Document:

exv10w12

 

Exhibit 10.12

 

STOCK PURCHASE AGREEMENT

by and among:

Starvox Communications, Inc.,

a California corporation;

Capital Telecommunications, Inc.,

a Pennsylvania corporation;

George V. Kingsbury, an individual

Barry J. Silverberg Living Trust Dated 09/22/1995;

and

Charles H. Wallace, an individual.

 

Dated as
of June 13, 2006

 

 

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page
	1. SALE AND PURCHASE OF SHARES; RELATED TRANSACTIONS
REQUIRING PAYMENT; EXECUTION OF DOCUMENTS
	 	 	1	 
	 
	 	 	 	 
	1.1 Sale and Purchase of Shares
	 	 	1	 
	 
	 	 	 	 
	1.2 Purchase Price
	 	 	1	 
	 
	 	 	 	 
	1.3 Bank Financing
	 	 	2	 
	 
	 	 	 	 
	1.4 Consulting Agreement
	 	 	2	 
	 
	 	 	 	 
	1.5 Execution of Documents; Closing
	 	 	2	 
	 
	 	 	 	 
	2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
SELLING SHAREHOLDERS
	 	 	4	 
	 
	 	 	 	 
	2.1 Due
Organization; Subsidiaries; Etc.
	 	 	4	 
	 
	 	 	 	 
	2.2 Charter Documents; Records
	 	 	5	 
	 
	 	 	 	 
	2.3 Capitalization
	 	 	5	 
	 
	 	 	 	 
	2.4 Financial Statements and Related Information
	 	 	6	 
	 
	 	 	 	 
	2.5 Liabilities
	 	 	7	 
	 
	 	 	 	 
	2.6 Absence of Changes
	 	 	8	 
	 
	 	 	 	 
	2.7 Title to Assets
	 	 	10	 
	 
	 	 	 	 
	2.8 Bank Accounts
	 	 	10	 
	 
	 	 	 	 
	2.9 Equipment; Real Property
	 	 	10	 
	 
	 	 	 	 
	2.10 Intellectual Property
	 	 	11	 
	 
	 	 	 	 
	2.11 Contracts
	 	 	13	 
	 
	 	 	 	 
	2.12 Compliance with Legal Requirements; Industry Standards
	 	 	16	 
	 
	 	 	 	 
	2.13 Governmental Authorizations
	 	 	16	 
	 
	 	 	 	 
	2.14 Tax Matters
	 	 	16	 
	 
	 	 	 	 
	2.15 Employee and Labor Matters; Benefit Plans
	 	 	18	 
	 
	 	 	 	 
	2.16 Environmental Matters
	 	 	21	 
	 
	 	 	 	 
	2.17 Insurance
	 	 	22	 
	 
	 	 	 	 
	2.18 Legal Proceedings; Orders
	 	 	23	 
	 
	 	 	 	 
	2.19 Authority; Binding Nature of Agreement
	 	 	23	 
	 
	 	 	 	 
	2.20 Non-Contravention; Consents
	 	 	24	 
	 
	 	 	 	 
	2.21 Brokers; Advisors
	 	 	25	 
	 
	 	 	 	 
	2.22 Full Disclosure
	 	 	25	 

-i-

 

Table of Contents

(continued)

	 	 	 	 	 
	 	 	Page
	2.23 eClone
Systems, Inc.
	 	 	25	 
	 
	 	 	 	 
	3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
	 	 	25	 
	 
	 	 	 	 
	3.1 Due Organization
	 	 	26	 
	 
	 	 	 	 
	3.2 Non-Contravention; Consents
	 	 	26	 
	 
	 	 	 	 
	3.3 Authority; Binding Nature of Agreement
	 	 	26	 
	 
	 	 	 	 
	3.4 Financial Ability to Perform
	 	 	26	 
	 
	 	 	 	 
	3.5 Legal
Ability to Perform
	 	 	26	 
	 
	 	 	 	 
	4. CERTAIN COVENANTS OF THE COMPANY AND THE SELLING
SHAREHOLDERS
	 	 	26	 
	 
	 	 	 	 
	4.1 Access and Investigation
	 	 	27	 
	 
	 	 	 	 
	4.2 Operation of the Business of the Acquired Companies
	 	 	27	 
	 
	 	 	 	 
	4.3 No Negotiation
	 	 	29	 
	 
	 	 	 	 
	4.4 Consents
	 	 	29	 
	 
	 	 	 	 
	4.5 Transaction Expenses
	 	 	29	 
	 
	 	 	 	 
	4.6 eClone Assets
	 	 	29	 
	 
	 	 	 	 
	5. CERTAIN COVENANTS OF THE PARTIES
	 	 	30	 
	 
	 	 	 	 
	5.1 Filings and Consents
	 	 	30	 
	 
	 	 	 	 
	5.2 Public Announcements
	 	 	31	 
	 
	 	 	 	 
	5.3 Best Efforts
	 	 	31	 
	 
	 	 	 	 
	5.4 Employment Matters
	 	 	31	 
	 
	 	 	 	 
	5.5 M&T Line of Credit
	 	 	31	 
	 
	 	 	 	 
	6. CONDITIONS TO CLOSING
	 	 	31	 
	 
	 	 	 	 
	6.1 Closing Conditions
	 	 	31	 
	 
	 	 	 	 
	6.2 Assignment of Right to Purchase Shares
	 	 	32	 
	 
	 	 	 	 
	7.
INDEMNIFICATION, ETC
	 	 	32	 
	 
	 	 	 	 
	7.1 Survival
of Representations, Etc.
	 	 	32	 
	 
	 	 	 	 
	7.2 Indemnification by Selling Shareholders
	 	 	33	 
	 
	 	 	 	 
	7.3 Indemnification by Purchaser
	 	 	33	 
	 
	 	 	 	 
	7.4 Limitations; Exclusivity
	 	 	33	 
	 
	 	 	 	 
	7.5 No Contribution
	 	 	34	 

-ii-

 

Table of Contents

(continued)

	 	 	 	 	 
	 	 	Page
	7.6 Defense of Third Party Claims
	 	 	34	 
	 
	 	 	 	 
	7.7 Procedure for Indemnification Claims Made by Purchaser
	 	 	35	 
	 
	 	 	 	 
	8. MISCELLANEOUS PROVISIONS
	 	 	38	 
	 
	 	 	 	 
	8.1 Further Assurances
	 	 	38	 
	 
	 	 	 	 
	8.2 Fees and Expenses
	 	 	38	 
	 
	 	 	 	 
	8.3 Attorneys’ Fees
	 	 	38	 
	 
	 	 	 	 
	8.4 Notices
	 	 	38	 
	 
	 	 	 	 
	8.5 Headings
	 	 	40	 
	 
	 	 	 	 
	8.6 Counterparts and Exchanges by Electronic Transmission or Facsimile
	 	 	40	 
	 
	 	 	 	 
	8.7 Governing Law
	 	 	40	 
	 
	 	 	 	 
	8.8 Successors and Assigns
	 	 	40	 
	 
	 	 	 	 
	8.9 Remedies Cumulative
	 	 	40	 
	 
	 	 	 	 
	8.10 Waiver
	 	 	40	 
	 
	 	 	 	 
	8.11 Waiver of Jury Trial
	 	 	41	 
	 
	 	 	 	 
	8.12 Amendments
	 	 	41	 
	 
	 	 	 	 
	8.13 Severability
	 	 	41	 
	 
	 	 	 	 
	8.14 Parties in Interest
	 	 	41	 
	 
	 	 	 	 
	8.15 Entire Agreement
	 	 	41	 
	 
	 	 	 	 
	8.16 Disclosure Schedule
	 	 	41	 
	 
	 	 	 	 
	8.17 Shareholder’s Agent
	 	 	41	 
	 
	 	 	 	 
	8.18 Construction
	 	 	42	 

-iii-

 

STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement is made and entered into as of June 13, 2006, by
and among: Starvox Communications, Inc., a California corporation (“Purchaser”);
Capital Telecommunications, Inc. a Pennsylvania corporation (the “Company”); and the
following parties (the “Selling Shareholders”): George V. Kingsbury, Barry J. Silverberg
Living Trust dated 9/22/1995 and Charles H. Wallace. Certain other capitalized terms used in this
Agreement are defined in Exhibit A.

Recitals

     A. The Selling Shareholders own in the aggregate fifty five thousand and ninety two
(55,092) shares of the Common Stock of the Company and two thousand five hundred (2,500)
 shares of Preferred Stock of the Company (collectively, the “Shares”), which
constitute all of the
outstanding capital stock of the Company.

     B. The Selling Shareholders wish to sell the Shares to the Purchaser on the terms set
forth in this Agreement.

     C. Concurrently with the execution of this Agreement, the Purchaser, the Company
and the Selling Shareholders are entering into a Management Services Agreement (the
“Management Services Agreement”) pursuant to which Purchaser shall provide specified
services to the Acquired Companies.

Agreement

     The Purchaser, the Company and the Selling Shareholders, intending to be legally bound, agree
as follows:

	1.	 	Sale and Purchase of Shares; Related transactions requiring payment; execution of
documents

     1.1 Sale and Purchase of Shares. At the Closing, the Selling Shareholders shall sell, assign,
transfer and deliver the Shares to the Purchaser, and the Purchaser shall purchase the Shares from
the Selling Shareholders, on the terms and subject to the conditions set forth in this Agreement.

     1.2 Purchase Price. The aggregate purchase price payable by the Purchaser for the Shares (the
“Purchase Price”) shall be Twelve Million Dollars ($12,000,000.00). The Purchase Price
shall be paid by the Purchaser as follows:

          (a) An aggregate amount equal to Eleven Million Five Hundred Thousand ($11,500,000.00) shall
be paid to the Selling Shareholders concurrently with the execution of this Agreement in accordance
with their respective interests as set forth in Schedule 1.2(a)(i) to their respective accounts set
forth in Schedule 1.2(a)(ii). Such payments shall not be refundable to the Purchaser or any other
person under any circumstances.

 

 

          (b) An aggregate amount of Five Hundred Thousand Dollars ($500,000.00) (the “Escrow
Amount”) shall be deposited concurrently with the execution of this Agreement into an account
designated by the Escrow Agent. The Escrow Amount shall be maintained in an escrow fund for the
purposes of satisfying claims brought pursuant to Section 7 for the period of time, and in
accordance with the terms of the Escrow Agreement attached as Exhibit B to this Agreement, which
Escrow Agreement shall be executed concurrently with the execution of this Agreement. One year
after the date of this Agreement, the Escrow Amount, or so much thereof as may then be held by the
Escrow Agent and not reserved for pending indemnification claims, shall be paid to the Selling
Shareholders in accordance with their respective interests as set forth in Schedule 1.2(a)(i) to
their respective accounts set forth in Schedule 1.2(a)(ii).

     1.3 Bank Financing. Concurrently with the execution of this Agreement, Purchaser shall cause
the Company’s line of credit with M&T Bank to be paid in full, up to a maximum amount of
$2,100,000, resulting in the satisfaction, termination and release of all of George V. Kingsbury’s
obligations under his personal guaranty of the Company’s M&T Bank line of credit.

     1.4 Consulting Agreement. Concurrently with the execution of this Agreement, Purchaser shall
pay George V. Kingsbury the sum of One Hundred Twenty Five Thousand Dollars ($125,000) as the
retainer due under the Consulting Agreement referred to in Section 1.5(v) below. Such payment
shall not be refundable to the Purchaser or any other person under any circumstances. Such payment
shall be made by wire transfer to the account identified on Schedule 1.2(a)(ii) for George V.
Kingsbury.

     1.5 Execution of Documents; Closing.

          (a) Concurrently with the execution of this Agreement, each Selling Shareholder, the Company
and the Purchaser, as applicable, shall execute the following documents, which shall be
effective as of the date of this Agreement or which shall be held in escrow pending the Closing,
as follows:

               (i) the Escrow Agreement, substantially in the form of Exhibit B,
shall be executed and delivered by all parties thereto and shall be effective upon execution and
delivery;

               (ii) Non-Competition and Non-Solicitation Agreements, substantially in the form of Exhibit C,
shall be executed by all parties thereto, and shall be held in escrow by the Purchaser pending the
Closing, at which time such documents shall be released to the from escrow without any further
action being required, and the Purchaser is authorized to fill in the Closing Date as the date of
such documents;

               (iii) Release Agreements, substantially in the form of Exhibit D, shall be executed by all
parties thereto, and shall be shall be effective upon execution and delivery;

2

 

               (iv) the Selling Shareholders shall cause to be delivered to the Purchaser a legal opinion,
dated as of the date of this Agreement, in the form of Exhibit E attached hereto, which legal
opinion shall be effective as of the date of this Agreement;

               (v) a Consulting Agreement substantially in the form of Exhibit F attached hereto shall be
executed in duplicate by the parties thereto shall be held in escrow by Purchaser pending the
Closing, at which time such documents shall be released to the parties thereto from escrow without
any further action being required, and the Purchaser is authorized to fill in the Closing Date as
the date of such documents;

               (vi) a FIRPTA certificate executed by the Company to the effect that the Company is not a
foreign person, which shall be held in escrow by Purchaser pending the Closing, at which time such
document shall be released from escrow without any further action being required, and the
Purchaser is authorized to fill in the Closing Date as the date of such document;

               (vii) the Management Services Agreement, duly executed by the parties thereto in duplicate,
which shall be effective as of the date of this Agreement;

               (viii) written resignations of the Selling Shareholders as officers and directors of the
Acquired Companies, which shall be held in escrow by Purchaser pending the Closing, at which time
such documents shall be released from escrow without any further action being required, and the
Purchaser is authorized to fill in the Closing Date as the date of such documents; and

               (ix) an executed Stock Power assigning to George V. Kingsbury all of the issued and
outstanding shares of stock of eClone Systems, Inc., which Purchaser shall hold in escrow pending
the Closing, at which time such document shall be released to George V. Kingsbury from escrow
without any further action being required, and the Purchaser is authorized to fill in the Closing
Date as the date of such document.

          (b) Once this Agreement has been executed and the Selling Shareholders have been provided
with written confirmation that (i) the payments required to be made under Sections 1.2, Section
1.3 and Section 1.4 have been made, the Selling Shareholders shall deliver to the Purchaser stock
certificates representing the Shares duly endorsed for transfer by the applicable Selling
Shareholder (or accompanied by duly executed stock powers) with the date of transfer left blank
which shall be held in escrow by the Purchaser until the Closing, at which time such stock
certificates and transfer documentation shall be released from escrow without any further action
being required, and the Purchaser is authorized to fill in the Closing Date as the date of
transfer.

          (c) The closing of the sale of the Shares to the Purchaser (the “Closing”) shall
take place at the principal office of the Purchaser at 10:00 a.m. on a date to be designated by
written notice delivered by the Purchaser to the Shareholders’ Agent. The date on which the
Closing actually takes place is referred to in this Agreement as the “Closing Date.”
Notwithstanding anything contained in this Agreement to the contrary, the Company and each of the
Selling Shareholders agree that on the Closing Date, each of the documents delivered to

3

 

Purchaser to be held in escrow pending the Closing pursuant to Section 1.5(a) and Section
1.5(b) shall be released from such escrow without the requirement of any further action on the
part of the Company or any of the Selling Shareholders, free of any escrow established herein,
and such documents shall be delivered to and maintained by Purchaser (except that a duplicate
original of the Management Services Agreement shall be given to the Company and a duplicate
original of the Consulting Agreement shall be given to George V. Kingsbury).

	2.	 	Representations and
Warranties of the Company
and Selling
Shareholders

     The Company and each of the Selling Shareholders represents and warrants, to and for the
benefit of the Purchaser, as follows:

     2.1 Due Organization; Subsidiaries; Etc.

          (a) Each of the Acquired Companies has been duly organized, and is validly existing and in
good standing, under the laws of the jurisdiction of its formation. Each of the Acquired Companies
has full 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 Contracts to which it is a
party or by which it is bound.

          (b) None of the Acquired Companies has 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 its respective corporate name as set forth in this Agreement and the names E-clone,
E-clone Systems, Upfront, Upfront Teleclub, Netrax and CTl.

          (c) Each of the Acquired Companies is qualified, licensed or admitted to do business as a
foreign corporation, and is in good standing, under the laws of all jurisdictions where the
property owned, leased or operated by it or the nature of its business requires such
qualification, license or admission and where the failure to be so qualified, licensed or admitted
would have a Material Adverse Effect on the Acquired Companies, except that the Company is not in
good standing in the State of Rhode Island. Part 2.1(c) of the Disclosure Schedule
accurately sets forth each jurisdiction where an Acquired Company is qualified, licensed or
admitted to do business.

          (d)
Part 2.1(d) of the Disclosure Schedule accurately sets forth: (i) the names of the
members of the board of directors of each of the Acquired Companies; (ii) the names of the members
of each committee of the board of directors of each of the Acquired Companies; and (iii) the names
and titles of the officers of each of the Acquired Companies.

          (e) 100% of the issued and outstanding shares of capital stock and other securities of each of
the Subsidiaries is owned, of record and beneficially, by the Company.

          (f) Except for the equity interests identified in Part 2.1(f) of the Disclosure
Schedule, none of the Acquired Companies has ever owned, beneficially or otherwise, any shares
or other securities of, or any direct or indirect equity interest in, any Entity.

4

 

          (g) None of the Acquired Companies is obligated to make, or has agreed to incur any
obligation to make, any future investment in or capital contribution to any Entity.

          (h) None of the Acquired Companies has guaranteed or is responsible or liable for any
obligation of any Person other than the Acquired Companies.

     2.2 Charter Documents; Records. The Company has made available to the Purchaser accurate and
complete copies of: (a) the certificate of incorporation and bylaws or equivalent governing
documents, including all amendments thereto, of each of the Acquired Companies (the “Charter
Documents”); and (b)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
shareholders or members, the board of directors and all committees of the board of directors of
each of the Acquired Companies since January 1, 2003, if any, which minutes or other records
contain a complete summary of all meetings of directors, shareholders and members at which any
formal action was taken or approved by vote or written consent, since January 1, 2003. All actions
taken and all transactions entered into by each of the Acquired Companies have been duly approved
by all necessary action of the board of directors and shareholders of each of the Acquired
Companies. There has been no violation of any of the provisions of the Charter Documents of any of
the Acquired Companies, and no Acquired Company has taken any action that is inconsistent in any
material respect with any resolution adopted by such Acquired Company’s shareholders, board of
directors or any committee of the board of directors. The stock records and minute books of each
of the Acquired Companies are accurate, up-to-date and complete in all material respects, and have
been maintained in accordance with all applicable Legal Requirements.

     2.3 Capitalization.

          (a) The authorized capital stock of the Company consists of 10,000,000 shares of Common
Stock, of which 55,092 shares have been issued and are outstanding as of the date of this
Agreement and 10,000 shares of Preferred Stock, of which 2,500 shares have been issued and are
outstanding as of the date of this Agreement. There are no shares of capital stock held in the
Company’s treasury except as set forth in Part 2.3(a) of the Disclosure Schedule. Part
2.3(a) of the Disclosure Schedule sets forth the names of each of the Company’s
shareholders, the addresses of such shareholders and the number of shares of Common Stock and
Preferred Stock owned of record by each of such shareholders. All of the outstanding shares of
Common Stock and Preferred Stock of the Company have been duly authorized and validly issued, and
are fully paid and nonassessable, and except as set forth in Part 2.3(a) of the Disclosure
Schedule, none of such shares is subject to any repurchase option, forfeiture provision or
restriction on transfer (other than restrictions on transfer imposed by virtue of applicable
federal and state securities laws). The Selling Shareholders have, and will convey to the
Purchaser at the Closing, good and valid title to the Shares free and clear of any Encumbrances.

          (b) There is no: (i) outstanding subscription, option, call, convertible note, warrant or
right (whether or not currently exercisable) to acquire any shares of capital stock or other
securities of the Company; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of capital stock or other securities

5

 

of the Company; (iii) Contract under which the Company is or may become obligated to sell or
otherwise issue any shares of capital stock or other securities of the Company; or (iv) 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. As of the Closing, there will be no outstanding options,
warrants or other rights to purchase shares of capital stock or other securities of the Company.

