of the fully-diluted outstanding
shares of capital stock of the Company (on an as-converted basis) (a) shall have voted against the
Merger or not consented thereto in writing, and (b) shall have delivered before the Effective Time
timely written notice of such holders’ intent to exercise dissenters’ rights for such shares in
accordance with the DGCL.

     7.6 No Material Adverse Effect. Since the date of this Agreement there shall not have been
any event, change, effect or development that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect on the Company.

     7.7 Employees.

          (a) The Company shall have terminated all of its existing Company Employee Agreements with
Company Employees, in form and substance reasonably satisfactory to Parent.

          (b) Each of Praveen Kumar Prabhakaran, Matt Edington and Sankaran Vaidhyanathan shall have
accepted employment offers from Parent or any subsidiary thereof and shall have executed all
standard agreements required as new employees of Parent or any subsidiary thereof.

     7.8 Agreements and Documents. Parent shall have received the following agreements and
documents, each of which shall be in full force and effect:

45.

 

          (a) a certificate executed by an officer of the Company and the Signing Noteholders and
Carve-Out Recipients and containing the representation and warranty of the Company and each Signing
Noteholder and Carve-Out Recipient that each of the conditions set forth in Sections 7.1, 7.2, 7.3
and 7.6 have been duly satisfied (the “Company Closing Certificate”);

          (b) a certificate of the Company’s Secretary in form and substance reasonably acceptable to
Parent, attesting to, and attaching thereto: (i) the Company’s Certificate of Incorporation as in
effect at the time of the Closing, (ii) the Company’s bylaws as in effect at the time of the
Closing; (iii) the incumbency of the Company’s officers executing this Agreement and the other
agreements and documents executed in connection with the Merger, (iv) resolutions of the board of
directors and stockholders of the Company authorizing the consummation of the Merger and the
transactions associated therewith, and (v) a good standing certificate with respect to the Company
from the Secretary of State of the State of Delaware and any other jurisdiction in which the
Company is qualified to do business, dated no more than five (5) days before the Closing;

          (c) written evidence of termination of the Company Stockholder Agreements referred to in
Section 6.4 (i.e., signatures of the Company and the other parties to such Company Stockholder
Agreements that are required for termination);

          (d) an executed payoff letter from Orrick, Herrington & Sutcliffe LLP, addressed to Parent and
in the form and substance reasonably satisfactory to Parent, evidencing receipt of all amounts owed
by the Company in respect of the transactions contemplated hereby and agreeing that the Company
does not owe any amounts to Orrick, Herrington & Sutcliffe LLP.

          (e) an executed payoff letter from Woodside Capital Partners International, LLC, addressed to
Parent and in the form and substance reasonably satisfactory to Parent, evidencing receipt of all
amounts owed by the Company in respect of the transactions contemplated hereby and agreeing that
the Company has no further obligations to Woodside Capital Partners International, LLC.

          (f) an Amendment to Parent’s Fifth Amended and Restated Stockholder’s Agreement, dated June
26, 2007 (the “Parent Stockholders’ Agreement”), in the form attached hereto as Exhibit F (the
“Parent Stockholders’ Agreement Amendment”), executed by each Person who will be receiving shares
of Parent Series E-1 Preferred pursuant to this Agreement;

          (g) an Amendment to Parent’s Fourth Amended and Restated Registration Rights Agreement, dated
June 26, 2007 (the “Parent Registration Rights Agreement”), in the form attached hereto as Exhibit
G (the “Parent Registration Rights Agreement Amendment”), executed by each Person who will be
receiving shares of Parent Series E-1 Preferred pursuant to this Agreement;

          (h) the Escrow Agreement, executed by the Agent and the Escrow Agent;

          (i) written resignations of all officers and directors of the Company effective as of the
Effective Time, and, in regards to each Company Subsidiary, written resignations of all

46.

 

officers and directors of each Company Subsidiary, such resignations to be effective seven (7)
days following the Effective Time; and

          (j) such other certificates and agreements as reasonably requested by Parent and delivered by
or on behalf of the Company at Closing, in form and substance reasonably acceptable to Parent.

     7.9 No Restraints. No temporary restraining order, preliminary or permanent injunction or
other order preventing the consummation of the Merger shall have been issued by any court of
competent jurisdiction and remain in effect, and there shall not be any Legal Requirement enacted
or deemed applicable to the Merger that makes consummation of the Merger illegal.

     7.10 No Legal Proceedings. There shall not be pending or threatened in writing any Legal
Proceeding by any Governmental Body or any other Person, (a) challenging the Merger, seeking to
restrain or prohibit the consummation of the Merger or seeking to obtain from the Company or the
Parent any damages that are material in relation to the Company and the Company Subsidiaries taken
as a whole, (b) which is reasonably likely to prohibit or limit the ownership or operation by the
Company, the Parent or any of their respective subsidiaries of any material portion of the business
or assets of the Company, the Parent or any of their respective subsidiaries, or to compel the
Company, the Parent or any of their respective subsidiaries to dispose of or hold separate any
material portion of the business or assets of the Company, the Parent or any of their respective
subsidiaries, as a result of the consummation of the Merger, (c) which is reasonably likely to
impose limitations on the ability of the Parent to acquire or hold, or exercise full rights of
ownership of, the Company and the Company Subsidiaries, (d) which is reasonably likely to prohibit
the Parent from effectively controlling in any material respect the business or operations of the
Company and the Company Subsidiaries or (e) which otherwise has or would be reasonably be expected
to have a Material Adverse Effect on the Company.

     7.11 Termination of Company Options. The Company shall have provided Parent with evidence, in
form and substance reasonably satisfactory to Parent, as to the termination of all outstanding
Company Options and the Company Equity Plan.

     7.12 Lender Consents. ORIX Venture Finance LLC (Parent’s senior lender) shall have provided
all necessary written consents and approvals to the transactions contemplated hereby, in form and
substance reasonably satisfactory to Parent.

     7.13 FIRPTA Compliance. The Company shall have filed with the IRS the notification referred
to in Section 6.5(b).

     7.14 Closing Date Balance Sheet. On the Closing Date, the Company will have (i) at least
$800,000 in Cash and (ii) at least $788,000 in Net Assets, each as of immediately prior to the
Effective Time, before giving effect to the Merger, but after payment of all fees, costs and
expenses of the type contemplated by Sections 2.23 (and Part 2.23 of the Company Disclosure
Schedule), 7.8(d), 7.8(e) and 11.3(b).

47.

 

     7.15 Pay-off of Company Indebtedness; Termination of Security Interests. At the Closing, (a)
the Company shall have paid off all Company Indebtedness, and (b) all security interests of every
type at any time granted by the Company shall have been terminated.

     7.16 Amendment of ENA Services, LLC Master License and Services Agreement. Prior to the
Closing, the Company shall enter into an agreement with ENA Services, LLC to amend the Master
License and Services Agreement, between the Company and ENA Services, LLC, dated as of February 7,
2008 (the “ENA License Agreement”), such amendment to correct the typo-graphical error in Section
7.2 therein, to provide for ENA Services, LLC’s indemnification of the Company from any and all
costs incurred by the Company and arising out of or related to any claim asserted against the
Company regarding the delineated items in clauses (i) — (iii) of Section 7.2 of the ENA License
Agreement.

     7.17 Packet Island India. The actions contemplated by Section 5.9 shall have been completed.

     7.18 Amendment to Company Charter. As promptly as practicable after the date of this
Agreement (and in no event more than seven days after the date hereof) and in compliance with the
DGCL, the Company shall cause the amendment to the Company Charter, in the form attached hereto as
Exhibit H, to be filed with, and declared effective by, the Secretary of State of the State of
Delaware.

SECTION 8. Conditions Precedent to Obligations of the Company

          The obligations of the Company to effect the Merger and otherwise consummate the transactions
contemplated by this Agreement are subject to the satisfaction, at or prior to the Closing, of the
following conditions:

     8.1 Accuracy of Representations. Each of the representations and warranties made by Parent
and Merger Sub in this Agreement shall have been accurate as of the date of this Agreement, and
shall continue to be accurate in all material respects as of the Closing Date as if made at the
Closing Date (without giving effect to any update to the Parent Disclosure Schedule, and without
giving effect to any “Material Adverse Effect” or other materiality qualifications contained or
incorporated directly or indirectly in such representations and warranties).

     8.2 Performance of Covenants. All of the covenants and obligations that Parent and Merger Sub
are required to comply with or to perform at or prior to the Closing shall have been complied with
and performed in all material respects.

     8.3 No Restraints. No temporary restraining order, preliminary or permanent injunction or
other order preventing the consummation of the Merger shall have been issued by any court of
competent jurisdiction and remain in effect, and there shall not be any Legal Requirement enacted
or deemed applicable to the Merger that makes consummation of the Merger illegal.

     8.4 Agreements and Documents. The Company shall have received the following agreements and
documents, each of which shall be in full force and effect:

48.

 

          (a) a certificate executed by an officer of Parent and containing the representation and
warranty of Parent that each of the conditions set forth in Sections 8.1 and 8.2 have been duly
satisfied (the “Parent Closing Certificate”);

          (b) a certificate of Parent’s Secretary in form and substance reasonably acceptable to the
Company, attesting to, and attaching thereto: (i) Parent’s Certificate of Incorporation as in
effect at the time of the Closing, (ii) Parent’s bylaws as in effect at the time of the Closing;
(iii) the incumbency of Parent’s officers executing this Agreement and the other agreements and
documents executed in connection with the Merger, (iv) resolutions of the board of directors and
stockholders of Parent authorizing the consummation of the Merger and the transactions associated
therewith, and (v) a good standing certificate with respect to Parent from the Secretary of State
of the State of Delaware, dated no more than five (5) days before the Closing;

          (c) a certificate of Merger Sub’s Secretary in form and substance reasonably acceptable to the
Company, attesting to, and attaching thereto: (i) Merger Sub’s Certificate of Incorporation as in
effect at the time of the Closing, (ii) Merger Sub’s bylaws as in effect at the time of the
Closing; (iii) the incumbency of Merger Sub’s officers executing this Agreement and the other
agreements and documents executed in connection with the Merger, (iv) resolutions of the board of
directors and stockholders of Merger Sub authorizing the consummation of the Merger and the
transactions associated therewith, and (v) a good standing certificate with respect to Merger Sub
from the Secretary of State of the State of Delaware, dated no more than five (5) days before the
Closing;

          (d) the Parent Stockholders’ Agreement Amendment, executed by Parent and such other parties as
may be necessary to amend the Parent Stockholders’ Agreement;

          (e) the Parent Registration Rights Agreement Amendment, executed by Parent and such other
parties as may be necessary to amend the Parent Registration Rights Agreement;

          (f) the Escrow Agreement, executed by Parent and the Escrow Agent; and

          (g) such other certificates and agreements as reasonably requested by the Company and
delivered by or on behalf of Parent or Merger Sub at Closing, in form and substance reasonably
acceptable to the Company.

     8.5 Required Company Stockholder Approval. The Required Company Stockholder Approval shall
have been obtained.

     8.6 Parent Board and Stockholder Approval. The Parent’s board of directors and the requisite
number of Parent’s stockholders shall have approved the Merger and all transactions contemplated by
this Agreement.

     8.7 Parent Restated Charter. The Parent Restated Charter shall have been filed and declared
effective by the Secretary of State of the State of Delaware.

SECTION 9. Termination

49.

 

     9.1 Termination Events. This Agreement may be terminated prior to the Closing:

          (a) by the mutual consent of Parent and the Company;

          (b) by Parent, if the Company or any Signing Noteholder or Carve-Out Recipient breaches or
fails to perform in any material respect any of his, her or its representations, warranties or
covenants contained in this Agreement, which breach or failure to perform (i) would give rise to
the failure of a condition set forth in Section 7.1 or 7.2, and (ii) (A) cannot be cured or (B) if
curable through the exercise of commercially reasonable efforts, has not been cured within thirty
(30) days after the giving of written notice to the Company of such breach (provided that Parent
and Merger Sub are not then in willful breach of any representation, warranty or covenant contained
in this Agreement);

          (c) by the Company, if Parent or Merger Sub breaches or fails to perform in any material
respect of any of its representations, warranties or covenants contained in this Agreement, which
breach or failure to perform (i) would give rise to the failure of a condition set forth in Section
8.1 or 8.2, and (ii) (A) cannot be cured or (B) if curable through the exercise of commercially
reasonable efforts, has not been cured within thirty (30) days after the giving of written notice
to the Parent of such breach (provided that the Company, the Signing Noteholders and the Carve-Out
Recipients are not then in willful breach of any representation, warranty or covenant in this
Agreement);

          (d) by Parent if Parent reasonably determines that the timely satisfaction of any condition
set forth in Section 7 has become impossible (other than as a result of any failure on the part of
Parent or Merger Sub to comply with or perform any covenant or obligation of Parent or Merger Sub
set forth in this Agreement);

          (e) by the Company if the Company reasonably determines that the timely satisfaction of any
condition set forth in Section 8 has become impossible (other than as a result of any failure on
the part of the Company or any of the Signing Noteholders or Carve-Out Recipients to comply with or
perform any covenant or obligation set forth in this Agreement);

          (f) by Parent if the Closing has not taken place on or before October 15, 2009 (the “Outside
Date”) (other than as a result of any failure on the part of Parent or Merger Sub to comply with or
perform any covenant or obligation of Parent or Merger Sub set forth in this Agreement);

          (g) by the Company if the Closing has not taken place on or before the Outside Date (other
than as a result of the failure on the part of the Company or any of the Signing Noteholders or
Carve-Out Recipients to comply with or perform any covenant or obligation set forth in this
Agreement); or

          (h) by Parent, if the Company or any of the Signing Noteholders or Carve-Out Recipients takes
any of the actions that would be proscribed by Section 5.4.

     9.2 Termination Procedures. If the Parent wishes to terminate this Agreement pursuant to
Sections 9.1(b), 9.1(d), 9.1(f) or 9.1(h), the Parent shall deliver to the Company a written notice
stating that the Parent is terminating this Agreement and setting forth a brief

50.

 

description of the basis on which Parent is terminating this Agreement. If the Company wishes
to terminate this Agreement pursuant to Sections 9.1(c), 9.1(e) or 9.1(g), the Company shall
deliver to the Parent a written notice stating that the Company is terminating this Agreement and
setting forth a brief description of the basis on which the Company is terminating this Agreement.

     9.3 Effect of Termination. If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement shall terminate; provided, however, that:
(a) neither the Company nor the Parent shall be relieved of any obligation or liability arising
from any prior breach by such party of any provision of this Agreement; (b) the parties shall, in
all events, remain bound by and continue to be subject to the provisions set forth in Section 11;
and (c) the parties shall, in all events, remain bound by and continue to be subject to the
Non-Disclosure Agreement.

SECTION 10. Indemnification, Etc.

     10.1 Survival of Representations, Etc.

          (a) The representations and warranties of each party to this Agreement shall survive for
twelve (12) months following the Closing and then terminate and expire, except that (i) the
Specified Representations shall survive the Closing indefinitely; (ii) the Tax Representations
shall survive the Closing and then terminate and expire upon the expiration of the applicable
statute of limitations; and (iii) the IP Representations shall survive the Closing and then
terminate and expire upon the three (3)-year anniversary of the Closing Date; provided, however,
that if a Claim Notice (as defined below) with respect to a particular representation, warranty or
covenant of any party is given to such party on or prior to the applicable expiration date of such
representation, warranty or covenant, then, notwithstanding anything to the contrary contained in
this Section 10.1(a), the claim asserted in such Claim Notice shall survive until such time as such
claim is fully and finally resolved. The covenants of each party to this Agreement shall survive
the Closing indefinitely unless a shorter period is specified herein. No claim for a breach of a
representation, warranty, covenant or indemnification obligation may be made or brought by any
party hereto after the expiration of the applicable survival period, except in the case of fraud,
which shall survive for the period of any applicable statute of limitations for any Person or
Governmental Body to make claims against any party for matters covered thereby.

