8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of report (Date of earliest event reported): May 18, 2007

INTER-TEL (DELAWARE), INCORPORATED

(Exact Name of Registrant as Specified in Charter)

Delaware	0-10211	86-0220994
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1615 S. 52nd Street Tempe, Arizona	85281
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (480) 449-8900

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

x Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01. Other Events.

As previously disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2007, the Company and certain members of the Company’s board of directors (the “Board of Directors”) are defendants in a stockholder class action suit (the “Delaware Stockholder Action”) filed on June 15, 2006 entitled Mercier v. Inter-Tel (Delaware), Inc., et al., No. 2226-VCS, in the Court of Chancery of the State of Delaware. On March 27, 2007, plaintiff filed a Second Amended Complaint (the “SAC”). Plaintiff alleges that the defendants breached their fiduciary duties by seeking to entrench themselves in office through a number of activities including alleged failure to pursue a “value maximizing plan” for the stockholders. Plaintiff also objects to the defendants’ approval of a proposal for a business combination charter amendment (“BCCA”), designed to protect against certain takeover related abuses and similar in some respects to Section 203 of the Delaware General Corporation Law. Plaintiff asks that the Court delete the BCCA from the Company’s certificate of incorporation on the grounds that the BCCA, despite its approval by stockholders on May 31, 2006, is not identical to Section 203 of the Delaware General Corporation Law, and therefore, violates the Delaware General Corporation Law.

Plaintiff further asks the Court to delete a provision from the Company’s certificate of incorporation requiring unanimous written consent of stockholders for action taken without a stockholders meeting (“Consent Provision”), despite the promise to stockholders that this Consent Provision would be effective for the Company after its reincorporation in Delaware just as it was for its Arizona predecessor. Plaintiff alleges that the defendants’ decision to add the Consent Provision to the Company’s certificate of incorporation, where it is required by the Delaware General Corporation Law to be effective, and delete it from the Company’s bylaws (where it was ineffective), was improper because it was done after stockholders’ approval of the reincorporation documents.

Plaintiff further alleges that the defendants improperly changed the Company common stock, after stockholders’ approval of the reincorporation documents, from no par value to a par value of $.001, despite that the only material difference in the change is that it saved the Company and its stockholders an otherwise unnecessary filing fee of approximately $400,000. Finally, plaintiff alleges, among other claims, that the entire reincorporation is invalid under Arizona and Delaware law, because of an allegedly defective reincorporation process.

The SAC seeks an injunction enjoining the defendants from failing to maximize value for the Company stockholders. The SAC further seeks a declaration that the defendants violated their fiduciary duties by adoption of defensive measures, failure to maximize value for stockholders and failure to disclose all material facts. The SAC further seeks a declaration that the BCCA, the Consent Provision, par value change and the reincorporation itself are invalid. The SAC also requests attorneys’ fees and costs, and damages in an unspecified amount. On May 11, 2007, the Company filed a motion to dismiss the claims alleged in the SAC.

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On May 18, 2008, plaintiff filed a proposed supplement to the SAC alleging that the defendants breached their fiduciary duties because they failed to properly pursue a higher bid for sale of the Company from Steven G. Mihaylo, Vector Capital Corporation and other potential financial buyers. Plaintiff further alleges that the price of $25.60 agreed to by the Company in the proposed merger with Mitel Networks Corporation (the “Merger”), as previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on April 27, 2007, is inadequate and that the defendants’ support of the proposed merger with Mitel Networks Corporation at this price is at odds with positions they took in opposing the $23.25 offer by Mr. Mihaylo and Vector Capital Corporation as too low. Plaintiff further alleges, among other claims, that the defendants breached their fiduciary duties by not including in the merger agreement provisions reflecting plaintiff’s allegations in his SAC. The proposed supplement to the SAC seeks an injunction prohibiting the Company from consummating the Merger and against the enforcement of the no solicitation and termination fee provisions contained in the merger agreement. It further seeks an order requiring the defendants to conduct an auction of the Company open to Mr. Mihaylo, Vector Capital Corporation, and all other potentially interested bidders. It further seeks an injunction against enforcement of the BCCA or, alternatively, a declaration that Mitel Networks Corporation is an interested stockholder under the BCCA and that the Merger cannot be consummated because the required vote cannot be obtained. Finally, it seeks a declaration that representations and covenants in the merger agreement are invalid, and damages in an unspecified amount.

On May 24, 2006, plaintiff filed motions seeking a preliminary injunction and summary judgment on the claims in the SAC. No briefing or hearing dates have been set for plaintiff’s motions.

The Company believes that all of plaintiff’s claims in the Delaware Stockholder Action are without merit, and intends to vigorously defend against them.

The Company has also recently been made a party to certain litigation in Arizona state court relating to the proposed Merger with Mitel Networks Corporation. On April 30, 2007, two shareholder class action lawsuits were filed in the Superior Court of the State of Arizona, County of Maricopa, against the Company and the Board of Directors. The cases are captioned Joel Gerber v. Inter-Tel Incorporated, et al., Case No. CV2007-007444 (the “Gerber Action”) and Farr v. Inter-Tel, Inc., et al., Case No. CV2007-007655 (the “Farr Action”). An additional shareholder class action lawsuit was filed against the Company and the Board of Directors on May 22, 2007. The case is captioned Suan Investments, Inc. v. Stout, et al., Case No. CV2007-009063 (the “Suan Action” and collectively with the Gerber Action and the Farr Action, the “Arizona Shareholder Actions”).

The complaint in the Gerber Action alleges, inter alia, that the Board of Directors breached their fiduciary duties of loyalty and due care in connection with the Merger by purportedly standing on both sides of the transaction, engaging in self-dealing, obtaining unspecified personal benefits and approving the Merger without regard to the fairness of the transaction to the Company stockholders. The complaint further alleges that the proposed Merger is a product of a flawed process that was not designed to ensure the sale of the Company for the highest value. According to the complaint, as a result of defendants’ self-dealing, their divided loyalties and the flawed process, the Company stockholders will not receive adequate or fair value for their stock in the Merger transaction. The complaint seeks an injunction prohibiting the Company from consummating the Merger as well as attorneys’ fees and costs.

Similarly, the complaint in the Farr Action alleges that the Board of Directors breached their fiduciary duties of loyalty, due care and candor in connection with the Merger by approving the Merger without regard to the fairness of the transaction to the Company stockholders. The complaint further alleges that defendants violated their fiduciary duties by failing to take steps to maximize the value of the Company to its stockholders, to properly value the Company, to protect against conflicts of interest purportedly resulting from the directors’ interrelationships

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with the Merger, and to disclose all material information that would permit the Company’s stockholders to cast a fully informed vote on the transaction. The complaint seeks an injunction prohibiting the Company from consummating the Merger and, to the extent consummated, rescission of the Merger and any of the terms of the merger agreement, as well as the imposition of a constructive trust for improper benefits allegedly received by defendants. The complaint also requests attorneys’ fees and costs.

