Document:

exv10w2

 

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is entered into and effective as of October 18, 2006 (the
“Effective Date”) by and between AmericanWest Bank, a Washington state-chartered bank (“Bank”; the
term “Bank” includes, unless the context indicates otherwise, the Far West Bank division of
AmericanWest Bank), and H. Don Norton (“Employee”).

RECITALS

WHEREAS, Bank desires to employ Employee, and Employee desires to accept employment, as the
Regional Director for the state of Utah; and

WHEREAS, Bank and Employee each desire to formalize the employment relationship by entering into
this Employment Agreement;

NOW, THEREFORE, in consideration of the mutual promises set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:

AGREEMENT

	 	 	The parties agree as follows:

	1.	 	Definitions; Construction. Defined terms used in this Agreement are capitalized. The
headings of Sections in this Agreement are provided for convenience only and will not affect
its construction or interpretation. All references to “Section” or “Sections” refer to the
corresponding Section or Sections of this Agreement.
	 
	2.	 	Employment; Title. Bank hereby employs Employee, and Employee hereby accepts
employment with Bank, upon the terms and conditions set forth in this Agreement. Employee’s
title shall be “Regional Director” of Bank’s Far West Bank division (“FWB”) and of Bank in the
state of Utah.
	 
	3.	 	Term of Employment. The term of this Agreement (“Term”) is two years, commencing on
the Effective Date of the merger between Bank and Far West Bank of Provo, Utah (the “Merger”).
In the event such merger is not finally consummated, this Agreement shall not go into effect.
	 
	4.	 	Duties. Employee will report directly to the President & Chief Executive Officer
(“CEO”) of Bank, and will perform and discharge well and faithfully the duties that may be
assigned to him from time to time by the CEO in connection with the conduct of Bank’s
business. Employee will conduct himself so as to maintain and increase the goodwill and
reputation of Bank and its business and abide by all codes of ethics or other professional
duties applicable to Employee. In his capacity as Regional Director, Employee shall:

	 	(a)	 	Serve as chairman of FWB’s regional board of directors;

 

 

	 	(b)	 	Serve as a director of AmericanWest Bank;
	 
	 	(c)	 	Represent FWB at community events and with local business organizations (such
as Rotary);
	 
	 	(d)	 	Monitor integration process relating to the Merger for any adverse employee or
customer impacts;
	 
	 	(e)	 	Provide assistance to relationship managers with calling efforts on existing
and prospective customers;
	 
	 	(f)	 	Develop new business prospect leads;
	 
	 	(g)	 	Provide leadership in communicating business changes incident to the Merger and
its integration;
	 
	 	(h)	 	Serve as liaison with local shareholders of AmericanWest Bancorporation;
	 
	 	(i)	 	Assist with enhancement of FWB credit administration and underwriting, to be
consistent with Bank standards by June 30, 2008;
	 
	 	(j)	 	Undertake efforts to retain at FWB the core deposit base of Far West Bank as of
the Effective Date of the Merger;
	 
	 	(k)	 	Assist with workout efforts on problem loans;

and such other duties as may be assigned from time to time by Bank’s CEO.

	5.	 	Extent of Service. Employee shall devote 32 hours per week to the business of Bank.
The foregoing, however, shall not preclude Employee from engaging in appropriate civic,
charitable or religious activities or from devoting a reasonable amount of time to private
investments (subject to the limitations of Section 13) or from serving on the boards of
directors of other entities, as long as such activities and services do not interfere or
conflict with his responsibilities to Bank.
	 
	6.	 	Compensation.

	 	(a)	 	Salary. Employee shall be paid a base salary at the monthly rate of
$12,500, inclusive of all fees earned as a member of Bank’s Board of Directors or as a
regional board member, payable in accordance with the standard payroll procedures of
Bank but not less than monthly. Employee’s base salary may be increased annually,
taking into consideration Employee’s performance for the most recent performance period
and other relevant factors.
	 
	 	(b)	 	Incentive Programs. Employee shall be entitled to participate in any
annual and longer-term incentive programs that are adopted by Bank and that cover
senior executive officers.

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	 	(c)	 	Special First Year Incentive. Not later than 60 days following the
first anniversary of the Effective Date of this Agreement, Employee shall receive a
guaranteed incentive bonus as set forth in Exhibit “A” hereto, provided the conditions
set forth therein are met.
	 