          (b) For purposes of this Agreement, a “Claim Notice” relating to a particular representation,
warranty, covenant or other matter to which a party is entitled to indemnification hereunder shall
be deemed to have been given if any party, acting in good faith, delivers to the other party(s) a
written notice stating that such party believes that there is or has been a possible breach of such
representation, warranty or covenant, or that such party is otherwise entitled to indemnification
hereunder, and containing (i) a brief description of the circumstances supporting such party’s
belief that there is or has been such a possible breach or that such party is entitled to
indemnification, and (ii) to the extent possible, a non-binding, preliminary estimate of the
aggregate dollar amount of the actual and potential Damages that have arisen and may arise as a
direct or indirect result of such possible breach or other matter giving rise to a right of
indemnification.

51.

 

     10.2 Funding of Escrow.

          (a) At the Closing, Parent shall deposit the Escrow Amount with the Escrow Agent in accordance
with the Escrow Agreement. The Escrow Amount shall be withheld from amounts otherwise payable to
the holders of the Class A-2 Notes, Class B Notes and Carve-Out Recipients, on a pro rata basis, as
reflected on Exhibit I attached hereto. The Escrow Amount will be governed by the terms set forth
in the Escrow Agreement and shall be held for the purpose of indemnifying the Parent Indemnitees
pursuant to the indemnification provisions set forth in this Section 10.

          (b) The Indemnifying Parties who are entitled to receive shares of Parent Series E-1 Preferred
pursuant to Sections 1.5 or 1.6 will be entitled to all rights in respect of the Escrow Amount
(such as voting and dividend rights) until their disbursement back to the Parent in satisfaction of
indemnification claims. In the event that the Parent completes an initial public offering of
shares of its Common Stock pursuant to a registration statement under the Securities Act declared
effective by the SEC, such Indemnifying Parties will have the ability to direct the sale of the
Escrow Amount (subject to lock-up obligations and other restrictions on transfer) as long as all
proceeds from the sales are placed into the escrow for any remaining escrow period and become
available for indemnification claims under Section 10.3.

     10.3 Indemnification of Parent Indemnitees.

          (a) Subject to the provisions of this Section 10, from and after the Effective Time, the
Parent Indemnitees shall be held harmless and indemnified from and against all Damages that the
Parent Indemnitees or any of them may incur based upon, arising out of or otherwise in any way
related to:

               (i) any inaccuracy in or breach of any representation or warranty set forth in Sections 2 or 3
as of the date of this Agreement (without giving effect to any update to the Company Disclosure
Schedule);

               (ii) any inaccuracy in or breach of any representation or warranty set forth in Sections 2 or
3 as if such representation and warranty had been made on and as of the Closing Date (without
giving effect to any update to the Company Disclosure Schedule);

               (iii) any breach of any covenant or obligation of the Company or any of the Signing
Noteholders or Carve-Out Recipients contained in this Agreement;

               (iv) any matter identified or referred to in Part 2.21 of the Company Disclosure Schedule;

               (v) (A) all Taxes (or the non-payment thereof) of the Company and each Company Subsidiary
attributable to all Pre-Closing Tax Periods, (B) all Taxes of any member of an affiliated,
consolidated, combined or unitary group for which the Company or any Company Subsidiary (or any
predecessor thereof) is liable, including pursuant to Treasury Regulation Section 1.1502-6 or any
analogous or similar state, local, or foreign law or regulation, and (C) any and all Taxes of any
person imposed on the Company or any Company Subsidiary

52.

 

as a transferee or successor, by contract or pursuant to any law, rule, or regulation, which
Taxes relate to an event or transaction occurring before the Closing Date;

               (vi) any Dissenting Share Liability;

               (vii) any inaccuracy in or breach of the representations set forth in Section 2.7(c) or, any
failure by the Company to satisfy Sections 7.14 or 7.16, any Company Indebtedness not paid by the
Company at the Closing or any Company Note Liability; or

               (viii) any Legal Proceeding directly or indirectly relating to any breach, alleged breach,
liability or matter of the type referred to in clause “(i),” “(ii),” “(iii),” “(iv),” “(v)”,
“(vi)”, or “(vii)” above (including any Legal Proceeding commenced by any Parent Indemnitee for the
purpose of enforcing any of his, her or its rights under this Section 10).

          (b) The Company and the Indemnifying Parties acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a result of or in
connection with any inaccuracy in or breach of any representation, warranty, covenant or obligation
or other matter referred to in Section 10.3(a), then (without limiting any of the rights of the
Surviving Corporation as a Parent Indemnitee) Parent shall also be deemed, by virtue of its
ownership of the stock of the Surviving Corporation, to have incurred Damages as a result of and in
connection with such matters.

          (c) The Parent Indemnitees shall not be entitled to any indemnification payment pursuant to
Sections 10.3(a)(i) or 10.3(a)(ii) for any inaccuracy in or breach as set forth in such Sections
(other than any inaccuracy in or breach of the representations contained in Sections 2.7(c) and
2.23) or pursuant to Section 10.3(a)(viii) to the extent that it relates to the matters referenced
in Sections 10.3(a)(i) or 10.3(a)(ii) (other than any inaccuracy in or breach of the
representations contained in Sections 2.7(c) and 2.23), until such time as the total amount of all
Damages (including the Damages arising from such inaccuracy in or breach and all other Damages
arising from any other inaccuracies in or breaches of any representations or warranties set forth
in Sections 2 or 3) that have been directly or indirectly suffered or incurred by any one or more
of the Parent Indemnitees, or to which any one or more of the Parent Indemnitees has or have
otherwise become subject, exceeds $25,000 in the aggregate (the “Threshold Amount”). At such time
as the cumulative amount of such Damages exceeds the Threshold Amount in the aggregate, the Parent
Indemnitees shall be entitled to recover only the amount of such Damages in excess of the Threshold
Amount.

          (d) Except with respect to inaccuracies in or breaches of the Specified Representations, Tax
Representations, Benefits Representations and IP Representations or in the case of fraud, willful
misrepresentation or intentional misconduct, the Parent Indemnitees shall not be entitled to any
indemnification payment pursuant to Sections 10.3(a)(i) or 10.3(a)(ii) for any inaccuracy in or
breach as set forth in such Sections (other than any inaccuracy in or breach of the representations
contained in Sections 2.7(c) and 2.23) or pursuant to Section 10.3(a)(viii) to the extent that it
relates to the matters referenced in Sections 10.3(a)(i) or 10.3(a)(ii) (other than any inaccuracy
in or breach of the representations contained in Sections 2.7(c) and 2.23), in excess of an
aggregate amount equal to the Escrow Amount (the “Cap Amount”), and in no event shall the liability
of any Indemnifying Party exceed such Person’s Pro Rata Share of the

53.

 

Cap Amount. In all cases (including with respect to inaccuracies in or breaches of the
Specified Representations, Tax Representations, Benefits Representations and IP Representations and
in the case of fraud, willful misrepresentation or intentional misconduct), the maximum liability
shall not exceed $700,000 (the “Maximum Amount”), and in no event shall the liability of any
Indemnifying Party exceed such Person’s Pro Rata Share of the Maximum Amount.

     10.4 Indemnification of Company Indemnitees.

          (a) Subject to the provisions of this Section 10, from and after the Effective Time, the
Parent shall hold harmless and indemnify the Company Indemnitees from and against all Damages that
the Company Indemnitees or any of them may incur based upon, arising out of or otherwise in any way
related to:

               (i) any inaccuracy in or breach of any representation or warranty set forth in Section 4 as of
the date of this Agreement (without giving effect to any update to the Parent Disclosure Schedule);

               (ii) any inaccuracy in or breach of any representation or warranty set forth in Section 4 as
if such representation and warranty had been made on and as of the Closing Date (without giving
effect to any update to the Parent Disclosure Schedule);

               (iii) any breach of any covenant or obligation of the Parent contained in this Agreement; or

               (iv) any Legal Proceeding directly or indirectly to any breach, alleged breach, liability or
matter of the type referred to in clause “(i),” “(ii),” or “(iii)” above (including any Legal
Proceeding commenced by any Company Indemnitee for the purpose of enforcing any of his, her or its
rights under this Section 10).

          (b) Subject to Section 10.4(d), the Company Indemnitees shall not be entitled to any
indemnification payment pursuant to Sections 10.4(a)(i) or 10.4(a)(ii) for any inaccuracy in or
breach as set forth in such Sections or pursuant to Section 10.4(a)(iv) to the extent that it
relates to the matters referenced in Sections 10.4(a)(i) or 10.4(a)(ii), until such time as the
total amount of all Damages (including the Damages arising from such inaccuracy in or breach and
all other Damages arising from any other inaccuracies in or breaches of any representations or
warranties set forth in Section 4) that have been directly or indirectly suffered or incurred by
any one or more of the Company Indemnitees, or to which any one or more of the Company Indemnitees
has or have otherwise become subject, exceeds the Threshold Amount. At such time as the cumulative
amount of such Damages exceeds the Threshold Amount in the aggregate, the Company Indemnitees shall
be entitled to recover only the amount of such Damages in excess of the Threshold Amount.

          (c) Subject to Section 10.4(d), the Company Indemnitees shall not be entitled to any
indemnification payment pursuant to Sections 10.4(a)(i) or 10.4(a)(ii) for any inaccuracy in or
breach as set forth in such Sections or pursuant to Section 10.4(a)(iv) to the extent that it
relates to the matters referenced in Sections 10.4(a)(i) or 10.4(a)(ii), in excess of an aggregate
amount equal to the Cap Amount.

54.

 

          (d) The limitations set forth in Sections 10.4(b) and 10.4(c) shall not apply in the case of
fraud, willful misrepresentation or intentional misconduct, in which case the maximum
indemnification payments to which the Company Indemnitees shall be entitled to receive shall be
limited to the Maximum Amount.

     10.5 Satisfaction of Parent Indemnitee Indemnification Claims.

          (a) For the purpose of recovering indemnification payments for which the Parent Indemnitees
may be entitled under this Section 10, the Parent shall first seek satisfaction of any such
indemnification obligations from the property held under the Escrow Agreement. Subject to the
limitations contained in this Section 10, if the Parent Indemnitees are not, following such
delivery and set-off, completely indemnified (the amount of such Damages which are not so
indemnified are referred to as “Unsatisfied Damages”), the Indemnifying Parties, severally and not
jointly, shall hold harmless and indemnify the Parent Indemnitees from and against all Unsatisfied
Damages, with such recovery to be effected first via delivery of shares of Parent Series E-1
Preferred and only after exhausting all shares of Parent Series E-1 Preferred held by the
Indemnifying Parties, if still not completely indemnified, subject to the limitations in this
Section 10, in cash.

          (b) To the extent that any indemnification obligations are to be satisfied by delivery of
shares of Parent Series E-1 Preferred (or other property) held under the Escrow Agreement, such
obligations shall be satisfied by disbursing (a) a number of shares of Parent Series E-1 Preferred
to the Parent determined by dividing (i) the aggregate dollar amount of such obligations by (ii)
$1.00 (as adjusted as appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization, merger, reorganization, reclassification or other similar transaction effected by
Parent between the Effective Time and the date such obligation is satisfied), or (b) if the shares
of Parent Series E-1 Preferred have been sold, the aggregate dollar amount of such obligations. If
the shares of Parent Series E-1 Preferred have been converted into shares of Parent Common Stock,
then equitable adjustments in the foregoing formula shall be made to take into account the relative
conversion ratio.

     10.6 Indemnification Procedures.

          (a) The indemnified party (or parties) shall promptly notify the indemnifying party (or
parties) of any third-party claim, demand, action or Legal Proceeding for which indemnification
will or may be sought under Sections 10.3 or 10.4 (a “Third Party Claim”), but in no event later
than ten (10) business days after receiving notice of such Third Party Claim; provided, however,
that the failure to so notify the indemnifying party will not relieve the indemnifying party from
liability hereunder in respect of such claim except to the extent the indemnifying party is
prejudiced as a result of such failure, including where failure results in losses to the
indemnifying party or the forfeiture of substantive rights or defenses that would otherwise be
available in the defense of such claim. Such notice shall specify facts reasonably known to the
indemnified party (or parties) giving rise to such indemnity rights. The indemnifying party will
have the right, at its expense, to assume the defense thereof using counsel reasonably acceptable
to the indemnified party. If the indemnifying party elects not to assume the defense or fails to
notify the indemnified party within ten (10) business days after delivery of the indemnified
party’s notice of such Third Party Claim, that it will assume the

55.

 

defense, then the indemnified party may employ counsel reasonably satisfactory to the
indemnifying party to represent or defend it against any such Third Party Claim and the
indemnifying party will pay the reasonable fees and disbursements of such counsel; provided,
however, that the indemnifying party shall not, in connection with any Legal Proceeding or any
separate but substantially similar Legal Proceedings arising out of the same general allegations,
be liable for the fees and expenses of more than one separate firm of attorneys at any time for all
indemnified persons, except to the extent that local counsel, in addition to its regular counsel,
is required to effectively defend against such Legal Proceeding. If the indemnifying party does
assume the defense of such Third Party Claim, the indemnifying party shall have no obligation in
respect of the indemnified party’s expenses; provided, that the indemnified party shall have the
right to participate in, at its own expense, but not control, the defense of any such Third Party
Claim. In connection with any Third Party Claim, the Parties shall cooperate with each other in
good faith in such manner to preserve in full (to the extent possible) the confidentiality of all
business records and the attorney-client work-product and any other potentially applicable
privileges and to render each other assistance as they may reasonably require. No Third Party
Claim shall be settled (i) without the prior written consent of the indemnifying party and (ii)
without the prior written consent of the indemnified party unless such settlement provides for no
relief other than the payment of monetary damages for which the relevant indemnified parties will
be indemnified in full.

          (b) As soon as reasonably practicable after becoming aware of a direct claim for
indemnification under Sections 10.3 or 10.4 other than a Third Party Claim (a “Direct Claim”), the
indemnified party (or parties) shall give a Claim Notice to the indemnifying party (or parties)
providing indemnification under this Section 10, as applicable, of such Direct Claim; provided,
however, that the failure to so notify the indemnifying party will not relieve the indemnifying
party from liability hereunder in respect of such claim except to the extent the indemnifying party
is prejudiced as a result of such failure. If the indemnified party is a Parent Indemnitee and is
seeking to enforce such claim pursuant to the Escrow Agreement, the indemnifying party shall
deliver a copy of the Claim Notice to the Escrow Agent.

          (c) Within twenty (20) days after receipt by the indemnifying party of a Claim Notice, the
indemnifying party may deliver to the indemnified party a written response (the “Response Notice”)
in which the indemnifying party: (i) agrees that the full Claimed Amount (the “Full Amount”) is
owed to the indemnified party (in which case the Response Notice shall be accompanied by a payment
by the indemnifying party to the indemnified party of the Claimed Amount, by check or by wire
transfer; provided, that if the indemnified party is a Parent Indemnitee and is seeking to enforce
such claim pursuant to the Escrow Agreement, the indemnifying party shall also deliver a copy of
the Response Notice to the Escrow Agent and instruct the Escrow Agent to disburse the Full Amount
to the indemnified party); (ii) agrees that part, but not all, of the Claimed Amount (the “Agreed
Amount”) is owed to the indemnified party (in which case the Response Notice shall be accompanied
by a payment by the indemnifying party to the indemnified party of the Agreed Amount, by check or
by wire transfer; provided, that if the indemnified party is a Parent Indemnitee and is seeking to
enforce such claim pursuant to the Escrow Agreement, the indemnifying party shall also deliver a
copy of the Response Notice to the Escrow Agent and instruct the Escrow Agent to disburse the
Agreed Amount to the indemnified party); or (iii) indicates that no part of the Claimed Amount is
owed to the indemnified party. Any part of the Claimed Amount that is not agreed to be released to
the

56.

 

indemnified party pursuant to the Response Notice shall be the “Contested Amount.” If the
Response Notice is not received by the indemnified party within such 20-day period, then the
indemnifying party shall be conclusively deemed to have agreed that the Full Amount is owed to the
indemnified party.

          (d) If the indemnifying party delivers a Response Notice indicating that there is a Contested
Amount, the indemnifying party and the indemnified party shall attempt in good faith to resolve the
dispute related to the Contested Amount. If the indemnified party and the indemnifying party
resolve such dispute, such resolution shall be binding on the indemnifying party and the
indemnified party, and if the indemnified party is Parent Indemnitee, a settlement agreement shall
be signed by the indemnified party and the indemnifying party and sent to the Escrow Agent.