The complaint in the Suan Action alleges, inter alia, that the Board of Directors breached their fiduciary duties of loyalty and due care in connection with the Merger by purportedly failing to take the necessary steps to ensure that the stockholders receive maximum value for their shares of the Company stock, including conducting an active auction or an open bidding process. As a result, the complaint claims that stockholders are deprived of a fair and adequate price for their shares. According to the complaint, the individual defendants also breached their fiduciary duties by failing to exercise independent business judgment and engaging in self-dealing through its proposal to sell the Company for material personal benefits. The complaint further alleges that the defendants imprudently accepted and relied upon advice as to the fairness of the consideration for the Merger from a financial advisor with conflicted interests. Finally, plaintiff asserts claims for conspiracy and aiding and abetting based on the same substantive allegations. The complaint seeks an injunction prohibiting the Company from consummating the Merger, rights of rescission against the merger agreement, an accounting for plaintiff’s alleged damages, and attorneys’ fees and costs.

The Company believes that the claims asserted in the Arizona Shareholder Actions are without merit and intends to vigorously defend against all such claims.

The SAC and supplement to SAC relating to the Delaware Stockholder Action and the complaints relating to the Arizona Shareholder Actions described above are attached as Exhibits 99.1, 99.2, 99.3, 99.4 and 99.5 hereto and are incorporated into this Item 8.01 by this reference.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit	Description
99.1	Second Amended Complaint, Mercier v. Inter-Tel (Delaware), Incorporated, Del. Ch., C.A. No. 2226-VCS, March 27, 2007.
99.2	Exhibit A to Motion for Leave to Supplement the Second Amended Complaint, May 18, 2007.
99.3	Class Action Complaint (Breach of Fiduciary Duty), Joel Gerber v. Inter-Tel Incorporated, et al., Case No. CV2007-007444, April 30, 2007.
99.4	Shareholder Class Complaint for Breach of Fiduciary Duty, Farr v. Inter-Tel, Inc., et al., Case No. CV2007-007655, April 30, 2007.
99.5	Class Action Complaint, Suan Investments, Inc. v. Stout, et al., Case No. CV2007-009063, May 22, 2007.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	INTER-TEL (DELAWARE), INCORPORATED
Date: May 24, 2007	By:	/s/ Kurt R. Kneip
	Name:	Kurt R. Kneip
	Title:	Chief Financial Officer

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EXHIBIT INDEX

Exhibit	Description
99.1	Second Amended Complaint, Mercier v. Inter-Tel (Delaware), Incorporated, Del. Ch., C.A. No. 2226-VCS, March 27, 2007.
99.2	Exhibit A to Motion for Leave to Supplement the Second Amended Complaint, May 18, 2007.
99.3	Class Action Complaint (Breach of Fiduciary Duty), Joel Gerber v. Inter-Tel Incorporated, et al., Case No. CV2007-007444, April 30, 2007.
99.4	Shareholder Class Complaint for Breach of Fiduciary Duty, Farr v. Inter-Tel, Inc., et al., Case No. CV2007-007655, April 30, 2007.
99.5	Class Action Complaint, Suan Investments, Inc. v. Stout, et al., Case No. CV2007-009063, May 22, 2007.

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EX-99.1

Exhibit 99.1

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

VERNON A. MERCIER	)
	)
Plaintiff,	)
	)
v.	)	Civil Action No. 2226-VCS
	)
INTER-TEL (DELAWARE), INCORPORATED, NORMAN STOUT, ALEXANDER CAPPELLO, J. ROBERT ANDERSON, JERRY W. CHAPMAN, GARY D. EDENS, STEVEN E. KAROL, ROBERT RODIN and AGNIESZKA WINKLER,	) ) ) ) )
	)
Defendants.	)

SECOND AMENDED COMPLAINT

NATURE OF THE ACTION

1. Plaintiff brings this action individually and as a class action on behalf of the public holders of common stock of Inter-Tel (Delaware), Incorporated (“Inter-Tel Delaware”), a Delaware corporation. Inter-Tel Delaware was the surviving corporation and successor to Inter-Tel, Incorporated, an Arizona corporation (“Inter-Tel Arizona”) in a redomestication merger pursuant to 8 Del. C. § 252 (the “Reincorporation”). However, this Reincorporation, which purportedly occurred on June 28, 2006, was not accomplished in compliance with the Delaware General Corporation Law (“DGCL”) or the merger statutes of Arizona. Defendants concealed the invalidity of the Reincorporation and have conducted Inter-Tel as a public Delaware corporation for over eight months. Defendants claim that in the Reincorporation the shares of Inter-Tel Arizona common stock were converted into shares of Inter-Tel Delaware common stock with a par value of $0.001 per share. However, the merger agreement approved by the shareholders provided that the merger consideration would be no-par value stock of Inter-Tel Delaware. Plaintiff asks the Court to declare the Reincorporation invalid, to grant such

rescissory and other equitable relief as possible, to invalidate the additional defensive measures implemented in connection with the Reincorporation and to award plaintiff and the class damages for the conversion of their Inter-Tel shares in an invalid merger.

2. At Inter-Tel Arizona’s May 31, 2006 annual meting of shareholders (the “Annual Meeting”), the defendants presented both the Reincorporation and a resolution to authorize the Inter-Tel board to include in Inter-Tel Delaware’s Certificate of Incorporation (the “Delaware Certificate”) a provision prohibiting business combinations with any holder of more than 15% of Inter-Tel’s stock (the “§ 203 Provision”). This provision conflicts with and is contrary to 8 Del. C. § 203 and other sections of the DGCL and the common law and public policy of Delaware. The § 203 Provision is also invalid because of the invalidity of the Reincorporation. Furthermore, the defendants breached their fiduciary duties by determining to include this provision in the Delaware Certificate. Moreover, the defendants lacked the authority to make that determination on behalf of the Inter-Tel Arizona board. Any purported approval of the “special resolution” relating to the § 203 Provision by holders of Inter-Tel Arizona stock is also invalid because of defendants’ misleading and incomplete disclosure.

3. Plaintiff seeks a declaration that a provision of Inter-Tel Delaware’s by-laws requiring unanimous stockholder approval to act by consent (the “Consent By-Law”) violated 8 Del. C. § 228 and Delaware’s public policy.¹ Plaintiff also seeks to invalidate, as contrary to the statutorily required agreement and plan of merger and 8 Del. C. §§ 251(d) and 252, a provision defendants secretly added to the Delaware Certificate after the vote of the Inter-Tel Arizona stockholders on the Reincorporation purporting to require unanimous stockholder approval to act by consent (the “Consent Provision”). Defendants were without authority to make the

¹ As discussed below, defendants on March 6, 2007 adopted restated by-laws which, inter alia, deleted the Consent By-Law.

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determination to place the Consent Provision in the Delaware Certificate and breached their fiduciary duties by their unilateral addition of that provision to the Delaware Certificate. The Consent Provision is also invalid because of the invalidity of the Reincorporation.

4. The change in the merger consideration from no par value common stock of Inter-Tel Delaware to $0,001 par value after the Inter-Tel Arizona stockholders had voted on the Reincorporation violated the agreement and plan of merger and 8 Del. C. §§ 251(d) and 252. Moreover, that change was not authorized by the Inter-Tel Arizona board. Plaintiff also seeks such rescissory and equitable relief as is practicable and damages for conversion.