	 	(d)	 	Expenses. Employee shall be entitled to prompt reimbursement of all
reasonable business expenses incurred by him in the performance of his duties during
the Term, subject to the timely presentment of appropriate vouchers and receipts in
accordance with Bank’s policies. Bank shall reimburse Employee for his monthly
membership dues at the Riverside Country Club as part of his expense reimbursement.
	 
	 	(e)	 	Deferred Compensation. Employee may, at his option, defer income from
all or part of his base salary and bonuses through a Deferred Compensation Plan that is
acceptable to Bank, which acceptance shall not be unreasonably withheld.

	7.	 	Employee Benefits. Employee shall be entitled to participate in employee benefit
plans or programs (including but not limited to retirement plans) of Bank, if any, to the
extent that his position, tenure, salary, age, health and other qualifications make him
eligible to participate, subject to the rules and regulations applicable thereto. In addition,
Bank shall pay Employee a car allowance of $500 per month, payable semi-monthly, as a fixed
allowance for use of his personal automobile.
	 
	8.	 	Vacation. Employee shall be entitled to vacation of four (4) weeks per year, at full
salary, at the discretion of Employee and as time allows, so long as it is reasonable and does
not jeopardize his responsibilities; provided, that at least once each year Employee
must be absent from his duties with Bank for a period of at least ten (10) consecutive
business days, all or any portion of which may be vacation leave. The length of vacation at
any one time should not exceed two (2) weeks without the approval of the CEO.
	 
	9.	 	Surety Bond. Employee agrees to furnish all information and take any other steps
necessary to enable Bank to obtain and maintain a fidelity bond conditioned on the rendering
of a true account by Employee of all moneys, goods or other property which may come into the
custody, charge or possession of Employee during the Term. The surety company issuing such
bond and the amount of the bond must be acceptable to Bank. All premiums on the bond shall be
paid by Bank. If Employee cannot personally qualify for a surety bond at any time during the
Term, Bank may terminate this Agreement immediately and such termination shall be deemed to be
a termination for Cause.
	 
	10.	 	Termination. Notwithstanding the provisions of Section 3, Employee’s employment may
be terminated without any breach of this Agreement (provided that any required payments under
Section 11 are duly made) under the following circumstances:

	 	(a)	 	Death. This Agreement shall terminate upon Employee’s death.

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	 	(b)	 	Disability. If Employee becomes Disabled, Bank may terminate Employee’s
employment hereunder by providing him written notice thereof, and such termination will
be effective upon delivery of such notice.
	 
	 	(c)	 	Resignation. Employee may terminate his employment with Bank at any
time by giving Bank two (2) months’ written notice thereof. Such termination will be
effective on the earlier of the last day of the notice period or the last day on which
Employee performs services for Bank.
	 
	 	(d)	 	Involuntary Termination Without Cause. Employee acknowledges that he
will be an at-will employee of Bank during the Term and that Bank may terminate
Employee’s employment at any time without cause by giving thirty (30) days’ written
notice thereof to Employee. Employee’s employment shall terminate effective on the last
day of the notice period or on such earlier date as Bank specifies in the notice.
	 
	 	(e)	 	Involuntary Termination for Cause. Bank may terminate Employee’s
employment for Cause by giving Employee written notice of such termination and the
reasons therefor. Employee’s employment shall terminate immediately upon receipt of the
notice.

	11.	 	Benefits on Termination of Employment. If Employee’s employment is terminated during
the Term, Employee shall be entitled to receive payments and benefits as follows:

	 	(a)	 	Death; Disability; Resignation; Termination for Cause.

          If Employee’s employment is terminated as a result of death, Disability, resignation or
termination for cause, Employee shall receive:

	 	(1)	 	his base salary through the date his employment terminates;
	 
	 	(2)	 	the pro rata portion of any incentive compensation earned but
not yet paid, which shall be calculated in the ordinary course and paid in
accordance with Bank’s standard payroll procedures; and
	 
	 	(3)	 	reimbursement of expenses described in Section 6(e) incurred
but not yet reimbursed.

As used in this section and Section 10, “Disability” and “Disabled” means that Employee has been
unable to perform the essential functions of his job under this Agreement, with or without
reasonable accommodation, for a period of three (3) consecutive months as the result of his
incapacity due to physical or mental illness.

	 	(b)	 	Termination without Cause.