          (c) All outstanding shares of capital stock and all other securities that have ever been
issued or granted by the Company 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 all applicable Contracts. None of the outstanding shares of capital stock or other
securities of the Company were issued in violation of any preemptive rights or other rights to
subscribe for or purchase securities of the Company. Part 2.3(c) of the Disclosure
Schedule accurately identifies each Acquired Company Contract relating to any securities of
any of the Acquired Companies that contains any information rights, registration rights, financial
statement requirements or other terms that would survive the Closing unless terminated or amended
prior to the Closing.

          (d) The Company owns, of record and beneficially, 100% of the issued and outstanding shares
of capital stock of each of the Subsidiaries. All of the shares of each of the Subsidiaries are
owned by the Company free and clear of any Encumbrance, The outstanding shares of the Subsidiaries
have been duly authorized and validly issued and are fully paid and nonassessable, have been
issued in compliance with all applicable securities laws and other applicable Legal Requirements
and were not issued in violation of or subject to any preemptive rights or other rights to
subscribe for or purchase securities of such Subsidiaries. There are no options, warrants or other
rights outstanding to subscribe for or purchase any shares or other securities of the Subsidiaries
and such Subsidiaries are not subject to any Contract or court or administrative order under which
any of such Subsidiaries is or may become obligated to sell or otherwise issue any shares or other
securities. There are no preemptive rights applicable to any shares of any of the Subsidiaries.
The Subsidiaries do not have the right to vote on or approve any of the transactions contemplated
by this Agreement.

     2.4 Financial Statements and Related Information.

          (a) The Company has made available to the Purchaser the following financial statements and
notes (collectively, the “Company Financial Statements”): (i) the audited consolidated
balance sheet of the Acquired Companies as of December 31, 2003, December 31, 2004, and December
31, 2005, and the related audited consolidated statement of income, consolidated statement of
shareholders’ equity and consolidated statement of cash flows for the year ended December 31,
2003, December 31, 2004, and December 31, 2005, together with the notes thereto and the
unqualified report and opinion of the Company’s auditor relating thereto; and (ii) the unaudited
consolidated balance sheet of the Acquired Companies as of May 31, 2006 (the “Unaudited
Interim Balance Sheet”), and (iii) the related unaudited consolidated statement of income for
the five months ended May 31, 2006.

          (b) The Company Financial Statements present fairly the financial position of the Acquired
Companies as of the respective dates thereof and the results of operations and

6

 

(in the case of the financial statements referred to in Section 2.4(a)(i) and Section 2.4(a)(iii))
cash flows of the Acquired Companies 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 financial statements referred to in Section 2.4(a)(iii) 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) The financial books, records and accounts of the Acquired Companies accurately and fairly
reflect, in reasonable detail, the transactions in and dispositions of the assets of the Acquired
Companies.

          (d) Part 2.4(d) of the Disclosure Schedule provides an accurate and complete
breakdown and aging of all accounts receivable, notes receivable and other receivables (other than
Employee Receivables, as defined in Section 2.4(e)) of the Acquired Companies as of February 28,
2006, and the Company has updated such information by including in Part 2.4(d) of the
Disclosure Schedule, an accounts receivable summary aging report as of May 31, 2006.
Except as set forth in Part 2.4(d) of the Disclosure Schedule, updated as stated above, ,
and except for the Employee Receivables, all existing accounts receivable of the Acquired
Companies (including those accounts receivable reflected on the Unaudited Interim Balance Sheet
that have not yet been collected and those accounts receivable that have arisen since May 31, 2006
and have not yet been collected): (i) represent valid obligations of customers of the Acquired
Companies arising from bona fide transactions entered into in the ordinary course of business; and
(ii) are current and to the Company’s and the Selling Shareholders’ Knowledge, collectible in full
when due in the ordinary course of the Company’s business, without any counterclaim or set off,
net of any allowance for doubtful accounts reflected on the Company’s financial statements.

          (e) Part 2.4(e) of the Disclosure Schedule provides an accurate and complete
breakdown of any amounts (including loans, advances or other indebtedness) owed to any of the
Acquired Companies by a director, officer, employee or shareholder of any of the Acquired
Companies as of the date of this Agreement (the “Employee Receivables”).

          (f) Part 2.4(f) of the Disclosure Schedule identifies the revenues received from each
of the top 25 customers of the Acquired Companies (based on revenues) in the months of December
2004, 2005 and 2006. The Company has made available to Purchaser accurate and complete copies of
all written Contracts from each of the top 25 customers of the Acquired Companies (on a revenue
basis), for the fiscal year ended December 31, 2005.

     2.5 Liabilities.

          (a) None of the Acquired Companies has any accrued, contingent or other Liabilities of any
nature, either matured or unmatured except for: (i) Liabilities identified as such in the
“liabilities” column of the Unaudited Interim Balance Sheet; (ii) accounts payable or accrued
salaries that have been incurred by each of the Acquired Companies since the date of the Unaudited
Interim Balance Sheet in the ordinary course of business and consistent with such Acquired
Company’s past practices; (iii) Liabilities under the Acquired Company Contracts; (iv) the
Liabilities identified in Part 2.5(a) of the Disclosure Schedule, (v) Liabilities incurred in

7

 

the ordinary course of business and consistent with past practices of the Acquired Companies which
are not required to be reflected in financial statements in accordance with GAAP, (vi) the
obligation to pay compensation to M&T Bank in connection with the transactions contemplated by
this Agreement (the “M&T Commission”), and (vii) Acquired Company Transaction Expenses incurred
since June 1, 2006.

          (b) Part 2.5(b) of the Disclosure Schedule provides an accurate and complete
breakdown and aging of: (i) all accounts payable of each of the Acquired Companies as of February
28, 2006, and the Company has updated such information by including in Part 2.5(b) of the
Disclosure Schedule, an accounts payable summary aging report as of May 31, 2006; and (ii)
all notes payable of each of the Acquired Companies and all other indebtedness of each of the
Acquired Companies for borrowed money as of February 28, 2006, and the Company has updated such
information by providing to Purchaser the Unaudited Interim Balance Sheet as of May 31, 2006.

          (c) None of the Acquired Companies has ever effected or otherwise been involved in any
“off-balance sheet arrangements” (as defined in Item 303(a)(4)(ii) of Regulation S-K under the
Securities Exchange Act of 1934, as amended). Without limiting the generality of the foregoing,
none of the Acquired Companies has ever guaranteed any debt or other obligation of any other
Person.

     2.6
Absence of Changes. Except as set forth in Part 2.6 of the Disclosure
Schedule,
between December 31, 2005 and the date of this Agreement:

          (a) there has not been any Material Adverse Effect on the Acquired Companies, and no event
has occurred that would reasonably be expected to have a Material Adverse Effect on the Acquired
Companies;

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

          (c) none of the Acquired Companies has declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of their respective capital stock or other
securities, and none of the Acquired Companies has repurchased, redeemed or otherwise reacquired
any of their respective shares of capital stock or other securities;

          (d) none of the Acquired Companies has sold, issued, granted or authorized the sale,
issuance or grant of: (i) any capital stock or other security; (ii) any option, call, warrant or
right to acquire any capital stock or other security; or (iii) any instrument convertible into or
exchangeable for any capital stock (or cash based on the value of such capital stock) or other
security;

          (e) there has been no amendment to any of the Charter Documents of any of the Acquired
Companies, and none of the Acquired Companies has effected or been a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse stock split or
similar transaction;

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          (f) none of the Acquired Companies has amended or prematurely terminated, or waived any
material right or remedy under, any Contract that is or would constitute a Material Contract (as
defined in Section 2.11(a));

          (g) none of the Acquired Companies has: (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; 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 past practices of the Acquired Companies;

          (h) none of the Acquired Companies has written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other indebtedness in excess of
$25,000 with respect to a single matter, or in excess of $100,000 in the aggregate;

          (i) none of the Acquired Companies has made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance (other than nonexclusive licenses
granted pursuant to the Contracts listed in Part2.10(a)(iii) of the Disclosure Schedule),
except for pledges of immaterial assets made in the ordinary course of business and consistent
with such Acquired Company’s past practices;

          (j) none of the Acquired Companies has: (i) lent money to any Person (other than pursuant to
routine and reasonable travel advances made to current employees of the Acquired Companies in the
ordinary course of business); or (ii) incurred or guaranteed any indebtedness for borrowed money;

          (k) none of the Acquired Companies has: (i) established, adopted or amended any Plan (as
defined in Section 2.15(b)); (ii) made any bonus, profit-sharing or similar payment to, or
increased the amount of wages, salary, commissions, fringe benefits or other compensation
(including equity-based compensation, whether payable in cash or otherwise) or remuneration
payable to, any of its directors, officers or employees; or (iii) other than with respect to
non-officer employees and in the ordinary course of business and consistent with past practices,
hired any new employee;

          (1) none of the Acquired Companies has changed any of its methods of accounting or accounting
practices in any respect;

          (m) none of the Acquired Companies has made any Tax election;

          (n) none of the Acquired Companies has commenced or settled any material Legal Proceeding;

          (o) none of the Acquired Companies has entered into any material transaction or taken any
other material action outside the ordinary course of business or inconsistent with its past
practices; and

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          (p) none of the Acquired Companies has agreed or legally committed to take any of the actions
referred to in clauses “(c)” through “(o)” above.

     2.7 Title to Assets.

          (a) Each of the Acquired Companies owns, and has good and valid title to, all assets
purported to be owned by it, including: (i) all assets reflected on the Unaudited Interim Balance
Sheet; (ii) all assets referred to in Part 2.10(a) of the Disclosure Schedule and all of
the rights of the Acquired Companies under the Contracts identified in Part 2.11(a) of the
Disclosure Schedule; and (iii) all other assets reflected in the books and records of the
Acquired Companies as being owned by the Acquired Companies. All of said assets are owned by the
Acquired Companies free and clear of any liens or other 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 any of the Acquired Companies,
liens securing indebtedness of the Company owed to M&T Bank and NTFC (GE Capital), and liens
securing indebtedness reflected on Part 2.9(b) of the Disclosure Schedule.

          (b) Part 2.7(b) of the Disclosure Schedule identifies all assets that are material to
the business of any of the Acquired Companies and that are being leased to any of the Acquired
Companies for which the annual rental payment for each such asset exceeds $100,000.

     2.8 Bank Accounts. Part 2.8 of the Disclosure Schedule provides the following
information with respect to each account maintained by or for the benefit of any of the Acquired
Companies at any bank or other financial institution: (a) the name of the bank or other financial
institution at which such account is maintained; (b) the account number; (c) the type of account;
and (d) the names of all Persons who are authorized to sign checks or other documents with respect
to such account.

     2.9 Equipment; Real Property.

          (a) Part 2.9(a) of the Disclosure Schedule contains a copy of the 2005 equipment
depreciation schedule of the Company.

          (b) None of the Acquired Companies own any real property or any interest in real property,
except for: (i) the leaseholds created under the real property leases identified in Part
2.9(b)(i) of the Disclosure Schedule; and (ii) the land described in Part 2.9(b)(ii) of
the Disclosure Schedule to which the Company has good and marketable fee title and which
is owned by the Company free and clear of any Encumbrances, except for the Encumbrances
identified in Part 2.9(b)(ii) of the Disclosure Schedule (All real property identified or
required to be identified in Part 2.9(b) of the Disclosure Schedule, including all
buildings, structures, fixtures and other improvements thereon, are referred to as the “Real
Property”.). To the Selling Shareholders and the Company’s Knowledge, the use and operation
of the Real Property by the Acquired Companies is (and at all times has been) authorized by, and
is (and at all times has been) in full compliance with, all applicable zoning, land use,
building, fire, health, labor,

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safety and environmental laws and other Legal Requirements. There is no Legal Proceeding pending,
or to the Knowledge of the Company and the Selling Shareholders threatened, that challenges or
adversely affects, or would challenge or adversely affect, the continuation of the present use or
operation of any Real Property. To the Knowledge of the Company and the Selling Shareholders, there
is no existing plan or study by any Governmental Body or by any other Person that challenges or
otherwise adversely affects the continuation of the present use or operation of any Real Property.
There are no subleases, licenses, occupancy agreements or other contractual obligations that grant
the right of use or occupancy of any of the Real Property to any Person other than the Acquired
Companies, and there is no Person in possession of any of the Real Property other than the Acquired
Companies.

          (c) Part 2.9(c) of the Disclosure Schedule sets forth an accurate and complete
description of: all service contracts, maintenance agreements or other similar agreements
affecting the Real Property which will remain in effect after the Closing.

     2.10 Intellectual Property.

          (a) Part 2.10(a) of the Disclosure Schedule accurately identifies and describes each
Acquired Company Service currently marketed, offered, provided, supported or sold by any of the
Acquired Companies.

          (b) Part 2.10(b) of the Disclosure Schedule accurately identifies: (i) each item of
Registered IP in which any of the Acquired Companies 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.

          (c) Part 2.10(c) of the Disclosure Schedule accurately identifies: (a) each Contract
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 any of the Acquired Companies and their respective employees in the Acquired
Companies’ standard forms thereof and (ii) non-exclusive licenses of third-party software that is
not incorporated into, or used in the development, manufacturing, testing, provision,
distribution, maintenance, or support of, any Acquired Company Service and that is not otherwise
material to the business of any of the Acquired Companies); and (b) whether the licenses or rights
granted to the Acquired Companies in each such Contract are exclusive or non-exclusive.

          (d) Part 2.10(d) of the Disclosure Schedule accurately identifies each Contract
pursuant to which any Person has been granted any license under, or otherwise has received or
acquired any right (whether or not currently exercisable) or interest in, any Acquired Company IP.
None of the Acquired Companies are bound by, and no Acquired Company IP is subject to, any
Contract containing any covenant or other provision that in any way limits or restricts the
ability of any of the Acquired Companies to use, exploit, assert, or enforce any Acquired Company
IP anywhere in the world.

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          (e) Part 2.10(e) of the Disclosure Schedule contains a complete and accurate list and
summary of the basis for calculating any royalties, fees, commissions, and other amounts payable
by any of the Acquired Companies to any other Person (other than sales commissions paid to
employees according to the Acquired Companies’ standard commissions plan) upon or for the
marketing, sale, license, support, provision or distribution of any Acquired Company Service or
the use of any Acquired Company IP.

          (f) The Company has afforded the Purchaser access to the Company’s form contract files.

          (g) The Acquired Companies exclusively own all right, title, and interest to and in the
Acquired Company IP (other than Intellectual Property Rights exclusively licensed to the Acquired
Companies, as identified in Part 2.10(c) of the Disclosure
Schedule).

          (h) To the Knowledge of the Company, no Person has infringed, misappropriated, or otherwise
violated, and no Person is currently infringing, misappropriating, or otherwise violating, any
Acquired Company IP. Part 2.10(i) of the Disclosure Schedule accurately identifies (and
the Company has provided to Purchaser a complete and accurate copy of) each letter or other
written or electronic communication or correspondence that has been sent or otherwise delivered by
or to any of the Acquired Companies or any representative of the Company regarding any actual,
alleged, or suspected infringement or misappropriation of any Acquired Company IP, and provides a
brief description of the current status of the matter referred to in such letter, communication,
or correspondence.

          (i) 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
Acquired Company IP; (b) a breach of or default under any Acquired Company IP Contract; (c) the
release, disclosure, or delivery of any Acquired 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 Acquired Company IP.

          (j) None of the Acquired Companies has ever infringed (directly, contributorily, by
inducement, or otherwise), misappropriated, or otherwise violated or made unlawful use of any
Intellectual Property Right of any other Person. No Acquired Company Service, and no method or
process used in the manufacturing of any Acquired Company Service, infringes, violates, or makes
unlawful use of any Intellectual Property Right of, or contains any Intellectual Property
misappropriated from, any other Person. There is no legitimate basis for a claim that any of the
Acquired Companies or any Acquired Company Service has infringed or misappropriated any
Intellectual Property Right of another Person or engaged in unfair competition or that any Acquired
Company Service, or any method or process used in the manufacturing of any Acquired Company
Service, infringes, violates, or makes unlawful use of any Intellectual Property Right of, or
contains any Intellectual Property misappropriated from, any other Person.

12

 

          (k) No infringement, misappropriation, or similar claim or Legal Proceeding is pending
or, to the Knowledge of the Company, threatened against any of the Acquired Companies or against
any other Person who is or may be entitled to be indemnified, defended, held harmless, or
reimbursed by any of the Acquired Companies with respect to such claim or Legal Proceeding.

          (1) To the Knowledge of the Company, no claim or Legal Proceeding involving any Intellectual
Property or Intellectual Property Right licensed to any of the Acquired Companies 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 any of the Acquired Companies, or (b) the development, marketing,
distribution, offer provision, licensing, support or sale of any Acquired Company Service.

          (m) Part 2.10(m) of the Disclosure Schedule contains the current Privacy Policy of
the Acquired Companies.

          (n) To the Knowledge of the Company, each of the Acquired Companies has complied at all times
and in all material respects with all of the Acquired Company Privacy Policies and with all
applicable Legal Requirements pertaining to privacy, User Data, or Personal Data.

     2.11 Contracts.

          (a) Part 2.11(a) of the Disclosure Schedule accurately identifies:

               (i) each executory Acquired Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor; any Acquired
Company Contract pursuant to which any of the Acquired Companies is or may become obligated to
make any severance, termination or similar payment to any current or former employee or director;
and any Acquired Company Contract pursuant to which any of the Acquired Companies is or may become
obligated to make any bonus or similar payment (other than payment in respect of salary) in excess
of $10,000 to any current or former employee or director;

               (ii) each executory Acquired Company Contract which provides for indemnification of any
officer, director, employee or agent;

               (iii) each executory Acquired Company Contract relating to the voting and any other rights or
obligations of a shareholder of any of the Acquired Companies;

               (iv) each executory Acquired Company Contract relating to the merger, consolidation,
reorganization or any similar transaction with respect to any of the Acquired Companies;

               (v) each executory Acquired Company Contract relating to the acquisition, transfer,
development or sharing of any Intellectual Property or Intellectual Property Right (including any
joint development agreement, technical collaboration agreement or similar

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agreement entered into by any of the Acquired Companies or any of their Predecessors with any
customer or other Person);

               (vi) each executory Acquired Company Contract relating to the acquisition, sale, spin-off or
outsourcing of any Subsidiary or business unit or operation of any of the Acquired Companies;

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

               (viii) each executory Acquired Company Contract imposing any restriction on any of the
Acquired Companies: (A) to compete with any other Person; (B) to 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; or (C) to develop or distribute any technology;

               (ix) each executory Acquired Company Contract creating or involving any agency relationship,
distribution arrangement or other reseller relationship (including any Contract in which another
Person is appointed or authorized to act or serve as a sales representative for any of the
Acquired Companies) the terms of which are materially different than the forms of agreements which
have been made available to Purchaser;

               (x) each executory Acquired Company Contract involving any loan, guaranty, pledge,
performance or completion bond or indemnity or surety arrangement not otherwise disclosed in the
Disclosure Schedule;

               (xi) each executory Acquired Company Contract pursuant to which: (A) any Person provides
equipment, materials or services that are necessary for the performance of any Acquired Company
Service; or (B) any Acquired Company is obligated to purchase all, or any specific portion or
percentage of, its requirements for, or any minimum amount of, any product, good or service;

               (xii) each executory Acquired Company Contract with any Related Party;

               (xiii) each executory Acquired Company Contract relating to any liquidation or dissolution of
any Subsidiary of the Company;

               (xiv) each executory Acquired Company Contract to which any Governmental Body is a party or
under which any Governmental Body has any rights or obligations, or involving or benefiting any
Governmental Body;

               (xv) any other executory Acquired Company Contract that requires: (A) the payment or delivery
of cash or other consideration in an amount or having a value in excess of $50,000 in the
aggregate; or (B) the performance of services having a value in excess of $50,000 in the aggregate,
other than customer contracts entered into in the ordinary course of business;

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               (xvi) any other executory Acquired Company Contract (other than nondisclosure agreements
and purchase orders) that may not be terminated by the respective Acquired Company (without
penalty) within 60 days after the delivery of a termination notice by such Acquired Company; and

               (xvii) any executory Acquired Company Contract that was entered into outside the ordinary
course of business or was inconsistent with the past practices of any of the Acquired Companies.