5. Plaintiff asks for injunctive, rescissory and other equitable relief against the individual defendants’ continuing breach of their fiduciary duty from their adoption and maintenance of preclusive defensive measures adopted for the primary purpose of entrenching themselves in office. Defendants have also disenfranchised Inter-Tel’s stockholders by secretly creating a “Special Committee” and using that committee and other board committees comprised of the defendants to conduct virtually all business of the Board, thereby excluding three duly elected directors. Indeed, the defendants seek to prevent such directors from even seeing minutes of the committee meetings.

THE PARTIES

6. Plaintiff is a holder of common stock of Inter-Tel Delaware. As a result of the invalid redomestication merger, his shares of Inter-Tel Arizona common stock were purportedly converted into shares of the common stock of Inter-Tel Delaware with a par value of $0.001.

7. Inter-Tel is a telecommunications company based in Tempe, Arizona. Inter-Tel Arizona’s common stock was, and Inter-Tel Delaware’s stock now is, listed on the national NASDAQ market under the symbol “INTL.” As of March 22, 2006, which was the record date

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for the 2006 Annual Meeting, Inter-Tel Arizona had 26,386,651 shares of common stock issued and outstanding. As of June 28, 2006, the date of the invalid redomestication merger, Inter-Tel Arizona had 26,589,631 shares of common stock issued and outstanding, which were purportedly converted into $0,001 par value shares of Inter-Tel Delaware common stock in the redomestication merger. Stockholders of Inter-Tel are entitled to exercise cumulative voting in the election of directors.

8. Defendant Norman Stout was purportedly appointed Chief Executive Officer and a member of Inter-Tel’s Board of Directors on February 22, 2006. However, defendants have produced no board minutes or written consent showing that the board took any action on February 22, 2006. Though he has been a director and/or officer of Inter-Tel for approximately 12 years, Stout owns only a minimal amount of Inter-Tel common stock.

9. Defendants Steven E. Karol and Robert Rodin were also purportedly appointed directors by the Inter-Tel Board in February 2006. However, defendants have not produced any evidence of such appointments.

10. Defendants Alexander Cappello and Agnieszka Winkler were elected to the Inter-Tel Board at the 2005 Annual Meeting. The other individual defendants joined the Board in the mid to late 1990s: J. Robert Anderson (1997); Jerry W. Chapman (1999); Gary D. Edens (1994). The individual defendants own only minimal amounts of Inter-Tel common stock, primarily in the form of options they granted to themselves as directors. The outside directors who were then on the Board received the following amounts of compensation during the fiscal year ended December 31, 2005: Cappello ($74,000); Anderson ($86,500); Chapman ($95,000); Edens ($82,000); and Winkler ($67,500). For their contributions to Inter-Tel’s defensive measures

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during 2006, defendant Cappello received a special director’s fee of an additional $100,000, and defendant Karol received a special director’s fee of an additional $50,000.

MIHAYLO RESIGNATIONS

11. Steven G. Mihaylo, the founder of Inter-Tel, served as the Company’s Chief Executive Officer from its formation in July 1969 until his forced resignation on February 22, 2006. In February 2006, defendant Cappello, as Chairman of the Inter-Tel Board, informed Mr. Mihaylo that the Board was requesting his resignation as Chief Executive Officer and would vote to terminate his employment as Chief Executive Officer without cause if he did not resign. Mr. Mihaylo resigned as CEO on February 22, 2006. He resigned from the Board of Directors on March 6, 2006.

12. Mihaylo is the owner of approximately 19.6% of the outstanding stock of Inter-Tel. On March 6, 2006, Mr. Mihaylo filed a 13-D with the SEC in which he indicated he was considering alternatives and that he had engaged legal counsel and a financial advisor.

THE REINCORPORATION PLAN

13. Even before Mihaylo’s departure as CEO, the defendants had begun considering numerous defensive measures designed to entrench themselves in office. As early as February 17, 2006, counsel had provided Inter-Tel’s Nominating and Corporate Governance Committee (“Governance Committee”) with a ten-page memorandum recommending reincorporation in Delaware and numerous defensive measures, including a certificate provision eliminating stockholder action by written consents. The memorandum described a certificate provision preventing action by consent as a “necessary adjunct” to preventing stockholders from calling special meetings. The combined effect “would mean that the ability of stockholders to hold a

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referendum on the direction of the Delaware Corporation would be limited to once a year (i.e. at the annual meeting).”

14. As of February 19, 2006, counsel had drafted proposed resolutions to delegate broad powers of the board to the Governance Committee, which is also referred to in the resolutions as “the Proxy Contest Committee.” These resolutions were purportedly to give the committee “the necessary authority to act in relationship to Steve should he start a proxy battle.” These resolutions were circulated to Inter-Tel Arizona’s five other directors on February 20, 2006, but were not provided to Mihaylo until the February 21, 2006 board meeting.

15. At a February 28, 2006 meeting, the Governance Committee determined to recommend to the Board that Inter-Tel incorporate in Delaware. In considering reincorporation, the Inter-Tel Board and various board committees reviewed the certificate of incorporation and by-laws of Inter-Tel Delaware numerous times. In each version, the Delaware Certificate did not contain a provision requiring unanimous stockholder consent and the Delaware Bylaws did contain such a provision. From the February 27, 2006 draft first provided to Inter-Tel directors to the Delaware Certificate as attached to the 4 preliminary and definitive proxy statements Inter-Tel filed with the SEC and to the Delaware Certificate that counsel submitted for execution and filing on May 31, 2006 and again on June 7, 2006, the Delaware Certificate never contained a unanimous consent requirement. In each of these many instances, the Delaware Bylaws did contain a unanimous consent requirement.

16. In counsel’s February 17, 2006 memorandum, it was recognized that under the SEC rules governing ‘“unbundling” of proposals, modifications of the Company’s corporate governance structure that did not “automatically flow” from application of Delaware law would require a separate stockholder vote on each such modification. Among “the corporate

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governance modifications” which counsel for the Governance Committee identified would not automatically flow from the change to Delaware law was a charter provision eliminating the right to act by consent. Counsel for the Governance Committee acknowledged in a memorandum to the defendants that unanimous written consent “is virtually impossible to be obtained with a public company, of course.” In a February 26, 2006 memo among counsel, it was recognized that requiring unaniminity for stockholder consent “is the same as abolishing it.”

17. A March 5, 2006 memorandum of counsel transmitted to the Inter-Tel directors indicated that the Governance Committee was recommending that the reincorporation “make no substantive changes in the current charter and Bylaws of the Company other than those modifications required by Delaware law.” In discussing “Limits on Stockholder Action” counsel stated:

The Company’s bylaws currently allow shareholders to act by written consent if such consent is unanimous… The Committee is proposing not to change these provisions as well.²

18. In a March 10, 2006 memorandum to the directors, counsel for Inter-Tel stated:

The draft Certificate and Bylaws were drafted to maintain as closely as possible the substance of the Company’s current Arizona charter documents such that the only significant difference in the governance of the Company would be the overarching application of Delaware law.

19. Attached to this memorandum as Exhibit C was counsel’s summary of the differences between Arizona and Delaware corporate law. The portion on consents stated:

Actions by Written Consent of Shareholders. Under Arizona Law and Delaware Law, shareholders may execute an action by written consent in lieu of a shareholder meeting. Arizona law provides that action by written consent is permitted so long as all of the shares outstanding and entitled to vote on the matter provide consent in writing. Delaware Law permits a corporation to

² Id. at INTL 1154-55.