	 	(1)	 	If Bank terminates Employee without cause, Employee shall
receive:

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	 	(i)	 	Continued payment, in accordance with Bank’s
standard payroll practices, of Employee’s then-current base salary from
the effective date of termination through the remainder of the Term but
not less than for a period of one (1) year;
	 
	 	(ii)	 	The pro rata portion of any incentive
compensation earned but not yet paid, which shall be calculated in the
ordinary course and paid in accordance with Bank’s standard payroll
practices; and
	 
	 	(iii)	 	Reimbursement of expenses described in Section
6(e) incurred but not yet reimbursed.

          In addition, for the three (3) calendar months following the effective date of Employee’s
termination without cause, Employee (and, where applicable, his dependents) shall be entitled to
continue participation in the group insurance plans maintained by Bank, including life, disability
and health insurance programs, as if he were still an employee of Bank. Where applicable,
Employee’s salary for purposes of such plans shall be deemed to be equal to his annual salary in
effect immediately prior to such termination. To the extent that Bank finds it not feasible to
obtain coverage for Employee under its group insurance policies during such three (3) month period,
Bank shall provide Employee with individual policies which offer at least the same level of
coverage and which impose not more than the same costs on Employee. The foregoing notwithstanding,
in the event that Employee becomes eligible for comparable group insurance coverage in connection
with new employment, Bank’s obligation to provide coverage under this paragraph shall terminate
immediately upon Employee’s eligibility for such coverage. Any group health continuation coverage
that Bank is required to offer under the Consolidated Omnibus Budget Reconciliation Act of 1986
(“COBRA”) shall commence upon Employee’s election to participate therein at such time as coverage
under this paragraph terminates, and continue for such period of time as allowed under the COBRA
regulations. Employee acknowledges that COBRA coverage will be at his own cost and expense and that
failure by him to submit timely payment of premiums therefor will result in cancellation of COBRA
coverage. Employee’s rights under other employee benefit plans in which he may have participated
will be determined in accordance with the written plan documents governing those plans.

	 	(c)	 	No Other Payments or Benefits. Except as otherwise expressly provided
in this Section 11 or as required by law, all of Employee’s employee benefits and
compensation shall cease on the last day on which he performs services as an employee
of Bank; provided, however, that those obligations assumed by Bank
pursuant to Change in Control provisions in written agreements previously entered into
between Employee and Far West Bank shall not be extinguished.

	12.	 	Proprietary Information.

	 	(a)	 	Employee agrees to comply fully with Bank’s policies relating to non-disclosure
of Bank’s trade secrets and proprietary information and processes, including
information regarding subsidiaries, affiliates, customers and prospective customers.
Without limiting the generality of the foregoing, Employee will not, whether during or
after his employment with Bank, disclose any such secrets,

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	 	 	 	information or processes to any person, firm, corporation, association or other
entity for any reason or purpose whatsoever, nor shall Employee make use of any such
property for his own purposes or for the benefit of any person, firm, corporation or
other entity (except Bank) under any circumstances during or after his employment;
provided, that after his employment ceases, this provision shall not apply
to secrets, information and processes that are then in the public domain (provided
that Employee was not responsible, directly or indirectly, for such secrets,
information or processes entering the public domain without Bank’s consent).

	 	(b)	 	Trade secrets, proprietary information, and processes shall not be deemed to
include information which is:

	 	(1)	 	publicly known (or becomes publicly known) without the fault or
negligence of Employee;
	 
	 	(2)	 	received from a third party without restriction and without
breach of this Agreement;
	 
	 	(3)	 	approved for release by written authorization of Bank; or
	 
	 	(4)	 	required to be disclosed by law; provided, however,
that in the event of a proposed disclosure pursuant to this subdivision,
Employee shall give Bank prior written notice before such disclosure is made.

	 	(c)	 	Employee agrees that in the event that Employee’s employment terminates for any
reason, Employee shall promptly deliver to Bank all property belonging to Bank,
including all keys, pass cards, identification cards and all documents, equipment and
materials of any nature pertaining to Employee’s employment with Bank. The obligations
in this paragraph include the return of documents, equipment and other materials which
may be in Employee’s desk at work, in Employee’s car or place of residence, or in any
other location under Employee’s control.