          (e) In all cases under Section 10, if the indemnified party is a Parent Indemnitee, the
indemnifying party shall deliver a copy of the Claim Notice and all other related notices hereunder
to the Agent.

     10.7 No Contribution. Each Indemnifying Party waives, acknowledges and agrees that he, she or
it shall not have and shall not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against the Surviving Corporation in
connection with any indemnification obligation or any other liability to which he, she or it may
become subject under or in connection with this Agreement.

     10.8 Exercise of Remedies by Parent Indemnitees Other Than Parent. No Parent Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be permitted to assert any
indemnification claim or exercise any other remedy under this Agreement unless Parent (or any
successor thereto or assign thereof) shall have consented to the assertion of such indemnification
claim or the exercise of such other remedy.

SECTION 11. Miscellaneous Provisions

     11.1 Agent. The Signing Noteholders and the Carve-Out Recipients and the other parties hereto
have agreed that it is desirable to designate a representative to act on behalf of the Signing
Noteholders and Carve-Out Recipients for certain limited purposes, as specified herein. By
executing this Agreement or participating in the Merger and receiving the benefits thereof,
including the right to receive the consideration pursuant to Section 1.5 or Section 1.6 hereof, as
applicable, each Signing Noteholder and Carve-Out Recipient hereby irrevocably authorizes and
appoints Jim Andelman (or such other Person as may be designated unanimously from time to time by
the Signing Noteholders and Carve-Out Recipients) as the Agent, and his, her or its representative
to act in his, her or its name, place and stead in such Agent’s sole discretion, to:

     (a) negotiate, determine, defend and settle any disputes that may arise under or in connection
with this Agreement, including, without limitation, with respect to Section 1.11, and, with respect
to the Indemnifying Parties, any indemnification Claim pursuant to Article 10; and

     (b) make, execute, acknowledge and deliver any releases, assurances, receipts, requests,
instructions, notices, agreements, certificates and any other instruments, and generally do any and
all things and take any and all actions that may be requisite, proper or advisable in

57.

 

connection with this Agreement, including, without limitation, with respect to the
Indemnifying Parties, pursuant to Article 10 hereof.

     (c) The Agent will have no liability to the Signing Noteholders or the Carve-Out Recipients
with respect to actions taken or omitted to be taken in his, her or its capacity as Agent, except
with respect to the Agent’s willful misconduct. The Agent shall be entitled to engage such counsel,
experts and other agents and consultants as he, she or it shall deem necessary in connection with
exercising his, her or its powers and performing his, her or its function hereunder and (in the
absence of bad faith on the part of the Agent) shall be entitled to conclusively rely on the
opinions and advice of such Persons.

     (d) The Parent Indemnitees shall be entitled to deal exclusively with the Agent on all matters
relating to Sections 1.11 and 10, and shall be entitled to rely conclusively (without further
evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of
any Signing Noteholder or Carve-Out Recipient by the Agent, and on any other action taken or
purported to be taken on behalf of any Signing Noteholder or Carve-Out Recipient by the Agent, as
fully binding upon such Signing Noteholder or Carve-Out Recipient. If the Agent shall die, become
disabled or otherwise be unable to fulfill his, her or its responsibilities as agent of the Signing
Noteholders and Carve-Out Recipients, then the Signing Noteholders and Carve-Out Recipients shall,
within ten days after such death or disability, appoint a successor agent and, promptly thereafter,
shall notify Parent of the identity of such successor. If for any reason there is no Agent at any
time, all references herein to the Agent shall be deemed to refer to the Signing Noteholders and
Carve-Out Recipients.

     11.2 Further Assurances. Each party hereto shall execute and cause to be delivered to each
other party hereto such instruments and other documents, and shall take such other actions, as such
other party may reasonably request (prior to, at or after the Closing) for the purpose of carrying
out or evidencing any of the transactions contemplated by this Agreement.

     11.3 Fees and Expenses.

          (a) Parent shall bear and pay its own fees, costs and expenses (including legal fees and
accounting fees) that have been incurred or that are incurred by Parent in connection with the
transactions contemplated by this Agreement, including all fees, costs and expenses incurred by
Parent in connection with or by virtue of (i) the investigation and review conducted by Parent and
its Representatives with respect to the Company’s business (and the furnishing of information to
Company and its Representatives in connection with the Company’s investigation and review of
Parent’s business), (ii) the negotiation, preparation and review of this Agreement (including the
Company Disclosure Schedule and Parent Disclosure Schedule) and all agreements, certificates,
opinions and other instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (iii) the preparation and submission of any filing or
notice required to be made or given in connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained in connection with any of such
transactions, and (iv) the consummation of the Merger.

58.

 

          (b) The Signing Noteholders and Carve-Out Recipients shall bear and pay the Company’s, the
Signing Noteholders’ and the Carve-Out Recipients’ fees, costs and expenses (including legal fees
and accounting fees) that have been incurred or that are incurred by the Company, the Signing
Noteholders or Carve-Out Recipients in connection with the transactions contemplated by this
Agreement, including all fees, costs and expenses incurred by the Company in connection with or by
virtue of (i) the investigation and review conducted by the Company and its Representatives with
respect to Parent’s business (and the furnishing of information to Parent and its Representatives
in connection with Parent’s investigation and review of the Company’s business), (ii) the
negotiation, preparation and review of this Agreement (including the Company Disclosure Schedule
and Parent Disclosure Schedule) and all agreements, certificates, opinions and other instruments
and documents delivered or to be delivered in connection with the transactions contemplated by this
Agreement, (iii) the preparation and submission of any filing or notice required to be made or
given in connection with any of the transactions contemplated by this Agreement, and the obtaining
of any Consent required to be obtained in connection with any of such transactions, and (iv) the
consummation of the Merger.

     11.4 Attorneys’ Fees. If any action or Legal Proceeding relating to this Agreement or the
enforcement of any provision of this Agreement is brought against any party hereto, the prevailing
party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition
to any other relief to which the prevailing party may be entitled).

     11.5 Notices. Any notice or other communication required or permitted to be delivered to any
party under this Agreement shall be in writing and shall be deemed properly delivered, given and
received when delivered (by hand, by registered mail, by courier or express delivery service or by
facsimile) to the address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party shall have specified in
a written notice given to the other parties hereto):

if to Parent or Merger Sub:

BroadSoft, Inc.

220 Perry Parkway

Gaithersburg, Maryland 20877

Attention: General Counsel

Facsimile: (240) 404-0113

with a copy (which shall not constitute notice) to:

Cooley Godward Kronish LLP

11951 Freedom Drive

Reston, Virginia 20190-5656

Attention: Mark D. Spoto, Esq.

Facsimile: (703) 456-8100

59.

 

if to the Company (prior to the Closing):

Packet Island Inc.

10080 N. Wolfe Rd, SW3-300

Cupertino, CA 95014, USA

Attention: Praveen Kumar Prabhakaran

Ph: 877 322 9888 / 408 329 9600

Fax: 408 725 1920

if to any of the Signing Noteholders or Carve-Out Recipients:

to the address of such Signing Noteholder or Carve-Out Recipient as
set forth on Exhibits A-I and A-2 attached hereto

with, as to the Company and the Signing Noteholders, a copy (which shall not
constitute notice) to:

Orrick, Herrington & Sutcliffe LLP

1020 March Road

Menlo Park, CA 94025-1015

Attention: Louis D. Soto, Esq.

Facsimile: (650) 614-7401

     11.6 Confidentiality. On and at all times after the Closing Date, each Signing Noteholder and
Carve-Out Recipient shall keep confidential, and shall not use or disclose to any other Person, any
non-public document or other non-public information in such Signing Noteholder’s or Carve-Out
Recipient’s possession that relates to the business of the Company or Parent.

     11.7 Time of the Essence. Time is of the essence of this Agreement.

     11.8 Headings. The underlined headings contained in this Agreement are for convenience of
reference only, shall not be deemed to be a part of this Agreement and shall not be referred to in
connection with the construction or interpretation of this Agreement.

     11.9 Counterparts. This Agreement may be executed in one or more counterparts (including by
facsimile signature or by other electronic means, such as .pdf file), all of which shall be
considered one and the same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other parties.

     11.10 Governing Law; Venue for Disputes; Specific Performance; Appointment.

          (a) This Agreement shall be construed in accordance with, and governed in all respects by, the
internal laws of the State of Delaware (without giving effect to principles of conflicts of laws).

          (b) Except as provided in Section 11.10(d) below, any Legal Proceeding relating to this
Agreement or the enforcement of any provision of this Agreement may be

60.

 

brought or otherwise commenced in any state or federal court located in Wilmington, Delaware.
Each party to this Agreement:

               (i) expressly and irrevocably consents and submits to the exclusive jurisdiction of each state
and federal court located in Wilmington, Delaware (and each appellate court located in Wilmington,
Delaware) in connection with any such Legal Proceeding;

               (ii) agrees that each state and federal court located in Wilmington, Delaware shall be deemed
to be a convenient forum;

               (iii) agrees not to assert (by way of motion, as a defense or otherwise), in any such Legal
Proceeding commenced in any state or federal court located in Wilmington, Delaware, any claim that
such party is not subject personally to the jurisdiction of such court, that such Legal Proceeding
has been brought in an inconvenient forum, that the venue of such Legal Proceeding is improper or
that this Agreement or the subject matter of this Agreement may not be enforced in or by such
court; and

               (iv) agrees that a final judgment in any Legal Proceeding in any such court shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.

          (c) Each party hereto irrevocably and unconditionally waives any right it may have to a trial
by jury in respect of any Legal Proceeding arising out of or relating to this Agreement or any of
the transactions contemplated hereby.

          (d) Each party hereto hereby irrevocably and unconditionally agrees to submit to binding
arbitration any dispute between any such party of any claim by a party against another party
arising out of or relating to this Agreement or any of the transactions contemplated hereby, or
relating to any alleged breach hereof or thereof, in accordance with the rules then in force of the
American Arbitration Association. The arbitration proceedings shall take place in Wilmington,
Delaware or such other location as the parties in dispute may agree upon. The arbitration
proceedings shall be subject to the substantive laws of the State of Delaware. There shall be one
arbitrator, as agreed upon by the parties in dispute, who shall be an individual skilled in the
legal and business aspects of the subject matter of this Agreement and of the dispute. In the
absence of such an agreement, each party in dispute shall select one arbitrator and the arbitrators
so selected shall select a third arbitrator. In the event the arbitrators cannot agree upon the
selection of a third arbitrator, such third arbitrator shall be appointed by the American
Arbitration Association at the request of any of the parties in dispute. The decision rendered by
the arbitrator shall be accompanied by a written opinion in support thereof. Such decision shall
be final and binding upon the parties in dispute without any right of appeal. Judgment upon any
such decision may be entered into in any court having jurisdiction thereof, or application may be
made to such court for a judicial acceptance of the decision in an order of enforcement. Costs of
the arbitration shall be assessed by the arbitrator against all or any of the parties in dispute
and shall be paid promptly by the party or parties so assessed.

          (e) A request by a party to a court for interim equitable or injunctive relief to protect and
secure his, her or its rights under this Agreement pending arbitration shall not be

61.

 

deemed to be a waiver of the right to arbitrate. Furthermore, each party to this Agreement
irrevocably and unconditionally agrees to submit any such request exclusively to a state or federal
court located in Wilmington, Delaware. Each party to this Agreement hereby irrevocably and
unconditionally consents to the personal jurisdiction of such courts and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court any defense that such
court does not have personal jurisdiction over him, her or it; each party to this Agreement hereby
irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or
proceeding arising out of such request in such courts and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an improper venue or in an
inconvenient forum.

          (f) Nothing in this Agreement will limit any party’s right to seek immediate injunctive or
other equitable relief whenever the facts or circumstances would permit a party to seek such relief
in any court specified in Section 11.10(b).

     11.11 Successors and Assigns.

          (a) This Agreement shall be binding upon: the Company and its successors and permitted
assigns (if any); the Signing Noteholders and Carve-Out Recipients and their respective successors
and permitted assigns (if any); and Parent and Merger Sub, and their successors and permitted
assigns (if any). This Agreement shall inure to the benefit of: the Company, the Signing
Noteholders, the Carve-Out Recipients, Parent, Merger Sub, the other Parent Indemnitees, and the
respective successors and permitted assigns (if any) of the foregoing.

          (b) Neither this Agreement nor any rights or obligations hereunder may be assigned by any
party hereto without the prior written consent of the other parties hereto, which consent may not
be unreasonably withheld; provided, that notwithstanding the foregoing, no consent of the Company,
the Signing Noteholders or the Carve-Out Recipients shall be required with respect to any
assignment by Parent or Merger Sub to any lender as part of a collateral assignment. Any attempted
or purported assignment by any party of this Agreement in violation of this Section 11.11 shall be
null and void.

     11.12 Remedies Cumulative; Specific Performance. The rights and remedies of the parties
hereto shall be cumulative (and not alternative). The parties to this Agreement agree that, in the
event of any breach or threatened breach by any party to this Agreement of any covenant, obligation
or other provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision, and (b) an injunction
restraining such breach or threatened breach.

     11.13 Waiver.

          (a) No failure on the part of any Person to exercise any power, right, privilege or remedy
under this Agreement, and no delay on the part of any Person in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver of such power, right,

62.

 

privilege or remedy; and no single or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or of any other power, right, privilege
or remedy.

          (b) No Person shall be deemed to have waived any claim arising out of this Agreement, or any
power, right, privilege or remedy under this Agreement, unless the waiver of such claim, power,
right, privilege or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be applicable or have any effect
except in the specific instance in which it is given.

     11.14 Amendments. This Agreement may not be amended, modified, altered or supplemented other
than by means of a written instrument duly executed and delivered on behalf of all of the parties
hereto.

     11.15 Severability. Any term or provision of this Agreement that is invalid or unenforceable
in any situation in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or unenforceable, the
parties hereto agree that the court making such determination shall have the power to limit the
term or provision, to delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified. In the event such court does not exercise the power granted
to it in the prior sentence, the parties hereto agree to replace such invalid or unenforceable term
or provision with a valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or unenforceable term.

     11.16 Parties in Interest. Except for the provisions of Sections 1.5, 1.6 and 10, none of the
provisions of this Agreement is intended to provide any rights or remedies to any Person other than
the parties hereto and their respective successors and assigns (if any). Without limiting the
generality of the foregoing, (a) no employee of the Company shall have any rights under this
Agreement or under any of the other agreements related to the Merger, and (b) no creditor of the
Company shall have any rights under this Agreement or any other agreements related to the Merger.

     11.17 Entire Agreement. This Agreement and the other agreements referred to herein set forth
the entire understanding of the parties hereto relating to the subject matter hereof and thereof
and supersede all prior agreements and understandings among or between any of the parties relating
to the subject matter hereof and thereof; provided, however, that the Non-Disclosure Agreement
shall not be superseded by this Agreement and shall remain in effect in accordance with its terms
until the earlier of (a) the Effective Time, or (b) the date on which such Non-Disclosure Agreement
is terminated in accordance with its terms.

     11.18 Construction.

63.

 

          (a) For purposes of this Agreement, whenever the context requires: the singular number shall
include the plural, and vice versa; the masculine gender shall include the feminine and neuter
genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.

          (b) The parties hereto agree that any rule of construction to the effect that ambiguities are
to be resolved against the drafting party shall not be applied in the construction or
interpretation of this Agreement.

          (c) For the purpose of analyzing whether any effect is “material” or constitutes a “Material
Adverse Effect” for any purpose under this Agreement, the analysis of materiality shall not be
limited to a long-term perspective (and whether any effect is or might be short-term, temporary or
cyclical in nature shall not be dispositive of its materiality).

          (d) As used in this Agreement, the words “include” and “including,” and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the
words “without limitation.”

          (e) Except as otherwise indicated, all references in this Agreement to “Sections” and
“Exhibits” are intended to refer to Sections of this Agreement and Exhibits to this Agreement.

[Signature Page Follows]

64.