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eliminate actions by written consent in its certificate of incorporation.

Both the Arizona Bylaws and Delaware Bylaws provide that written consent is permitted if signed by the holders of all of the shares of outstanding stock entitled to vote with respect to the subject matter of the action. (Emphasis added.)

20. At a March 16, 2006 meeting, the Inter-Tel board discussed the Delaware Certificate and Delaware Bylaws acknowledging “the goal to maintain as closely as possible the substance of the Company’s current Arizona charter documents.”

21. The resolutions concerning the Reincorporation adopted by the board on March 16, 2006 included:

RESOLVED FURTHER: That the Certificate of Incorporation and Bylaws of the Delaware Company, in the form attached hereto as Exhibit A and Exhibit B, respectively, are hereby approved.

RESOLVED FURTHER: That, following the approval of the shareholders and upon direction of the Board, the officers of the Company are hereby authorized, directed and empowered to effect the Reincorporation upon such terms and conditions as are set forth in a form of Agreement of Merger and Reincorporation (the “Merger Agreement”), to be prepared by counsel to the Company, pursuant to which at the effective time of the Reincorporation (the “Effective Time”), one share of common stock of Delaware Company will be issued and exchanged for each share of Common Stock of the Company then outstanding.

These resolutions demonstrate that (i) when the board approved the Delaware Certificate and Delaware Bylaws the unanimous consent requirement was in the bylaws and not in the certificate, and (ii) when the board purported to approve the Reincorporation no Merger Agreement had even been drafted yet.

22. The Delaware Certificate and Delaware Bylaws were circulated to board committees, the full board, the SEC, the Inter-Tel Arizona stockholders, corporation service companies and others a dozen or more times, and in each instance the unanimous consent

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requirement appeared in the Delaware Bylaws and not in the Delaware Certificate. The defendants made a deliberate decision to have the Delaware Certificate and Delaware Bylaws track the Arizona charter and bylaws, including having the unanimous consent requirement in the bylaws and not in the certificate. Therefore, it is clear that the unanimous consent requirement was deliberately put in the Delaware Bylaws instead of the Delaware Certificate. Consequently, the unanimous consent provision was not mistakenly put in the Delaware Bylaws and mistakenly omitted from the Delaware Certificate because of a “scrivener’s error.”

THE NO PAR VALUE PROVISION

23. Early drafts of the Delaware certificate provided for Inter-Tel Delaware to have common stock with $0.001 par value. However, all versions of the Delaware certificate filed with the Company’s preliminary and final proxy materials did not specify that the common stock would have a par value. Moreover, the Reincorporation Agreement, as filed with the SEC and sent to the stockholders, repeatedly stated that the stock of Inter-Tel Delaware to be issued as the merger consideration would be no par value.

24. In a March 5, 2006 memorandum to the Inter-Tel directors, counsel to the Governance Committee pointed out that the annual cost of incorporation in Delaware would be substantially more than in Arizona. A March 10, 2006 memorandum to the directors from counsel to the Company also mentioned the additional estimated cost of reincorporation.

THE § 203 PROVISION

25. The Inter-Tel Board discussed and approved “a charter amendment to ensure that any potential business combination led by an interested stockholder be approved by a majority of the disinterested shareholders of the Company.” This charter amendment would purportedly “reflect and implement protections afforded by Section 203 of the General Corporation law of

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Delaware without regard to when shares were acquired.” The Board supposedly approved this provision out of “the desire that the Board, if necessary, have time to react to and negotiate with any potential bidders.” Counsel for the Company told the directors “how the proposed charter amendment mirrored in many respects Section 203 of the Delaware General Corporation Law, except for the fact that there world be no exemption for shareholders who had held their stock for greater than three years.”

OTHER DEFENSIVE MEASURES

26. Other defensive measures taken by the defendants in the spring of 2006 included (i) new indemnification agreements for directors and officers (the “Indemnification Agreements”), (ii) the appointments of Stout, Rodin and Karol to the board (the “Board Appointments”, (iii) by-law amendments requiring advance notice of director nominations and proposals by stockholders (the “Advance Notice By-Laws”) and (iv) new compensation for directors and officers (the “New Compensation Arrangements”).

MIHAYLO’S BRIEF PROXY CONTEST

27. On April 3, 2006, Mr. Mihaylo sent a letter to the Inter-Tel Board proposing a meeting to discuss a possible all-cash acquisition of Inter-Tel by Mihaylo and Vector Capital Corporation (“Vector’), a technology-focused private equity fund.

28. Because the Company declined to extend the April 8, 2006 deadline under the Advance Notice By-Laws, Mr. Mihaylo delivered on April 7, 2006, a notice of director nominations and notice of resolutions to be presented at the Annual Meeting, including a resolution urging the Board to arrange for the prompt sale of Inter-Tel to the highest bidder and resolutions to repeal the recent by-law amendments. Because of Mr. Mihaylo’s 19.6%

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ownership position and the availability of cumulative voting, the defendants recognized that voting alone in a contested election he would have been able to elect at least two directors.

29. On April 21, 2006, Mihaylo filed preliminary proxy materials with the SEC, proposing his three nominees to the eight-member board. His materials opposed the Reincorporation and contended that the § 203 Provision would reduce the flexibility of the board and stockholders. He noted that he was the only beneficial owner of more than 15% of Inter-Tel’s stock and that he had owned his stock since 1969 and was therefore not in the class of persons from whom the Delaware legislature intended to protect stockholders in enacting Section 203. He further stated:

The Delaware legislature determined that Section 203 would only apply to shareholders owning 15% or more of a company’s common stock who have held their shares for less than three years. Yet the Inter-Tel Board has determined to apply the provisions of Section 203 to shareholders holding 15% or more of the Common Stock, regardless of the length of time of their ownership of the Company . The Delaware legislature has seen no need, after over 18 years of experience with Section 203, to amend Section 203 as proposed by the Inter-Tel Board.

THE MIHAYLO SETTLEMENT

30. On May 5, 2006, Mr. Mihaylo and the Company entered into a settlement agreement to resolve the upcoming proxy contest by having Inter-Tel immediately increase the Board from 8 to 11 directors and appoint Mihaylo and his two nominees to the Board (the “Mihaylo Settlement”). Under the Mihaylo Settlement, Inter-Tel would nominate and recommend all 11 directors at the Annual Meeting. Mihaylo agreed to withdraw his proxy solicitation and to vote in favor of (i) the 11 directors to be nominated by Inter-Tel (and not to cumulate his votes) and (ii) the other proposals presented by the Company, including the Reincorporation and the § 203 Provision. Mihaylo agreed that the board could exclude his

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nominees “from any discussions concerning, and from receipt of any materials regarding, the Company’s value and the strategic plan upon which such value would in part be based, the Company’s relationship with Mr. Mihaylo, and the consideration of any proposal to acquire the Company from Mr. Mihaylo or any other person” (the “Mihaylo Director Restrictions”). The Mihaylo Settlement also provided that if Mihaylo made a proposal to acquire Inter-Tel, a special committee of the Board (which excludes Mihaylo and his two nominees), would review the proposal in a timely manner. Under the Mihaylo Settlement, Mihaylo agreed to a standstill subject to his right to call a special meeting of stockholders if any acquisition proposal he submits meeting certain criteria is rejected by the Board or is not acted on in a timely manner. Inter-Tel agreed to postpone any adoption of a by-law or certificate provision to prevent Mihaylo from calling a special stockholders meeting as long as he owned more than 10% of Inter-Tel’s outstanding stock.