(Contracts
in the respective categories described in clauses “(i)” through “(xvi)” above and all
Contracts identified, or required to be identified, in Part 2.10 of the Disclosure
Schedule are referred to in this Agreement as “Material Contracts.”)

Without limiting the foregoing, except as set forth in Part 2.11(a) of the Disclosure Schedule:
(a) no Related Party has any direct or indirect interest in any material asset used in or
otherwise relating to the business of any of the Acquired Companies; (b) no Related Party is
indebted to any of the Acquired Companies; and (c) since January 1, 2003, no Related Party has
entered into, or has had any direct or indirect financial interest in, any transaction or business
dealing involving any of the Acquired Companies.

          (b) The Company has made available to the Purchaser accurate and complete copies of all
written Material Contracts identified in Part 2.11 (a) of
the Disclosure Schedule,
including all amendments thereto. Part 2.11(a) of the Disclosure Schedule provides an accurate
and complete description of the material terms of each Material Contract that is not in written
form. Each Contract identified in Part 2.11(a) of the Disclosure Schedule is valid and in
full force and effect, and, to the Knowledge of the Company or the Selling Shareholders, is
enforceable by the respective Acquired 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) Except as set forth in Part 2.11(c) of the Disclosure Schedule: (i) none of the
Acquired Companies (and none of their Predecessors) has materially violated or breached, or
committed any material default under, any Acquired Company Contract, which remains uncured, and,
to the Knowledge of the Company or the Selling Shareholders, no other Person has materially
violated or breached, or committed any material default under, any Acquired Company Contract which
remains uncured; (ii) to the Knowledge of the Company or the Selling Shareholders, 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: (A) result in a material violation or breach of any of
the provisions of any Material Contract; (B) give any Person the right to declare a default or
exercise any remedy under any Material Contract; (C) give any Person the right to accelerate the
maturity or performance of any Material Contract; or (D) give any Person the right to cancel,
terminate or modify any Material Contract; and (iii) since January 1, 2003, none of the Acquired
Companies (and none of their Predecessors) has received any notice or other communication
regarding any actual or possible violation or breach of, or default under, any Acquired Company
Contract.

15

 

          (d) All Acquired Company Services have been performed in compliance with all warranties and
other applicable requirements of all Contracts relating to such services, except with respect to
customer disputes arising in the ordinary course of business which do not, individually or in the
aggregate, create a Material Adverse Effect.

     2.12 Compliance with Legal Requirements; Industry Standards. To the
Knowledge of the Selling Shareholders and the Company, each of the Acquired Companies is in
compliance in all material respects with each Legal Requirement that is applicable to it or to the
conduct of its business or the ownership of its assets, and no event has occurred, and no
condition or circumstance exists, that will (with or without notice or lapse of time) constitute
or result in a violation by the any of the Acquired Companies of, or a failure on the part of any
of the Acquired Companies to comply with, any Legal Requirement. Except as set forth in Part 2.12
of the Disclosure Schedule, since January 1, 2006, none of the Acquired Companies (and
none of their Predecessors) has received any notice or other communication from any Person
regarding any actual or possible violation of, or failure to comply with, any Legal Requirement.

     2.13 Governmental Authorizations.

          (a) Part 2.13(a) of the Disclosure Schedule identifies each Governmental
Authorization held by the Acquired Companies. The Company has made available to the Purchaser
accurate and complete copies of all Governmental Authorizations identified in Part 2.13(a) of the
Disclosure Schedule. The Governmental Authorizations identified in Part 2.13(a) of the
Disclosure Schedule are valid and in full force and effect, and collectively constitute
all Governmental Authorizations necessary to enable the respective Acquired Company to conduct its
business in the manner in which its business is currently being conducted, except that the Company
is not in good standing in the State of Rhode Island. Each of the Acquired Companies is, and since
March 1, 2006, each of the Acquired Companies (and each of their Predecessors) has been, in
compliance in all material respects with the terms and requirements of the respective Governmental
Authorizations identified in Part 2.13(a) of the Disclosure Schedule. Since March 1, 2006,
no Acquired Company (and none of their Predecessors) has received any notice or other
communication from any Governmental Body regarding: (i) any actual or possible violation of or
failure to comply with any term or requirement of any Governmental Authorization; or (ii) any
actual or possible revocation, withdrawal, suspension, cancellation, termination or modification
of any Governmental Authorization.

          (b) None of the Acquired Companies possesses (or has ever possessed) or has any rights or
interests with respect to (or has ever had any rights or interests with respect to) any grants,
incentives or subsidies from any Governmental Body.

     2.14 Tax Matters.

          (a) All Tax Returns required to be filed by or on behalf of the Acquired Companies (and on
behalf of their Predecessors) with any Governmental Body with respect to any taxable period ending
on or before the Closing Date (the “Acquired Company Returns”): (i) have been or will be
filed on or before the applicable due date (including any extensions of

16

 

such due date); and (ii) have been, or will be when filed, accurately and completely prepared in
compliance with all applicable Legal Requirements. All Taxes that are due and payable on or before
the Closing Date have been or will be timely paid on or before the Closing Date. The Company has
made available to the Purchaser accurate and complete copies of all Acquired Company Returns filed
by or on behalf of the Acquired Companies (or their Predecessors) since January 1, 2003.

          (b) The Company Financial Statements fully accrue all actual and contingent liabilities for
Taxes with respect to all periods through the dates thereof in accordance with GAAP. The Company
has established (or with respect to the period after the date of this Agreement and prior to the
Closing will establish), in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from January 1, 2005
through the date of this Agreement. All Taxes incurred (whether or not due) since the date of the
Unaudited Interim Balance Sheet have been incurred in the ordinary course of business. All Taxes
required to be withheld by the Acquired Companies have been properly and timely withheld and
remitted.

          (c) No Acquired Company Return relating to Taxes has ever been examined or audited by any
Governmental Body, except for sales tax returns (none of which are ongoing at the date of this
Agreement). No extension or waiver of the limitation period applicable to any of the Acquired
Company Returns is currently in effect for any Acquired Company, and no request for any such
extension or waiver is pending on behalf of any of the Acquired Companies.

          (d) No claim or Legal Proceeding is pending or threatened against or with respect to any of
the Acquired Companies in respect of any Tax. There are no unsatisfied liabilities for Taxes
(including liabilities for interest, additions to tax and penalties thereon and related expenses)
with respect to any notice of deficiency or similar document received by any of the Acquired
Companies with respect to any Tax (other than liabilities for Taxes asserted under any such notice
of deficiency or similar document which are being contested in good faith by the respective
Acquired Companies and with respect to which adequate reserves for payment have been established).
There are no liens for Taxes upon any of the assets of each of the Acquired Companies except liens
for current Taxes not yet due and payable.

          (e) There is no agreement, plan, arrangement or other Contract covering any current or former
employee or independent contractor of any of the Acquired Companies or any other Person with a
current or former relationship with any of the Acquired Companies that, considered individually or
considered collectively with any other agreements, plans arrangements or other Contracts, will, or
would reasonably be expected to, give rise to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code.

          (f) Except as set forth in Part 2.14(i) of the Disclosure Schedule, none of the
Acquired Companies has a permanent establishment in any country other than its country of
incorporation, as defined in any applicable Tax treaty between the United States and such other
country.

17

 

     2.15 Employee and Labor Matters; Benefit Plans.

          (a) The Company has made available to the Purchaser documentary information concerning all
current Acquired Company Employees as of January 31, 2006, which correctly reflects: (i) their
dates of employment; (ii) their positions; (iii) their salaries; (iv) any other compensation
payable to them (including housing allowances, compensation payable pursuant to bonus, deferred
compensation or commission arrangements or other compensation); and (v) any promises made to them
with respect to changes or additions to their compensation or benefits. None of the Acquired
Companies is, and none of the Acquired Companies has been, bound by or a party to, or has a duty
to bargain for, any collective bargaining agreement or other Contract with a labor organization
representing any Acquired Company Employees and there are no labor organizations representing,
purporting to represent or, to the Knowledge of the Company or the Selling Shareholders, seeking
to represent any current Acquired Company Employees. During the three years prior to the date
hereof, none of the Acquired Companies has had any strike, slowdown, work stoppage, lockout, job
action or threat thereof, or question concerning representation, by or with respect to any of the
Acquired Company Employees. The employment of each of the current Acquired Company Employees is
terminable at will.

          (b) Part 2.15(b) of the Disclosure Schedule identifies each “employee benefit plan”
as defined in Section 3.3 of ERISA, employment, salary, bonus, consulting, compensation, deferred
compensation, incentive compensation, stock purchase, equity, severance pay, termination pay,
hospitalization, medical, insurance, supplemental unemployment benefits, profit-sharing, pension,
retirement, welfare, fringe benefit or other employee benefits plan, program or agreement, whether
written or unwritten and whether funded or unfunded (individually referred to as a “Plan”
and collectively referred to as the “Plans”) which is sponsored, maintained, contributed
to or required to be contributed to by any of the Acquired Companies or any ERISA Affiliate for
the benefit of any Acquired Company Employee or with respect to which any of the Acquired
Companies may have any Liability.

          (c) None of the Acquired Companies nor any ERISA Affiliate maintains, sponsors or contributes
to, and none of the Acquired Companies nor any ERISA Affiliate has at any time in the past
maintained, sponsored or contributed to, any employee pension benefit plan (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), whether
or not excluded from coverage under specific Titles or Subtitles of ERISA) for the benefit of
Acquired Company Employees (a “Pension Plan”), except for those Pension Plans described in
Part 2.15(b) of the Disclosure Schedule, none of which is or was subject to Title IV of
ERISA, Section 412 of the Code or a multiemployer plan (within the meaning of Section 3(37) of
ERISA).

          (d) None of the Acquired Companies nor any ERISA Affiliate maintains, sponsors or contributes
to any employee welfare benefit plan (as defined in Section 3(1) of ERISA, whether or not excluded
from coverage under specific Titles or Merger Subtitles of ERISA) for the benefit of Acquired
Company Employees (a “Welfare Plan”) except for those Welfare Plans described in Part
2.15(d) of the Disclosure Schedule, none of which is or was a multiemployer plan (within
the meaning of Section 3(37) of ERISA), or a multiple employer welfare arrangement (within the
meaning of the Section 3(40) of ERISA).

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          (e) With respect to each Plan, the Company has made available to the Purchaser: (i) an
accurate and complete copy of such Plan (including all amendments thereto); (ii) an accurate and
complete copy of the annual return/report (if required under ERISA) with respect to such Plan for
the past three years; (iii) an accurate and complete copy of: the most recent summary plan
description, together with each Summary of Material Modifications (if required under ERISA) with
respect to such Plan; (iv) if such Plan is funded through a trust or any third party funding
vehicle, an accurate and complete copy of the trust or other funding agreement (including all
amendments thereto) and accurate and complete copies the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to such Plan, including service
provider agreements, insurance contracts, minimum premium contracts, stop-loss agreements,
investment management agreements, subscription and participation agreements and recordkeeping
agreements; (vi) an accurate and complete copy of the most recent determination or opinion letter
received from the Internal Revenue Service with respect to such Plan (if such Plan is intended to
be qualified under Section 401(a) of the Code); (vii) standard healthcare continuation forms and
related notices; (viii) all correspondence to or from any Governmental Body relating to any Plan,
other than routine correspondence that will not result in Liability to any Acquired Company; (ix)
the discrimination tests for each Plan for the three most recent plan years; and (x) true, correct
and complete copies of all election statements under Section 83(b) of the Code that are in the
possession of any of the Acquired Companies or subject to its control with respect to any unvested
securities or other property issued by any of the Acquired Companies to any Acquired Company
Employee.

          (f) None of the Acquired Companies is, and none of the Acquired Companies has ever been,
required to be treated as a single employer with any other Person under Section 4001(b)(1) of
ERISA or Section 414(b), (c), (m) or (o) of the Code. None of the Acquired Companies has ever been
a member of an “affiliated service group” within the meaning of Section 414(m) of the Code. None
of the Acquired Companies nor any ERISA Affiliate has ever made a complete or partial withdrawal
from a “multiemployer plan” (as defined in Section 3(37) of ERISA) resulting in “withdrawal
liability” (as defined in Section 4201 of ERISA), without regard to subsequent reduction or waiver
of such liability under either Section 4207 or 4208 of ERISA. None of the Acquired Companies nor
any ERISA Affiliate has ever maintained, established, sponsored, participated in or contributed to
any multiple employer plan, as described in Section 413(c) of the Code.

          (g) No Welfare Plan provides death, medical, health or other welfare benefit coverage (whether
or not insured) with respect to any Acquired Company Employee after any such Person’s termination
of service, including upon or after retirement (other than: (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the Code; and (ii)
benefits the full cost of which are borne by Acquired Company Employees of the Acquired Companies
(or their beneficiaries)). None of the Acquired Companies has ever represented, promised or
contracted (whether in written or oral form) that any Acquired Company Employee or other Person
would be provided with such death, medical, health or other welfare benefits after termination of
service or upon or after retirement.

          (h) To the Selling Shareholder’s and the Company’s Knowledge, each of the Plans has been
operated and administered in all material respects in accordance with applicable Legal
Requirements, including ERISA and the Code. There has been no “prohibited

19

 

transaction,” as such term is defined in Section 406 of ERISA or Section 4975 of the Code, with
respect to any Plan. All contributions required to be made by the Acquired Companies to any Plan
have been timely made or accrued and all contributions for any period ending on or before the
Closing Date which are not yet due will have been paid or accrued on or prior to the Closing Date.
Each Plan subject to ERISA has timely filed all requisite government reports (which were true and
correct as of the date filed) and has properly and timely filed and distributed or posted all
required notices and reports to Acquired Company Employees. There are no audits, inquiries or
proceedings pending or, to the Knowledge of the Company or the Selling Shareholders, threatened by
the IRS, the Department of Labor or any other Governmental Body with respect to any Plan.

          (i) Each Plan intended to be qualified under Section 401(a) of the Code, and each trust
intended to be exempt under Section 501(a) of the Code, has been determined to be so qualified or
exempt by the IRS, and there has been no event, condition or circumstance that has adversely
affected or is reasonably likely to adversely affect such qualified status.

          (j) None of the Acquired Companies maintains a nonqualified deferred compensation plan or
arrangement that would be reasonably likely to subject an employee or independent contractor to
interest or additional income tax under Section 409A of the Code.

          (k) Except as set forth in Part 2.15(m) of the Disclosure Schedule, neither the
execution, delivery or performance of this Agreement, nor the consummation of any of the
transactions contemplated by this Agreement, will or may (either alone or upon the occurrence of
any additional or subsequent events) (i) result in any payment (whether of severance pay or
otherwise and whether or not under any Plan), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits or (ii) be deemed a “parachute
payment” under Section 280G of the Code with respect to any Acquired Company Employee. Part2.15(m)
of the Disclosure Schedule lists all Persons who are “disqualified individuals” (within the
meaning of Section 280G of the Code and the regulations promulgated thereunder).

          (l) To the Selling Shareholder’s and the Company’s Knowledge, each of the Acquired Companies
is: (i) in compliance in all material respects with all applicable Legal Requirements, Contracts
and orders, rulings, decrees, judgments or arbitration awards of any arbitrator or any court or
other Governmental Body respecting employment, employment practices, terms and conditions of
employment, wages, hours or other labor-related matters, including Legal Requirements, orders,
rulings, decrees, judgments and awards relating to discrimination, wages and hours, labor
relations, leave of absence requirements, occupational health and safety, privacy, harassment,
retaliation, immigration, wrongful discharge or violation of the personal rights of Acquired
Company Employees or prospective employees; (ii) has withheld and reported all amounts required by
any Legal Requirement or Contract to be withheld and reported with respect to wages, salaries and
other payments to any Acquired Company Employee; (iii) has no Liability for any arrears of wages or
any Taxes or any penalty for failure to comply with any of the foregoing; and (iv) has no Liability
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 any Acquired Company Employee (other than routine payments to be made
in the normal

20

 

course of business and consistent with past practice). Since January 1, 2003, none of the
Acquired Companies (and no Predecessor of any of the Acquired Companies) has effectuated a “plant
closing,” partial “plant closing,” or “mass layoff (each as defined in the Worker Adjustment and
Retraining Notification Act (the “WARN Act”) or any similar Legal Requirement) affecting
any site of employment or one or more facilities or operating units within any site of employment
or facility of any of the Acquired Companies (or any Predecessor of any of the Acquired
Companies).

          (m) Each of the Acquired Companies has good labor relations. Except as set forth in Part
2.15(o) of the Disclosure Schedule, there are no pending or (to the Knowledge of the
Company or the Selling Shareholders) threatened or reasonably anticipated claims or Legal
Proceedings against any Acquired Company under any workers’ compensation policy or long-term
disability policy. To the Knowledge of the Company or the Selling Shareholders, no employee of any
of the Acquired Companies 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:
(A) the performance by such employee of any of his duties or responsibilities as an employee of any
of the Acquired Companies; or (B) the business or operations of any of the Acquired Companies.

          (n) There are no pending or (to the Knowledge of the Company or the Selling Shareholders)
threatened or reasonably anticipated claims or Legal Proceedings against any of the Plans, the
assets of any of the Plans or the Acquired Companies, or the Plan administrator or any fiduciary
of the Plans with respect to the operation of such Plans (other than routine, uncontested benefit
claims), and to the Knowledge of the Company and the Selling Shareholders there are no facts or
circumstances which could form the basis for any such claims or Legal Proceedings.

          (o) To the knowledge of the Company or the Selling Shareholders, no current or former
independent contractor of any of the Acquired Companies is or was a misclassified employee. No
independent contractoris eligible to participate in any Plan. No Acquired Company has ever had any
temporary or leased employees that were not properly accounted for.

          (p) Except as set forth in Part 2.15(r) of the Disclosure Schedule, there is no Legal
Proceeding, claim, labor dispute or grievance pending or (to the Knowledge of the Company or the
Selling Shareholders) threatened or reasonably anticipated relating to any employment Contract,
compensation, wages and hours, leave of absence, plant closing notification, employment statute or
regulation, privacy right, labor dispute, workers’ compensation policy, long-term disability
policy, safety, retaliation, immigration or discrimination matter involving any Acquired Company
Employee, including charges of unfair labor practices or harassment complaints.

      2.16
Environmental Matters.

          To the Selling Shareholders’ and the Company’s Knowledge:

          (a) The Real Property and each other parcel of property that is (or that has been) owned by,
leased to, occupied by, controlled by or used by any of the Acquired

21

 

Companies, and all surface water, groundwater, soil and air associated with or adjacent to
such property: (a) is free of any Materials of Environmental Concern; and (b) is free of any
environmental contamination of any nature. None of the Real Property contains: (i) any underground
storage tanks, asbestos, equipment using PCBs or underground injection wells; or (ii) any septic
tanks in which process wastewater or any Materials of Environmental Concern have been Released. No
Acquired Company has ever Released any Materials of Environmental Concern except in compliance with
all applicable Environmental Laws.

          (b) Each of the Acquired Companies: (i) is and has been in compliance with, and has not been
and is not in violation of or subject to any Liability under, any applicable Environmental Laws;
and (ii) possesses all permits and other Governmental Authorizations required under applicable
Environmental Laws, and is in compliance with the terms and
conditions thereof.

          (c) None of the Acquired Companies has received any notice or other communication, whether
from a Governmental Body, citizens group, employee or otherwise, that alleges that such Acquired
Company is not in compliance with any Environmental Law, and, to the Knowledge of the Company or
the Selling Shareholders, there are no circumstances that may prevent or interfere with such
Acquired Company’s compliance with any Environmental Law in the future.