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	BroadSoft, Inc.,

a Delaware corporation

 	 
	 	By:  	/s/ Michael Tessler
 	 
	 	 	Michael Tessler 	 
	 	 	Chief Executive Officer 	 
	 
	 	BroadSoft PacketSmart, Inc.,

a Delaware corporation

 	 
	 	By:  	/s/ Michael Tessler
 	 
	 	 	Michael Tessler 	 
	 	 	Chief Executive Officer 	 
	 
	 	Packet Island, Inc.,

a Delaware corporation

 	 
	 	By:  	/s/ Praveen Kumar Prabhakaran
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

	 	 	 	 	 
	 	The Agent

 	 
	 	/s/ Jim Andelman
 	 
	 	Name:  	Jim Andelman 	 
	 	 	 
	 
	 	Carve-Out Recipients

 	 
	 	/s/ Praveen Kumar Prabhakaran
 	 
	 	Name:  	Praveen Kumar Prabhakaran 	 
	 	 	 
	 	      /s/ Andrew Aczel
 	 
	 	Name:  	Andrew Aczel 	 
	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	/s/ Joseph Lin
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 	If an Individual:

 	 
	 	By:  	Joseph Lin
 	 
	 	 	 	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	/s/ Paul Lin
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 
	 	If an Individual:

 	 
	 	By:  	Paul Lin 	 
	 	

If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and
Reorganization to be executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	/s/ Jean Lin Nguyen
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 
	 	If an Individual:

 	 
	 	By:  	Jean Lin Nguyen
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and
Reorganization to be executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 
	 	If an Individual:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	/s/ Jim Andelman
 	 
	 
	 	Rincon Venture Partners, L.P. 	 
	 
	 	By:  	     Rincon Venture Partners, LLC
 	 
	 	Its: General Partner 	 
	 	Jim Andelman, Manager 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

Davidson Family Trust Dated 7/09/87 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	/s/ John M. Davidson, Trustee
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	/s/ John M. Davidson, Trustee
 	 
	 	 	 	 
	 	Davidson Family Trust Dated 7/09/87 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

Henry Wong 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	/s/ Henry Wong
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	/s/ Karthick Sankarachary
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 
	 	If an Individual:

 	 
	 	By:  	Karthick Sankarachary
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	/s/ Olivier Helleboid
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 
	 	If an Individual:

 	 
	 	By:  	Olivier Helleboid
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

Praveen Kumar Prabhakaran 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	/s/ Praveen Kumar Prabhakaran
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

Softsmith Infotech 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	/s/ Siva Panchanatham
 	 
	 	 	Siva Panchanatham 	 
	 	 	President 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

David S. Clark 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	/s/ David S. Clark
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

Arul Iyyavoo 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	/s/ Arul Iyyavoo
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

Sridar Kandaswamy 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	/s/ Sridar Kandaswamy
 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 
	 	If an Individual:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

GARAGE TECHNOLOGY VENTURES I, L.P.
 	 
	 	By:  	Garage Technology Ventures
 	 
	 	 	 	 
	 	By:  	/s/ William M. Reichert
 	 
	 	 	Managing Director 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

 	 
	 	
 	 
	 	(Noteholder Name) 	 
	 	 	 
	 
	 	If an Individual:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

GARAGE CALIFORNIA ENTREPRENEURS FUND, L.P.

By: Garage Technology Ventures

 	 
	 	By:  	/s/ William M. Reichert
 	 
	 	 	Managing Director  	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

     The parties hereto have caused this Agreement and Plan of Merger and Reorganization to be
executed and delivered as of the date first written above.

	 	 	 	 	 
	 	Signing Noteholder:

Startup Capital Ventures 

(Noteholder Name)

If an Individual:

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 
	 	If an Entity:

STARTUP CAPITAL VENTURES, L.P.

By: Startup Capital Ventures, LLC, General

Partner

 	 
	 	By:  	/s/ Timothy Dick
 	 
	 	 	General Partner 	 
	 	 	 	 
	 

SIGNATURE PAGE TO BROADSOFT PACKET ISLAND MERGER AGREEMENT

 

Disclosure Schedule and Exhibits

The Disclosure Schedule and all Exhibits, except Exhibit B below, have been intentionally omitted
pursuant to Item 601(b)(2) of Regulation S-K. The Registrant will furnish supplementally a copy of
any omitted information to the Securities and Exchange Commission upon request.

 

Exhibit B

CERTAIN DEFINITIONS

     For purposes of the Agreement (including this Exhibit B):

     Acquisition Transaction. “Acquisition Transaction” shall mean any transaction involving:

          (f) the sale, license, disposition or acquisition of all or a material portion of the
Company’s business or assets;

          (g) the issuance, disposition or acquisition of (i) any capital stock or other equity security
of the Company (other than common stock issued upon exercise of Company Options), (ii) any option,
call, warrant or right (whether or not immediately exercisable) to acquire any capital stock or
other equity security of the Company (other than stock options granted to employees of the Company
in routine transactions in accordance with the Company’s past practices), or (iii) any security,
instrument or obligation that is or may become convertible into or exchangeable for any capital
stock or other equity security of the Company; or

          (h) any merger, consolidation, business combination, reorganization or similar transaction
involving the Company.

     Affiliated Group. “Affiliated Group” shall mean any affiliated group within the meaning of
Code Section 1504(a) or any similar group defined under a similar provision of any applicable Legal
Requirement.

     Agent. “Agent” shall mean Jim Andelman, as set forth in the Preamble; provided that the
Signing Noteholders and Carve-Out Recipients may designate a successor agent from time to time upon
prior notice to Parent signed by all Signing Noteholders and Carve-Out Recipients.

     Aggregate Merger Consideration. “Aggregate Merger Consideration” shall mean 1,500,000 shares
of Parent Series E-1 Preferred, subject to adjustment pursuant to Section 1.11.

     Agreed Amount. “Agreed Amount” shall have the meaning set forth in Section 10.6(c).

     Agreement. “Agreement” shall mean the Agreement and Plan of Merger and Reorganization to
which this Exhibit B is attached (including the Company Disclosure Schedule and the Parent
Disclosure Schedule), as it may be amended from time to time.

     Benefits Representations. “Benefits Representations” shall mean the representations and
warranties set forth in Sections 2.18(g) — (m).

     Cap Amount. “Cap Amount” shall have the meaning set forth in Section 10.3(d).

     Carve-Out Payment. “Carve-Out Payment” shall mean 74,000 shares of Parent Series E-1
Preferred of the Aggregate Merger Consideration, subject to adjustment pursuant to Section 1.11.

 

     Carve-Out Plan. “Carve-Out Plan” shall mean that certain Carve-Out Plan adopted by the
Company’s Board of Directors by Unanimous Written Consent, dated as of October 2, 2009.

     Carve-Out Plan Percentage. “Carve-Out Plan Percentage” shall mean 50% with respect to Praveen
Kumar Prabhakaran and 50% with respect to Andy Aczel.

     Carve-Out Recipients. “Carve-Out Recipients” shall have the meaning set forth in the
Preamble.

     Cash. “Cash” means the aggregate amount of unrestricted cash and cash equivalents held as of
immediately prior to the Effective Time in the bank accounts of the Company, reduced by the
aggregate balance of all outstanding checks written against such accounts.

     Certificate of Merger. “Certificate of Merger” shall have the meaning set forth in Section
1.3.

     CGCL. “CGCL” shall mean the California General Corporation Law.

     Claim Notice. “Claim Notice” shall have the meaning set forth in Section 10.1(b).

     Class A-1 Notes. “Class A-1 Notes” shall mean the Secured Senior Convertible Promissory Notes
issued pursuant to that certain Secured Senior Convertible Note Purchase Agreement, dated as of the
Closing Date, by and between the Company and each of the purchasers listed on Exhibit A thereto.

     Class A-2 Notes. “Class A-2 Notes” shall mean the Secured Senior Convertible Promissory Notes
issued pursuant to that certain Secured Senior Convertible Note Purchase Agreement and Amendment,
dated as of September 3, 2009, by and between the Company and each of the purchasers listed on
Exhibit A thereto.

     Class B Notes. “Class B Notes” shall mean the Secured Senior Convertible Promissory Notes
issued pursuant to that certain Senior Convertible Note Purchase Agreement, dated as of November
30, 2007 and issued pursuant to the amendment thereof dated July 16, 2008, as amended on September
3, 2009.

     Closing. “Closing” shall have the meaning set forth in Section 1.3.

     Closing Date. “Closing Date” shall have the meaning set forth in Section 1.3.

     Closing Balance Sheet Adjustment Statement. “Closing Balance Sheet Adjustment Statement”
shall have the meaning set forth in Section 1.11(c).

     COBRA. “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended.

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

     Company. “Company” shall have the meaning set forth in the Preamble.

 

     Company Affiliate. “Company Affiliate” shall mean any Person under common control with the
Company within the meaning of Sections 414(b), (c), (m) and (o) of the Code, and the regulations
issued thereunder.

     Company Capital Stock. “Company Capital Stock” shall have the meaning set forth in Section
1.8.

     Company Charter. “Company Charter” shall mean the Amended and Restated Certificate of
Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on June
20, 2006.

     Company Closing Certificate. “Company Closing Certificate” shall have the meaning set forth
in Section 7.8(a).

     Company Common Stock. “Company Common Stock” shall mean the common stock ($0.001 par value)
of the Company.

     Company Contract. “Company Contract” shall mean any Contract: (a) to which the Company is a
party; (b) by which the Company or any of its assets is or may become bound or under which the
Company has, or may become subject to, any obligation; or (c) under which the Company has or may
acquire any right or interest.

     Company Disclosure Schedule. “Company Disclosure Schedule” shall mean the schedule (dated as
of the date of the Agreement) delivered to Parent and Merger Sub on behalf of the Company.

     Company Employee. “Company Employee” shall mean any current or former employee, independent
contractor or director of the Company or any Company Affiliate.

     Company Employee Agreement. “Company Employee Agreement” shall mean each management,
employment, severance, consulting, relocation, repatriation or expatriation agreement or other
Contract between the Company or any Company Affiliate and any Company Employee, other than any such
management, employment, severance, consulting, relocation, repatriation or expatriation agreement
or other Contract with a Company Employee which is terminable “at will” without any obligation on
the part of the Company or any Company Affiliate to make any payments or provide any benefits in
connection with such termination.

     Company Employee Plan. “Company Employee Plan” shall mean any plan, program, policy,
practice, Contract or other arrangement providing for compensation, severance, termination pay,
deferred compensation, performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether written, unwritten or otherwise, funded or
unfunded, including each “employee benefit plan,” within the meaning of Section 3(3) of ERISA
(whether or not ERISA is applicable to such plan), that is or has been maintained, contributed to,
or required to be contributed to, by the Company or any Company Affiliate for the benefit of any
Company Employee, or with respect to which the Company or any Company Affiliate has or may have any
liability or obligation, except such definition shall not include any Company Employee Agreement.

 

     Company Equity Plan. “Company Equity Plan” shall mean the Company’s 2004 Stock Incentive Plan
(as amended and restated in January 2008) and the Company’s 2004 Stock Incentive Plan,
collectively.

     Company Financial Statements. “Company Financial Statements” shall have the meaning set forth
in Section 2.7(a).

     Company Indebtedness. “Company Indebtedness” shall mean the net book value of all outstanding
obligations (whether short-term or long-term) of the Company and the Company Subsidiaries for
borrowed money or in respect of loans or advances, as of the close of business on the Closing Date,
before giving effect to the Merger, determined in accordance with GAAP. For the avoidance of
doubt, Company Indebtedness shall not include any intercompany payables or loans of any kind or
nature, and Company Indebtedness shall include any amount claimed by Henry Wong to be due and owing
to him by the Company with respect to certain convertible promissory notes in the aggregate
principal amount of $200,000, which were cancelled by the Company on September 9, 2009.

     Company Indemnitees. “Company Indemnitees” shall mean the following Persons: (a) Company;
(b) Company’s current affiliates; (c) the respective Representatives of the Persons referred to in
clauses “(a)” and “(b)” above, including the Signing Noteholders and Carve-Out Recipients; and (d)
the respective successors and assigns of the Persons referred to in clauses “(a)”, “(b)” and “(c)”
above.

     Company IP. “Company IP” shall mean all Intellectual Property Rights owned (or purported to
be owned) by, or exclusively licensed to, the Company.

     Company IP Contract. “Company IP Contract” shall mean any Contract to which the Company is a
party or by which the Company is bound, that contains any assignment or license of, or covenant not
to assert or enforce, any Intellectual Property Right or that otherwise relates to any Company IP
or any Intellectual Property developed by, with, or for the Company.

     Company Note Liability. “Company Note Liability” shall mean any Damages based upon, arising
out of or otherwise in any way related to any attempt by any holder of Company Notes to demand
payment for such Company Notes after the Effective Time.

     Company Notes. “Company Notes” shall mean the Class A-1 Notes, the Class A-2 Notes and the
Class B Notes.

     Company Options. “Company Options” shall have the meaning set forth in Section 2.3(b).

     Company Pension Plan. “Company Pension Plan” shall mean each Company Employee Plan that is an
“employee pension benefit plan,” within the meaning of Section 3(2) of ERISA.

     Company Product. “Company Product” shall mean any product or service designed, developed,
manufactured, marketed, distributed, provided, licensed, or sold at any time by the Company.

 

     Company Series A Preferred Stock. “Company Series A Preferred Stock” shall mean the Series A
Preferred Stock ($0.001 par value) of the Company.

     Company’s Knowledge. “Company’s Knowledge” shall mean (a) the actual knowledge of the
following officers of the Company: Praveen Kumar Prabhakaran, Matt Eddington and Sankaran
Vaidhyanathan; and (b) the knowledge of any particular fact or matter that a reasonable person
similarly situated to any such officer would reasonably be expected to have after reasonable
inquiry.

     Company Software. “Company Software” shall mean the software (including firmware and other
software embedded in hardware devices) owned, developed (or currently being developed), used,
marketed, distributed, licensed, or sold by the Company (including any software that is part of, is
distributed with, or is used in the design, development, manufacturing, production, distribution,
testing, maintenance, or support of any Company Product, but excluding any third-party software
that is generally available on standard commercial terms and is licensed to the Company solely for
internal use on a non-exclusive basis).

     Company Stock Certificate. “Company Stock Certificate” shall have the meaning set forth in
Section 1.8.

     Company Stockholder Agreements. “Company Stockholder Agreements” shall have the meaning set
forth in Section 6.4.

     Company Subsidiaries. “Company Subsidiaries” shall have the meaning set forth in Section
2.1(c).

     Company Unaudited Interim Balance Sheet. “Company Unaudited Interim Balance Sheet” shall have
the meaning set forth in Section 2.7(a)(ii).

     Company Warrants. “Company Warrants” shall have the meaning set forth in Section 2.3(b).

     Consent. “Consent” shall mean any approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).

     Contested Amount. “Contested Amount” shall have the meaning set forth in Section 10.6(c).

     Contract. “Contract” shall mean any written, oral or other agreement, contract, subcontract,
lease, understanding, instrument, note, warranty, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature.

     Damages. “Damages” shall include claims, Liabilities, damages, payments, obligations, losses,
costs and expenses (including reasonable attorneys’ fees, court costs, expert witness fees,
transcript costs and other expenses of litigation), and judgments (at law or in equity) of any
nature, but shall not include special or punitive damages unless such damages are part of any
judgment or award against an Indemnitee in actions by third parties to the extent that any such
judgment or award is subject to indemnification pursuant to Section 10.

 

     Datasite. “Datasite” shall mean the internet datasite maintained by the Company at
https://sharepoint.wcpexchangeserver.com immediately prior to the date of this Agreement, but only
to the extent that materials on such datasite were made generally available to the Parent and its
Representatives.

     DGCL. “DGCL” shall mean the General Corporation Law of the State of Delaware.

     Direct Claim. “Direct Claim” shall have the meaning set forth in Section 10.6(b).

     Dissenting Share. “Dissenting Share” shall have the meaning set forth in Section 1.10.

     Dissenting Share Liability. “Dissenting Share Liability” shall mean, with respect to each
Dissenting Share entitled to payment pursuant to Section 262 of the DGCL and, if applicable by
virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL, an amount equal to (a) the
consideration determined to be due with respect to such Dissenting Share pursuant to Section 262 of
the DGCL and, if applicable by virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL, together
with any interest and penalties therein, minus (b) the amount otherwise payable with
respect to such Dissenting Share pursuant to Section 1.5 of this Agreement if such share was not a
Dissenting Share entitled to payment pursuant to Section 262 of the DGCL and, if applicable by
virtue of Section 2115 of the CGCL, Chapter 13 of the CGCL.