31. The Mihaylo Settlement ensured that the individual defendants would retain their offices. The settlement occurred when other stockholders could no longer nominate directors or present proposals because of the Advance Notice By-Laws the defendants had adopted. Rather than substituting Mihaylo’s nominees for existing directors, including those directors the Board had purportedly appointed in February 2006, the defendants merely expanded the Board. Moreover, defendants secured an agreement that Mihaylo’s nearly 20 percent of the outstanding stock would be voted for them and their entrenchment proposals.

THE PRELIMINARY PROXY STATEMENT AND SEC COMMENT LETTER

32. On April 10, 2006, defendants filed preliminary proxy materials with the SEC for an Annual Meeting to be held on May 31, 2006. The discussion of the Reincorporation Agreement in the preliminary proxy statement included the following:

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The Reincorporation Agreement may be amended at any time prior to the Effective Time, subject to applicable law, provided, however, that the principal portions of the Reincorporation Agreement may not be amended without shareholder approval.

An earlier draft of this disclosure prepared by counsel had left out the proviso.

33. The Reincorporation Agreement attached as Annex A to the preliminary proxy materials provided in Section 4.5:

4.5 Amendment. The Boards of Directors of the Constituent Corporations may amend this Agreement (or certificate in lieu thereof) at any time before the Effective Date of the Merger, provided that an amendment made subsequent to the adoption of this Agreement by the stockholders of either Constituent Corporation shall not (i) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of any class or series thereof of such Constituent Corporation, (ii) alter or change any term of the Certificate of Incorporation of the Surviving Corporation to be effected by the Merger or (iii) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders of any class or series of capital stock of any Constituent Corporation.

Thus, the “principal portions of the Reincorporation Agreement” that the Proxy Statement said could not be amended without shareholder approval must have included, at a minimum, the provisions that Section 4.5 explicitly provided could not be amended after adoption of the agreement by shareholders.

34. In an April 21, 2006 comment letter, the SEC directed:

Please revise your disclosure to state clearly that the Reincorporation Agreement may be amended after security holders have voted to adopt the proposal, and confirm that you will re-solicit security holders’ approval if the terms of the agreement will be materially different than as described here. Additionally, please summarize the “principal portions” of the Reincorporation Agreement that may not be amended without the approval of security holders.

35. Inter-Tel’s April 27, 2006 response to the SEC stated:

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Response: The Company has made revisions to the disclosure to state clearly that the Reincorporation Agreement may be amended after the security holders have voted to adopt the proposal and have confirmed that the Company will re-solicit security holders’ approval if the terms of the Reincorporation Agreement are changed in any material respect, rather than pointing to specific principal portions of the Reincorporation Agreement.

36. Inter-Tel’s revised disclosure, which appeared in the final Proxy Statement stated:

The Reincorporation Agreement may be amended at any time prior to the Effective Time, either before or after the shareholders have voted to adopt the proposal subject to applicable law. The Company will re-solicit the shareholders’ approval of the Reincorporation if the terms of the Reincorporation Agreement are changed in any material respects.

Significantly, the text of Section 4.5 of the Reincorporation Agreement, as attached to the three preliminary proxy statements Inter-Tel filed and the final Proxy Statement, remained the same.

THE PROXY STATEMENT

37. On May 10, 2006, Inter-Tel issued its definitive proxy materials for the May 31, 2006 Annual Meeting (the “Proxy Statement”). The Reincorporation and § 203 Amendment were voted upon by record holders of Inter-Tel Arizona stock as of March 22, 2006. Between March 22, 2006 and May 31, 2006, more than 10 million shares of Inter-Tel Arizona common stock traded, a volume equal to nearly half of all outstanding shares of Inter-Tel not held by Mihaylo.

38. The Proxy Statement’s summary of the material provisions of the Reincorporation stated:

The Reincorporation will be effected by merging the Company into a newly formed Delaware company (the “Delaware Company”). Shareholders are urged to read this section of the Proxy Statement carefully, including the related annexes referenced below and attached to this Proxy Statement, before voting on the Reincorporation. The following discussion summarizes material provisions of the Reincorporation. This

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summary is subject to and qualified in its entirety by the Agreement and Plan of Merger and Reincorporation (the “Reincorporation Agreement”) that will be entered into by the Company and the Delaware Company in substantially the form attached hereto as Annex A, the Certificate of Incorporation of the Delaware Company (the “Delaware Certificate”), in substantially the form attached hereto as Annex B, as altered to effect changes approved by the Company’s shareholders in Proposal No. 3, if applicable, and the bylaws of the Delaware Company (the “Delaware Bylaws”), in substantially the form attached hereto as Annex C. …

The Reincorporation will be effected by the merger of the Company with and into the Delaware Company, a wholly-owned subsidiary of the Company that will be incorporated under the Delaware General Corporation Law (“Delaware Law”) for purposes of the Reincorporation. The Company will disappear as a result of the merger, and the Delaware Company will be the surviving corporation … (underlining added; boldface in original).

The Proxy Statement indicated in several places that the only additional provision to be potentially included in the Delaware Certificate is the § 203 Provision. The Proxy Statement also said that:

At the effective time of the Reincorporation (the “Effective Time”), the Company will be governed by the Delaware Certificate, the Delaware By-laws and Delaware Law.

39. In describing the Reincorporation proposal, the Proxy Statement represented that:

The Company is not seeking through this Proposal No. 2 to change the current charter and bylaw provisions of the Company.

The Proxy Statement also told the stockholders that:

Both the Arizona By-laws and Delaware By-laws provide that written consent is permitted if signed by the holders of all of the shares of outstanding stock entitled to vote with respect to the subject matter of the action.

Significantly, the Proxy Statement did not say that the Company’s charter and by-laws would be changed so that the requirement of unanimous written consent would be contained in the Delaware Certificate. The Proxy Statement indicated that the Delaware By-law requiring

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unanimous written consent for stockholder action could be repealed, altered or amended by vote of a majority of the outstanding stock of Inter-Tel Delaware. However Section 2.10 of the Delaware By-laws provides that when a quorum is present, the vote of the holders of a majority of the stock having voting power present or represented by proxy shall decide any question, unless a statute, certificate provision or by-law requires a different vote.

40. The Reincorporation Agreement attached as Annex A to the Proxy Statement recited that Inter-Tel Delaware would have authorized capital of 100 million shares of common stock “with no par value.” The Reincorporation Agreement indicates several times that the merger consideration will be no par value common stock of Inter-Tel Delaware. Section 4.8 provides that the Reincorporation Agreement is to be interpreted in accordance with and governed by Delaware law.

THE REINCORPORATION

41. The Proxy Statement acknowledged that the name “Inter-Tel, Incorporated” was not available “from the Delaware Secretary of State” so that the Company will have to use “Inter-Tel (Delaware), Incorporated” as its corporate name after the Reincorporation and file “a dba” to continue to use Inter-Tel and Inter-Tel, Incorporated as trade names. Nevertheless, the Reincorporation Agreement attached to the Proxy Statement stated in Section 1.1 that “the name of the Surviving Corporation shall be Inter-Tel, Incorporated.”