          (d) No current or prior owner of any of the Real Property has received any notice or other
communication (in writing or otherwise), whether from a Government Body, citizens group, employee
or otherwise, that alleges that such current or prior owner or such Acquired Company is not in
compliance with any Environmental Law. All Governmental Authorizations currently held by each of
the Acquired Companies pursuant to Environmental Laws are identified in Part 2.16 of the
Disclosure Schedule.

          (e) No Acquired Company has ever sent or transported, or arranged to send or transport, any
Materials of Environmental Concern to a site that, pursuant to any applicable Environmental Law:
(i) has been placed on the “National Priorities List” of hazardous waste sites or any similar
state list; (ii) is otherwise designated or identified as a potential site for remediation,
cleanup, closure or other environmental remedial activity; or (iii) is subject to a Legal
Requirement to take “removal” or “remedial” action as detailed in any applicable Environmental Law
or to make payment for the cost of cleaning up any site.

          (f) No Acquired Company has used or allowed the use of any chemicals or other Materials of
Environmental Concern on or at any property currently or formerly operated or used by any Acquired
Company.

     2.17 Insurance.

          (a) Part 2.17(a) of the Disclosure Schedule provides accurate and complete
information with respect to: (i) each property and casualty insurance policy maintained by, at the
expense of or for the benefit of each of the Acquired Companies as of the date of this Agreement;
and any claims pending thereunder as of the date of this Agreement; and (ii) the loss history for
each insurance policy for the last three years through the date of this Agreement.

22

 

The Company has made available to the Purchaser accurate and complete copies of the insurance
policies identified on Part 2.17(a) of the Disclosure Schedule. Each of the insurance
policies identified in Part 2.17(a) of the Disclosure Schedule is in full force and
effect.

          (b) Since January 1, 2003, none of the Acquired Companies (and none of their Predecessors)
has received any notice or other communication regarding any actual or possible: (i) cancellation
or invalidation of any insurance policy; (ii) refusal of any coverage or rejection of any claim
under any insurance policy; or (iii) material adjustment in the amount of the premiums payable
with respect to any insurance policy other than adjustments reflecting market conditions.

     2.18 Legal Proceedings; Orders.

          (a) There is no pending Legal Proceeding and, to the Knowledge of the Company or the Selling
Shareholders, no Person has threatened to commence any Legal Proceeding: (i) that involves any of
the Acquired Companies or any of the assets owned or used by any of the Acquired Companies or any
Person whose liability any of the Acquired Companies has or may have retained or assumed, either
contractually or by operation of law; (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, any of the transactions
contemplated by this Agreement; or (iii) that relates to the ownership of any capital stock of any
of the Acquired Companies, or any option or other right to the capital stock of any of the
Acquired Companies, or right to receive consideration as a result of the transactions contemplated
by this Agreement. To the Knowledge of the Company or the Selling Shareholders, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that will or could
reasonably be expected to, give rise to or serve as a basis for the commencement of any such Legal
Proceeding.

          (b) There is no order, writ, injunction, judgment or decree to which any of the Acquired
Companies, or any of the assets owned or used by each of the Acquired Companies, is subject. To
the Knowledge of the Company or the Selling Shareholders, no officer or other employee of any of
the Acquired Companies 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 respective Acquired Company’s business.

     2.19 Authority; Binding Nature of Agreement.

          (a) The Company has the absolute and unrestricted right, power and authority to enter into and
to perform its obligations under this Agreement and under each other agreement, document or
instrument referred to in or contemplated by this Agreement to which the Company is or will be a
party; and the execution, delivery and performance by the Company of this Agreement and of each
such other agreements, documents and instruments have been duly authorized by all necessary action
on the part of the Company and its board of directors. This Agreement and each other agreement,
document and instrument referred to in or contemplated by this Agreement to which the Company is a
party 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

23

 

of debtors; and (ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.

          (b) Each of the Selling Shareholders has the absolute and unrestricted right, power and
capacity to enter into and to perform such Selling Shareholder’s obligations under this Agreement
and under each other agreement, document or instrument referred to in or contemplated by this
Agreement to which any Selling Shareholder is or will be a party. This Agreement and each other
agreement, document and instrument referred to in or contemplated by this Agreement to which any
Selling Shareholder is a party constitutes the legal, valid and binding obligation of such Selling
Shareholder, enforceable against such Selling Shareholder 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) The board of directors of the Company has determined that the transactions contemplated
by this Agreement are advisable and fair and in the best interests of the Company and its
shareholders.

     2.20 Non-Contravention; Consents. Neither: (1) the execution, delivery or performance by the
Company or the Selling Shareholders of this Agreement or any of the other agreements, documents or
instruments referred to in this Agreement; nor (2) the consummation by the Company or the Selling
Shareholders of the transactions contemplated by this Agreement or any such other agreement,
document or instrument, will (with or without notice or lapse of time):

          (a) contravene, conflict with or result in a violation of: (i) any of the provisions of any
Charter Documents of any of the Acquired Companies; or (ii) any resolution adopted by the
shareholders, board of directors or any committee of the board of directors of any of the Acquired
Companies;

          (b) contravene, conflict with or result in a violation of any Legal Requirement or any
order, writ, injunction, judgment or decree to which any of the Acquired Companies or any of the
Selling Shareholders, or any of the assets owned or used by any of the Acquired Companies, is
subject;

          (c) assuming all consents and approvals required from any Governmental Body are obtained,
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 any of the Acquired Companies or that otherwise
relates to any such Acquired Company’s business or to any of the assets owned or used by any such
Acquired Company;

          (d) assuming all consents and approvals required from any secured commercial lender are
obtained, contravene, conflict with or result in a violation or breach of, or result in a default
under, any provision of any Acquired Company Contract that is or would constitute a Material
Contract or any Contract that is binding on any Selling Shareholder, or give any Person the right
to: (i) declare a default or exercise any remedy under any such

24

 

Acquired Company Contract; (ii) accelerate the maturity or performance of any such Acquired
Company Contract; or (iii) cancel, terminate or modify any such Acquired Company Contract; or

          (e) result in the imposition or creation of any lien or other Encumbrance upon or with
respect to any asset owned or used by any of the Acquired Companies (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 any of the Acquired Companies).

Except as set forth in Part 2.20 of the Disclosure Schedule, none of the Acquired
Companies nor any of the Selling Shareholders is and none of the Acquired Companies nor any of the
Selling Shareholders will 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 transactions contemplated by this Agreement.

     2.21 Brokers; Advisors. Except for M&T Investment Banking Group, no broker, finder or
investment banker is entitled to any brokerage, finder’s or other fee or commission in connection
with any of the transactions contemplated by this Agreement based upon arrangements made by or on
behalf of any of the Acquired Companies or any of the Selling Shareholders. Except as set forth in
Part 2.21 of the Disclosure Schedule, no Person is or may become entitled to receive any
fee or other amount from any of the Acquired Companies or any of the Selling Shareholders for
professional services performed or to be performed in connection with any of the transactions
contemplated by this Agreement. None of the Acquired Companies have incurred any legal fees, legal
costs or legal expenses of any nature that are payable to a third party in connection with this
Agreement and any of the transactions contemplated by this Agreement, other than fees and expenses
incurred in connection with updating the Acquired Companies’ corporate books and records.

     2.22 Full Disclosure. To the Knowledge of the Company or the Selling Shareholders, this
Agreement (including the Disclosure Schedule) does not: (i) contain any representation,
warranty or information that is false or misleading with respect to any material fact; or (ii) omit
to state any material fact necessary in order 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.

     2.23 eClone Systems, Inc. As of the date of this Agreement, eClone Systems, Inc. (“eClone”),
owns assets (the “eClone Assets”) having an aggregate value of less than Twenty Thousand
($20,000). When delivered, Schedule 2.23 shall contain a complete and accurate list of all eClone
Assets. As of the date of this Agreement, none of the Acquired Companies owes any Liabilities of
any nature, either matured or unmatured, to eClone.

	3.	 	Representations and Warranties of the Purchaser

     The Purchaser represents and warrants to the Company and the Selling Shareholders as follows:

25

 

     3.1 Due Organization. The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of California and has full power and authority to
conduct its business in the manner in which its business is currently being conducted and to own
and use its assets in the manner in which its assets are currently owned and used. The Purchaser
is qualified to do business as a foreign corporation, and is in good standing, in each
jurisdiction in which the nature of its business and of its properties makes such qualification
necessary, except where the failure to be so qualified would not have a material adverse effect on
the Purchaser’s business, condition, assets, liabilities, operations, financial performance or
prospects.

     3.2 Non-Contravention; Consents. Neither: (i) the execution, delivery or performance by the
Purchaser of this Agreement or any of the other agreements, documents or instruments referred to
in this Agreement; nor (ii) the consummation by the Purchaser of the transactions contemplated by
this Agreement or any of such other agreements, documents or instruments, will (with or without
notice or lapse of time) contravene, conflict with or result in a violation of, or require consent
under: (A) any of the provisions of the articles of incorporation or bylaws of the Purchaser; (B)
any resolution adopted by the shareholders or the board of directors of the Purchaser; or (C) any
provision of any contract to which the Purchaser is bound.

     3.3 Authority; Binding Nature of Agreement. The Purchaser has the absolute and unrestricted
right, power and authority to enter into and perform its obligations under this Agreement and
under each other agreement, document and instrument referred to in this Agreement to which the
Purchaser is a party; and the execution, delivery and performance by the Purchaser of this
Agreement any of each such other agreement, document and instrument have been duly authorized by
all necessary action on the part of the Purchaser and, if necessary, its board of directors. This
Agreement and each other agreement, document or instrument referred to in this Agreement to which
the Purchaser is a party constitutes the legal, valid and binding obligation of the Purchaser,
enforceable against 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.

     3.4 Financial Ability to Perform. The Purchaser has the financial ability to timely make the
payments required to be made by the Purchaser under this Agreement. The Purchaser has all funds
needed to make such payments, and such funds are held in escrow by Purchaser’s counsel. Purchaser
has provided to the Selling Shareholders primary documentation confirming the foregoing.

     3.5 Legal Ability to Perform. The Purchaser is qualified to obtain, and there is no legal
impediment to Purchaser obtaining, all consents, approvals and licenses from Governmental Bodies
which are required for Purchaser’s lawful consummation of the transactions contemplated by this
Agreement, including all consents, approvals and licenses granted or issued by the Federal
Communications Commission and pertinent state public utility commission(s) or bodies having
comparable authority.

	4.	 	Certain Covenants of the Company and the Selling Shareholders

26

 

     4.1 Access and Investigation. During the period from the date of this Agreement and
continuing until the Closing (the “Pre-Closing Period”), the Company shall, and shall
cause their respective Representatives and each of the Acquired Companies and their respective
Representatives to: (a) provide the Purchaser and the Purchaser’s Representatives with on-site
access to the Acquired Companies’ Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating to the Acquired
Companies; (b) provide the Purchaser and the Purchaser’s Representatives with copies of such
existing books, records, Tax Returns, work papers and other documents and information relating to
each of the Acquired Companies, and with such additional financial, operating and other data and
information regarding each of the Acquired Companies, as the Purchaser may request. During the
Pre-Closing Period, the Purchaser may make inquiries of Persons having business relationships with
any of the Acquired Companies (including suppliers, licensors, distributors and customers) and
each Acquired Company shall help facilitate (and shall cooperate fully with the Purchaser in
connection with) such inquiries.

     4.2 Operation of the Business of the Acquired Companies.

          (a) During the Pre-Closing Period, each of the Acquired Companies and the Selling
Shareholders shall, unless otherwise instructed by the Purchaser in writing pursuant to the terms
of the Management Services Agreement:

               (i) use their best efforts to conduct the business and operations of the Acquired Companies
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;

               (ii) use their best efforts to preserve intact the current business organization of the
Acquired Companies, keep available the services of the current officers and employees of the
Acquired Companies and maintain the relations and good will of the Acquired Companies with all
suppliers, customers, landlords, creditors, employees and other Persons having business
relationships with such Acquired Company;

               (iii) use their best efforts to cause the Company’s officers to report regularly to the
Purchaser concerning the status of the business of the Acquired Companies;

               (iv) use their best efforts to cause the Acquired Companies to continue the insurance
policies identified in Part 2.17 of the Disclosure Schedule;

               (v) not permit or cause the Acquired Companies to declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital stock or other
securities, or repurchase, redeem or otherwise reacquire any shares of capital stock or other
securities;

               (vi) not permit or cause the Acquired Companies to sell, issue or authorize the issuance of:
(A) any capital stock or other security; (B) any option or right to acquire any capital stock (or
cash based on the value of capital stock) or other security; or (C) any instrument convertible into
or exchangeable for any capital stock (or cash based on the value of capital stock) or other
security;

27

 

               (vii) not permit or cause any Transfer of any of the Shares;

               (viii) not permit or cause the Acquired Companies to amend such Acquired Company’s Charter
Documents, or become a party to any Acquisition Transaction, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;

               (ix) not permit or cause the Acquired Companies to form any subsidiary or acquire any equity
interest or other interest in any other Entity;

               (x) not permit or cause the Acquired Companies to make new commitments for capital
expenditures;

               (xi) not permit or cause the Acquired Companies to: (A) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract; or (B) amend or prematurely
terminate, or waive any right or remedy under, any Acquired Company Contract;

               (xii) not permit or cause the Acquired Companies to: (A) acquire, lease or license any right
or other asset from any other Person; (B) sell or otherwise dispose of, or lease or license, any
right or other asset to any other Person; or (C) waive or relinquish any right;

               (xiii) not permit or cause the Acquired Companies to: (A) lend money to any Person; or (B)
incur or guarantee any indebtedness for borrowed money;

               (xiv) none of the Acquired Companies shall: (A) establish, adopt, amend or terminate any
Plan; (B) pay any bonus or make any profit-sharing payment, cash incentive payment or similar
payment, other than commissions paid in the ordinary course of business and consistent with past
practices; (C) increase the amount of the wages, salary, commissions, fringe benefits or other
compensation (including equity-based compensation, whether payable in cash or otherwise) or
remuneration payable to any of its directors, officers or employees; or (D) hire or make an offer
to hire any new employee;

               (xv) not permit or cause the Acquired Companies to change any of its methods of accounting or
accounting practices;

               (xvi) not permit or cause the Acquired Companies to make any Tax election;

               (xvii) not permit or cause the Acquired Companies to commence or settle any Legal Proceeding;

               (xviii) not take or permit to be taken any action material to the business of any of the
Acquired Companies

               (xix) not permit or cause the Acquired Companies or the Selling Shareholders to agree or
commit to take any of the actions described in clauses “(iv)” through “(xvii)” above.

28

 

Notwithstanding the foregoing, an Acquired Company may take any action described in clauses “(i)”
through “(xix)” above if the Purchaser gives its prior written consent to the taking of such
action by the Acquired Company.

          (b) During the Pre-Closing Period, none of the Acquired Companies nor the Selling
Shareholders shall take, permit or cause any action which is intended, or would reasonably be
expected, to prevent Purchaser from exercising any of its rights under the Management Services
Agreement; provided, however, that if such breach is curable by the Acquired Companies or the
Selling Shareholders, as applicable, within three (3) business days after the date that Purchaser
notifies the Shareholders’ Agent in writing of the existence of such breach (the “Cure Period”),
then none of the Acquired Companies nor the Selling Shareholders shall be deemed to be in breach
of this Section 4.2(b), provided that such breach is cured before the expiration of the Cure
Period.

     4.3 No Negotiation. During the Pre-Closing Period, neither the Company nor the Selling
Shareholders shall, and neither the Company nor the Selling Shareholders shall authorize or permit
any of the Acquired Companies or any Representative of any of the Acquired Companies or the Selling
Shareholder to: (a) solicit or encourage the initiation or submission of any expression of
interest, inquiry, proposal or offer from any Person (other than the Purchaser) relating to a
possible Acquisition Transaction; (b) participate in any discussions or negotiations or enter into
any agreement, understanding or arrangement with, or provide any non-public information to, any
Person (other than the Purchaser or its Representatives) relating to or in connection with a
possible Acquisition Transaction; or (c) entertain or accept any proposal or offer from any Person
(other than the Purchaser) relating to a possible Acquisition Transaction. The Company shall
promptly (and in any event within 48 hours of receipt thereof) notify the Purchaser in writing of
any inquiry, indication of interest, proposal or offer relating to a possible Acquisition
Transaction that is received by any of the Acquired Companies or the Selling Shareholders during
the Pre-Closing Period (including the identity of the Person making or submitting such inquiry,
indication of interest, proposal or offer, and the terms thereof).

     4.4 Consents. The Company shall use its best efforts to obtain the Consents referred to on
Schedule 4.4, if any, prior to the Closing.

     4.5 Transaction Expenses. The M&T Commission and the Acquired Company Transaction Expenses
shall be paid by the Selling Shareholders and not the Company, and the Selling Shareholders hereby
covenant and agree to pay the M&T Commission and the Acquired Company Transaction Expenses within
three (3) business days of the date of this Agreement and hereby agree to defend, indemnify and
hold the Company and the Purchaser harmless from any claim or dispute involving the M&T Commission
or the Acquired Company Transaction Expenses, which indemnification obligation shall be in
addition to the indemnification provisions of Section 7.

     4.6 eClone Assets. Within three (3) business days after the date hereof, the Company shall
deliver to the Purchaser, Schedule 2.23, which shall contain a complete and accurate list of all
eClone Assets.

29

 

	5.	 	Certain Covenants of the Parties 

     5.1 Filings and Consents.

          (a) Each party shall use their best efforts to file, as soon as practicable after the date of
this Agreement, all notices, reports and other documents required to be filed by such party with
any Governmental Body with respect to the transactions contemplated by this Agreement, and to
submit promptly any additional information requested by any such Governmental Body. Without
limiting the generality of the foregoing, the Company and the Purchaser shall, promptly after the
date of this Agreement, prepare and file any notifications required under any applicable laws or
regulations in connection with the transactions contemplated by this Agreement which are required
to be filed by the Company and the Purchaser. The Company and the Purchaser shall respond as
promptly as practicable to any inquiries or requests received from the Federal Communications
Commission (the “FCC”), any state public utility commission(s) or body having comparable authority
(the “State PUC(s)”), or any other Governmental Body.

          (b) The Purchaser and the Company each shall promptly supply the other with any information
which may be required in order to effectuate any filings (including applications) pursuant to (and
to otherwise comply with its obligations set forth in) Section 5.1(a). Except where prohibited by
applicable Legal Requirements or any Governmental Body, and subject to the confidentiality
provisions of the Confidentiality Agreement, the Purchaser and the Company shall: (i) consult with
the other prior to taking a position with respect to any such filing; (ii) permit the other to
review and discuss in advance, and consider in good faith the views of the other in connection
with, any analyses, appearances, presentations, memoranda, briefs, white papers, arguments,
opinions and proposals before making or submitting any of the foregoing to any Governmental Body
by or on behalf of any party hereto in connection with any Legal Proceeding related solely to this
Agreement or the transactions contemplated hereby; (iii) coordinate with the other in preparing
and exchanging such information; and (iv) promptly provide the other (and its counsel) with copies
of all filings, notices, analyses, presentations, memoranda, briefs, white papers, opinions,
proposals and other submissions (and a summary of any oral presentations) made or submitted by
such party with or to any Governmental Body related solely to this Agreement or the transactions
contemplated hereby.

          (c) Each of the Purchaser and the Company shall notify the other promptly upon the receipt of:
(i) any communication from any official of any Governmental Body in connection with any filing made
pursuant to this Agreement; (ii) knowledge of the commencement or threat of commencement of any
Legal Proceeding by or before any Governmental Body with respect to any of the transactions
contemplated by this Agreement (and shall keep the other party informed as to the status of any
such Legal Proceeding or threat); and (iii) any request by any official of any Governmental Body
for any amendment or supplement to any filing made pursuant to this Agreement or any information
required to comply with any Legal Requirements applicable to any of the transactions contemplated
by this Agreement. Whenever any event occurs that is required to be set forth in an amendment or
supplement to any filing made pursuant to Section 5.1(a), the Purchaser or the Company, as the case
may be, shall (promptly upon learning of the occurrence of such event) inform the other of

30

 

the occurrence of such event and cooperate in filing with the applicable Governmental Body
such amendment or supplement.