     Dissenting Stockholder. “Dissenting Stockholder” shall have the meaning set forth in Section
1.10.

     DOL. “DOL” shall mean the United States Department of Labor.

     Effective Time. “Effective Time” shall have the meaning set forth in Section 1.3.

     ENA License Agreement. “ENA License Agreement” shall have the meaning set forth in Section
7.16.

     Encumbrance. “Encumbrance” shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, claim, interference, option, right of first refusal, preemptive
right, community property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction on the use of any
asset and any restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset).

     Entity. “Entity” shall mean any corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm or other enterprise,
association, organization or entity.

     ERISA. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     Escrow Agent. “Escrow Agent” shall mean SunTrust Bank N.A.

 

     Escrow Agreement. “Escrow Agreement” shall mean an Escrow Agreement, substantially in the
form attached hereto as Exhibit J, among Parent, the Agent and the Escrow Agent.

     Escrow Amount. “Escrow Amount” shall mean 15% of the Aggregate Merger Consideration.

     Estimated Balance Sheet. “Estimated Balance Sheet” shall have the meaning set forth in
Section 1.11(b).

     Estimated Balance Sheet Adjustment. “Estimated Balance Sheet Adjustment” shall have the
meaning set forth in Section 1.11(b).

     Estimated Balance Sheet Adjustment Statement. “Estimated Balance Sheet Adjustment Statement”
shall have the meaning set forth in Section 1.11(b).

     Final Balance Sheet. “Final Balance Sheet” shall have the meaning set forth in Section
1.11(c).

     Final Balance Sheet Adjustment. “Final Balance Sheet Adjustment” shall have the meaning set
forth in Section 1.11(d).

     Final Balance Sheet Adjustment Statement. “Final Balance Sheet Adjustment Statement” shall
have the meaning set forth in Section 1.11(c).

     Firm. “Firm” shall have the meaning set forth in Section 1.11(c).

     FMLA. “FMLA” shall mean the Family Medical Leave Act of 1993, as amended.

     Foreign Plan. “Foreign Plan” shall mean: (a) any plan, program, policy, practice, Contract or
other arrangement mandated by a Governmental Body other than the United States; (b) any Company
Employee Plan maintained or contributed to by the Company or any Company Affiliate that is not
subject to United States law; and (c) any Company Employee Plan that covers or has covered Company
Employees whose services are performed primarily outside of the United States.

     Full Amount. “Full Amount” shall have the meaning set forth in Section 10.6(c).

     GAAP. “GAAP” shall mean United States generally accepted accounting principles.

     Governmental Authorization. “Governmental Authorization” shall mean any: (a) permit, license,
certificate, franchise, permission, clearance, registration, qualification or authorization issued,
granted, given or otherwise made available by or under the authority of any Governmental Body or
pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.

     Governmental Body. “Governmental Body” shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other jurisdiction of any

 

nature; (b) federal, state, local, municipal, foreign or other government; or (c) governmental
or quasi-governmental authority of any nature (including any governmental division, department,
agency, commission, instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).

     HIPAA. “HIPAA” shall mean the Health Insurance Portability and Accountability Act of 1996, as
amended.

     Indemnifying Parties. “Indemnifying Parties” shall mean (a) the Signing Noteholders who are
holders of either or both Class A-2 Notes and Class B Notes and (b) the Carve-Out Recipients.

     Intellectual Property. “Intellectual Property” shall mean and include all algorithms,
application programming interfaces, apparatus, assay components, biological materials, cell lines,
clinical data, chemical compositions or structures, circuit designs and assemblies, databases and
data collections, diagrams, formulae, gate arrays, IP cores, inventions (whether or not
patentable), know-how, logos, marks (including brand names, product names, logos, and slogans),
methods, network configurations and architectures, net lists, photomasks, processes, proprietary
information, protocols, schematics, specifications, software, software code (in any form including
source code and executable or object code), subroutines, test results, test vectors, user
interfaces, techniques, URLs, web sites, works of authorship, and other forms of technology
(whether or not embodied in any tangible form and including all tangible embodiments of the
foregoing such as instruction manuals, laboratory notebooks, prototypes, samples, studies, and
summaries).

     Intellectual Property Rights. “Intellectual Property Rights” shall mean and include all
rights of the following types, which may exist or be created under the laws of any jurisdiction in
the world: (a) rights associated with works of authorship, including exclusive exploitation rights,
copyrights, moral rights, and mask works; (b) trademark and trade name rights and similar rights;
(c) trade secret rights; (d) patents and industrial property rights; (e) other proprietary rights
in Intellectual Property of every kind and nature; and (f) all registrations, renewals, extensions,
continuations, divisions, or reissues of, and applications for, any of the rights referred to in
clauses (a) through (e) above.

     Interim Balance Sheet Date. “Interim Balance Sheet Date” shall have the meaning set forth in
Section 2.7(a)(ii).

     IP Representations. “IP Representations” shall mean the representations and warranties set
forth in Section 2.12.

     IRS. “IRS” shall mean the United States Internal Revenue Service.

     Legal Proceeding. “Legal Proceeding” shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or appellate proceeding),
hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any arbitrator or
arbitration panel.

 

     Legal Requirement. “Legal Requirement” shall mean any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any Governmental Body.

     Material Adverse Effect. “Material Adverse Effect” shall mean, with respect to any Person, a
material adverse effect on (a) the business, assets, condition (financial or otherwise), results of
operations or prospects of such Person and its subsidiaries, taken as a whole, (b) the ability of
such Person to perform its obligations under this Agreement or (c) the ability of such Person to,
or the timing when such Person may, consummate the Merger; provided that the foregoing shall not
include any change, event, circumstance, condition or effect (individually or in the aggregate with
respect to such entity and its subsidiaries) primarily resulting from: (i) a general deterioration
in the economy or in the economic conditions prevalent in the industry in which such entity and its
subsidiaries operate, as long as such Person is not disproportionately impacted; (ii) any change in
applicable law, or the interpretation thereof; (iii) changes resulting from the announcement or
pendency of the transactions provided for in this Agreement or compliance with the terms if this
Agreement, (iv) action or inaction by the Parent, in the case of the Company, (v) action or
inaction by the Company, in the case of Parent, or (vi) any force majeure event, disruptions of
suppliers, acts of terrorism, wars, acts of God and the like.

     Material Contracts. “Material Contracts” shall have the meaning set forth in Section 2.13(a).

     Maximum Amount. “Maximum Amount” shall have the meaning set forth in Section 10.3(d).

     Merger. “Merger” shall have the meaning set forth in the Recitals.

     Merger Sub. “Merger Sub” shall have the meaning set forth in the Preamble.

     Net Assets. “Net Assets” shall mean (a) Cash plus, without duplication, current assets of the
Company, determined in accordance with GAAP, that are substantially similar to the assets appearing
on the Company Unaudited Interim Balance Sheet minus (b) Total Liabilities.

     Non-Disclosure Agreement. “Non-Disclosure Agreement” shall mean the Nondisclosure Agreement
between Parent and the Company, dated as of March 27, 2008.

     Note Consideration. “Note Consideration” shall mean 1,426,000 shares of Parent Series E-1
Preferred of the Aggregate Merger Consideration to be issued to the holders of Company Notes,
subject to adjustment pursuant to Section 1.11.

     Noteholder’s or Carve-Out Recipient’s Immediate Family. “Noteholder’s or Carve-Out
Recipient’s Immediate Family” shall have the meaning set forth in Section 6.6(b).

     Note Purchase Agreements. “Note Purchase Agreements” shall mean the following agreements: (a)
Senior Convertible Note and Warrant Purchase Agreement, between the Company and each of the
purchasers listed on Exhibit A thereto, dated as of November 30, 2007;

 

(b) Amendment No. 1 to Senior Convertible Note and Warrant Purchase Agreement, between the
Company and each of the investors listed on Exhibit A thereto, dated as of July 16, 2008; (c)
Amendment No. 2 to Senior Convertible Promissory Note Purchase Agreement and Senior Convertible
Promissory Notes, between the Company and each of the investors listed on Exhibit A thereto, dated
as of December 31, 2008 (d) Security Agreement, between the Company and each of the parties listed
on Exhibit A thereto, dated December 31, 2008; (e) Secured Senior Convertible Note Purchase
Agreement and Amendment between the Company and each of the purchasers listed on Exhibit A thereto,
dated as of September 3, 2009; (f) Secured Senior Convertible Note Purchase Agreement between the
Company and the purchasers listed on Exhibit A thereto, dated as of the Closing Date and (g) any
other agreement relating to the Company Notes.

     Open Source Code. “Open Source Code” shall mean any software code that is distributed as
“free software” or “open source software” or is otherwise distributed publicly in source code form
under terms that permit modification and redistribution of such software. Open Source Code
includes software code that is licensed under the GNU General Public License, GNU Lesser General
Public License, Mozilla License, Common Public License, Apache License, BSD License, Artistic
License, or Sun Community Source License.

     Outside Date. “Outside Date” shall have the meaning set forth in Section 9.1(f).

     Packet Island India. “Packet Island India” shall have the meaning set forth in Section 5.9.

     Parent. “Parent” shall have the meaning set forth in the Preamble.

     Parent Closing Certificate. “Parent Closing Certificate” shall have the meaning set forth in
Section 8.4(a).

     Parent Common Stock. “Parent Common Stock” shall have the meaning set forth in Section
4.2(a).

     Parent Disclosure Schedule. “Parent Disclosure Schedule” shall mean the schedule (dated as of
the date of the Agreement) delivered to the Company on behalf of Parent and Merger Sub.

     Parent Equity Plans. “Parent Equity Plans” shall have the meaning set forth in Section
4.2(b).

     Parent Financial Statements. “Parent Financial Statements” shall have the meaning set forth
in Section 4.5(a).

     Parent Indemnitees. “Parent Indemnitees” shall mean the following Persons: (a) Parent; (b)
Parent’s current and future affiliates (including the Surviving Corporation); (c) the respective
Representatives of the Persons referred to in clauses “(a)” and “(b)” above; and (d) the respective
successors and assigns of the Persons referred to in clauses “(a)”, “(b)” and “(c)” above;
provided, however, that the Signing Noteholders and Carve-Out Recipients shall not be deemed to be
“Parent Indemnitees.”

 

     Parent Options. “Parent Options” shall have the meaning set forth in Section 4.2(b).

     Parent Preferred Stock. “Parent Preferred Stock” shall have the meaning set forth in Section
4.2(a).

     Parent Registration Rights Agreement. “Parent Registration Rights Agreement” shall have the
meaning set forth in Section 7.8(g).

     Parent Registration Rights Agreement Amendment. “Parent Registration Rights Agreement
Amendment” shall have the meaning set forth in Section 7.8(g).

     Parent Restated Charter. “Parent Restated Charter” shall have the meaning set forth in the
Recitals.

     Parent Series E-1 Preferred. “Parent Series E-1 Preferred” shall mean the Parent’s Series E-1
Convertible Preferred Stock, par value $0.01 per share.

     Parent’s Knowledge. “Parent’s Knowledge” shall mean (a) the actual knowledge of the following
officers of Parent: Michael Tessler, Scott Hoffpauir, Jim Tholen and Mary Ellen Seravalli; and (b)
solely with respect to Section 4.8, the knowledge of any particular fact or matter that a
reasonable person similarly situated to any such officer would reasonably be expected to have after
reasonable inquiry.

     Parent Stockholders’ Agreement. “Parent Stockholders’ Agreement” shall have the meaning set
forth in Section 7.8(f).

     Parent Stockholders’ Agreement Amendment. “Parent Stockholders’ Agreement Amendment” shall
have the meaning set forth in Section 7.8(f).

     Parent Unaudited Interim Balance Sheet. “Parent Unaudited Interim Balance Sheet” shall have
the meaning set forth in Section 4.5(a)(ii).

     Parent Warrants. “Parent Warrants” shall have the meaning set forth in Section 4.2(b).

     Person. “Person” shall mean any individual, Entity or Governmental Body.

     Pre-Closing Period. “Pre-Closing Period” shall have the meaning set forth in Section 5.1.

     Pre-Closing Tax Period. “Pre-Closing Tax Period” shall mean any taxable year or period that
ends on or before the Closing Date and, with respect to any taxable year or period beginning before
and ending after the Closing Date, the portion of such taxable year or period ending on and
including the Closing Date. For purposes of this Agreement, in the case of any taxable year or
period of a Company or a Company Subsidiary which includes the Closing Date (but does not end on
that day), (a) property Taxes allocable to the Pre-Closing Tax Period shall be equal to the amount
of such property Taxes for the entire taxable year or period multiplied by a fraction, the
numerator of which is the number of days during the taxable year or period that are in the
Pre-Closing Tax Period and the denominator of which is the number of days in the

 

entire taxable year or period, and (b) Taxes (other than property Taxes) of the Company or a
Company Subsidiary for the Pre-Closing Tax Period shall be computed as if such taxable year or
period (and the taxable year or period of any entity taxable as a partnership in which the Company
or the Company Subsidiary owns a direct or indirect interest) ended as of the close of business on
the Closing Date.

     Pro Rata Share “Pro Rata Share” means (a) for each Indemnifying Party, the ratio obtained by
dividing (i) the aggregate number of shares of Parent Series E-1 Preferred that such Indemnifying
Party may be entitled to receive pursuant to Sections 1.5 or 1.6, as set forth on Exhibit A-1
(assuming delivery of such Indemnifying Party’s portion of the Escrow Amount), by (ii) in the case
of the holders of Class B Notes and the Carve-Out Recipients, the aggregate amount of the Aggregate
Merger Consideration payable to such parties, including the Final Balance Sheet Adjustment, and in
the case of the holders of Class A-2 Notes, the aggregate amount of the Aggregate Merger
Consideration payable to such parties, excluding the Final Balance Sheet Adjustment.

     Released Claims. “Released Claims” shall have the meaning set forth in Section 5.7(a).

     Registered IP. “Registered IP” shall mean all Intellectual Property Rights that are
registered, filed, or issued under the authority of any Governmental Body, including all patents,
registered copyrights, registered mask works, and registered trademarks and all applications for
any of the foregoing.

     Representatives. “Representatives” shall mean officers, directors, employees, agents,
attorneys, accountants, advisors and representatives.

     Required Company Stockholder Approval. “Required Company Stockholder Approval” shall mean the
affirmative vote of a majority of the Company Series A Preferred Stock and the Company Common
Stock, voting together on an as-if converted to common stock basis, and a majority of the Company
Series A Preferred Stock.

     Response Notice. “Response Notice” shall have the meaning set forth in Section 10.6(c).

     SEC. “SEC” shall mean the United States Securities and Exchange Commission.

     Securities Act. “Securities Act” shall mean the Securities Act of 1933, as amended.

     Significant Customer. “Significant Customer” shall have the meaning set forth in Section
2.22.

     Signing Noteholders. “Signing Noteholders” shall have the meaning set forth in the Preamble.

     Specified Representations. “Specified Representations” shall mean the representations and
warranties set forth in Sections 2.5, 2.6 and 2.9.

     Statement No. 5. “Statement No. 5” shall have the meaning set forth in Section 2.7(d).

 

     Subsidiary Shares. “Subsidiary Shares” shall have the meaning set forth in Section 2.4(c).

     Surviving Corporation. “Surviving Corporation” shall have the meaning set forth in Section
1.1.

     Tax. “Tax” shall mean any tax (including any income tax, franchise tax, capital gains tax,
gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax,
sales tax, use tax, property tax, business tax, withholding tax or payroll tax), levy, assessment,
tariff, duty (including any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or under the authority
of any Governmental Body.

     Tax Representations. “Tax Representations” shall mean the representations and warranties set
forth in Section 2.17.

     Tax Return. “Tax Return” shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form, election, certificate or
other document or information filed with or submitted to, or required to be filed with or submitted
to, any Governmental Body in connection with the determination, assessment, collection or payment
of any Tax or in connection with the administration, implementation or enforcement of or compliance
with any Legal Requirement relating to any Tax.