42. The Delaware by-laws attached to the Proxy Statement also contained the Consent By-Law providing that action by written consent is only possible by a unanimous consent of all shares of outstanding stock. The Delaware certificate attached to the Proxy Statement did not contain any provision regarding stockholder action by written consent.

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THE SPECIAL RESOLUTION

43. The Proxy Statement sought approval of a special resolution that, among other things, provided that in the event the Reincorporation was approved, the Board could decide to put a provision in the Certificate of Inter-Tel Delaware that will “require the approval of a majority of the disinterested stockholders to effect certain business combination transactions involving shareholders holding 15% or more of the Company’s stock.” The resolution enabled the Board to determine whether to add the § 203 Provision to the Delaware Certificate. It did not authorize that board to add any other provisions to that certificate.

44. The disclosure concerning the special resolution occupies only one page of Inter-Tel’s 49 page Proxy Statement. The Proxy Statement described the § 203 Provision as follows:

The proposed provision has been drafted to mirror in many ways Section 203 of the Delaware Law as described in detail in Proposal No. 2. The principal differences between the statutory regime and the proposed charter provision are (i) that the charter provision would apply to all Interested Shareholders, regardless of when such an Interested shareholder (sic) acquired a 15% interest in the Company’s voting stock or for how long such an Interested Shareholder has held such interest and (ii) rather than requiring the approval of two-thirds of the disinterested shareholders to consummate a business transaction as required by Section 203 of the Delaware Law, the proposed provision would require the approval of only a majority of disinterested shareholders. The Board believes that these alterations will provide wider protections against takeover abuses by Interested Shareholders than those afforded by statute without imposing more onerous approval burdens.

Thus, the Proxy Statement asserted that the § 203 Provision “mirrors” 8 Del. C. § 203, and identified only two principal differences between § 203 and the certificate provision. However, the Proxy Statement did not mention the numerous other differences that made the § 203 Provision far more restrictive than § 203. For example, the Proxy Statement did not mention the § 203 Provision’s complete elimination of the ability of the Board to pre-approve the § 203

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Provision’s Interested Stockholder status or a Business Combination. Because the § 203 Provision places an “increased burden … on takeover attempts,” defendants conceded that it might discourage future attempts to acquire control of the Company unless the incumbent Board approves.

THE ANNUAL MEETING AND OTHER DEVELOPMENTS

45. Inter-Tel’s Annual Meeting was held on May 31, 2006, For several weeks following the Annual Meeting, the defendants made no public announcement regarding the Annual Meeting’s outcome. Not until June 30, 2006, did Inter-Tel publicly announce that the Reincorporation and § 203 Provision had been approved at the Annual Meeting. Of course, the vote was influenced by Mihaylo’s agreement to vote for the Reincorporation and the § 203 Provision, the defendants’ elimination of the opposition to those proposals and defendants’ misleading and incomplete disclosure.

46. The first thing the Inter-Tel directors did after the Annual Meeting was to see to their own compensation. On May 31, 2006, the board amended Inter-Tel’s director option plan to permit the Chairman of the Board to receive options and to provide for proration of available shares toward the 7,500 options per-director annual grant. Based on this amendment, the non-employee directors were each granted options for 2,750 shares on June 7, 2006. The board also approved a “substitute compensation arrangement” so that each non-employee director was paid $29,433 in cash, which purportedly represented the Black-Scholes value of 4,750 options. Of course, unlike the options which would have been subject to various restrictions that rendered them worth significantly less than the Black-Scholes value, the cash had a certain and immediate greater value than the options.

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47. The Mihaylo Settlement agreement, dated May 5, 2006, provides in paragraph l(d) for the Mihaylo Director Restrictions. Yet just one day earlier, the Inter-Tel board purported to adopt a resolution creating the Special Committee, which effectively allowed the defendants to exclude Mihaylo and his nominees from virtually any substantive board meeting. According to Minutes of the May 4, 2006 Board Meeting (which were not produced in this case until March 19, 2007):

NOW, THEREFORE, BE IT RESOLVED: that this Board of Directors determines that it is in the best interest of the Company and its shareholders to create and, accordingly, hereby does create a Special Committee . . . consisting of [defendants Cappello (as Chairman), Anderson, Chapman, Edens, Karol, Rodin Stout and Winkler], and that the Special Committee shall have and may exercise all the powers and authority of the Board of Directors, to the extent permitted by law, the bylaws and articles of incorporation of the Company, with respect to all matters as to which the Special Committee may determine that Mihaylo and the other Mihaylo Nominees have or may have actual or potential conflicting financial interests and/or loyalties, including without limitation those matters specifically referred to in the Settlement Agreement (the “Designated Matters”);

The resolution also purports to authorize officers to take any action pursuant to the authority of the Special Committee and to ratify all such conduct and documents executed pursuant to such authority. The resolution also provides that members of the Special Committee are paid $1,500 per meeting.

48. Under the Mihaylo Settlement, Mihaylo and his nominees could only be excluded from discussions concerning Inter-Tel’s value and strategic plan, the Company’s relationship with Mr. Mihaylo and the consideration of any acquisition proposal from Mr. Mihaylo or any other person. Notably, despite the breathtaking scope of the Special Committee’s authority, it cannot reasonably include the power to change the Inter-Tel Delaware Certificate and the Reincorporation Agreement.

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49. Defendants’ privilege log produced in this case indicates that at the May 31, 2006 Board meeting, the Board discussed the formation of a Special Committee. However, in the draft minutes of the meeting that defendants have produced, the entire discussion of the “formation” of the Special Committee is redacted as purportedly “not responsive,” even though these discussions occurred after the purported creation of the Special Committee.

50. On June 7, 2006, Inter-Tel’s counsel sent the Delaware Certificate to Corporation Service Company (“CSC”) for filing with the Delaware Secretary of State. CSC’s representative asked whether Inter-Tel wanted to include a par value for its stock, pointing out that 100 million shares of no par value stock would require a filing fee of $402,317. There followed a discussion among Inter-Tel officers and counsel concerning whether to include a par value. Significantly, in none of these exchanges did anyone indicate that having no par value stock as the merger consideration was the result of a drafting error. Rather, Inter-Tel’s management, including defendant Stout, simply determined, two weeks after the Inter-Tel Arizona stockholders voted on the Reincorporation, to change the merger consideration from no-par value stock of Inter-Tel Delaware to par-value stock.

THE MIHAYLO OFFER AND AMENDMENT

51. On June 15, 2006, it was announced that Mihaylo, together with Vector, had submitted a proposal to the Inter-Tel Board to acquire all the outstanding common shares of the Company for $22.50 per share in cash (the “Mihaylo Offer”). The Mihaylo Offer represented approximately a 14% premium over the closing price of Inter-Tel’s stock on NASDAQ on March 3, 2006 and a 12% premium over the closing price on June 14, 2006.