          (d) Subject to Section 5.1(e), the Purchaser and the Company shall use their best efforts to
take, or cause to be taken, all actions necessary to make effective the transactions contemplated
by this Agreement. Without limiting the generality of the foregoing, but subject to Section
5.1(e), each party to this Agreement: (i) 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 transactions contemplated
by this Agreement; (ii) shall use their best efforts to obtain each Consent (if any) required to
be obtained (pursuant to any applicable Legal Requirement or Contract, or otherwise) by such party
in connection with any of the transactions contemplated by this Agreement; and (iii) shall use
their best efforts to lift any restraint, injunction or other legal bar to any of the transactions
contemplated by this Agreement.

          (e) Notwithstanding anything to the contrary contained in this Agreement, the Purchaser shall
not have any obligation under this Agreement: (i) to divest or agree to divest (or cause any of
its Subsidiaries or any of the Acquired Companies to divest or agree to divest) any of its
respective businesses, product lines or assets, or to take or agree to take (or cause any of its
Subsidiaries or any of the Acquired Companies to take or agree to take) any other action or agree
(or cause any of its Subsidiaries or any of the Acquired Companies to agree) to any limitation or
restriction on any of its respective businesses, product lines or assets; or (ii) to contest any
Legal Proceeding relating to any of the transactions contemplated by this Agreement.

     5.2 Public Announcements. During the Pre-Closing Period, except as expressly contemplated by
this Agreement or as required by law, none of the Purchaser, any of the Acquired Companies or any
of the Selling Shareholders will issue any press release or make any public announcement regarding
this Agreement or any of the transactions contemplated by this Agreement without the mutual
consent of the parties hereto.

     5.3 Best Efforts. Prior to the Closing, the Purchaser, the Company and the Selling
Shareholders shall use their best efforts to cause the conditions set forth in Sections 6 to be
satisfied on a timely basis.

     5.4 Employment Matters. During the Pre-Closing Period, Purchaser shall extend offers of
employment with the Company to the Persons identified on Schedule 5.4 pursuant to employment
agreements in a form to be provided by the Purchaser to the applicable individuals, which a copy to
the Company, for employment with Purchaser commencing as of the Closing.

     5.5 M&T Line of Credit. After the date hereof, the Purchaser shall not cause or permit the
Company to incur debt under the Company’s line of credit with M&T Bank.

	6.	 	Conditions to closing

     6.1 Closing Conditions. The Closing shall occur in accordance with Section 1.5(c) upon the
satisfaction or Purchaser’s waiver of the following conditions (the “Closing Conditions”):

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          (a) Governmental Authorizations. All material Governmental Authorizations necessary to
consummate the transactions contemplated by this Agreement shall have been obtained and shall be
in full force and effect;

          (b) Consents. All Consents identified in Schedule 4.4, if any, shall have been obtained and
shall be in full force and effect.

          (c) No Restraints. No temporary restraining order, preliminary or permanent injunction or
other order preventing the Purchaser’s acquisition of the Shares 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 Purchaser’s acquisition of the Shares (other than
the requirement of obtaining all material Governmental Authorizations as contemplated by this
Agreement) that makes Purchaser’s acquisition of the Shares illegal.

     6.2 Assignment of Right to Purchase Shares. If the Closing Conditions shall not have been
satisfied or waived by Purchaser on or before that date (the “Assignment Date”) which is the first
to occur of: (a) 5:00 p.m. (Pacific time) on the 180th calendar day after the date of
this Agreement; or (b) the date that Purchaser receives written notice of a final order issued by a
Governmental Body denying any material Governmental Authorization such that any of the Closing
Conditions would not be satisfied, Purchaser shall have the right to assign Purchaser’s rights
under this Agreement to another party (a “Qualified Assignee”), whether or not the Qualified
Assignee is affiliated with Purchaser, for such consideration payable to the Purchaser as the
Purchaser and the Qualified Assignee deem appropriate. Purchaser shall give the Company and the
Selling Shareholders written notice of such assignment together with copies of all assignment
documents. The Qualified Assignee shall be deemed the “Purchaser” for all purposes under this
Agreement and upon the satisfaction, or waiver, of the Closing Conditions with respect to the
Qualified Assignee, the Closing shall occur in accordance with Section 1.5(c). At such Closing, the
certificates evidencing the Shares, and the other documents held in escrow by Purchaser pursuant to
Section 1.5(a) and Section 1.5(b) of this Agreement, shall be released to the Qualified Assignee.

	7.	 	Indemnification, Etc.

     7.1 Survival of Representations, Etc.

          (a) Subject to Section 7.1(c), the representations and warranties made by the parties in this
Agreement shall survive the Closing and shall expire on the first anniversary following the date
of this Agreement (the “Representation Survival Date”); provided however, that if, at any
time prior to the Representation Survival Date, any party to this Agreement acting in good faith
delivers to the other parties and, if applicable, the Escrow Agent, a Claim Notice alleging with
particularity the existence of an inaccuracy in or a breach of any of the representations and
warranties made by any party and asserting a claim for indemnification based on such alleged
inaccuracy or breach, then the claim asserted in such Claim Notice shall survive the
Representation Survival Date until such time as such claim is fully and finally resolved.

32

 

          (b) The representations, warranties, covenants and obligations of the parties to this
Agreement, and the rights and remedies of the parties, not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or knowledge of, any
party or any of their Representatives which is obtained after the date of this Agreement.

          (c) Nothing contained in this Agreement shall limit any rights or remedy of any Person for
claims based on fraud.

     7.2 Indemnification by Selling Shareholders. From and after the Closing (but
subject to Section 7.1 and Section 7.4), the Selling Shareholders, jointly and severally,
shall hold
harmless and indemnify the Purchaser for any Damages which are suffered or incurred by the
Purchaser (regardless of whether or not such Damages relate to any third-party claim) and
which
arise from or as a result of, or are connected with:

          (a) any inaccuracy in or breach of any representation or warranty made by the Company or a
Selling Shareholder in this Agreement as of the date of this Agreement;

          (b) any breach of any covenant or obligation of the Company or a Selling Shareholder
contained in this Agreement, except for any breach that may result from any action taken by
Purchaser under the Management Services Agreement.

The Selling Shareholders agree that, if after the Closing, the Company 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, then Purchaser shall also be
deemed, by virtue of its ownership of the stock of the Company, to have incurred Damages as a
result of and in connection with such inaccuracy or breach.

     7.3 Indemnification by Purchaser. Subject to Section 7.1, the Purchaser shall hold
harmless and indemnify the Selling Shareholders and the Acquired Companies from and against
any Damages which are suffered or incurred by them (regardless of whether or not such
Damages relate to any third-party claim) and which arise from or as a result of, or are
connected
with:

          (a) any inaccuracy in or breach of any representation or warranty made by the Purchaser in
this Agreement as of the date of this Agreement;

          (b) any inaccuracy in or breach of any representation or warranty made by the Purchaser in
this Agreement as if such representation or warranty was made on and as of the Closing; or

          (c) any breach of any covenant or obligation of the Purchaser contained in this Agreement.

     7.4 Limitations; Exclusivity.

          (a) Subject to Section 7.4(b), the Selling Shareholders shall not be required to provide
indemnification for any Damages suffered by Purchaser except to the extent that the

33

 

total amount of all Damages suffered by Purchaser exceeds Fifty Thousand Dollars ($50,000)
in the aggregate.

(b) The limitations set forth in Section 7.4(a) shall not apply: (i) in the case of fraud;
(ii) to any breach of any of the Specified Representations or (ii) to any breach of any of the
Specified Covenants.

(c) Subject to Section 7.4(d), recourse by the Purchaser to the funds held in escrow
pursuant to the Escrow Agreement shall be the Purchaser’s sole and exclusive remedy for monetary
Damages resulting from the matters referred to in Section 7.2.

(d) The limitations set forth in Section 7.4(c) shall not apply: (i) in the case of fraud;
(ii) to any breach of any of the Specified Representations or (ii) to any breach of any of the
Specified Covenants.

(e)

     7.5 No Contribution. Each Selling Shareholder waives, and acknowledges and agrees that
such Selling Shareholder 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 any of
the Acquired Companies in connection with any indemnification obligation under this Agreement.

     7.6 Defense of Third Party Claims. In the event of the assertion or commencement by any
Person of any claim or Legal Proceeding (whether against any of the Acquired Companies, the
Purchaser or any other Person) with respect to which any Selling Shareholder may become obligated
to hold harmless, indemnify, compensate or reimburse the Purchaser pursuant to Section 7, the
Shareholders’ Agent shall have the right to conduct a defense of the claim or Legal Proceeding
with counsel selected by the Shareholders’ Agent reasonably satisfactory to the Purchaser unless
and until the amount claimed exceeds the amount remaining in escrow pursuant to the Escrow
Agreement. If at any time, the amount of the claim or Legal Proceeding exceeds the amount
remaining in escrow pursuant to the Escrow Agreement, the Purchaser shall have the right, at its
election, to proceed with the defense of such claim or Legal Proceeding on its own with counsel
reasonably satisfactory to the Shareholders’ Agent. In each case:

          (a) each party shall make available to the party conducting the defense any documents and
materials in his or its possession or control that may be necessary to the defense of such claim
or Legal Proceeding; and

          (b) the party conducting the defense shall have the right to settle, adjust or compromise
such claim or Legal Proceeding; provided, however, that (i) if the Purchaser settles, adjusts or
compromises any such claim or Legal Proceeding without the consent of the Shareholders’ Agent,
such settlement, adjustment or compromise shall not be conclusive evidence of the amount of
Damages incurred by the Purchaser in connection with such claim or Legal Proceeding (it being
understood that if the Purchaser requests that the Shareholders’ Agent consent to a settlement,
adjustment or compromise, the Shareholders’ Agent shall not unreasonably withhold or delay such
consent), and (ii) without the consent of the Purchaser, the

          

34

 

Shareholders’ Agent shall have no authority to enter into any settlement, adjustment or
compromise which imposes any monetary or non-monetary obligation on the Purchaser or the Acquired
Companies, it being understood that the Shareholders’ Agent’ settlement authority shall be limited
to the funds remaining in escrow pursuant to the Escrow Agreement.

          (c) The Purchaser shall give the Shareholders’ Agent prompt notice of the commencement of any
such Legal Proceeding against the Purchaser or any of the Acquired Companies; provided, however,
that any failure on the part of the Purchaser to so notify the Shareholders’ Agent shall not limit
any of the obligations of the Selling Shareholders under Section 7 (except to the extent such
failure materially prejudices the defense of such Legal Proceeding).

          (d) If the Shareholders’ Agent has the right, but does not elect, to proceed with the defense
of any claim or Legal Proceeding, the Purchaser may proceed with the defense of such claim or
Legal Proceeding; provided, however, if the Purchaser settles, adjusts or compromises any such
claim or Legal Proceeding without the consent of the Shareholders’ Agent, such settlement,
adjustment or compromise shall not be conclusive evidence of the amount of Damages incurred by the
Purchaser in connection with such claim or Legal Proceeding (it being understood that if the
Purchaser requests that the Shareholders’ Agent consent to a settlement, adjustment or compromise,
the Shareholders’ Agent shall not unreasonably withhold or delay such consent).

          (e) If the Purchaser has the right, but does not elect, to proceed with the defense of any
such claim or Legal Proceeding, the Shareholders’ Agent may proceed with the defense of such claim
or Legal Proceeding with counsel reasonably satisfactory to the Purchaser; provided, however, that
the Shareholders’ Agent may not settle, adjust or compromise any such claim or Legal Proceeding
without the prior written consent of the Purchaser (which consent may not be unreasonably withheld
or delayed).

     7.7 Procedure for Indemnification Claims Made by Purchaser. Subject to the provisions of
Sections 7.4 of this Agreement, the following procedures shall apply to indemnification claims
made by Purchaser:

          (a) If the Purchaser claims in good faith to have incurred or suffered Damages for which it
is entitled to indemnification under this Agreement, the Purchaser may deliver a claim notice (a
“Claim Notice”) to the Shareholders’ Agent. Each Claim Notice shall: (i) state that the
Purchaser believes in good faith that the Purchaser is entitled to indemnification under this
Agreement; (ii) contain a detailed statement of the facts and circumstances supporting the
Purchaser’s claim; and (iii) contain a non-binding, preliminary, good faith estimate of the
amount to which the Purchaser claims to be entitled (the “Claimed Amount”).

          (b) Within 20 days after receipt of a Claim Notice, the Shareholders’ Agent may deliver to
Purchaser a written response (the “Response Notice”) in which the Shareholders’ Agent: (i) agrees
that the full Claimed Amount is owed to the Purchaser; (ii) agrees that part, but not all, of the
Claimed Amount is owed to the Purchaser; or (iii) indicates that no part of the Claimed Amount is
owed to the Purchaser. If the Response Notice is delivered in accordance with clause “(ii)” or
“(iii)” of the preceding sentence, the Response Notice shall also contain a

           

35

 

detailed description of the facts and circumstances supporting the Shareholders’ Agent’s
claim that only a portion or no part of the Claimed Amount is owed to the Purchaser, as the case
may be. Any part of the Claimed Amount that is not agreed to be owing to the Purchaser pursuant to
the Claim Notice shall be the “Contested Amount.” If a Response Notice is not delivered by the
Shareholders’ Agent to the Purchaser within such 20 day period, then the Shareholders’ Agent shall
be deemed to have agreed that an amount equal to the full Claimed Amount is owed to the Purchaser.

          (c) If the Shareholders’ Agent in its Response Notice agrees or is deemed to have agreed that
the full Claimed Amount is owed to the Purchaser, the Shareholders’ Agent shall, within 10
business days following such 20 day period, authorized the Escrow Agent to pay the Claimed Amount
to the Purchaser.

          (d) If the Shareholders’ Agent in its Response Notice agrees that part, but not all, of the
Claimed Amount is owed to the Purchaser (the “Agreed Amount”), the Shareholders’ Agent shall,
within 10 business days following such 20 day period, authorize the Escrow Agent to pay the Agreed
Amount to the Purchaser.

          (e) If any Response Notice indicates that there is a Contested Amount, the Shareholders’
Agent and the Purchaser shall attempt in good faith to resolve the dispute related to the
Contested Amount. If the Shareholders’ Agent and the Purchaser shall resolve such dispute, the
Shareholders’ Agent and the Purchaser shall sign a settlement agreement jointly authorizing the
Escrow Agent to pay the agreed upon amount to the Purchaser.

          (f) In the event that there is a dispute relating to any Claim Notice or Contested Amount
(whether it is a matter between the Purchaser, on the one hand, and the Shareholders’ Agent, on
the other hand, or it is a matter that is subject to a claim or Legal Proceeding asserted or
commenced by a third party brought against the Purchaser or any of the Acquired Companies in a
litigation or arbitration), such dispute (“Arbitrable Disputes”) shall be settled by binding
arbitration. Notwithstanding the preceding sentence, nothing in this Section shall prevent the
Purchaser from seeking preliminary injunctive relief from a court of competent jurisdiction
pending settlement of any Arbitrable Dispute.

          (g) Except as herein specifically stated, any Arbitrable Dispute shall be resolved by
arbitration in accordance with JAMS’ Comprehensive Arbitration Rules and Procedures (the “JAMS
Rules”) then in effect. However, in all events, the provisions contained herein shall govern over
any conflicting rules which may now or hereafter be contained in the JAMS Rules. Any judgment upon
the award rendered by the arbitrator shall be entered in any court having jurisdiction over the
subject matter thereof. The arbitrator shall have the authority to grant any equitable and legal
remedies that would be available if any judicial proceeding was instituted to resolve an Arbitrable
Dispute. The final decision of the arbitrator, as entered by a court of competent jurisdiction,
will be furnished by the arbitrator to the Shareholders’ Agent and the Purchaser in writing and
will constitute a final, conclusive and non-appealable determination of the issue in question,
binding upon the Shareholders’ Agent, the Selling Shareholders and the Purchaser, and an order with
respect thereto may be entered in any court of competent jurisdiction.

36

 

          (h) Any such arbitration will be conducted before a single arbitrator who will be
compensated for his or her services at a rate to be determined by the Purchaser and the
Shareholders’ Agent or by JAMS, but based upon reasonable hourly or daily consulting rates for the
arbitrator in the event the parties are not able to agree upon his or her rate of compensation.

          (i) The arbitrator shall be mutually agreed upon by the Purchaser and the Shareholders’
Agent. In the event the Purchaser and the Shareholders’ Agent are unable to agree within 20 days
following submission of the dispute to JAMS by one of the parties, JAMS will have the authority to
select an arbitrator from a list of arbitrators who satisfy the criteria set forth in clause
“(iv)” hereof.

          (j) No arbitrator shall have any past or present family, business or other relationship with
the Purchaser, any of the Acquired Companies, any of the Selling Shareholders or any “affiliate”
(as such term is defined in Rule 12b-2 of the Securities Act of 1933, as amended), director or
officer thereof, unless following full disclosure of all such relationships, the Purchaser and the
Shareholders’ Agent agree in writing to waive such requirement with respect to an individual in
connection with any dispute.

          (k) The arbitrator shall be instructed to hold an up to one eight hour, one day hearing
regarding each disputed matter within 60 days of his designation and to render an award (without
written opinion) no later than 10 days after the conclusion of such hearing, in each case unless
otherwise mutually agreed in writing by the Purchaser and the Shareholders’ Agent.

          (I) No discovery other than an exchange of relevant documents may occur in any arbitration
commenced under the provisions of this Section. The Purchaser and the Shareholders’ Agent agree to
act in good faith to promptly exchange relevant documents.

          (m) The Purchaser and the Shareholders’ Agent will each pay 50% of the initial compensation to
be paid to the arbitrator in any such arbitration and 50% of the costs of transcripts and other
normal and regular expenses of the arbitration proceedings; provided, however, that: (A) the
prevailing party in any arbitration will be entitled to an award of attorneys’ fees and costs; and
(B) all costs of arbitration, other than those provided for above, will be paid by the losing
party, and the arbitrator will be authorized to determine the identity of the prevailing party and
the losing party.

          (n) The arbitrator chosen in accordance with these provisions will not have the power to
alter, amend or otherwise affect the terms of these arbitration provisions or any other provisions
contained in this Section or the Agreement.

          (o) Except as specifically otherwise provided in this Section or the Agreement, arbitration
will be the sole and exclusive remedy of the parties for any Arbitrable Dispute or any other
dispute arising out of or relating to the Agreement.

          (p) Upon resolution of the arbitration, the Shareholders’ Agent shall, within 10 business
days following the entry of the arbitrator’s decision by a court of competent jurisdiction, or
such shorter period of time as may be set forth in the arbitrator’s decision, cause

37

 

the Escrow Agent to pay the amount of the award specified in the arbitrator’s decision, if any,
to the Purchaser.

          (q) Any funds in the escrow account not paid to Purchaser pursuant to these procedures shall
be released to the Selling Shareholders at the conclusion of the escrow period, which shall be
one year after the date of this Agreement, provided that if any claims for indemnification are
made within one year after the date of this Agreement, the amount reserved for such claims but
ultimately not needed to pay such escrow claims, shall be released to the Selling Shareholders.

	8.	 	Miscellaneous Provisions

     8.1 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.

     8.2 Fees and Expenses. Subject to Section 7, each party to this Agreement shall bear and pay
all fees, costs and expenses that have been incurred or that are incurred in the future by such
party in connection with the transactions contemplated by this Agreement, including all fees, costs
and expenses incurred by such party in connection with or by virtue of: (a) the negotiation,
preparation and review of this Agreement (including the 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; (b)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 (c) the consummation of the transactions contemplated
by this Agreement; provided, however, that the Selling Shareholders shall bear and pay all Acquired
Company Transaction Expenses and the M&T Commission in accordance with Section 4.5.

     8.3 Attorneys’ Fees. If any 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).

     8.4 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: (a) when delivered by hand; (b) on the day sent by facsimile provided that the sender
has received confirmation of transmission as of or prior to 5:00 p.m. Eastern time on such day;
(c) the first business day after sent by facsimile (to the extent that the sender has received
confirmation of transmission after 5:00 p.m. Eastern time on the day sent by facsimile); or (d)
the third business day after sent by registered mail or by courier or express delivery service, in
any case 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):

38

 

     If to Purchaser:

Starvox Communications, Inc.