     Third Party Claim. “Third Party Claim” shall have the meaning set forth in Section 10.6(a).

     Threshold Amount. “Threshold Amount” shall have the meaning set forth in Section 10.3(c).

     Total Liabilities. “Total Liabilities” shall mean all debts, obligations, duties and
liabilities of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary
liability) of the Company, regardless of whether such debts, obligations, duties or liabilities
would be required to be disclosed on a balance sheet prepared in accordance with GAAP and
regardless of whether such debts, obligations, duties or liabilities are immediately due and
payable or are due and payable at some future date. Notwithstanding the foregoing, “Total
Liabilities” shall not include the Company Notes and any interest accrued on such Company Notes.

     Transfer Taxes. “Transfer Taxes” shall have the meaning set forth in Section 6.7(c).

     Unsatisfied Damages. “Unsatisfied Damages” shall have the meaning set forth in Section
10.5(a).exv10w1

Exhibit 10.1

GENOTHERAPEUTICS, INC.

STOCK OPTION PLAN

     1. PURPOSE.

     (a) The purpose of the Genotherapeutics, Inc. Stock Option Plan (the “Plan”) is to provide a
means by which selected key employees and directors (if declared eligible under paragraph 4) of
Genotherapeutics, Inc. (the “Company”), and its Affiliates, as defined in subparagraph 1(b), may be
given an opportunity to benefit from increases in value of the stock of the Company. The Plan will
be effected solely through the granting of nonstatutory stock options.

     (b) The word “Affiliate” as used in the Plan means any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424 (e) and (f), respectively,
of the Internal Revenue Code of 1986, as amended from time to time (the “Code”).

     (c) The Company, by means of the Plan, seeks to retain and reward the services of persons now
or later employed by or serving as directors of the Company, to secure and retain the services of
persons capable of filling such positions, and to provide incentives for such persons to exert
maximum efforts for the success of the Company.

     2. ADMINISTRATION.

     (a) The Plan shall be administered by a Committee appointed by the Board of Directors of the
Company composed of not fewer than 3 members, (the “Committee”).

     (b) The Committee shall have the power, subject to, and within the limitations of, the express
provisions of the Plan and to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board of Directors:

Page 1 of 13

 

(i) To determine from time to time which of the persons eligible under the Plan
shall be granted nonqualified stock options (“Option Awards”) and the number of shares with respect to which Option Awards shall be granted to each such person.

(ii) To construe and interpret the Plan and Option Awards granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Committee, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Award, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.

(iii) To amend the Plan as provided in paragraph 11.

(iv) Generally, to exercise such powers and to perform such acts as the Committee
deems necessary or expedient to promote the best interests of the Company.

     (c) The Board of Directors may abolish the Committee at any time and revest in the Board of
Directors the administration of the Plan.

     3. SHARES SUBJECT TO THE PLAN.

     (a) Subject to the provisions of paragraph 9 relating to adjustments upon changes in stock,
the stock that may be issued pursuant to Option Awards granted under the Plan shall not exceed in
the aggregate Three Thousand (3,000) shares of the Company’s common stock. If any option or right
granted under the Plan shall for any reason expire or otherwise terminate without having been exercised in full or which is settled in cash, the stock not issued under such
option or right shall again become available to the Plan.

Page 2 of 13

 

     (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.

     4. ELIGIBILITY.

Option Awards may be granted only to directors, officers or employees of the Company or its
Affiliates.

     5. TERMS OF OPTION AWARDS.

     Each Option Award shall be in such form and shall contain such terms and conditions as the
Committee shall deem appropriate. The provisions of separate options need not be identical, but
each option shall include (through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:

     (a) The term of any option shall be ten (10) years from the date it was granted.

     (b) The exercise price of each Option Award shall be not less than one hundred percent (100%)
of the fair market value of the stock subject to the option on the date the option is granted;
provided, however, that the Committee shall have the discretion to grant options to one or more
persons and in such proportions and at such higher exercise price as the Committee may determine.
Fair market value shall be determined by the Committee on such basis as it deems appropriate.

     (c) The purchase price of stock acquired pursuant to an option shall be paid, to the extent
permitted by applicable statutes and regulations, either (i) in cash at the time the option is
exercised, or (ii) at the discretion of the Committee, determined either at the time of the grant
or exercise of the option, (A) by delivery to the Company of
other common stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting
the generality of the foregoing, the use of other common stock of the Company) with the person

Page 3 of 13

 

to whom the option is granted or to whom the option is transferred pursuant to subparagraph 5(d), or
(C) in any other form of legal consideration that may be acceptable to the Committee.

     (d) Unless otherwise expressly stated in the option, an Option Award shall not be transferable
except by will or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the option is granted only by such person, nor shall an Option
Holder have the right or power to anticipate, accelerate, convey, assign or otherwise alienate,
hypothecate, pledge or otherwise encumber any Option Award or the shares subject to the Option
Award.

     (e) Shares of stock subject to any Option Award shall vest as follows: (i) one-third (1/3) of
such shares shall vest on the third anniversary of the date of grant of such Option Award; (ii) an
additional one-third (1/3) of such shares shall vest on the fourth anniversary of the date of grant
of such Option Award; and (iii) the final one-third (1/3) of such shares shall vest on the fifth
anniversary of the date of grant of such Option Award. In the case of any Option Award granted to
a person using different exercise prices, this paragraph shall be applied separately to the shares
granted at each option price.

     (f) Shares sold to a third party shall be subject to a thirty day right of first refusal by
the Company at the same price and terms as offered by any third party pursuant to a bona fide
offer, and may not be sold prior to an offer of sale to the Company on such terms. Further, shares
acquired through exercise of an Option Award shall be subject to the terms and conditions of the
Voting and Shareholder Agreement dated May 13, 1999, between the Company and its stockholders, as
amended from time to time (the “Stockholders Agreement”).

     (g) In the event of a participant’s termination of employment or service as a director, as
applicable, by reason of voluntary retirement (at or after age sixty-five (65) or after age
fifty-

Page 4 of 13

 

five with no fewer than ten (10) years of service), death, permanent and total disability,
involuntary termination (other than a termination for cause but including any involuntary
termination as the result of a Change in Control, as addressed in paragraph (h) below), with
respect to such participant’s Option Award(s) (i) the Committee may in its sole, absolute and final
discretion elect to vest any or all shares not otherwise vested under the terms of the Plan, and
(ii) any vested shares subject to an Option Award may be exercised within ten (10) years following
the date of grant of such Option Award. In the event of an Option Award holder’s employment or
status as a director, as applicable, is terminated under any other circumstances, (i) any nonvested
Option Award shall be forfeited immediately, and (ii) the date of such termination of employment
shall be the last day on which any vested Option Award may be exercised.

     For purposes of this section, a permanent and total disability shall mean the occurrence of
the following conditions: (i) the Option Award holder’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) of properly performing the principal
functions which had been typically assigned to him by the Company, (ii) such incapacity shall exist
or be expected to exist with a reasonable degree of medical certainty for more than ninety (90)
days in the aggregate during any consecutive twelve (12) month period, and (iii) either the Option
Award holder or the Company shall have given the other thirty (30) days written notice of intent to
terminate employment or service as a director because of disability. In the event the Company and
Option Award holder are in material disagreement regarding the Participant’s physical or mental
condition, the Company shall authorize a panel of three (3) physicians selected by the Company to examine the Participant to determine conclusively, by a majority,
whether the Participant is disabled for purposes of the Plan.

Page 5 of 13

 

     For purposes of this section, a termination for cause shall mean the termination of an
individual’s status as an employee or director of the Company, as applicable, as the result of (i)
fraud or dishonesty in connection with the business of the Company; (ii) gross negligence in the
performance of duties for the Company; (iii) willful failure in carrying out duties as an employee
or director; or (iv) arrest and conviction of a felony involving moral turpitude, whether or not in
connection with the business of the Company; provided that (iii) above shall not apply if the
Option Award holder has been assigned by the Company to duties which are not comparable to such
holder’s function and compensation at the Company, or which are non-executive or demeaning
assignments, or if the Company has given such participant demeaning and unreasonable pay cuts.

     (h) In the event of a Change in Control of the Company, all shares subject to all Option
Awards shall become one hundred percent (100%) vested and shall be converted to cash, options or
stock of equivalent value in the surviving organization under terms and condition which
substantially preserve the economic status of the participants, as determined by the Committee.
For purposes of this paragraph, a Change in Control shall mean:

(i) a sale or other disposition of more than fifty percent (50%) of the issued and
outstanding voting stock of the Company, in a single transaction or in a series of
transactions. For such purposes, “Voting Stock” shall mean capital stock of the
Company of any class or classes, the holders of which are ordinarily, in the absence
of contingencies, entitled to vote for the election of members of the Board of
Directors (or Persons performing similar functions) of the Company.

(ii) a merger or consolidation of the Company with or into any other entity, if
immediately after giving effect to such transaction more than fifty percent (50%)

Page 6 of 13

 

of the issued and outstanding Voting Stock of the surviving entity of such transaction
is held by persons who are not holders of the Voting Stock immediately prior to
giving effect to such transaction;

(iii) a sale or other disposition of all or substantially all of the Company’s
assets in a single transaction or in a series of transactions (including, without
limitation, any liquidation or dissolution of the Company).

A Change of Control shall not include any of the following events:

(i) any transfer or issuance of stock of the Company to one or more of the Company’s
lenders (or to any agents or representatives thereof) in exchange for debt of the
Company owed to any such lenders;

(ii) any transfer of stock of the Company to or by any person or entity, including
but not limited to one or more of the Company’s lenders (or to any agents or
representatives thereof), pursuant to the terms of any pledge of said stock as
collateral for any loans or financial accommodations to the Company and/or its
subsidiaries; or

(iii) any transfer or issuance to any person or entity, including but not limited to
one or more of the Company’s lenders (or to any agents or representatives thereof),
in connection with the workout or restructuring of the Company’s debts to any one of
the Company’s lenders, including but not limited to the issuance of new stock in
exchange for any equity contribution to the Company in connection with the workout
or restructuring of such debt.

(iv) any transfer of stock by a stockholder of the Company which is a partnership or
corporation to the partners or stockholders in such stockholder.

Page 7 of 13

 

     (i) In the event of an initial public offering of the Company, Option Awards shall be
convertible to options in shares of the newly public company, under terms and conditions which
substantially preserve the rights and options of the participant. Any resulting registration of
options or shares shall be effected at Company expense.

     (j) If provided in the Option Award, each Option Award shall carry the right to receive any
dividend or dividend equivalent on vested shares, under such terms and conditions as may be
specified in the Option Award.

     (k) Notwithstanding any other provisions of the Plan, any vested but unexercised Option Award
shares shall be forfeited upon the Option Award holder’s “Competition” with the Company. For this
purpose, Competition shall be determined by the Committee, and shall exist if the Option Award
holder directly or indirectly (i) engages or has a financial interest in, (ii) becomes an officer,
employee, director, partner, advisor or consultant of or to, (iii) has an equity interest in, or
(iv) in any way materially assists any person, corporation, entity or business whose existing or
planned products or activities compete in whole or in part with the existing or planned products or
activities of the Company. The sole fact of ownership by an Option Award holder of less than two
percent (2%) of the stock of a publicly traded company which may have product lines which compete
with product lines of this Company shall not be treated as Competition. Any determination by the
Committee under this section shall be final and conclusive, unless overruled by the Board.

     (l) Notwithstanding any other provision of the Plan or any Option Award to the contrary, any
and all sales of shares to the Company or any Affiliate are contingent upon and subject to the
terms and conditions of any bank loan covenants by the Company or any Affiliate.

     6. COVENANTS OF THE COMPANY.

Page 8 of 13

 

     (a) During the term of any Option Award granted under the Plan, the Company shall keep
available at all times for issuance or sale the number of shares of stock required to satisfy such
Option Award.

     (b) The Company shall seek to obtain from each regulatory commission or agency having
jurisdiction over the Plan such authority, if any, as may be required to issue and sell shares of
stock upon grant or exercise of Option Awards under the Plan; provided, however, that this
undertaking shall not require the Company to register under the Securities Act of 1933, as amended
(the “Securities Act”), either the Plan, any Option Award granted under the Plan or any stock
issued or issuable pursuant to any such Option Awards. If, after reasonable efforts, the Company
is unable to obtain from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell stock upon exercise of such
Option Awards unless and until such authority is obtained.

     7. USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of stock pursuant to Option Awards granted under the Plan shall
constitute general funds of the Company.

     8. MISCELLANEOUS.

     (a) The Committee shall have the power to accelerate the time during which an Option Award may
be exercised or the time during which an option or stock acquired pursuant to an Option Award will
vest, notwithstanding the provisions in the Option Award stating the time during which it may be
exercised or the time during which stock acquired pursuant thereto will vest.

Page 9 of 13

 

     (b) Neither a recipient of an Option Award nor any person to whom an Option Award is
transferred under subparagraph 5(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option Award unless and until such
person has satisfied all requirements for exercise of the Option Award pursuant to its terms and is
thereby entitled to receive shares of stock.

     (c) Throughout the term of any Option Award granted pursuant to the Plan, the Company shall
make available to the holder of such Option Award upon request, not later than one hundred twenty
(120) days after the close of each fiscal year of the Company during the option term, upon request,
such financial and other information regarding the Company as comprises the annual report to the
shareholders of the Company provided for in the bylaws of the Company.

     (d) Nothing in the Plan or any instrument executed or Option Award granted pursuant thereto
shall confer upon any recipient any right to continue in the employ of the Company or any Affiliate
or to limit the Company’s right to terminate the employment or directorship of any participant with
or without cause. In the event that an Option Award recipient is permitted or otherwise entitled
to take a leave of absence, the Company shall have the unilateral right to (i) determine whether
such leave of absence will be treated as a termination of employment for purposes of his or her Option Award, and (ii) suspend or otherwise delay the time or times at
which the shares subject to the Option Award would otherwise vest.

     (e) To the extent provided by the terms of any Option Award, the recipient may satisfy any
federal, state or local tax withholding obligation relating to the exercise or receipt of such
Option Award by any of the following means or by a combination of such means: (i) tendering a cash
payment: (ii) authorizing the Company to withhold from the shares of the

Page 10 of 13

 

common stock otherwise
issuable to the participant as a result of the exercise or receipt of the Option Award cash or a
number of shares having a fair market value less than or equal to the amount of the withholding tax
obligation; or (iii) delivering to the Company owned and unencumbered shares of the common stock
having a fair market value less than or equal to the amount of the withholding tax obligation.

     (f) In connection with each Option Award made pursuant to the Plan, the Company may require as
a condition precedent to its obligation to issue or transfer shares to an eligible participant, or
to evidence the removal of any restrictions on transfers or lapse of any repurchase right, that
such participant make arrangements satisfactory to the Company to insure that the amount of any
federal or other withholding tax required to be withheld with respect to such sale or transfer, or
such removal or lapse, is made available to the Company for timely payment of such tax.

     (g) The Company may, as a condition of transferring any stock pursuant to the Plan, require
any person who is to acquire such stock (i) to give written assurances satisfactory to the Company
as to the optionee’s knowledge and experience in financial and business matters, and that he or she
is capable of evaluating, alone or together with the purchaser representative, the merits and risks
of acquiring the stock; and (ii) to give written assurances satisfactory to the Company stating that such person is acquiring the stock for such person’s own account and not
with any present intention of selling or otherwise distributing the stock. These requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares has been registered under a then currently effective registration statement under the
Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for
the

Page 11 of 13

 

Company that such requirement need not be met in the circumstances under the then applicable
securities laws.

     (h) The Committee shall determine or cause to be determined the fair market value of the stock
of the Company from time to time, as required for purposes of this Plan.

     9. ADJUSTMENTS UPON CHANGES IN STOCK.

     If any change is made in the stock subject to the Plan, or subject to any Option Award granted
under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend, combination of shares,
exchange of shares, change in corporate structure or otherwise), the Plan and outstanding Option
Awards will be appropriately adjusted in the class(es) and maximum number of shares subject to the
Plan and the class(es) and number of shares and price per share of stock subject to outstanding
Option Awards.