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52. Consistent with their efforts to do everything to prevent Inter-Tel’s stockholders from receiving an offer for their shares, the defendants claimed that the Mihaylo Offer did not comply with the Mihaylo Settlement because it was conditional on completion of due diligence. On June 28, 2006, Inter-Tel entered into an amendment of the Mihaylo Settlement pursuant to which Inter-Tel agreed to provide additional due diligence to Mihaylo, and Mihaylo was given until July 28, 2006 to submit to the Inter-Tel Board an offer to purchase all Inter-Tel’s shares for cash. The Amendment also extended Inter-Tel’s agreement not to amend its by-laws to prevent Mihaylo from calling a special meeting of the stockholders so long as he and his affiliate hold at least ten percent (10%) of the Company’s stock (the “Additional Special Meeting Restriction”) until July 28, 2006 (in the event Mihaylo has not made an offer as of that date) or September 30, 2006 (in any event).

THE INVALID REINCORPORATION

53. On June 16, 2006, a Special Committee of the Inter-Tel Arizona Board had a meeting at which it discussed this lawsuit, which had been filed the day before. The heavily redacted minutes reflect that the committee determined to hold off on the Reincorporation in Delaware “until a more rigorous analysis had been undertaken.” According to heavily redacted minutes of a June 19, 2006 meeting, the Special Committee determined to “proceed with the reincorporation, subject to including the majority of the minority provision and unanimous shareholder written consent provision in the certificate of incorporation.” Defendants and counsel recognized that plaintiff’s claim that the Consent By-Law was invalid under Delaware was correct. However, rather than simply acknowledge the invalidity of the by-law, their reaction was to question plaintiff’s motives, to affix blame and to preserve their ability to prevent Inter-Tel’s stockholders from acting by consent. They decided to misinterpret the Proxy

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Statement as providing “wiggle room” for them to move the consent restriction from the by-laws to the Delaware Certificate. Defendants and counsel concluded that the § 203 Provision was proper because additional exceptions to the prohibition on business combinations were contained in § 203.

54. The Special Committee purportedly decided at its June 19, 2006 meeting to proceed with the Reincorporation and include the § 203 Provision and Consent Provision in the Delaware Certificate. Nevertheless, according to heavily redacted minutes, the committee discussed these issues again at a June 24, 2006 meeting. These minutes claim for the first time that putting the unanimous consent requirement in the by-laws instead of the certificate was “due to a drafting error.” In determining to put the Consent Provision in the Delaware Certificate, the Special Committee relied on the false conclusion that “the proxy statement clearly stated that there would be such a requirement in either the charter or by-laws,” (Emphasis added). In fact, the Proxy Statement expressly said the unanimous consent requirement would be in the by-laws and the forms of Delaware Certificate and Delaware By-Laws that were included with the Proxy Statement confirmed the provision would not be in the charter.

55. The Special Committee minutes from June 2006 do not show that (i) the directors reviewed the text of the Consent Provision or (ii) the directors authorized any change in the merger consideration from no par to par value shares. Moreover, the Inter-Tel Arizona Board never acted to amend the Reincorporation Agreement or change the Delaware Certificate.

56. On June 26, 2006, Stephen M. Wurzburg, Esquire of Pillsbury Winthrop Shaw Pittman (“Pillsbury”) transmitted to Norman Stout, Inter-Tel Arizona’s Chief Executive Officer, “the revised Certificate of Incorporation for Inter-Tel Delaware, Incorporated to create the wholly-owned subsidiary of Inter-Tel (Arizona),” and “a bunch of other documents which need

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signing as well to effect the re-incorporation.” The additional documents which required execution in connection with the reincorporation were described by Mr. Wurzburg as follows:

1. action by sole incorporator of Inter-Tel Delaware: The incorporator adopts bylaws, elects the board (Norman), and resigns.

2. action by sole director of Inter-Tel Delaware: The director takes care of typical formation tasks such as ratifying acts of incorporator, electing officers, etc. and approves the issuance of 1000 shares of stock for $ 1.00 to Inter-Tel AZ.

3. action by sole director of Inter-Tel Delaware: The director approves the reincorporation.

4. stock purchase agreement: Inter-Tel (Arizona) subscribes to the 1,000 shares of Inter-Tel Delaware.

5. certificate of merger: the document filed with the Secretary of State of Delaware to effect the reincorporation.

6. articles of merger: the document filed with the Secretary of State of Arizona to reflect the merger.

7. Agreement and plan of merger and reincorporation: the agreement between the Arizona and Delaware corporation to effect the merger. It is substantially in the form attached to the proxy statement.

8. bylaws: the bylaws of Inter-Tel Delaware. They are substantially in the form attached to the proxy statement.

9. action by sole stockholder of Inter-Tel Delaware: Inter-Tel Arizona, as the sole stockholder of Inter-Tel Delaware approves the merger.

57. Mr. Stout was in Toronto, Canada when he received Mr. Wurzburg’s June 26, 2006 e-mails and could not open or print out the attached documents. On June 27, 2006, Mr. Wurzburg faxed signature pages for the Inter-Tel Delaware incorporation and the Reincorporation documents to Mr. Stout with instructions:

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Please sign attached documents but do not date, then fax back to Steve Wurzburg at (866) 741-1919.

Later that same day, Mr. Stout faxed the signature pages back to Mr. Wurzburg of Pillsbury. Thus, the signature pages of the Reincorporation documents were executed by Stout on June 27, 2006. Consistent with Mr. Wurzburg’s instructions, the signature pages sent by Mr. Stout did not have the date filled in. Defendants have not identified who altered these documents to date them by hand “June 28,” 2006.

58. Comparison of the Reincorporation Agreement, Delaware By-Laws and other documents sent to Mr. Stout on June 26, 2006 with what the defendants claimed were the documents approved by the incorporator, board and stockholder of Inter-Tel Delaware reveals numerous differences, indicating that changes were made from the documents Stout purportedly approved. For example, the by-laws purportedly adopted by Stout as incorporator, as attached as Exhibit A to the Action of Incorporator of Inter-Tel Delaware contained in Inter-Tel’s closing binder, include a unanimous consent requirement in Section 2.16, that begins with the phrase:

So long as provided in Section D of Article IV of the Corporation’s Certificate of Incorporation …

This phrase, which was absent from every version of the by-laws that was provided to the directors, filed with the SEC and/or sent to the Inter-Tel stockholders, does not appear in the Inter-Tel Delaware by-laws that Mr. Wurzburg sent to Mr. Stout on June 26, 2006 with the Action of Incorporator purporting to adopt by-laws. There were also numerous changes to the Reincorporation Agreement. Inter-Tel’s counsel acknowledged in an e-mail sent on the evening of June 28, 2006, that the “footer” on the Reincorporation Agreement had been changed stating, “yes footer shows v2 to match signature.” There are no minutes or other documents showing that (i) the Inter-Tel Arizona Board ever approved any amended Reincorporation Agreement, (ii)

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any change in the merger consideration, (iii) the revised Consent By-Law or (iv) the Consent Provision.