	13.	 	Noncompetition.

	 	(a)	 	Participation in a Competing Business. While Employee is employed
pursuant to this Agreement and for the longer of (i) one year following termination of
his employment for any reason or (ii) the balance of the Term remaining, if any (such
longer period of time being the “Restricted Period”), Employee will not become involved
with a Competing Business or serve, directly or indirectly, a Competing Business in any
manner, including, without limitation, as a shareholder, member, partner, director,
officer, manager, investor, organizer, “founder,” employee, consultant or agent;
provided, however, that Employee may acquire and passively own an interest not
exceeding 3% of the total equity interest in a Competing Business.

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	 	(b)	 	No Solicitation. While Employee is employed pursuant to this Agreement
and during the Restricted Period, Employee will not directly or indirectly solicit or
attempt to solicit (1) any employees of Bank to leave their employment or (2) any
customers of Bank to remove their business from Bank, or to participate in any manner
in a Competing Business.
	 
	 	(c)	 	Employment Outside Utah. Nothing in this Section shall prevent
Employee from accepting employment from a Competing Business which employment shall
take place outside the state of Utah; provided, that Employee shall comply with the
provisions of subdivision (b) of this Section 13 relating to solicitation of any
employees or customers of Bank during the Restricted Period.
	 
	 	(d)	 	Competing Business. “Competing Business” means any financial
institution or trust company (including without limitation, any start-up or other
financial institution or trust company in formation) that competes or will compete with
Bank.

	14.	 	Enforcement.

	 	(a)	 	Scope of Covenants. Bank and Employee stipulate that, in light of all
of the facts and circumstances of the relationship between Employee and Bank, the
agreements referred to in Sections 12 and 13 (including without limitation their scope,
duration and geographic extent) are fair and reasonably necessary for the protection of
Bank’s confidential information, goodwill and other protectable interests. If a court
of competent jurisdiction should decline to enforce any of those covenants and
agreements, Employee and Bank request the court to reform these provisions to restrict
Employee’s use of confidential information and Employee’s ability to compete with Bank
to the maximum extent, in time, scope of activities and geography, the court finds
enforceable.
	 
	 	(b)	 	Injunctive Relief. Employee acknowledges that Bank will suffer
immediate and irreparable harm that will not be compensable by damages alone if
Employee repudiates or breaches any of the provisions of Sections 12 or 13 or threatens
or attempts to do so. For this reason, under these circumstances, Bank, in addition to
and without limitation of any other rights, remedies or damages available to it at law
or in equity, will be entitled to obtain temporary, preliminary and permanent
injunctions in order to prevent or restrain the breach, and Bank will not be required
to post a bond as a condition for the granting of this relief.
	 
	 	(c)	 	Adequate Consideration. Employee specifically acknowledges the receipt
of adequate consideration for the covenants contained in Sections 12 and 13 and that
Bank is entitled to require him to comply with those Sections. Sections 12, 13 and this
Section 14 will survive termination of this Agreement. Employee represents that if his
employment is terminated, whether voluntarily or involuntarily, Employee has experience
and capabilities sufficient to enable Employee to obtain employment in areas which do
not violate this Agreement and that Bank’s

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	 	 	 	enforcement of a remedy by way of injunction will not prevent Employee from earning
a livelihood.

	15.	 	Miscellaneous.

	 	(a)	 	Employment Taxes. All payments made pursuant to this Agreement shall
be subject to withholding of applicable taxes.
	 
	 	(b)	 	Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered mail to Employee at
his residence address as maintained on Bank’s records, or to Bank at its executive
offices (care of the President & Chief Executive Officer), or such other address as
either party shall notify the other in accordance with the foregoing procedure.
	 
	 	(c)	 	Force Majeure. No party shall be liable to any other for any delay or
failure to perform hereunder, which delay or failure is due to causes beyond the
control of said party, including, but not limited to: acts of God; acts of the public
enemy; terrorism; acts of the United States of America, or any State, territory or
political subdivision thereof or of the District of Columbia; fires; floods; epidemics;
quarantine restrictions; strikes; or freight embargoes. Notwithstanding the foregoing
provisions of this Section 16(c), in every case the delay or failure to perform must be
beyond the control and without the fault or negligence of the party claiming excusable
delay.
	 
	 	(d)	 	Integration; Amendment. This Agreement comprises the entire agreement
and understanding between the parties as to the subject matter hereof and supersedes
all prior or contemporaneous agreements, whether written or oral, regarding Employee’s
employment with Bank and all rights, privileges and benefits related thereto. No
waiver, alteration or modification of any of the provisions of this Agreement shall be
binding unless in writing and signed by duly authorized representatives of the parties
hereto.
	 