2728 Orchard Parkway

San Jose, CA 95134-2012 USA

Attention: Douglas S. Zorn

Facsimile: (650) 331-0541

with a copy to:

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306-2155

Attn: Mark Tanoury

Fax: (650) 849-7400

     If
to the Company, the Selling Shareholders or the Shareholders Agent before the Closing:

Capital Telecommunications, Inc.

200 West Market Street

York, PA 17401

Attention: George V. Kingsbury

Fax:717-848-8806

with a copy to:

Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC

233 East Redwood Street

Baltimore, Maryland 21202

Attn: Elliott Cowan, Esq.

Facsimile: (410) 576-4032

     If to the Company after the Closing:

Capital Telecommunications, Inc.

200 West Market Street

York, PA 17401

Attention: Ken Wong

Fax:717-848-8806

with a copy to:

Cooley Godward LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA
94306-155

39

 

Attn: Mark Tanoury

Fax: (650) 849-7400

     If to the Shareholders Agent or the Selling Shareholders after the Closing:

George V. Kingsbury

855 Glenwood Drive

York, PA 17403

Fax — none — fax notice not accepted

with a copy to:

Gordon, Feinblatt, Rothman, Hoffberger & Hollander, LLC

233 East Redwood Street

Baltimore, Maryland 21202

Attn: Elliott Cowan, Esq.

Facsimile: (410) 576-4032

     8.5 Headings. The bold-faced 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.

     8.6 Counterparts and Exchanges by Electronic Transmission or Facsimile. This Agreement may be
executed in several counterparts, each of which shall constitute an original and all of which,
when taken together, shall constitute one agreement. The exchange of a fully executed Agreement
(in counterparts or otherwise) by electronic transmission or facsimile shall be sufficient to bind
the parties to the terms and conditions of this Agreement.

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

     8.8 Successors and Assigns. This Agreement shall inure to the benefit of and shall be binding
upon the parties hereto and their respective successors, permitted assigns, heirs, executors and
personal representatives. This Agreement may be assigned by Purchaser in accordance with the
provisions of Section 6.2 of this Agreement. This Agreement may not be assigned by any of the
Selling Shareholders without the prior written consent of Purchaser.

     8.9 Remedies Cumulative. The rights and remedies of the parties hereto shall be cumulative
(and not alternative).

     8.10 Waiver. 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, 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.
No Person shall be deemed to have waived any claim arising out of

40

 

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.

     8.11 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all
right to trial by jury in any Legal Proceeding arising out of or related to this Agreement or the
transactions contemplated hereby.

     8.12 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 parties hereto.

     8.13 Severability. In the event that any provision of this Agreement, or the application of
any such provision to any Person or set of circumstances, shall be determined to be invalid,
unlawful, void or unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent permitted by law.

     8.14 Parties in Interest. Except for the provisions of Section 7, 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 permitted assigns (if any).

     8.15 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 Confidentiality Agreement
shall not be superseded by this Agreement and shall remain in effect in accordance with its terms
until the earlier of: (a) the Closing; or (b) the date on which such Confidentiality Agreement is
terminated in accordance with its terms.

     8.16 Disclosure Schedule. The Disclosure Schedule shall be arranged in separate parts
corresponding to the numbered and lettered sections contained herein permitting such disclosure,
and the information disclosed in any numbered or lettered part shall be deemed to relate to and to
qualify only the particular representation or warranty set forth in the corresponding numbered or
lettered section herein permitting such disclosure; provided, however, that any information
disclosed under any numbered or lettered part of the Disclosure Schedule shall be deemed to be
disclosed and incorporated in any other numbered or lettered part of the Disclosure Schedule where
it is reasonably apparent on the face of such disclosure that such disclosure would be
appropriate.

     8.17 Shareholder’s Agent.

          (a) The Selling Shareholders irrevocably appoint George V. Kingsbury (the “Shareholders’
Agent”) as their agent and attorney in fact for purposes of acting on behalf of the Selling
Shareholders as contemplated by this Agreement, and the Shareholders’ Agent hereby accepts such
appointment. Purchaser shall be entitled to deal exclusively with the Shareholders’

41

 

Agent on all matters relating to this Agreement, 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 Selling Shareholder by the Shareholders’ Agent, and on any other action
taken or purported to be taken on behalf of any Selling Shareholder by the Shareholders’ Agent, as
fully binding upon such Selling Shareholder.

          (b) The Selling Shareholders grant to the Shareholders’ Agent full authority to execute,
deliver, acknowledge, certify and file on behalf of the Selling Shareholders (in the name of any
or all of the Selling Shareholders or otherwise) any and all documents and take any actions that
the Shareholders’ Agent may, in his sole discretion, determine to be necessary, desirable or
appropriate, and, in the case of any document, in such forms and containing such provisions as the
Shareholders’ Agent may, in his sole discretion, determine to be appropriate, in performing his
duties under this Agreement.

          (c) The Selling Shareholders recognize and intend that the power of attorney granted in this
Section: (i) is coupled with an interest and is irrevocable; (ii) may be delegated by the
Shareholders’ Agent; and (iii) shall survive the death or incapacity of each of the Selling
Shareholders.

          (d) If the Shareholders’ Agent shall die, resign, become disabled or otherwise be unable to
fulfill his responsibilities hereunder, Barry Silverberg shall be the successor Shareholders’
Agent. If Barry Silberberg shall die, resign, become disabled or otherwise be unable to fulfill
his responsibilities hereunder, the Selling Shareholders (or their successors in interest) shall,
by consent of the Selling Shareholders (or their successors in interest) that held at least a
majority of the Shares on the date of this Agreement, within ten days after such death or
disability, appoint a successor to the Shareholders’ Agent and immediately thereafter notify
Purchaser of the identity of such successor. The Selling Shareholders (or their successors in
interest) may, by consent of the Selling Shareholders (or their successors in interest) that held
at least a majority of the Shares on the date of this Agreement, replace the Shareholders’ Agent
for any reason and appoint a replacement (who shall be reasonably satisfactory to Purchaser) and
immediately thereafter notify Purchaser of the identity of such successor. Any such successor
shall succeed the Shareholders’ Agent as Shareholders’ Agent hereunder.

     8.18 Construction.

          (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) 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.”

42

 

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

Signatures on Following Page

43

 

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

	 	 	 	 	 	 	 
	 	 	Starvox Communications, Inc.,	 	 
	 	 	a California corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Douglas S. Zorn	 	 
	 

	 	Name:
	 	 

Douglas S. Zorn
	 	 
	 

	 	Title:
	 	 President	 	 
	 
	 	 	 	 	 	 
	 	 	Capital Telecommunications, Inc.,	 	 
	 	 	a Pennsylvania corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ George V. Kingsbury	 	 
	 

	 	Name:
	 	 

George V. Kingsbury
	 	 
	 

	 	Title:
	 	 President	 	 
	 
	 	 	 	 	 	 
	 	 	Selling Shareholders:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ George V. Kingsbury	 	 
	 	 	 	 	 
	 	 	George V. Kingsbury	 	 
	 
	 	 	 	 	 	 
	 	 	Barry J. Silverberg Living
Trust dated

9/22/1995	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Barry J. Silverberg, Trustee	 	 
	 

	 	 	 	 

Barry J. Silverberg, Trustee
	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Charles H. Wallace	 	 
	 	 	 	 	   
	 	 	Charles H. Wallace	 	 

44

 

Exhibit A

CERTAIN DEFINITIONS

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

     Acquired Companies. “Acquired Companies” shall mean the Company and each of the
Subsidiaries.

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

     Acquired Company Employee. “Acquired Company Employee” shall mean any Person who is
an employee, director or consultant of or to any of the Acquired Companies or becomes an employee,
director or consultant of or to any of the Acquired Companies during the Pre-Closing Period.

     Acquired Company IP. “Acquired Company IP” shall mean all: (a) Intellectual Property
Rights used to provide, or necessary to provide, any Acquired Company Service; and (b)
Intellectual Property Rights in which any of the Acquired Companies has (or purports to have) an
ownership interest or an exclusive license or similar exclusive right.

     Acquired Company IP Contract. “Acquired Company IP Contract” shall mean any material
Contract to which any of the Acquired Companies is a party or by which any of the Acquired
Companies is bound, that contains any assignment or license of, or any covenant not to assert or
enforce, any Intellectual Property Right.

     Acquired Company Privacy Policy. “Acquired Company Privacy Policy” shall mean each
external or internal, present privacy policy of any of the Acquired Companies, including any
policy relating to (i) the privacy of users of the Acquired Company Services or of any Acquired
Company Website, and (ii) the collection, storage, disclosure, and transfer of any User Data or
Personal Data.

     Acquired Company Service. “Acquired Company Service” shall mean each service
developed (or currently being developed), marketed, offered or provided by any of the Acquired
Companies.

     Acquired Company Transaction Expenses. “Acquired Company Transaction Expenses” shall
mean any fees, costs or expenses payable to the Company’s outside legal counsel incurred since
June 1, 2006, or to any financial advisor, or other Person who performed services (other than
accounting services) for or on behalf of the Acquired Companies, or who is otherwise entitled to
any compensation from the Acquired Companies, in connection with the Agreement or any of the
transactions contemplated by the Agreement.

 

 

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

          (a) the sale, license or disposition of all or substantially all of any of the Acquired
Companies’ business or assets;

          (b) the issuance, disposition or acquisition of: (i) any capital stock or other equity
security of any of the Acquired Companies; (ii) any option, call, warrant or right (whether or not
immediately exercisable) to acquire any capital stock, unit or other equity security of any of the
Acquired Companies; or (iii) any security, instrument or obligation that is or may become
convertible into or exchangeable for any capital stock, unit or other equity security of any of
the Acquired Companies; or

          (c) any merger, consolidation, business combination, reorganization or similar transaction
involving any of the Acquired Companies.

     Agreement. “Agreement” shall mean the Stock Purchase Agreement to which this Exhibit A
is attached (including the Disclosure Schedule), as it may be amended from time to time.

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

     Company Web Site. “Company Web Site” shall mean any public or private website owned,
maintained, or operated at any time by or on behalf of any of the Acquired Companies.

     Confidentiality Agreement. “Confidentiality Agreement” shall mean that certain Mutual
Confidentiality and Nondisclosure Agreement dated October 10, 2005 between the Purchaser and the
Company.

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

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

     Damages. “Damages” shall include any loss, damage, injury, , Liability, claim, demand,
settlement, adverse judgment, adverse award, fine, penalty, Tax, fee (including reasonable
attorneys’ fees), charge, cost (including costs of investigation) or expense of any nature. The
amount of any Damages shall be calculated after taking into account any quantifiable tax savings
or third party insurance recovery with respect to the occurrence which caused the Damage.

     Disclosure Schedule. “Disclosure Schedule” shall mean the schedule (dated as of the
date of the Agreement) delivered to the Purchaser on behalf of the Company and each Selling
Shareholder and prepared in accordance with the Agreement.

2

 

     Encumbrance. “Encumbrance” shall mean any lien, pledge, hypothecation, charge,
mortgage, security interest, encumbrance, claim or restriction of any nature.

     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.

     Environmental Law. “Environmental Law” shall mean any federal, state, local or foreign
Legal Requirement relating to pollution or protection of human health or the environment (including
ambient air, surface water, ground water, land surface or subsurface strata), including any law or
regulation relating to emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of Environmental Concern.

     ERISA Affiliate. “ERISA Affiliate” shall mean each Subsidiary of the Company and any
other Person that is or has been under common control with the Company or any of its Subsidiaries
within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations issued
thereunder.

     Escrow Agent. “Escrow Agent” shall mean Zions First National Bank.

     Escrow Agreement “Escrow Agreement” shall mean that certain Escrow Agreement dated
the date of this Agreement by and among the Purchaser, the Selling Shareholders and the Escrow
Agent substantially in the form of Exhibit C hereto.

     GAAP. “GAAP” shall mean U.S. generally accepted accounting principles.

     Governmental Authorization. “Governmental Authorization” shall mean any: (a) permit,
license, certificate, franchise, permission, clearance, registration, qualification, authorization
or order 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).

     Intellectual Property. “Intellectual Property” shall mean all proprietary algorithms,
apparatus, databases, data collections, diagrams, formulae, inventions (whether or not
patentable), know-how, logos, marks (including brand names, product names, logos, and slogans),
methods and processes (including manufacturing methods, sales methodologies and

3

 

processes, training methods and similar methods and processes), information, protocols, recipes,
schematics, specifications, software, 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 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 and moral rights; (b) trademark and trade name rights and similar rights; (c) trade
secret rights; (d) patent and industrial property rights; (e) other proprietary rights in
Intellectual Property; and (f) rights in or relating to registrations, renewals, extensions,
combinations, divisions, and reissues of, and applications for, any of the rights referred to in
clauses “(a)” through “(e)” above.

     Knowledge. An individual shall be deemed to have “Knowledge” of a particular fact or
other matter if such individual is actually aware of such fact or other matter. The Company shall
be deemed to have “Knowledge” of a particular fact or other matter if any stockholder of any of
the Acquired Companies has Knowledge of such fact or other matter.

     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.

     Liability. “Liability” shall mean any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent,
indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability),
regardless of whether such debt, obligation, duty or liability would be required to be disclosed
on a balance sheet prepared in accordance with GAAP and regardless of whether such debt,
obligation, duty or liability is immediately due and payable.

     Material. When used to describe a detrimental event, occurrence, condition or state of facts,
the word “material” shall mean sufficiently detrimental to cause a Material Adverse Effect. When
used in other contexts, the word “Material” shall mean “substantial” and “important” and not merely
more than de-minimus.

     Material Adverse Effect. A violation or other matter will be deemed to have a “Material
Adverse Effect” on a party to this Agreement if such violation or other matter would,

4

 

or would reasonably be expected to, have a material adverse effect on such party’s business,
condition, assets, liabilities, operations, financial performance or prospects; provided, however,
that for purposes of determining whether there shall have been any such Material Adverse Affect,
(i) any adverse change resulting from or relating to general business or economic conditions shall
be disregarded, (ii) any adverse change resulting from or relating to conditions generally
affecting the industry in which such party competes shall be disregarded, (iii) any adverse change
resulting from or relating to the announcement or pendency of the transactions contemplated by
this Agreement shall be disregarded, and (iv) any adverse change resulting from any action taken
by Purchaser shall be disregarded.

     Materials of Environmental Concern. “Materials of Environmental Concern” shall mean
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and petroleum products
and any other substance that is now or hereafter regulated by any Environmental Law or that is
otherwise a danger to health, reproduction or the environment.

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

     Personal Data. “Personal Data” shall mean a natural person’s name, street address,
telephone number, e-mail address, photograph, social security number, driver’s license number,
passport number, or customer or account number, or any other piece of information that allows the
identification of a natural person.

     Predecessor. “Predecessor” shall mean any Entity that has been merged with or into,
that has transferred material assets or liabilities outside the ordinary course of business to or
that is otherwise a predecessor to, any of the Acquired Companies.

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

     Related Party. “Related Party” shall mean: (a) each of the Selling Shareholders; (b)
each individual who is, or who has at any time since inception been, an officer or director of any
of the Acquired Companies; (c) each member of the immediate family of each of the individuals
referred to in clauses “(a)” and “(b)” above; and (c) any trust or other Entity (other than the
Company) in which any one of the individuals referred to in clauses “(a),” “(b)” and “(c)” above
holds (or in which more than one of such individuals collectively hold), beneficially or otherwise,
a material voting, proprietary or equity interest.

     Release. “Release” means any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping or other releasing into the environment, whether intentional or
unintentional.

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

5

 

     Specified Covenants. “Specified Covenants” shall mean the covenants of the Acquired
Companies and the Selling Shareholders, as applicable, set forth in Section 4.2(a)(v), Section
4.2(a)(vi), Section 4.2(a)(vii), Section 4.2(a)(viii), Section 4.2(a)(ix), Section 4.2(a)(x),
Section 4.2(a)(xiii), Section 4.2(a)(xiv), Section 4.2(a)(xv), Section 4.2(a)(xvi), Section
4.2(a)(xvii), Section 4.2(a)(xix) (to the extent that Section 4.2(a)(xix) relates to Section
4.2(a)(v), Section 4.2(a)(vi), Section 4.2(a)(vii), Section 4.2(a)(viii), Section 4.2(a)(ix),
Section 4.2(a)(x), Section 4.2(a)(xiii), Section 4.2(a)(xiv), Section 4.2(a)(xv), Section
4.2(a)(xvi) and Section 4.2(a)(xvii)), Section 4.3 and Section 4.5.

     Specified Representations. “Specified Representations” shall mean the representations
and warranties of the Company and the Selling Shareholders set forth in Section 2.1(a), Section
2.1(c), Section 2.1(d), Section 2.1(e), Section 2.1(g), Section 2.1(h), Section 2.2(a), Section
2.3, Section 2.7(a), Section 2.13(a), Section 2.19 and Section 2.23.

     Subsidiaries. “Subsidiaries” shall mean Capital Telecommunications of Erie, Inc., a
Pennsylvania corporation, Star Tel of Victoria, Inc., a Texas corporation, Star Tel Transmission
Co., Inc., a Texas corporation, and Eastern Telephone Systems, Inc., a Delaware corporation.

     Tax. “Tax” shall mean any tax (including any income tax, franchise tax, service 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, addition, penalty or interest), imposed, assessed or collected by
or under the authority of any Governmental Body or any liability or obligation to with respect to
the foregoing by virtue of any Contract or otherwise.

     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.

     Transfer. A “Transfer” of any Shares shall be deemed to have occurred if any Selling
Shareholder directly or indirectly: (a) sells, pledges, encumbers, grants an option with respect
to, transfers or disposes of such security or any interest in such Shares; or (ii) enters into an
agreement or commitment contemplating the possible sale of, pledge of, encumbrance of, grant of an
option with respect to, transfer of or disposition of such Shares or any interest therein.

     User Data. “User Data” shall mean any Personal Data or other data or information
collected by or on behalf of any of the Acquired Companies from users of the Acquired Company
Services or of any Acquired Company Website.

6

 

Exhibit B

FORM OF ESCROW AGREEMENT

 

 

EXHIBIT C

FORM OF NON-COMPETITION AND NON-SOLICITATION AGREEMENT

ii

 

Exhibit D

FORM OF RELEASE AGREEMENT

iii

 

Exhibit E

SELLING SHAREHOLDERS’ COUNSEL’S LEGAL OPINION

iv

 

Exhibit F

FORM OF CONSULTING AGREEMENT

v

 

SCHEDULE 1.2(a)(i)

Selling Shareholder Interests

     Common Stock

	 	 	 	 	 
	Name
	 	Shares
	Barry J. Silverberg Living Trust dated
09/22/1995
	 	 	17,546	 
	 
	 	 	 	 
	Charles H. Wallace
	 	 	17,546	 
	 
	 	 	 	 
	George V. Kingsbury
	 	 	20,000	 

     Preferred Stock

	 	 	 	 	 
	Name
	 	Shares
	Barry J. Silverberg Living Trust dated
09/22/1995
	 	 	1,000	 
	 
	 	 	 	 
	Charles H. Wallace
	 	 	500	 
	 
	 	 	 	 
	George V. Kingsbury
	 	 	1,000	 

vi

 

SCHEDULE 1.2(a)(ii)

SELLING SHAREHOLDER BANK ACCOUNT/WIRE TRANSFER INSTRUCTIONS

	 	 	 	 	 	 	 
	1.	 	Barry J. Silverberg Living Trust dated 09/22/1995	 	 
	 
	 	 	 	 	 	 
	 

	 	Account Name:
	 	George V. Kingsbury, Agent for
Shareholders of Capital Telecommunications, Inc.	 	 
	 