     10. AMENDMENT OF THE PLAN.

     (a) The Committee at any time, and from time to time, may amend the Plan subject to and within
the limitations of any resolutions approved by the Board of Directors.

     (b) The Committee in its discretion shall determine at the time of each amendment of the Plan
whether or not to submit such amendment to the Board of Directors of the Company for approval.

     (c) Rights and obligations under any Option Award granted before amendment of the Plan shall
not be altered or impaired by any amendment of the Plan unless (i) the Company requests the consent
of the person to whom the Option Award was granted and (ii) such person consents in writing.

Page 12 of 13

 

     11. TERMINATION OR SUSPENSION OF THE PLAN.

     (a) The Committee may suspend or terminate the Plan at any time. No Option Awards may be
granted under the Plan while the Plan is suspended or after it is terminated. Upon the termination
of the Plan, all Option Awards shall become fully vested.

     (b) Rights and obligations under any Option Award granted while the Plan is in effect shall
not be altered or impaired by suspension or termination of the Plan, except with the consent of the
person to whom the Option Award was granted.

     12. EFFECTIVE DATE OF PLAN.

     The Plan shall be effective as of November 18, 1999 upon execution by the President of the
Company, following approval by the Plan Committee.

     IN
WITNESS WHEREOF, the President of the Company has executed this Plan
as of the 26th day of
August, 1999.

	 	 	 	 	 
	 	GENOTHERAPEUTICS, INC.

 	 
	 	BY:  	/s/ Marc S. Hanover
 	 
	 	 	Title: CFO / Secretary 	 
	 

	 	 	 	 	 
	 	APPROVED:

PLAN COMMITTEE

 	 
	 	/s/ John H. Pontius
 	 
	 
	 	/s/ Marc S. Hanover
 	 
	 
	 	/s/ Mitchell S. Steiner
 	 
	 

Page 13 of 13

 

First Amendment 

 GTx, Inc.

1999 Stock Option Plan

     Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;

     Whereas, Section 5(f) of the 1999 Plan contains a provision that subjects any shares
acquired pursuant to the exercise of an option to a 30 day right of first refusal in favor of the
Company (the “Right of First Refusal”);

     Whereas, it was the intent of the Company that the Right of First Refusal would end
at such time as the Company completed its initial public offering of common stock;

     Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend Section 5(f) of the Company’s 1999 Plan to reflect the Company’s intent; and

     Whereas, the Compensation Committee of the Company has approved such amendment.

     Now, Therefore, Be it Resolved, the 1999 Plan is hereby amended, effective as of the
date hereof, as follows:

	1.	 	That Section 5(f) of the 1999 Plan is hereby deleted in its entirety and replaced with the
following:

          (f) Prior to such time as the Company’s shares of common stock are
first sold to the public in an offering registered pursuant to Section 5 of
the Securities Act of 1933, as amended (the “Initial Public Offering”), any
such shares of stock acquired though the exercise of an option shall be
subject to a thirty (30) day right of first refusal by the Company at the
same price and terms as offered by any third party pursuant to a bona fide
offer, and may not be sold prior to an offer to sell to the Company on such
terms. Further, shares acquired through exercise of an Option Award shall be
subject to the terms and conditions of the Voting and Shareholder Agreement
dated April 15, 1999, between the Company and its stockholders, as amended
from time to time (the “Stockholders Agreement”).

     In Witness Whereof, the Company has caused this First Amendment to the 1999 Plan to
be executed on October 2, 2003.

	 	 	 	 	 
	 	GTx, Inc.

 	 
	 	By:  	/s/ Henry P. Doggrell
 	 
	 	 	Name:  	Henry P. Doggrell 	 
	 	 	Title:  	General Counsel/Secretary 	 

 

 

Second Amendment 

 to the GTx, Inc.

1999 Stock Option Plan

     Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;

     Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend Section 5(g) of the Company’s 1999 Plan;

     Whereas, the Compensation Committee of the Company has approved such amendments; and

     Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).

     Now, Therefore, Be it Resolved, the 1999 Plan is hereby amended, effective as of the
date hereof, as follows:

	1.	 	That the last sentence of the first paragraph in Section 5(g) of the 1999 Plan is hereby
deleted in its entirety and replaced with the following:

          (g) In the event an Option Award holder’s employment or status as a
director, as applicable, is terminated under any other circumstances, (i)
any nonvested Option Award shall be forfeited immediately, and (ii) the
Option Award holder shall have until the earlier to occur of (A) a period of
ninety (90) days from the date of termination or (B) the expiration of the
term of the Option Award to exercise such Option Award.

     In Witness Whereof, the Company has caused this Second Amendment to the 1999 Plan to
be executed on March 18, 2004.

	 	 	 	 	 
	 	GTx, Inc.

 	 
	 	By:  	/s/ Henry P. Doggrell
 	 
	 	 	Name:  	Henry P. Doggrell 	 
	 	 	Title:  	General Counsel/Secretary 	 
	 

 

 

Third Amendment to the 

GTx, Inc.

1999 Stock Option Plan

     Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;

     Whereas, the Compensation Committee believes it to be in the best interests of the
Company to amend the Company’s 1999 Plan to clarify certain existing provisions in light of final
regulations issued under Section 409A of the Internal Revenue Code of 1986, as amended;

     Whereas, the Compensation Committee of the Company has approved such amendments; and

     Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 4350(i)(1)(A).

     Now, Therefore, Be it Resolved, the 1999 Plan is hereby amended, effective as of the
date hereof, as follows:

	1.	 	That Section 1(b) of the 1999 Plan is hereby deleted in its entirety and replaced with the
following:

     (b) The word “Affiliate” as used in the Plan means any subsidiary
corporation of the Company, as such term is defined in Section 424(f) of the
Internal Revenue Code of 1986, as amended from time to time (the “Code”).

	2.	 	That Section 5(b) of the 1999 Plan is hereby deleted in its entirety and replaced
with the following:

     (b) The exercise price of each Option Award shall be not less than one
hundred percent (100%) of the fair market value of the stock subject to the
option on the date the option is granted; provided, however, that the
Committee shall have the discretion to grant options to one or more persons
in such proportions and at such higher exercise price as the Committee may
determine. Notwithstanding the foregoing, an Option Award may be granted
with an exercise price lower than one hundred percent (100%) of the fair
market value of the stock subject to the option on the date the option is
granted if such Option Award is granted pursuant to an assumption of or
substitution for another option pursuant to a Change in Control (as defined
in section 5(h) of the Plan) and in a manner consistent with the provisions
of Sections 409A and 424(a) of the Code. F Fair market value means, as of
any date, the value of the Company’s common stock determined as follows:

 

 

     i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq Global Market or any other
established market, the fair market value of a share of common
stock shall be the closing sales price for such stock as quoted
on such exchange or market (or the exchange or market with the
greatest volume of trading in the common stock) on the date of
determination, as reported in The Wall Street Journal or such
other source as the Committee deems reliable.

     ii) Unless otherwise provided by the Committee, if there is
no closing sales price for the common stock on the date of
determination, then the fair market value shall be the closing
sales price on the last preceding date for which such quotation
exists.

     iii) In the absence of such markets for the common stock,
the fair market value shall be determined by the Committee in
good faith and in a manner that complies with Section 409A of the
Code.

	3.	 	That the following will be added to the 1999 Plan as Section 8(i):

     (i) To the extent permitted by applicable law, the Committee, in its
sole discretion, may determine that the delivery of common stock upon the
exercise of all or a portion of any Option Award may be deferred and may
establish programs and procedures for deferral elections to be made by
persons receiving options. Deferrals by persons will be made in accordance
with Section 409A of the Code.

	4.	 	That the following will be added to the 1999 Plan as Section 8(j):

     (j) To the extent that the Committee determines that any Option Award
granted hereunder is subject to Section 409A of the Code, the agreement
evidencing such Option Award shall incorporate the terms and conditions
necessary to avoid the consequences specified in Section 409A(a)(1) of the
Code. To the extent applicable, this Plan and the agreements evidencing
Option Awards shall be interpreted in accordance with Section 409A of the
Code, including without limitation any applicable guidance that may be
issued or amended in the future.

	5.	 	That Section 10(c) of the 1999 Plan is hereby deleted in its entirety and replaced
with the following:

     (b) Rights and obligations under any Option Award granted before
amendment of the Plan shall not be altered or impaired by any amendment of
the Plan unless (i) the Company requests the consent of the person to whom
the Option Award was granted and (ii) such person

2.

 

consents in writing. Notwithstanding the foregoing, subject to the
limitations of applicable law, if any, the Committee may amend the terms of
any one or more Option Awards without the consent of the person to whom the
Option Award was granted if necessary to bring the Option Award into
compliance with Section 409A of the Code.

     In Witness Whereof, the Company has caused this Third Amendment to the 1999 Plan to
be executed on November 4, 2008.

	 	 	 	 	 
	 	GTx, Inc.

 	 
	 	By:  	/s/ Henry P. Doggrell
 	 
	 	 	Name:  	Henry P. Doggrell 	 
	 	 	Title:  	Vice President, General Counsel 	 
	 

3.

 

Fourth Amendment

to the GTx, Inc.

1999 Stock Option Plan

     Whereas, GTx, Inc. (the “Company”) adopted the Genotherapeutics, Inc. Stock Option
Plan (the “1999 Plan”) effective August 26, 1999;

     Whereas, the Compensation Committee believes it to be in the best interest of the
Company to interpret the Plan to provide a consistent definition of the terms “voluntary
retirement” and “Retirement” with respect to any stock option awards granted thereunder;

     Whereas, the Compensation Committee believes that this Fourth Amendment will also
benefit the optionees under the 1999 Plan by clarifying the applicable requirements for determining
“voluntary retirement” and “Retirement” and that this Fourth Amendment will not alter or impair any
rights or obligations the optionees have under any stock option award granted thereunder;

     Whereas, the Compensation Committee has approved this Fourth Amendment; and

     Whereas, the contemplated amendments are not “material amendments” as contemplated by
Nasdaq Marketplace Rule 5635(c) and IM-5635-1.

     Now, Therefore, Be it Resolved, the 1999 Plan and any stock option award issued
pursuant thereto are hereby interpreted and amended as follows:

The definition of “voluntary retirement” and “Retirement” with respect to the 1999
Plan and any stock option award issued pursuant thereto shall be amended and
interpreted to mean “any voluntary termination of employment by the Optionee after
having reached the age of sixty-five (65) years or after having reached the age of
fifty-five (55) years if the Optionee has no fewer than five (5) years of service
with the Company.”

     In Witness Whereof, the Company has caused this Fourth Amendment to the 1999 Plan to
be executed on December 10, 2009.

	 	 	 	 	 
	 	GTx, Inc.

 	 
	 	By:  	/s/ Henry P. Doggrell
 	 
	 	 	Name:  	Henry P. Doggrell 	 
	 	 	Title:  	General Counsel/Secretary 	 
	 

 

 

NONQUALIFIED STOCK OPTION SUBSCRIPTION AGREEMENT

     This Nonqualified Stock Option Subscription Agreement (this “Agreement”), dated as of the
___ day of _______, ___, is made by and between GTx, Inc. (the “Company”), a Delaware
corporation, and the Employee of the Company whose name appears on the signature page hereof
(hereinafter referred to as the “Optionee”).

     WHEREAS, pursuant to the 1999 Stock Option Plan, as amended (the “Plan”), the terms of which
are hereby incorporated by reference, the Company intends to provide incentives to certain key
Employees of the Company by providing them with opportunities for ownership of shares of Common
Stock; and

     WHEREAS, a duly constituted committee of the Board of Directors of the Company (hereinafter
referred to as the “Committee”) appointed to administer the Plan has determined that it would be to
the advantage and best interest of the Company and its stockholders to grant the Option provided
for herein to the Optionee under the Plan and has advised the Company thereof and instructed the
undersigned officers to issue said Option;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:

ARTICLE I

DEFINITIONS

     Whenever the following terms are used in this Agreement, they shall have the meaning specified
 below unless the Plan indicates to the contrary.

     1.1  —  Cause. “Cause” used in connection with the termination of employment of the
Optionee shall mean a termination of employment of the Optionee by the Company or any of its
Subsidiaries due to (i) fraud or dishonesty of the Optionee in connection with the business of the
Company; (ii) gross negligence of the Optionee in the performance of duties for the Company; (iii)
willful failure by the Optionee in carrying out duties as an employee; or (iv) arrest and
conviction of the Optionee for a felony involving moral turpitude, whether or not in connection
with the business of the Company; provided that (iii) above shall not apply if the Optionee has
been assigned by the Company to duties which are not comparable to such Optionee’s function and
compensation at the Company, or which are non-executive or demeaning assignments, or if the Company
has given such Optionee demeaning and unreasonable pay cuts.

     1.2  —  Change in Control. “Change in Control” shall have the meaning given in
Section 3.3.

     1.3  —  Code. “Code” shall mean the Internal Revenue Code of 1986, as amended.

     1.4  —  Common Stock. “Common Stock” shall mean the common capital stock of the
Company.

 

 

     1.5  —  Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of
1934, as amended, and all rules and regulations promulgated thereunder.

     1.6  —  Exercise Price. “Exercise Price” shall mean the price per Option Share as
set forth on the signature page hereof.

     1.7  —  Grant Date. “Grant Date” shall mean the date on which the Option provided
for in this Agreement was granted.

     1.8  —  IPO. “IPO” shall mean the date on which the Company’s shares of Common
Stock are first sold to the public in an offering registered pursuant to Section 5 of the
Securities Act of 1933, as amended.

     1.9  —  Option. “Option” shall mean any stock option to purchase Common Stock of
the Company granted under this Agreement.

     1.10  —  Option Shares. “Option Shares” shall mean the number of shares of Common
Stock for which this Option is granted as set forth upon the signature page hereof.

     1.11  —  Permanent Disability. “Permanent Disability” of the Optionee shall mean
the occurrence of the following conditions: (i) the optionee’s physical or mental incapacity (excluding
infrequent and temporary absences due to ordinary illness) prevents the optionee from properly performing
the essential functions of his or her job which had been typically assigned to him or her by the Company,
with or without reasonable accommodation, (ii) such incapacities shall exist or be expected to exist within
a reasonable degree of medical certainty for more than ninety (90) days in the aggregate during any consecutive
twelve (12) month period, (iii) the delivery of a report to the Company determining the existence of the
incapacities with respect to the optionee and describing in detail the incapacities which satisfy the requirements
of the foregoing subsections (i) and (ii), which report shall be signed by a medical doctor duly licensed to
practice medicine in either the state of Tennessee or the state in which the optionee resides and which report must
be received by the Company while the optionee is still employed by the Company, provided, however, if the Committee
determines the report to be inadequate or inaccurate, the Committee may select two additional independent medical
doctors and request each to provide a report meeting the above specifications, and the determination of a majority
of the three medical doctors shall be conclusive and binding on the optionee and the Company, and the optionee shall
cooperate with the Company’s request and submit to such medical examinations, and (iv) either the optionee or the
Company shall have given the other thirty (30) days written notice of intent to terminate employment or service
because of permanent and total disability.

     1.12  —  Permitted Transferee. “Permitted Transferee” shall have the meaning given
in Section 5.2(b).

     1.13  —  Person. “Person” means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock company, trust or unincorporated
organization.

     1.14  —  Plan. “Plan” shall mean the 1999 Stock Option Plan of GTx, Inc.

     1.15  —  Retirement. “Retirement” shall mean any voluntary termination of
employment by the Optionee after having reached the age of sixty-five (65) years (or after having
reached the age of fifty-five (55) years if the Optionee has no fewer than five (5) years of
service with the Company).

ARTICLE II

GRANT OF OPTION

     2.1  —  Grant of Option. For good and valuable consideration, on and as of the date
hereof, the Company irrevocably grants to the Optionee the Option to purchase any part or all of

2

 

an aggregate of the number of Option Shares set forth on the signature page hereof upon the
terms and conditions set forth in this Agreement.

     2.2  —  Consideration to the Company. In consideration of the granting of this
Option by the Company, the Optionee agrees to render faithful and efficient services to the Company
with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in
this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ or
service of the Company or shall interfere with or restrict in any way the rights of the Company,
which are hereby expressly reserved, to discharge the Optionee at any time for any reason
whatsoever, with or without Cause.