	 	(e)	 	Waiver. Failure or delay on the part of a party hereto to enforce any
right, power or privilege hereunder shall not be deemed to constitute a waiver thereof.
Additionally, a waiver by a party of a breach of any promise hereof by the other party
shall not operate as or be construed to constitute a waiver of any subsequent breach by
such other party.
	 
	 	(f)	 	Savings Clause. If any term, covenant or condition of this Agreement
or the application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such term,
covenant or condition to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby and each term, covenant or
condition of this Agreement shall be valid and enforced to the fullest extent permitted
by law.
	 
	 	(g)	 	Authority to Contract. Bank warrants and represents that it has full
authority to enter into this Agreement and to consummate the transactions contemplated

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	 	 	 	hereby, and that this Agreement is not in conflict with any other agreement to which
Bank is a party or by which it may be bound. Bank further warrants and represents
that the individual executing this Agreement on its behalf has the full power and
authority to bind it to the terms hereof and has been authorized to do so in
accordance with its corporate organization.

	 	(h)	 	Dispute Resolution.

	 	(1)	 	Any controversy or claim between Bank and Employee arising from
or relating to this Agreement or any agreement or instrument delivered under or
in connection with this Agreement, including any alleged dispute, breach,
default or misrepresentation in connection with any of the provisions of this
Agreement, shall, at the option of Employee or Bank, be submitted to
arbitration, using either the American Arbitration Association (“AAA”) or
Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in accordance with
the rules of either JAMS or AAA (at the option of the party initiating the
arbitration) and Title 9 of the United State Code. Any such arbitration shall
take place in Spokane, Washington. All statutes of limitations or any waivers
contained herein which would otherwise be applicable shall apply to any
arbitration proceeding under this Section 16(h). The parties agree that related
arbitration proceedings may be consolidated. The arbitrator shall prepare
written reasons for the award. Judgment upon the award rendered may be entered
in any court having jurisdiction.
	 
	 	(2)	 	If any arbitration, legal action or other proceeding is brought
for the enforcement of this Agreement or any agreement or instrument delivered
under or in connection with this Agreement, or because of an alleged dispute,
breach, default or misrepresentation in connection with any of the provisions
of this Agreement, the successful or prevailing party shall be entitled to
recover reasonable attorneys’ fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it may be entitled.

	 	(i)	 	Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
	 
	 	(j)	 	Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one and
the same instrument.
	 
	 	(k)	 	Advice of Counsel. Before signing this Agreement, Employee either (i)
consulted with and obtained advice from his independent legal counsel in respect to the
legal nature and operation of this Agreement, including its impact on his rights,
privileges and obligations, or (ii) freely and voluntarily decided not to have the
benefit of such consultation and advice with legal counsel.

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

	 	 	 	 	 
	EMPLOYEE
	 
	 	 	 	 
	By

	 	/s/
	 	H. Don Norton
	 	 	 
	 

	 	 	 	H. Don Norton
	 
	 	 	 	 
	AMERICANWEST BANK
	 
	 	 	 	 
	By

	 	/s/
	 	Robert M. Daugherty
	 	 	 
	 

	 	 	 	Robert M. Daugherty
	 

	 	 	 	President and Chief Executive Officer

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EXHIBIT “A”

Incentive Bonus

Employee shall be entitled to receive, not later than 60 days following the first anniversary (the
“Anniversary Date”) of the Effective Date of this Agreement, the following incentive bonuses
provided that the condition(s) relating to each such bonus are met:

	1.	 	$20,000, provided that the average Quarter-End Figures (defined for purposes of this Exhibit
“A” as the totals as of March 31, June 30, September 30 and December 31) over the 12 calendar
month period immediately following the Effective Date of the merger of Far West Bank with and
into Bank (the “Merger”) for core deposits of the Far West Bank division (the “FWB Division”)
of AmericanWest Bank, divided in each case by the core deposits of Far West Bank immediately
prior to the Merger, equals or exceeds 97%.
	 
	2.	 	$20,000, provided that the average Quarter-End Figures for the FWB Division over the 12
calendar month period immediately following the Effective Date of the Merger for the quotient
of net loan charge-offs to total loans for each calendar month is less than 30 basis points.
	 
	3.	 	$20,000, provided that the average Quarter-End Figures for the FWB Division over the 12
calendar month period immediately following the Effective Date of the Merger for the quotient
of nonperforming assets to total loans for each calendar month is less than 40 basis points.
	 