	 	Account No.
	 	15004212182907	 	 
	 

	 	Bank Information:
	 	M&TBank	 	 
	 

	 	 	 	21 East Market Street	 	 
	 

	 	 	 	York, PA 17402	 	 
	 

	 	 	 	717-852-3002	 	 
	 

	 	ABA No.:
	 	022000046	 	 
	 
	 	 	 	 	 	 
	2.	 	Charles H. Wallace	 	 
	 
	 	 	 	 	 	 
	 

	 	Account Name:
	 	George V. Kingsbury, Agent for
Shareholders of Capital Telecommunications, Inc.	 	 
	 

	 	Account No.
	 	15004212182907	 	 
	 

	 	Bank Information:
	 	M & T Bank	 	 
	 

	 	 	 	21 East Market Street	 	 
	 

	 	 	 	York, PA 17402	 	 
	 

	 	 	 	717-852-3002	 	 
	 

	 	ABA No.:
	 	022000046	 	 
	 
	 	 	 	 	 	 
	3.	 	George V. Kingsbury	 	 
	 
	 	 	 	 	 	 
	 

	 	Account Name:
	 	George V. Kingsbury, Agent for
Shareholders of Capital Telecommunications, Inc.	 	 
	 

	 	Account No.
	 	15004212182907	 	 
	 

	 	Bank Information:
	 	M & T Bank	 	 
	 

	 	 	 	21 East Market Street	 	 
	 

	 	 	 	York, PA 17402	 	 
	 

	 	 	 	717-852-3002	 	 
	 

	 	ABA No.:
	 	022000046	 	 

vii

 

SCHEDULE 1.3(b)(iii)

PERSONS TO EXECUTE 

NON-COMPETITION AND NON-SOLICITATION AGREEMENTS

     The Selling Shareholders

viii

 

SCHEDULE 4.4

MATERIAL CONSENTS

     None

ix

 

SCHEDULE 5.4

EMPLOYEES TO BE OFFERED EMPLOYMENT

Kyle Dickson

Dan Dumler

Rich Cheshier

Bob Smith

Dwayne Quinn

Julie Roppelt

x

 

LIST OF EXHIBITS AND SCHEDULES

EXHIBITS

	 	 	 
	Exhibit A

	 	Certain Definitions
	 
	 	 
	Exhibit B

	 	Form of Escrow Agreement
	 
	 	 
	Exhibit C

	 	Form of Non-Competition and Non-Solicitation Agreement
	 
	 	 
	Exhibit D

	 	Form of Release Agreement
	 
	 	 
	Exhibit E

	 	Form of Selling Shareholders’ Legal Opinion
	 
	 	 
	Exhibit F

	 	Form of Consulting Agreement
	
SCHEDULES

	Schedule 1.2(a)(i)

	 	Shareholder Interests
	 
	 	 
	Schedule 1.2(a)(ii)

	 	Selling Shareholder Bank Account/Wire Transfer Instructions
	 
	 	 
	Schedule 1.3(b)(iii)

	 	Persons to Execute Non-Competition and Non-Solicitation
Agreements
	 
	 	 
	Schedule 4.4

	 	Material Consents
	 
	 	 
	Schedule 5.4

	 	Employees to be Offered Employment

xiexv10w13

 

Exhibit 10.13

U.S. WIRELESS DATA, INC.

REGISTRATION RIGHTS AGREEMENT

February 2, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 
	 	 	 	 	 	 	 	 
	Section 1 Definitions	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	 
	 	1.1	 	Certain Definitions	 	 	1	 
	 
	 	 	 	 	 	 	 	 
	Section 2 Registration Rights	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	 
	 	2.1	 	Requested Registration	 	 	4	 
	 
	 	2.2	 	Company Registration	 	 	6	 
	 
	 	2.3	 	Registration on Form S-3	 	 	7	 
	 
	 	2.4	 	Expenses of Registration	 	 	8	 
	 
	 	2.5	 	Registration Procedures	 	 	9	 
	 
	 	2.6	 	Indemnification	 	 	10	 
	 
	 	2.7	 	Information by Investor	 	 	12	 
	 
	 	2.8	 	Restrictions on Transfer	 	 	12	 
	 
	 	2.9	 	Rule 144 Reporting	 	 	14	 
	 
	 	2.10	 	Market Stand-Off Agreement	 	 	14	 
	 
	 	2.11	 	Delay of Registration	 	 	15	 
	 
	 	2.12	 	Transfer or Assignment of Registration Rights	 	 	15	 
	 
	 	2.13	 	Limitations on Subsequent Registration Rights	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	Section 3 Miscellaneous	 	 	15	 
	 
	 	 	 	 	 	 	 	 
	 
	 	3.1	 	Amendment	 	 	15	 
	 
	 	3.2	 	Notices	 	 	16	 
	 
	 	3.3	 	Governing Law	 	 	16	 
	 
	 	3.4	 	Successors and Assigns	 	 	17	 
	 
	 	3.5	 	Entire Agreement	 	 	17	 
	 
	 	3.6	 	Delays or Omissions	 	 	17	 
	 
	 	3.7	 	Severability	 	 	17	 
	 
	 	3.8	 	Titles and Subtitles	 	 	17	 
	 
	 	3.9	 	Counterparts	 	 	17	 
	 
	 	3.10	 	Telecopy Execution and Delivery	 	 	17	 
	 
	 	3.11	 	Jurisdiction; Venue	 	 	18	 
	 
	 	3.12	 	Further Assurances	 	 	18	 
	 
	 	3.13	 	Termination Upon Change of Control	 	 	18	 
	 
	 	3.14	 	Conflict	 	 	18	 
	 
	 	3.15	 	Attorneys’ Fees	 	 	18	 
	 
	 	3.16	 	Aggregation of Stock	 	 	18	 

-i-

 

 

U.S. WIRELESS DATA, INC.

REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made as of                      ___, 2007, by and
among U.S. Wireless Data, Inc., a Delaware corporation (the “Company”), and the persons and
entities (each, an “Investor” and collectively, the “Investors”) listed on Exhibit A
hereto. Unless otherwise defined herein, capitalized terms used in this Agreement have the
meanings ascribed to them in Section 1.

RECITALS

     WHEREAS: the Company has entered into that certain Agreement and Plan of Merger (the “Merger
Agreement”), dated as of June 14, 2006, by and among the Company, StarVox Acquisition, Inc.
(“Merger Sub”), a wholly owned subsidiary of USWD, and StarVox Communications, Inc. (“StarVox”);

     WHEREAS: pursuant to the Merger Agreement the Company, Merger Sub and StarVox have agreed to
enter into a business combination transaction by means of a merger (the “Merger”) of Merger Sub
with and into StarVox, whereby upon completion of the Merger StarVox will be the surviving
corporation and a wholly owned subsidiary of the Company;

     WHEREAS: certain existing investors (the “Existing Investors”) of the Company and StarVox
hold registration rights with respect to certain securities of the Company and/or StarVox held by
them;

     WHEREAS: in connection with the Merger, the Company, StarVox and the Existing Investors
desire to amend, modify and consolidate such registration rights under the Agreement;

     WHEREAS: in connection with the Merger, the Company desires to grant such Existing Investors
the respective registration rights provided in this Agreement:

     NOW, THEREFORE: In consideration of the mutual promises and covenants set forth herein, and
other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:

Section 1

Definitions

     1.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

          (a) “Commission” shall mean the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.

 

 

          (b) “Common Stock” means the Common Stock of the Company.

          (c) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.

          (d) “Existing Investors” shall have the meaning set forth in the Recitals hereto.

          (e) “Holder” shall mean any Investor who holds Registrable Securities and any holder of
Registrable Securities to whom the registration rights conferred by this Agreement have been duly
and validly transferred in accordance with Section 2.12 of this Agreement.

          (f) “Indemnified Party” shall have the meaning set forth in Section 2.6(c) hereto.

          (g) “Indemnifying Party” shall have the meaning set forth in Section 2.6(c) hereto.

          (h) “Initiating Holders” shall mean any Holder or Holders who in the aggregate hold not less
than fifty percent (50%) of the outstanding Registrable Securities.

          (i) “Investors” shall mean the persons and entities listed on Exhibit A hereto.

          (j) “Merger Agreement” shall have the meaning set forth in the Recitals hereto.

          (k) “Registrable Securities” shall mean (i) the shares of Common Stock owned or held by
any Investor; (ii) Warrants exercisable for Warrant Shares; (iii) the Warrant Shares and (iv)
shares of Common Stock issuable upon conversion of convertible securities held by an Investor, in
each case whether or not issued or issuable as of the date of this agreement. Registrable
Securities include any warrants, shares of capital stock or other securities of the Company issued
as a dividend or other distribution with respect to or in exchange for or in replacement of such
Registrable Securities. As to any particular Registrable Securities, such securities shall cease
to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such
securities shall have become effective under the Securities Act and such securities shall have been
sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b)
such securities shall have been otherwise transferred pursuant to Rule 144 of the Securities Act
(or any similar provisions thereunder, but not Rule 144A), new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and subsequent public
distribution of them shall not require registration under the Securities Act; (c) the Securities
and Exchange Commission makes a definitive determination to the Company that the Registrable
Securities are salable under Rule 144(k) or (d) such securities shall have ceased to be
outstanding.

     (l) The terms “register,” “registered” and “registration” shall refer to a registration
effected by preparing and filing a registration statement in compliance with the Securities Act and
applicable rules and regulations thereunder, and the declaration or ordering of the effectiveness
of such registration statement.

-2-

 

          (m) “Registration Expenses” shall mean all expenses incurred in effecting any registration
pursuant to this Agreement, including, without limitation, all registration, qualification, and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel for the Company,
blue sky fees and expenses, and expenses of any regular or special audits incident to or required
by any such registration, but shall not include Selling Expenses, fees and disbursements of counsel
for the Holders and the compensation of regular employees of the Company, which shall be paid in
any event by the Company.

          (n) “Restricted Securities” shall mean any Registrable Securities required to bear the first
legend set forth in Section 2.8(c) hereof.

          (o) “Rule 144” shall mean Rule 144 as promulgated by the Commission under the Securities Act,
as such Rule may be amended from time to time, or any similar successor rule that may be
promulgated by the Commission.

          (p) “Rule 145” shall mean Rule 145 as promulgated by the Commission under the Securities Act,
as such Rule may be amended from time to time, or any similar successor rule that may be
promulgated by the Commission

          (q) “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar
successor federal statute and the rules and regulations thereunder, all as the same shall be in
effect from time to time.

          (r) “Selling Expenses” shall mean all underwriting discounts, selling commissions and stock
transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of
counsel for any Holder (other than the fees and disbursements of one special counsel to the Holders
included in Registration Expenses).

          (s) “Series A Preferred Stock” shall mean the shares of Series A Preferred Stock of the
Company.

          (t) “Shares” shall mean the Company’s Series A Preferred Stock held by an Investor as
indicated on Exhibit A hereto.

          (u) “Warrant Shares” shall mean (i) shares of Common Stock issued or issuable upon exercise of
the any outstanding warrants held by an Investor as indicated on Exhibit A hereto and (ii)
any Common Stock issued as a dividend or other distribution with respect to or in exchange for or
in replacement of the shares referenced in (i) above; provided, however, that
Warrant Shares shall not include any shares of Common Stock described in clause (i) or (ii) above
which have previously been registered or which have been sold to the public either pursuant to a
registration statement or Rule 144, or which have been sold in a private transaction in which the
transferor’s rights under this Agreement are not validly assigned in accordance with this
Agreement.

          (v) “Withdrawn Registration” shall mean a forfeited demand registration under Section 2.1 in
accordance with the terms and conditions of Section 2.4.

-3-

 

Section 2

Registration Rights

     2.1 Requested Registration.

          (a) Request for Registration. Subject to the conditions set forth in this Section
2.1, if the Company shall receive from Initiating Holders a written request signed by such
Initiating Holders that the Company effect any registration with respect to all or a part of the
Registrable Securities (such request shall state the number of shares of Registrable Securities to
be disposed of and the intended methods of disposition of such shares by such Initiating Holders),
the Company will:

               (i) promptly give written notice of the proposed registration to all other Holders; and

               (ii) as soon as practicable, file and use its commercially reasonable efforts to effect such
registration (including, without limitation, filing post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and appropriate compliance
with the Securities Act) and to permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request received by the Company within twenty (20) days after such written
notice from the Company is mailed or delivered.

          (b) Limitations on Requested Registration. The Company shall not be obligated to
effect, or to take any action to effect, any such registration pursuant to this Section 2.1:

               (i) If the Initiating Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration statement, propose to sell Registrable
Securities and such other securities (if any) if the aggregate proceeds (after deduction for
underwriter’s discounts and expenses related to the issuance) are less than $1,000,000;

               (ii) In any particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration, qualification, or compliance,
unless the Company is already subject to service in such jurisdiction and except as may be required
by the Securities Act;

               (iii) After the Company has initiated two such registrations pursuant to this Section 2.1
(counting for these purposes only (x) registrations which have been declared or ordered effective
and pursuant to which securities have been sold, and (y) Withdrawn Registrations;

               (iv) During the period starting with the date sixty (60) days prior to the Company’s good
faith estimate of the date of filing of, and ending on a date one hundred eighty
(180) days after the effective date of, a Company-initiated registration (or ending on the
subsequent date on which all market stand-off agreements applicable to the offering have
terminated)]; provided

-4-

 

that the Company is actively employing in good faith commercially
reasonable efforts to cause such registration statement to become effective; or

               (v) If the Initiating Holders propose to dispose of shares of Registrable Securities which may
be immediately registered on Form S-3 pursuant to a request made under Section 2.3 hereof.

               (vi) If the Initiating Holders do not request that such offering be firmly underwritten by
underwriters selected by the Initiating Holders (subject to the consent of the Company, which
consent shall not be unreasonably withheld); or

               (vii) If the Company and the Initiating Holders are unable to obtain the commitment
of the underwriter described in clause (b)(vii) above to firmly underwrite the offer.

          (c) Deferral. If (i) in the good faith judgment of the Board of Directors of the
Company, the filing of a registration statement covering the Registrable Securities would be
materially detrimental to the Company and the Board of Directors of the Company concludes, as a
result, that it is in the best interests of the Company to defer the filing of such registration
statement at such time, and (ii) the Company shall furnish to such Holders a certificate signed by
the President of the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be materially detrimental to the Company for such registration statement to
be filed in the near future and that it is, therefore, in the best interests of the Company to
defer the filing of such registration statement, then (in addition to the limitations set forth in
Section 2.1(b)(v) above) the Company shall have the right to defer such filing for a period of not
more than one hundred eighty (180) days after receipt of the request of the Initiating Holders,
and, provided further, that the Company shall not defer its obligation in this manner more than
twice in any twelve-month period.

          (d) Other Shares. The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 2.1(e), include securities of the
Company being sold for the account of the Company.

          (e) Underwriting. If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 2.1 and the Company shall include such
information in the written notice given pursuant to Section 2.1(a)(i). In such event, the right of
any Holder to include all or any portion of its Registrable Securities in such registration
pursuant to this Section 2.1 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities to the extent provided
herein. If the Company shall request inclusion in any registration pursuant to Section 2.1 of
securities being sold for its own account, or if other persons shall request inclusion in any
registration pursuant to Section 2.1, the Initiating Holders shall, on behalf of all Holders, offer
to include such securities in the underwriting and such offer shall be conditioned upon the
participation of the Company or such other persons in
such underwriting and the inclusion of the Company’s and such person’s other securities of the
Company and their acceptance of the further applicable provisions of this Section 2 (including

-5-

 

Section 2.10). The Company shall (together with all Holders and other persons proposing to
distribute their securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders, which underwriters are reasonably
acceptable to the Company.

     Notwithstanding any other provision of this Section 2.1, if the underwriters advise the
Initiating Holders in writing that marketing factors require a limitation on the number of shares
to be underwritten, the number of Registrable Securities that may be so included shall be allocated
as follows: (i) first, among all Holders requesting to include Registrable Securities in such
registration statement based on the pro rata percentage of Registrable Securities held by such
Holders, assuming conversion and (ii) second, to the Company, which the Company may allocate, at
its discretion, for its own account, or for the account of other holders or employees of the
Company.

     If a person who has requested inclusion in such registration as provided above does not agree
to the terms of any such underwriting, such person shall be excluded therefrom by written notice
from the Company, the underwriter or the Initiating Holders. The securities so excluded shall also
be withdrawn from registration. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall also be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section 2.1(e), then the
Company shall then offer to all Holders who have retained rights to include securities in the
registration the right to include additional Registrable Securities in the registration in an
aggregate amount equal to the number of shares so withdrawn, with such shares to be allocated among
such Holders requesting additional inclusion, as set forth above.

     2.2 Company Registration.

          (a) Company Registration. If the Company shall determine to register any of its
securities either for its own account or the account of a security holder or holders, other than a
registration pursuant to Section 2.1 or 2.3, a registration relating solely to employee benefit
plans, a registration relating to the offer and sale of debt securities, a registration relating to
a corporate reorganization or other Rule 145 transaction, or a registration on any registration
form that does not permit secondary sales, the Company will:

               (i) promptly give written notice of the proposed registration to all Investors; and

               (ii) use its commercially reasonable efforts to include in such registration (and any related
qualification under blue sky laws or other compliance), except as set forth in Section 2.2(b)
below, and in any underwriting involved therein, all of such Registrable Securities or
Warrant Shares as are specified in a written request or requests made by any Investor or
Investors received by the Company within ten (10) days after such written notice from the Company
is mailed or delivered. Such written request may specify all or a part of an Investor’s
Registrable Securities or Warrant Shares as the case may be.

-6-

 

          (b) Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so advise the Investors as
a part of the written notice given pursuant to Section 2.2(a)(i). In such event, the right of any
Investor to registration pursuant to this Section 2.2 shall be conditioned upon such Investor’s
participation in such underwriting and the inclusion of such Investor’s Registrable Securities or
Warrant Shares, as the case may be, in the underwriting to the extent provided herein. All
Investors proposing to distribute their securities through such underwriting shall (together with
the Company and the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the underwriter or underwriters
selected by the Company.

     Notwithstanding any other provision of this Section 2.2, if the underwriters advise the
Company in writing that marketing factors require a limitation on the number of shares to be
underwritten, the underwriters may (subject to the limitations set forth below) exclude all
Registrable Securities and Warrant Shares from, or limit the number of Registrable Securities and
Warrant Shares to be included in, the registration and underwriting. The Company shall so advise
all holders of securities requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated, as follows: (i)
first, to the Company for securities being sold for its own account, and (ii) second, to the
Investors requesting to include Registrable Securities or Warrant Shares, as the case may be, in
such registration statement based on the pro rata percentage of the aggregate amount of Registrable
Securities and Warrant Shares held by such Investors, assuming conversion.

     If a person who has requested inclusion in such registration as provided above does not agree
to the terms of any such underwriting, such person shall also be excluded therefrom by written
notice from the Company or the underwriter. The Registrable Securities or Warrant Shares shall
also be withdrawn from such registration. Any Registrable Securities or Warrant Shares excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If shares are so
withdrawn from the registration and if the number of shares of Registrable Securities and Warrant
Shares to be included in such registration was previously reduced as a result of marketing factors
pursuant to Section 2.2(b), the Company shall then offer to all persons who have retained the right
to include securities in the registration the right to include additional securities in the
registration in an aggregate amount equal to the number of shares so withdrawn, with such shares to
be allocated among the persons requesting additional inclusion, in the manner set forth above.

          (c) Right to Terminate Registration. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 2.2 prior to the effectiveness of such
registration whether or not any Investor has elected to include securities in such registration.

     2.3 Registration on Form S-3.

          (a) Request for Form S-3 Registration. After its initial public offering, the Company
shall use its commercially reasonable efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Section 2 and subject to the

-7-

 

conditions set forth in this Section 2.3, if the Company shall receive from a Holder or Holders of
Registrable Securities a written request that the Company effect any registration on Form S-3 or
any similar short form registration statement with respect to all or part of the Registrable
Securities (such request shall state the number of shares of Registrable Securities to be disposed
of and the intended methods of disposition of such shares by such Holder or Holders), the Company
will take all such action with respect to such Registrable Securities as required by Section
2.1(a)(i) and (ii).