     2.3  —  Adjustments in Option. Subject to Section 9 of the Plan, in the event that
the outstanding shares of the Common Stock subject to the Option are changed into or exchanged for
a different number or kind of shares of capital stock or other securities of the Company, or of
another corporation, by reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of shares or otherwise, the Committee
shall make an appropriate adjustment in the number and kind of shares of Option Shares. Such
adjustment in the Option shall be made without change in the total price applicable to the
unexercised portion of the Option (except for any change in the aggregate price resulting from
rounding-off of shares, quantities or prices) and with any necessary corresponding adjustment in
the Exercise Price. No fractional shares shall be issued, and any fractional shares resulting from
computations pursuant to Section 9 of the Plan shall be eliminated from the respective Options.
Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company
and all other interested persons.

     2.4  —  Tax Treatment. The Option hereby granted is intended to be a Supplemental
Stock Option as defined in the Plan (hereinafter referred to as a “Nonqualified Stock Option”) and
not an Incentive Stock Option as described in Section 422 of the Code.

ARTICLE III

PERIOD OF EXERCISABILITY

     3.1  —  General Rule. The Option will become exercisable as to the following
percentages of the Option Shares on the following anniversaries of the Grant Date provided that the
Optionee is then employed by the Company on such anniversary:

	 	 	 	 	 
	Third anniversary
	 	 	33	%
	Fourth anniversary
	 	 	67	%
	Fifth anniversary
	 	 	100	%

     3.2  —  Termination of Employment and Nonvested Options. In the event the
Optionee’s employment or service with the Company is terminated (other than a termination for Cause
but including any involuntary termination as the result of a Change in Control, as described
below), by reason of Retirement, death, or Permanent Disability, the Committee may in its sole,
absolute and final discretion elect to vest any or all shares subject to the Option, that are not
otherwise vested pursuant to the terms of the Plan. In the event the Optionee’s

3

 

employment or service is terminated under any other circumstances, any portion of the Option
that is has not vested shall be forfeited immediately.

     3.3  —  Change in Control. Notwithstanding Section 3.1, unless the Optionee is
terminated for Cause, the Option will become exercisable in full in the event of any voluntary or
involuntary termination of the Optionee’s employment or service occurring simultaneously with or at
any time after any of the following events (a “Change in Control”):

	 	(a)	 	the sale or other disposition of all or substantially all of the assets of the
Company in a single transaction or in a series of transactions (including, without
limitation, any liquidation or dissolution of the Company);
	 
	 	(b)	 	the sale or other disposition of more than fifty percent (50%) of the issued
and outstanding voting stock of the Company, in a single transaction or in a series of
transactions. For such purposes, “voting stock” shall mean the capital stock of the
Company of any class or classes, the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of members of the Board of Directors
(or Persons performing similar functions) of the Company; or
	 
	 	(c)	 	a merger or consolidation of the Company with or into any other entity, if
immediately after giving effect to such transaction more than fifty percent (50%) of
the issued and outstanding voting stock of the surviving entity of such transaction is
held by persons who were not holders (taking into account their individual and
affiliated holdings) as of the date of the grant of this Option of at least 20% of the
voting stock of the Company.

A Change in Control shall not include:

     (1) any transfer or issuance of stock of the Company to one or more of the
Company’s lenders (or to any agents or representatives thereof) in exchange for debt
of the Company owed to any such lenders;

     (2) any transfer of stock of the Company to or by any person or entity,
including but not limited to one or more of the Company’s lenders (or to any agents
or representatives thereof), pursuant to the terms of any pledge of said stock as
collateral for any loans or financial accommodations to the Company and/or its
subsidiaries;

     (3) any transfer or issuance to any person or entity, including but not limited
to one or more of the Company’s lenders (or to any agents or representatives
thereof), in connection with the workout or restructuring of the Company’s debts to
any one of the Company’s lenders, including but not limited to the issuance of new
stock in exchange for any equity contribution to the Company in connection with the
workout or restructuring of such debt; or

     (4) any transfer of stock by a stockholder of the Company, which is a
partnership or corporation to the partners, or stockholders in such stockholder.

4

 

     3.4  —  Optional Vesting/Accelerated Exercise in connection with a Change of
Control. In the event a Change in Control appears likely to occur, the Committee may, in its
sole and absolute discretion, send written notice to the Optionee at least ten (10) days prior to
the contemplated date of any Change in Control specifying (a) that the Option will become
exercisable in full on the date of the Change in Control, (b) that any portion or all of the Option
which thereby becomes exercisable and any portion or all of the Option which was already
exercisable will immediately thereafter expire on the same date and (c) that to prevent the lapse
of the Option, the Optionee must exercise the Option no later than such date. Except as may
otherwise be expressly provided in such written notice, any acceleration of the exercisability of
the Option and any attempted exercise of the Option by the Optionee shall be null and void if the
Change in Control does not occur within thirty (30) days of the date contemplated in the notice.

     3.5  —  Expiration of Option. Any portion of the Option, which has become
exercisable will nevertheless expire and will no longer be exercisable to any extent by anyone on
the earliest to occur of the following events:

	 	(a)	 	the tenth anniversary of the Grant Date;
	 
	 	(b)	 	the earlier of (A) three (3) months after termination of employment
(specifically including a termination of employment after a Change in Control), unless
such termination is for Cause or results from Retirement, death, Permanent Disability
or (B) the term of the Option as set forth in the Plan;
	 
	 	(c)	 	twelve (12) months after termination of employment on account of Permanent
Disability, provided that if Optionee shall die within such time without having fully
exercised all vested Options, Optionee’s estate shall have an additional twelve (12)
months from Optionee’s date of death to exercise such Options;
	 
	 	(d)	 	eighteen (18) months after termination of employment on account of Optionee’s
death or within eighteen (18) months after Optionee’s termination of employment if
Optionee qualifies under clause (b) but dies within three (3) months after his or
termination of employment without having exercised all of his or her vested Options;
	 
	 	(e)	 	the earlier of five (5) years after the date of the Retirement of Optionee, or
the term of the Option as set forth in the Plan;
	 
	 	(f)	 	at the close of business on the date of the termination of the Optionee’s
employment by the Company for Cause; and
	 
	 	(e)	 	if the Committee so determines and gives written notice as provided in Section
3.4, upon the Effective Date of any Change in Control.

     3.6  —  Non-competition. Notwithstanding any other provisions of this Agreement,
any Option outstanding, including any vested but unexercised Option, shall be forfeited upon the
Optionee’s “Competition” with the Company. For this purpose, Competition shall be determined by
the Committee and shall exist if the Optionee, directly or indirectly (i) engages or has a
financial interest in, (ii) becomes an officer, employee, director, partner, advisor or consultant
of

5

 

or to, (iii) has an equity interest in, or (iv) in any way materially assists any person,
corporation, entity or business whose existing or planned products or activities compete in whole
or in part with the existing or planned products or activities of the Company. The sole fact of
ownership by an Optionee of less than two percent (2%) of the stock of a publicly traded company
which may have product lines which compete with product lines of the Company shall not be treated
as Competition. Any determination by the Committee under this section shall be final and
conclusive, unless overruled by the Board.

ARTICLE IV

EXERCISE OF OPTION

     4.1  —  Person Eligible to Exercise. During the lifetime of the Optionee, only the
Optionee or the Optionee’s guardian or conservator may exercise the Option or any portion thereof,
and after the death of the Optionee, any portion of the Option may, prior to the time when the
Option becomes unexercisable under Section 3.5, be exercised by the Optionee’s personal
representative or by any person empowered to do so under the Optionee’s will or under the then
applicable laws of descent and distribution; provided, however, at any time after the transfer of
the Option or any portion thereof pursuant to Section 5.2, the transferred portion of the Option
may be exercised only by the transferee.

     4.2  —  Partial Exercise. Any exercisable portion of the Option or the entire
Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the
time when the Option or portion thereof becomes unexercisable under Section 3.5; provided, however,
that any partial exercise shall be for whole shares only.

     4.3  —  Manner of Exercise. The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or his or her office all of the
following prior to the time when the Option or such portion becomes unexercisable under Section
3.5:

	 	(a)	 	Notice in writing signed by the Optionee or the other person then entitled to
exercise the Option or portion thereof, stating that the Option or portion thereof is
thereby exercised, such notice complying with all applicable rules established by the
Committee; and
	 
	 	(b)	 	Full payment of the Exercise Price (as provided in Section 4.4), for the
shares with respect to which such Option or portion thereof is exercised; and
	 
	 	(c)	 	Such representations and documents as the Committee deems reasonably necessary
or advisable to effect compliance with all applicable laws, including provisions of the
Securities Act of 1933, as amended, and any other federal, state or foreign securities
laws or regulations following an IPO; and
	 
	 	(d)	 	Full payment to the Company (as provided in Section 4.4) of all amounts, if
any, which, under federal, state or local law, it is required to withhold upon exercise
of the Option; and

6

 

	 	(e)	 	If the Option or portion thereof shall be exercised pursuant to Section 4.1 by
any person or persons other than the Optionee, appropriate proof of the right of such
person or persons to exercise the Option.

Notwithstanding the foregoing, the Optionee may give notice exercising the Option subject to the
condition or conditions that any then contemplated Change in Control will actually occur and that
the Option will become exercisable because of the Change in Control with respect to the Option
Shares for which notice of exercise is given. In such an event, full payment of the Exercise Price
with respect to all Option Shares need not be made until the date of the Change in Control.

     4.4  —  Payment. The Exercise Price and any tax withholding shall be payable in
cash, by check, or by any combination thereof. Except as otherwise provided by the Committee
before the Option is exercised: (i) all or a portion of the Exercise Price or any tax withholding
may be paid by delivery of shares of Common Stock acceptable to the Committee and having an
aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash
that would otherwise be required; and (ii) the Exercise Price or any tax withholding may be paid by
authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) to
be acquired upon the exercise of the Option and remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such
exercise.

     4.5  —  Conditions to Issuance of Stock Certificates. The shares of Common Stock
deliverable upon the exercise of the Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares that have then been reacquired by the Company.
Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of Common Stock purchased upon the exercise of
the Option or portion thereof prior to fulfillment of all of the following conditions:

	 	(a)	 	The admission of such shares to listing on all stock exchanges, if any, on
which such class of Common Stock is then listed;
	 
	 	(b)	 	The completion of any registration or other qualification of such shares under
any state or federal law or under rulings or regulations of the SEC or of any other
governmental regulatory body, which the Committee shall, in its absolute discretion
deem necessary or advisable;
	 
	 	(c)	 	The obtaining of approval or other clearance from any state or federal
governmental agency which the Committee shall determine to be necessary or advisable;
and
	 
	 	(d)	 	The payment to the Company of all amounts, if any, which, under federal, state
or local law, it is required to withhold upon exercise of the Option.

     4.6  —  Rights as Stockholder. The holder of the Option shall not be, nor have any
of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable
upon the exercise of the Option or any portion thereof unless and until certificates representing
such shares shall have been issued by the Company in the name of such holder. No adjustment

7

 

shall be made for cash dividends for which the record date is prior to the date such stock
certificate is issued.

     4.7  —  Issuance of Certificate; Legend. The stock certificate or certificates
deliverable to the Optionee upon the exercise of the Option may, at the request of the Optionee at
the time of exercise, be issued in his or her name alone or in his or her name and the name of
another person as joint tenants with right of survivorship. The Committee may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any other federal, state
or foreign securities laws or regulations including, without limitation, placing legends on share
certificates and issuing stock-transfer orders to transfer agents and registrars.

ARTICLE V

MISCELLANEOUS

     5.1  —  Administration. The Committee shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret or revoke any such rules. No member of
the Committee shall be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or the Option. The Board of Directors of the Company in its
absolute discretion may at any time and from time to time exercise any and all rights and duties of
the Committee under the Plan and this Agreement.

     5.2  —  Transferability of Option . (a) Except as provided in subsection (b),
neither the Option nor any interest or right therein or part thereof shall be subject to
disposition by transfer, alienation, anticipation, encumbrance or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted
disposition thereof shall be null and void and of no effect; provided, however, that this Section
5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.

     (b) The Committee may, in its discretion, establish forms and procedures for the transfer of
all or any portion of such Option by the Optionee to (i) Immediate Family Members (as defined
hereinafter), (ii) a trust or trusts for the exclusive benefit of the Optionee and such Immediate
Family Members, or (iii) a partnership or limited liability company in which the Optionee and such
Immediate Family Members are the only partners or members (collectively such Optionee’s “Permitted
Transferees”), provided that subsequent transfers shall be prohibited except in accordance with the
laws of descent and distribution, or by will. Notification and approval of all such transfers
shall be in the form specified by the Committee. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable immediately prior to
transfer, provided that for purposes of Articles IV and V hereof (other than this Section 5.2), the
term “Optionee” shall be deemed to refer to the Permitted Transferee. Notwithstanding the
foregoing, the Committee and the Company shall have no obligation to inform any Permitted
Transferee of any expiration, termination, lapse or acceleration of any such Option and may give
notices required hereunder, if any, to the Optionee. The events of termination of employment of
Article III hereof shall continue to be applied with

8

 

respect to the original Optionee, following which the Option shall be exercisable by the
Permitted Transferee only to the extent, and for the periods specified at Article III hereof. As
used in this Section 5.2(b) “Immediate Family Member” shall mean, with respect to the Optionee, his
or her spouse, child, stepchild, grandchildren or other descendants, and shall include
relationships arising from legal adoption.

     5.3  —  Shares of Common Stock to be Reserved. The Company shall at all times
during the term of the Option reserve and keep available such number of shares of Common Stock as
will be sufficient to satisfy the requirements of this Agreement.

     5.4  —  Notices. Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary, and any notice to be given to
the Optionee shall be addressed to him or her at the address given beneath his or her signature
hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a
different address for notices to be given to him or her. Any notice which is required to be given
to the Optionee shall, if the Optionee is then deceased, be given to the Optionee’s personal
representative if such representative has previously informed the Company of his or her status and
address by written notice under this Section 5.4. Any notice shall have been deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with
postage prepaid) in a post office or branch post office regularly maintained by the United States
Postal Service or when delivered by hand (whether by overnight courier or otherwise).

     5.5  —  Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.

     5.6  —  No Right to Employment. Nothing in the Plan or this Agreement shall confer
upon the Optionee any right to continue in the employ of the Company or any Affiliate or to limit
the Company’s right to terminate the employment relationship of any eligible employee with or
without Cause. In the event that an Optionee is permitted or otherwise entitled to take a leave of
absence, the Company shall have the unilateral right to (i) determine whether such leave of absence
will be treated as a termination of employment for purposes of his or her Option, or (ii) suspend
or otherwise delay the time or times at which the shares subject to the Option would otherwise
vest.

     5.7  —  Amendment. This Agreement may be amended only by a writing executed by the
parties hereto, which specifically states that it is amending this Agreement.

     5.8  —  Governing Law. The laws of the State of Tennessee shall govern the
interpretation, validity and performance of the terms of this Agreement, regardless of the law that
might be applied under principles of conflicts of laws.

     5.9  —  Jurisdiction. Any suit, action or proceeding against the Optionee with
respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be
brought in any court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Nothing herein shall in any way be deemed to limit the ability of the
Company to serve any such writs, process or summonses in any other manner permitted by

9

 

applicable law or to obtain jurisdiction over the Optionee, in such other jurisdictions, and
in such manner, as may be permitted by applicable law. The Optionee hereby irrevocably waives any
objections which he or she may now or hereafter have to the laying of the venue of any suit, action
or proceeding arising out of or relating to this Agreement brought in any court of competent
jurisdiction in the State of Tennessee, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in any inconvenient
forum. No suit, action or proceeding against the Company with respect to this Agreement may be
brought in any court, domestic or foreign, or before any similar domestic or foreign authority
other than in a court of competent jurisdiction in the State of Tennessee, and the Optionee hereby
irrevocably waives any right which he or she may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic or foreign authority. The Company
hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or
proceeding.

     IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

	 	 	 	 	 
	 	GTx, INC.

 	 
	 	By:  	 	 
	 	 	Title:  
	 
	 	 	No. of Option Shares:  

 	 
	 	 	Exercise Price:  

 	 
	 	 	 

 	 
	 	 	
___________________, Optionee

Address: 	 
	 

10

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