	4.	 	$20,000, provided that the average Quarter-End Figures for the FWB Division over the 12
calendar month period immediately following the Effective Date of the Merger for the quotient
of Loan Delinquencies to total loans for each calendar month is less than 50 basis points.
	 
	5.	 	$20,000, provided that the average Quarter-End Figures for the FWB Division over the 12
calendar month period immediately following the Effective Date of the Merger for the quotient
of credits graded at Sub-Standard or worse to total loans for each calendar month is less than
3%.

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Exhibit 4.1

VOTING AGREEMENT

      This Voting Agreement, dated as of October 18, 2006 (this “Agreement”), is by and
among Vertical Communications, Inc., a Delaware corporation (“Vertical”), and the other
Persons listed on the signatures pages hereto (each a “Stockholder” and collectively, the
“Stockholders”).

W I T N E S S E T H

      WHEREAS, as of the date hereof, each Stockholder owns beneficially the number of shares of
common stock of Vodavi Technology, Inc., a Delaware corporation (the “Company”) set forth
opposite such Stockholder’s name on Schedule I hereto (all shares so owned and which may
hereafter be acquired by each Stockholder prior to the termination of this Agreement, whether upon
the exercise of options, conversion of convertible securities, exercise of warrants or by means of
purchase, dividend, distribution or otherwise, being referred to herein with respect to each
Stockholder as the “Stockholder Shares”); and

      WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Company is
entering into an Agreement and Plan of Merger, dated as of the date hereof (as such agreement may
hereafter be amended from time to time, the “Merger Agreement”), along with Vertical, and
Vertical Acquisition Sub Inc., a Delaware corporation and a wholly owned subsidiary of Vertical
(“Sub”), which provides for, upon the terms and subject to the conditions set forth
therein, the merger of Sub with and into the Company (the “Merger”); and

      WHEREAS, pursuant to the Merger Agreement, the Company has agreed to call a special meeting of
its stockholders for the purpose of seeking approval of the Company’s stockholders to consummate
the transactions contemplated by the Merger Agreement (the “Proposal”); and

      WHEREAS, in consideration of Vertical entering into the Merger Agreement and incurring certain
related fees and expenses relating to the Merger, the Stockholders have agreed to enter into this
Agreement.

      NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, the Company and the Stockholders hereby
agree as follows:

ARTICLE I.

VOTING OF SHARES; AND OTHER COVENANTS OF THE STOCKHOLDERS

      SECTION 1.1. Voting of Shares. From the date hereof until termination of this
Agreement pursuant to Section 3.2 hereof (the “Term”), at any meeting of the stockholders
of the Company called to vote on the Proposal or at any adjournment or postponement thereof, and in
any action by consent of the stockholders of the Company with respect to which approval of the
Proposal is sought, each Stockholder shall (A) appear at such meeting or otherwise cause its
Stockholder Shares to be counted as present thereat for purposes of establishing a quorum and

 

 

(B) vote (or cause to be voted) its Stockholder Shares in favor of the Proposal and such other
matters as may be necessary or advisable to consummate the transactions contemplated by the Merger
Agreement.

      SECTION 1.2. No Inconsistent Arrangements. Except as contemplated by this Agreement,
no Stockholder shall during the Term (i) grant any proxy, power-of-attorney or other authorization
in or with respect to its Stockholder Shares which is inconsistent with the terms hereof, (ii)
deposit its Stockholder Shares into a voting trust or enter into a voting agreement or arrangement
with respect to its Stockholder Shares, (iii) sell, transfer, pledge or encumber, assign or
otherwise dispose of or enforce or permit the execution of the provisions of any redemption, share
purchase or sale, recapitalization or other agreement with the Company or enter into any contract,
option or other arrangement or understanding with respect to the offer for sale, sale, transfer,
pledge, encumbrance, assignment or other disposition of any of the Stockholder Shares except to a
person who agrees in writing to be bound by the terms and conditions of this Agreement as a
Stockholder or (iv) take any other action that would in any way restrict, limit or interfere with
the performance of its obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.