          (b) Limitations on Form S-3 Registration. The Company shall not be obligated to
effect, or take any action to effect, any such registration pursuant to this Section 2.3:

               (i) In the circumstances described in either Sections 2.1(b)(i), 2.1(b)(iii) or 2.1(b)(v);

               (ii) If the Holders, together with the holders of any other securities of the Company entitled
to inclusion in such registration, propose to sell Registrable Securities and such other securities
(if any) on Form S-3 at an aggregate price to the public of less than $l,000,000; or

               (iii) If, in a given twelve-month period, the Company has effected one (1) such registration
in such period.

          (c) Deferral. The provisions of Section 2.1(c) shall apply to any registration
pursuant to this Section 2.3.

          (d) Underwriting. If the Holders of Registrable Securities requesting registration
under this Section 2.3 intend to distribute the Registrable Securities covered by their request by
means of an underwriting, the provisions of Sections 2.1(e) shall apply to such registration.
Notwithstanding anything contained herein to the contrary, registrations effected pursuant to this
Section 2.3 shall not be counted as requests for registration or registrations effected pursuant to
Section 2.1.

     2.4 Expenses of Registration. All Registration Expenses incurred in connection with registrations pursuant to Sections
2.1, 2.2 and 2.3 hereof shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration proceeding begun pursuant
to Sections 2.1 and 2.3 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities to be registered or because a sufficient number
of Holders shall have withdrawn so that the minimum offering conditions set forth in Sections 2.1
and 2.3 are no longer satisfied (in which case all participating Holders shall bear such
expenses pro rata among each other based on the number of Registrable Securities requested to
be so registered), unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to a demand registration pursuant to Section 2.1. All Selling Expenses relating to
securities registered on behalf of the Holders shall be borne by the holders of securities included
in such registration pro rata among each other on the basis of the number of Registrable Securities
so registered.

-8-

 

     2.5 Registration Procedures. In the case of each registration effected by the Company pursuant to Section 2, the Company
will keep each Holder or Investor, as the case may be, advised in writing as to the initiation of
each registration and as to the completion thereof. At its expense, the Company will use its
commercially reasonable efforts to:

          (a) Keep such registration effective for a period of ending on the earlier of the date which
is sixty (60) days from the effective date of the registration statement or such time as the
Holders or Investors, as the case may be, have completed the distribution described in the
registration statement relating thereto;

          (b) Prepare and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for the period set forth in subsection (a)
above;

          (c) Furnish such number of prospectuses, including any preliminary prospectuses, and other
documents incident thereto, including any amendment of or supplement to the prospectus, as a Holder
or Investor, as the case may be, from time to time may reasonably request;

          (d) Use its reasonable best efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such jurisdiction as shall
be reasonably requested by the Holders or Investors, as the case may be; provided, that the
Company shall not be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states or jurisdictions;

          (e) Notify each seller of Registrable Securities or Warrant Shares, as the case may be,
covered by such registration statement at any time when a prospectus relating thereto is required
to be delivered under the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or incomplete in light of the circumstances then
existing, and following such notification promptly prepare and furnish to such seller a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to be stated therein
or necessary
to make the statements therein not misleading or incomplete in light of the circumstances then
existing;

          (f) Provide a transfer agent and registrar for all Registrable Securities or Warrant Shares,
as the case may be, registered pursuant to such registration statement and a CUSIP number for all
such Registrable Securities or Warrant Shares, as the case may be, in each case not later than the
effective date of such registration;

-9-

 

          (g) Cause all such Registrable Securities or Warrant Shares, as the case may be, registered
pursuant hereunder to be listed on each securities exchange on which similar securities issued by
the Company are then listed; and

          (h) In connection with any underwritten offering pursuant to a registration statement filed
pursuant to Section 2.1 hereof, enter into an underwriting agreement in form reasonably necessary
to effect the offer and sale of Common Stock, provided such underwriting agreement contains
reasonable and customary provisions, and provided further, that each Holder or Investor, as the
case may be, participating in such underwriting shall also enter into and perform its obligations
under such an agreement.

     2.6 Indemnification.

          (a) To the extent permitted by law, the Company will indemnify and hold harmless each
Investor, each of its officers, directors and partners, legal counsel and accountants and each
person controlling such Investor within the meaning of Section 15 of the Securities Act, with
respect to which registration, qualification or compliance has been effected pursuant to this
Section 2, and each underwriter, if any, and each person who controls within the meaning of Section
15 of the Securities Act any underwriter, against all expenses, claims, losses, damages and
liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based on:
(i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated
by reference in any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such registration, qualification
or compliance, (ii) any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading, or (iii) any
violation (or alleged violation) by the Company of the Securities Act, any state securities laws or
any rule or regulation thereunder applicable to the Company and relating to action or inaction
required of the Company in connection with any offering covered by such registration, qualification
or compliance, and the Company will reimburse each such Investor, each of its officers, directors,
partners, legal counsel and accountants and each person controlling such Investor, each such
underwriter and each person who controls any such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or settling any such claim,
loss, damage, liability or action; provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability, or action arises out of or is
based on any untrue statement or omission based upon written information furnished to the Company
by such Investor, any of such Investor’s officers, directors,
partners, legal counsel or accountants, any person controlling such Investor, such underwriter
or any person who controls any such underwriter, and stated to be specifically for use therein; and
provided, further that, the indemnity agreement contained in this Section 2.6(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent shall not be
unreasonably withheld).

          (b) To the extent permitted by law, each Investor will, if Registrable Securities or Warrant
Shares, as the case may be, held by such Investor are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and hold harmless the

-10-

 

Company, each of its directors, officers, partners, legal counsel and accountants and each
underwriter, if any, of the Company’s securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, each other such Investor, and each of their officers, directors and partners, and
each person controlling each other such Investor, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on: (i) any untrue statement
(or alleged untrue statement) of a material fact contained or incorporated by reference in any
prospectus, offering circular or other document (including any related registration statement,
notification, or the like) incident to any such registration, qualification or compliance, or (ii)
any omission (or alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse the Company and such
Investors, directors, officers, partners, legal counsel and accountants, persons, underwriters, or
control persons for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written information furnished to
the Company by such Investor and stated to be specifically for use therein; provided,
however, that the obligations of such Investor hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages or liabilities (or actions in respect thereof) if
such settlement is effected without the consent of such Investor (which consent shall not be
unreasonably withheld); and provided that in no event shall any indemnity under this
Section 2.6 exceed the gross proceeds from the offering received by such Investor, except in the
case of fraud or willful misconduct by such Investor.

          (c) Each party entitled to indemnification under this Section 2.6 (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the “Indemnifying Party”)
promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may
be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation2 resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at such party’s expense; and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.6, to the extent such failure is not
prejudicial. No Indemnifying Party, in the defense of any such claim or litigation, shall, except
with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.

          (d) If the indemnification provided for in this Section 2.6 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability,

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claim, damage, or expense referred to herein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage, or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the
Indemnified Party on the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage, or expense as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission. No person or entity will be required
under this Section 2.6(d) to contribute any amount in excess of the gross proceeds from the
offering received by such person or entity, except in the case of fraud or willful misconduct by
such person or entity.] No person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.

          (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.

     2.7 Information by Investor. Each Investor holding Registrable Securities or Warrant Shares, as the case may be, shall
furnish to the Company such information regarding such Investor and the distribution proposed by
such Investor as the Company may reasonably request in writing and as shall be reasonably required
in connection with any registration, qualification, or compliance referred to in this Section 2.

     2.8 Restrictions on Transfer.

          (a) The holder of each certificate representing Registrable Securities or Warrant Shares, as
the case may be, by acceptance thereof agrees to comply in all respects with the provisions of this
Section 2.8. Each Investor agrees not to make any sale, assignment, transfer,
pledge or other disposition of all or any portion of the Restricted Securities, or any
beneficial interest therein, unless and until (x) the transferee thereof has agreed in writing for
the benefit of the Company to take and hold such Restricted Securities subject to, and to be bound
by, the terms and conditions set forth in this Agreement, including, without limitation, this
Section 2.8 and Section 2.10, except for transfers permitted under Section 2.8(b), and (y):

               (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;
or

               (ii) Such Investor shall have given prior written notice to the Company of such Investor’s
intention to make such disposition and shall have furnished the Company with a

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detailed description
of the manner and circumstances of the proposed disposition, and, if requested by the Company, such
Investor shall have furnished the Company, at its expense, with (i) an opinion of counsel,
reasonably satisfactory to the Company, to the effect that such disposition will not require
registration of such Restricted Securities under the Securities Act or (ii) a “no action” letter
from the Commission to the effect that the transfer of such securities without registration will
not result in a recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by the Investor to the
Company.

          (b) Permitted transfers include (i) a transfer not involving a change in beneficial ownership,
or (ii) in transactions involving the distribution without consideration of Restricted Securities
by any Investor to (x) a parent, subsidiary or other affiliate of Investor that is a corporation,
(y) any of its partners, members or other equity owners, or retired partners, retired members or
other equity owners, or to the estate of any of its partners, members or other equity owners or
retired partners, retired members or other equity owners, or (z) a venture capital fund that is
controlled by or under common control with one or more general partners or managing members of, or
shares the same management company with, such Investor, or (iii) transfers in compliance with Rule
144(k), as long as the Company is furnished with satisfactory evidence of compliance with such
Rule; provided, in each case, that the Investor thereof shall give written notice to the
Company of such Investor’s intention to effect such disposition and shall have furnished the
Company with a detailed description of the manner and circumstances of the proposed disposition.

          (c) Each certificate representing Registrable Securities or Warrant Shares, as the case may
be, shall (unless otherwise permitted by the provisions of this Agreement) be stamped or otherwise
imprinted with a legend substantially similar to the following (in addition to any legend required
under applicable state securities laws):

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS
OF CERTAIN STATES. THESE SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE
SECURITIES LAWS PURSUANT TO REGISTRATION OR AN EXEMPTION THEREFROM. THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD IN THE EVENT OF A
PUBLIC OFFERING, AS SET FORTH IN A REGISTRATION RIGHTS

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AGREEMENT, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY.

     The Holders consent to the Company making a notation on its records and giving instructions to
any transfer agent of the Restricted Securities and Warrant Shares in order to implement the
restrictions on transfer established in this Section 2.8.

          (d) The first legend referring to federal and state securities laws identified in Section
2.8(c) hereof stamped on a certificate evidencing the Restricted Securities or Warrant Shares, as
the case may be, and the stock transfer instructions and record notations with respect to such
Restricted Securities shall be removed and the Company shall issue a certificate without such
legend to the holder of such Restricted Securities if (i) such securities are registered under the
Securities Act, or (ii) such holder provides the Company with an opinion of counsel reasonably
acceptable to the Company to the effect that a public sale or transfer of such securities may be
made without registration under the Securities Act, or (iii) such holder provides the Company with
reasonable assurances, which may, at the option of the Company, include an opinion of counsel
satisfactory to the Company, that such securities can be sold pursuant to Section (k) of Rule 144
under the Securities Act.

     2.9 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the
Commission that may permit the sale of the Restricted Securities to the public without
registration, the Company agrees to use its commercially reasonable efforts to:

          (a) Make and keep public information regarding the Company available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from and after ninety
(90) days following the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;

          (b) File with the Commission in a timely manner all reports and other documents required of
the Company under the Securities Act and the Exchange Act at any time after it has become subject
to such reporting requirements; and

          (c) So long as an Investor owns any Restricted Securities or Warrant Shares, furnish to the
Investor forthwith upon written request a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 (at any time from and after ninety (90) days following
the effective date of the first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed as an Investor may
reasonably request in availing itself of any rule or regulation of the Commission allowing an
Investor to sell any such securities without registration.

     2.10 Market Stand-Off Agreement. If requested by the Company and an underwriter of Common Stock (or other securities) of the
Company, each Investor shall not sell or otherwise transfer, make any short sale of, grant any
option for the purchase of, or enter into any hedging or

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similar transaction with the same economic
effect as a sale, of any Common Stock (or other securities) of the Company held by such Investor
(other than those included in the registration) during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company filed under the Securities
Act (or such other period as may be requested by the Company or an underwriter to accommodate
regulatory restrictions on (i) the publication or other distribution of research reports and (ii)
analyst recommendations and opinions, including, but not limited to, the restrictions contained in
NASD Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto).
The obligations described in this Section 2.10 shall not apply to a registration relating solely to
employee benefit plans on Form S-l or Form S-8 or similar forms that may be promulgated in the
future, or a registration relating solely to a transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions and may stamp each
such certificate with the second legend set forth in Section 2.8(c) hereof with respect to the
shares of Common Stock (or other securities) subject to the foregoing restriction until the end of
such one hundred eighty (180) day (or other) period. Each Investor agrees to execute a market
standoff agreement with said underwriters in customary form consistent with the provisions of this
Section 2.10.

     2.11 Delay of Registration . No Investor shall have any right to take any action to restrain, enjoin, or otherwise delay
any registration as the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.

     2.12 Transfer or Assignment of Registration Rights. The rights to cause the Company to register securities granted to an Investor by the
Company under this Section 2 may be transferred or assigned by an Investor only to a transferee or
assignee of not less than 100,000 shares of Registrable Securities or Warrant Shares, as the case
may be, (as presently constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like); provided that (i) such transfer or
assignment of Registrable Securities or Warrant Shares is effected in accordance with the terms of
Section 2.8 hereof and
applicable securities laws, (ii) the Company is given written notice prior to said transfer or
assignment, stating the name and address of the transferee or assignee and identifying the
securities with respect to which such registration rights are intended to be transferred or
assigned and (iii) the transferee or assignee of such rights assumes in writing the obligations of
such Investor under this Agreement, including without limitation the obligations set forth in
Section 2.10.

     2.13 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or prospective holder any
registration rights the terms of which are pari passu with or senior to the registration rights
granted to the Holders hereunder.

Section 3

Miscellaneous

     3.1 Amendment. Except as expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument

-15-

 

referencing this
Agreement and signed by the Company and the Holders holding a majority of the Registrable
Securities (excluding any of such shares that have been sold to the public or pursuant to Rule
144); provided, that if any amendment, waiver, discharge or termination operates in a
manner that treats any Holder different from other Holders, the consent of such Holder shall also
be required for such amendment, waiver, discharge or termination. Each Investor holding Warrant
Shares acknowledges that any amendment that does not diminish such Investor’s right to participate
in a Company registration pursuant to Section 2.2 hereof shall not be deemed to operate in manner
that treats such Investor different from other Investors. Any such amendment, waiver, discharge or
termination effected in accordance with this paragraph shall be binding upon each Investor and each
future holder of all such securities of such Investor. Each Investor acknowledges that by the
operation of this paragraph, the holders of a majority of the Registrable Securities (excluding any
of such shares that have been sold to the public or pursuant to Rule 144) will have the right and
power to diminish or eliminate all rights of such Investor under this Agreement.

     3.2 Notices. All notices and other communications required or permitted hereunder shall be in writing
and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or
electronic mail or otherwise delivered by hand or by messenger addressed:

          (a) if to an Investor, at the Investor’s address, facsimile number or electronic mail address
as shown in the Company’s records, as may be updated in accordance with the provisions hereof;

          (b) if to any Holder, at such address, facsimile number or electronic mail address as shown in
the Company’s records, or, until any such holder so furnishes an address, facsimile number or
electronic mail address to the Company, then to and at the address of the last holder of such
shares for which the Company has contact information in its records; or

          (c) if to the Company, one copy should be sent to StarVox Communications, Inc., 2728 Orchard
Parkway, San Jose, California 95134-2012, (800) 270-9380, Attn: Chief Executive Officer, or at such
other address as the Company shall have furnished to the Investors, with a copy to Douglas H.
Collom, Esq., Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto, California
94304.

     Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given when delivered if delivered personally, or, if sent by mail, at the
earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as aforesaid or, if sent
by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon
confirmation of delivery when directed to the electronic mail address set forth on Exhibit
A.

     3.3 Governing Law. This Agreement shall be governed in all respects by the internal laws of the State of
California] as applied to agreements entered into among California residents to be performed
entirely within California, without regard to principles of conflicts of law.

-16-

 

     3.4 Successors and Assigns. This Agreement, and any and all rights, duties and obligations hereunder, shall not be
assigned, transferred, delegated or sublicensed by any Investor without the prior written consent
of the Company. Any attempt by an Investor without such permission to assign, transfer, delegate
or sublicense any rights, duties or obligations that arise under this Agreement shall be void.
Subject to the foregoing and except as otherwise provided herein, the provisions of this Agreement
shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and
administrators of the parties hereto.

     3.5 Entire Agreement. This Agreement and the exhibits hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof. No party hereto shall be liable
or bound to any other party in any manner with regard to the subjects hereof or thereof by any
warranties, representations or covenants except as specifically set forth herein.

     3.6 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or
remedy accruing to any party to this Agreement upon any breach or default of any other party under
this Agreement shall impair any such right, power or remedy of such non-defaulting party, nor
shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or
of or in any similar breach or default thereafter occurring, nor shall any waiver of any single
breach or default be deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in writing and shall be effective only to the
extent specifically set forth in such writing. All remedies, either under this Agreement or by law
or otherwise afforded to any party to this Agreement, shall be cumulative and not alternative.

     3.7 Severability. If any provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, portions of such provision, or such provision in
its entirety, to the extent necessary, shall be severed from this Agreement, and such court will
replace such illegal, void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the same economic, business and
other purposes of the illegal, void or unenforceable provision. The balance of this Agreement
shall be enforceable in accordance with its terms.

     3.8 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not
to be considered in construing or interpreting this Agreement. All references in this Agreement to
sections, paragraphs and exhibits shall, unless otherwise provided, refer to sections and
paragraphs hereof and exhibits attached hereto.

     3.9 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be
enforceable against the parties that execute such counterparts, and all of which together shall
constitute one instrument.

     3.10 Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or
more parties hereto and delivered by such party by facsimile or any similar electronic transmission
device pursuant to which the signature of or on behalf of such

-17-

 

party can be seen. Such execution
and delivery shall be considered valid, binding and effective for all purposes. At the request of
any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as
well as any facsimile, telecopy or other reproduction hereof.

     3.11 Jurisdiction; Venue. With respect to any disputes arising out of or related to this Agreement, the parties
consent to the exclusive jurisdiction of, and venue in, the state courts in Santa Clara County in
the State of California (or in the event of exclusive federal jurisdiction, the courts of the
Northern District of California).

     3.12 Further Assurances. Each party hereto agrees to execute and deliver, by the proper exercise of its corporate,
limited liability company, partnership or other powers, all such other and additional instruments
and documents and do all such other acts and things as may be necessary to more fully effectuate
this Agreement.

     3.13 Termination Upon Change of Control. Notwithstanding anything to the contrary herein, this Agreement (excluding any then-existing
obligations) shall terminate upon (a) the acquisition of the Company by another entity by means of
any transaction or series of related transactions to which the Company is party (including, without
limitation, any stock acquisition, reorganization, merger or consolidation but excluding any sale
of stock for capital raising purposes) other than a transaction or series of transactions in which
the holders of the voting securities of the Company outstanding immediately prior to such
transaction continue to retain (either by such voting securities remaining outstanding or by such
voting securities being converted into voting securities of the surviving entity), as a result of
shares in the Company held by such holders prior to such transaction, at least fifty percent (50%)
of the total voting power represented by the voting securities of the Corporation or such surviving
entity outstanding immediately after such transaction or series of transactions; or (b) a sale,
lease or other conveyance of all substantially all of the assets of the Company.

     3.14 Conflict. In the event of any conflict between the terms of this Agreement and the Company’s
Certificate or its Bylaws, the terms of the Company’s Certificate or its Bylaws, as the case may
be, will control.

     3.15 Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this
Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party
such reasonable fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.

     3.16 Aggregation of Stock. All securities held or acquired by affiliated entities (including affiliated venture
capital funds) or persons shall be aggregated together for purposes of determining the availability
of any rights under this Agreement.

(Remainder of Page Intentionally Left Blank)

-18-

 

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

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