      SECTION 1.3. Disclosure. Each Stockholder hereby authorizes Vertical and/or the
Company to publish and disclose in any filing with the SEC, including any proxy statement relating
to the approval of the Merger Agreement by the Company’s stockholders (including all exhibits and
schedules filed with the SEC), its identity and ownership of its Stockholder Shares and the nature
of its commitments, arrangements and understandings under this Agreement.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS

      Each Stockholder severally hereby represents and warrants as follows:

      SECTION 2.1. Authority. The Stockholder has all requisite power and authority to
execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the part of the
Stockholder. This Agreement has been duly executed and delivered by or on behalf of the
Stockholder and constitutes a legal, valid and binding obligation of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws and except that the availability of
equitable remedies, including specific performance, is subject to the discretion of the court
before which any proceeding for such remedy may be brought.

      SECTION 2.2. Required Filings and Consents. The execution and delivery of this
Agreement by the Stockholder does not, and the performance of this Agreement by the Stockholder
will not, require any consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority (other than any necessary filing under the Exchange
Act), domestic or foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not prevent

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or delay the performance by the Stockholder of the Stockholder’s obligations under this
Agreement.

      SECTION 2.3. Ownership of Shares. The Stockholder is the record and beneficial owner
of the Shares set forth opposite its name on Schedule I hereto. On the date hereof, such
Shares constitute all of the Shares owned of record or beneficially by such Stockholder.

      SECTION 2.4. Each Stockholder understands and acknowledges that Vertical is entering into the
Merger Agreement in reliance upon such Stockholder’s execution and delivery of this Agreement.

ARTICLE III.

MISCELLANEOUS

      SECTION 3.1. Definitions. Terms used but not otherwise defined in this Agreement
have the meanings ascribed to such terms in the Merger Agreement.

      SECTION 3.2. Termination. This Agreement shall terminate and be of no further force
and effect (i) by the written mutual consent of all of the parties hereto, (ii) upon the approval
of the Proposal by the Company’s stockholders at a meeting duly called and held for such purpose at
which a quorum was present and acting throughout, or (iii) automatically and without any required
action of the parties hereto upon termination of the Merger Agreement in accordance with its terms.
No such termination of this Agreement shall relieve any party hereto from any liability for any
breach of this Agreement prior to termination.

      SECTION 3.3. Further Assurance. From time to time, at another party’s request and
without consideration, each party hereto shall execute and deliver such additional documents and
take all such further action as may be necessary or desirable to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this Agreement.

      SECTION 3.4. No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect hereof at law or in
equity, or to insist upon compliance by any other party hereto with its obligations hereunder, or
any custom or practice of the parties at variance with the terms hereof shall not constitute a
waiver by such party of its right to exercise any such right, power or remedy or to demand such
compliance.

      SECTION 3.5. Specific Performance. Each Stockholder acknowledges that if such
Stockholder fails to perform any of its obligations under this Agreement, immediate and irreparable
harm or injury would be caused to the Company for which money damages would not be an adequate
remedy. In such event, each such Stockholder agrees that the Company shall have the right, in
addition to any other rights it may have, to specific performance of this Agreement. Accordingly,
should the Company institute an action or proceeding seeking specific enforcement of the provisions
hereof, each Stockholder hereby waives the claim or defense that

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the Company has an adequate remedy at law and hereby agrees not to assert in any such action
or proceeding the claim or defense that such a remedy at law exists.

      SECTION 3.6. Notice. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made (i) as of the date
delivered or sent by facsimile if delivered personally or by facsimile, and (ii) on the third
business day after deposit in the U.S. mail, if mailed by registered or certified mail (postage
prepaid, return receipt requested), in each case to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice, except that notices of changes
of address shall be effective upon receipt):

	 	 	 	 	 
	 

	 	(a)
	 	If to Vertical:
	 
	 	 	 	 
	 

	 	 	 	Vertical Communications, Inc.
	 

	 	 	 	One Memorial Drive
	 

	 	 	 	Cambridge, Massachusetts 02142
	 

	 	 	 	Attn: William Y. Tauscher
	 
	 	 	 	 
	 

	 	 	 	With a copy to:
	 
	 	 	 	 
	 

	 	 	 	Andrews Kurth LLP
	 

	 	 	 	1717 Main Street, Suite 3700
	 

	 	 	 	Dallas, TX 75201
	 

	 	 	 	Attn: Victor B. Zanetti, Esq.

      (b) If to a Stockholder, at the address set forth below each Stockholder’s name on
Schedule I hereto.

      SECTION 3.7. Expenses. All fees, costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the Company, including,
without limitation, the fees, costs and expenses incurred by the Stockholders.

      SECTION 3.8. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

      SECTION 3.9. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions contemplated hereby is not affected in
any manner adverse to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as possible
in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the
maximum extent possible.

-4-

 

      SECTION 3.10. Entire Agreement; Third-Party Beneficiaries. This Agreement
constitutes the entire agreement and supersedes any and all other prior agreements and
undertakings, both written and oral, among the parties, or any of them, with respect to the subject
matter hereof, and this Agreement is not intended to confer upon any other person any rights or
remedies hereunder.

      SECTION 3.11. Assignment. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement shall be assigned, in whole or in part, by operation of law or
otherwise.

      SECTION 3.12. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial. This
Agreement shall be governed by, and construed in accordance with, the internal laws of the State of
Delaware without regard to the choice of law principles thereof. Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the courts of the State of Delaware located in
New Castle County and the United States District Court for the District of Delaware for the purpose
of any suit, action, proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or proceeding and to the
laying of venue in such court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.

      SECTION 3.13. Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of Vertical and each of the Stockholders.

      SECTION 3.14. Waiver. Any agreement on the part of a party hereto to any extension
of time for the performance of any of the obligations or other acts of the other parties hereto or
waiver of any inaccuracies in the representations and warranties of the other parties hereto
contained herein or in any document delivered pursuant hereto or compliance by the other parties
hereto with any of their agreements or conditions contained herein shall be valid only as against
such party and only if set forth in an instrument in writing signed by such party. The failure of
any party hereto to assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of those rights.

      SECTION 3.15. Descriptive Headings; Interpretation. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part of or to affect the
meaning or interpretation of this Agreement.

      SECTION 3.16. Counterparts. This Agreement may be executed (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto in

-5-

 

separate counterparts, each of which when executed shall be deemed to be an original but all
of which shall constitute one and the same agreement.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-6-

 

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

	 	 	 	 	 	 	 
	 	 	VERTICAL COMMUNICATIONS, INC.
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ ken clinebell
	 

	 	 	 	Name:
	 	Ken Clinebell
	 

	 	 	 	 	 	 
	 

	 	 	 	Title:
	 	CFO
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	STOCKHOLDERS
	 
	 	 	 	 	 	 
	 	 	HUMMINGBIRD MANAGEMENT LLC
	 
	 	 	 	 	 	 
	 	 	By:	 	/s/ paul d. sonkin
	 	 	 	 	 
	 

	 	 	 	Name:
	 	Paul D. Sonkin
	 

	 	 	 	Title:
	 	Managing Member
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ gregory k. roeper
	 	 	 
	 	 	Gregory K. Roeper
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ david a. husband
	 	 	 
	 	 	David A. Husband

 

 

Schedule I

	 	 	 
	 

	 	Number of Shares
	Name and Address of Stockholder

	 	Beneficially Owned
	 
	Hummingbird Management LLC

	 	504,601(1) 
	460 Park Avenue, 12th Floor
	 	 
	New York, NY 10022
	 	 
	Attention: Paul D. Sonkin, Managing Member
	 	 
	 
	Gregory K. Roeper

	 	10,725 
	c/o Vodavi Technology, Inc.
	 	 
	4717 E. Hilton Ave.
	 	 
	Suite 400
	 	 
	Phoenix, AZ 85034-6402
	 	 
	 
	David A. Husband

	 	19,850 
	c/o Vodavi Technology, Inc.
	 	 
	4717 E. Hilton Ave.
	 	 
	Suite 400
	 	 
	Phoenix, AZ 85034-6402
	 	 

	 	 	 
	 

(1) Amounts listed for Hummingbird Management LLC represent 505,414 shares of common stock
beneficially owned by Hummingbird Management LLC (f/k/a Morningside Value Investors, LLC), as
investment manager to The Hummingbird Value Fund, L.P. The managing member of Hummingbird
Management is Paul D. Sonkin, who also serves as the managing member of HFV Capital, the general
partner of The Hummingbird Value Fund and The Hummingbird Microcap Value Fund. Hummingbird
Management LLC has sole voting and dispositive power over the shares, and Hummingbird Management
LLC disclaims any economic interest or beneficial ownership of the shares. In addition to the
amounts listed for Hummingbird Management LLC, Mr. Sonkin’s beneficial ownership, for which Mr.
Sonkin has sole voting and dispositive power, includes 15,000 shares issuable upon exercise of
options, which is not included in the beneficial ownership of Hummingbird Management LLC.

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