59. The Certificate of Incorporation of Inter-Tel Delaware was not filed until June 28, 2006. The Reincorporation was invalid because at the time of execution of the Reincorporation documents, the signers did not have the legal capacity claimed. The Action of Incorporator of Inter-Tel Delaware purportedly adopting by-laws, reducing the Inter-Tel Delaware board from 11 directors to 1 director, electing Stout as initial director and resigning as incorporator “immediately after execution” was signed by Stout the day before Inter-Tel Delaware was formed. Stout executed consents as the purported sole director of Inter-Tel Delaware supposedly approving the Reincorporation Agreement, ratifying the actions of the incorporator (including the adoption of by-laws) authorizing the issuance of stock to Inter-Tel Arizona, electing officers and taking numerous other actions, all at a time when Inter-Tel Delaware had not been formed and consequently he had not been elected as director. The purported written consent of Inter-Tel Arizona as sole stockholder of Inter-Tel Delaware approving the Reincorporation Agreement (the “Reincorporation Consent”) was executed at a time when Inter-Tel Arizona could not have been a stockholder of Inter-Tel Delaware because the Delaware corporation had not yet been created. Similarly, the Reincorporation Agreement and Common Stock Purchase Agreement were executed by Inter-Tel Delaware before that corporation existed. The same is true for the certificate of merger filed with the Delaware Secretary of State and the Articles of Merger filed with the Arizona Secretary of State. Significantly, the Action by Written Consent of the Sole Director of Inter-Tel Delaware approving the Reincorporation Agreement repeatedly identifies the merger consideration as “no par value” stock of Inter-Tel Delaware.

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CHANGES TO THE INTER-TEL DELAWARE CERTIFICATE

60. On June 28, 2006, a Certificate of Incorporation of Inter-Tel (Delaware), Incorporated was filed with the Delaware Secretary of State. In addition to adding the Section 203 Provision, this Certificate of Incorporation contained two other additions that were not found in the text of the Delaware Certificate which was provided to the Inter-Tel Arizona stockholders as Annex B to the Proxy Statement. First, though the Reincorporation Agreement attached as Annex A to the Proxy Statement had indicated that the shares of Inter-Tel Delaware would have no par value, the Certificate filed with the Delaware Secretary of State provided that Inter-Tel Delaware’s common stock would have a par value of $0,001 per share. Second, in response to plaintiff’s Complaint pointing out the invalidity of the Consent By-law, a new Section D was added to Article IV to place the requirement for a unanimous vote for actions by stockholder consent into the Certificate of Incorporation (the “Consent Provision”). Specifically, Article IV Section D provides:

Action Without Meeting By Written Consent. All actions required to be taken at any annual or special meeting may be taken without a meeting, without prior notice and without a vote, if a consent or consent in writing, setting forth the action so taken, shall be signed by the holders of all shares of outstanding voting stock and shall be delivered to the Corporation by delivery to its registered office, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings or (sic) stockholders are recorded.

Also, in response to plaintiff’s Complaint, §1.1 of the Reincorporation Agreement was revised to provide that the name of the Surviving Corporation would be Inter-Tel (Delaware) Incorporated, rather than Inter-Tel, Incorporated.

61. On June 30, 2006, Inter-Tel filed with the SEC an 8-K representing that the Certificate and By-laws of the Surviving Corporation were attached. The 8-K also represents

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that the § 203 Provision and the differences in the rights of Inter-Tel’s stockholders as a result of the Reincorporation were more fully described in the Proxy Statement, “which is incorporated in its entirety herein by reference.” However, the 8-K makes no mention of the addition of Article IV Section D to the Certificate, the change in the common stock of Inter-Tel Delaware from no-par stock to par stock or the changes in the Reincorporation Agreement.

62. On August 23, 2006, Mr. Stout executed an “Action by Sole Director of Inter-Tel Delaware, Incorporated Dated Effective: June 28, 2006 at 3:36 p.m.” (the “August 23 Action”). By creating this after-the-fact “Action,” Inter-Tel’s counsel and its CEO, Mr. Stout, recognized that the Reincorporation documents had not been approved and executed in conformity with the DGCL. Though it was not executed until August 23, 2006, the August 23 Action purports to be effective “June 28, 2006 at 3:36 p.m.” in an effort to have the actions recited therein effective “after formation [of Inter-Tel Delaware], but prior to the Reincorporation.” Thus, the August 23 Action recognized that, in order to be legally effective, various actions taken in connection with the Reincorporation, such as approval of the Reincorporation Agreement by the Board of Inter-Tel Delaware, had to have occurred after the incorporation of Inter-Tel Delaware (which purportedly occurred at 3:34 p.m. on June 28, 2006, though the document indicates that it was not delivered to the Secretary of State until 3:39 p.m.) but before the filing of the merger certificate at 3:39 p.m. on that date. However, the August 23 Action, even if it could be retroactively effective, could not validate actions that were taken by Stout as incorporator or as a purported officer of Inter-Tel Delaware or the consent on behalf of Inter-Tel Arizona as purported sole stockholder of Inter-Tel Delaware. Moreover, because Mr. Stout was not the sole director of Inter-Tel Delaware on August 23, 2006, his signature was not sufficient to act on behalf of the Inter-Tel Delaware Board.

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MIHAYLO’S RENEWED AND INCREASED OFFERS

63. In a letter dated July 28, 2006, Mihaylo and Vector resubmitted their offer to the Inter-Tel Board to purchase all of the outstanding shares of common stock of the Company for $22.50 per share in cash. At a meeting held on August 11, 2006, the Special Committee of the Inter-Tel Board rejected the offer as inadequate. On August 21, 2006, Mihaylo and Vector increased their offer to purchase all of the outstanding shares of common stock of the Company to $23.25 per share in cash (the “August 21 Offer”).

64. On August 25, 2006, pursuant to Section 5 of the Mihaylo Settlement, Mihaylo submitted a letter to the Company in which he exercised his right to request that the Company promptly call a special meeting of the stockholders (the “Special Meeting”) in order to vote to “urge the Inter-Tel Board of Directors to arrange for the prompt sale of Inter-Tel to the highest bidder.”

65. On August 25, 2006, the Company announced that the Special Committee had rejected the $23.25 offer from Mihaylo and Vector. On August 26, 2006, Mihaylo and Vector filed with the SEC a Form PREC14A, which contained preliminary proxy solicitation materials concerning the Special Meeting and recommended that the stockholders of Inter-Tel vote in favor of a non-binding resolution urging the Board to arrange a “prompt sale of Inter-Tel to the highest bidder” (the “Mihaylo Resolution”).

66. Using the financial and other resources of Inter-Tel, the defendants waged an expensive proxy contest against the Mihaylo Resolution. In their proxy contest, the defendants emphasized that the Inter-Tel Special Committee was currently conducting a strategic review of alternatives for maximizing shareholder value. However, the defendants did not announce the

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results of their strategic review prior to the October 24 Special Meeting. Indeed, the results have still not been announced.

67. In the proxy contest, the defendants touted themselves as highly competent and committed to strong corporate governance. However, in their proxy statement and other disclosure materials related to the Special Meeting, the defendants never disclosed (i) that the Consent Provision had been placed in the Inter-Tel Delaware certificate after the shareholder vote, (ii) the manner in which the Reincorporation documents had been revised and executed or (iii) the change in the merger consideration. A reasonable stockholder would consider these facts important in determining whether to trust the competence and integrity of management to carry out a review of strategic options and execute a strategic plan.

68. At the Special Meeting, the Mihaylo Resolution received approximately 49.4% of the votes cast. Approximately 20% of the shares did not vote. Given the closeness of the vote, the non-binding nature of the resolution, the number of shares not voted, defendants’ failure to complete and disclose the outcome of the strategic review and defendants’ failure to disclose facts germane to their competence and integrity, the results of the vote were hardly a mandate for defendants’ purported long-term strategic plan.

THE 2007 PROXY CONTEST

69. On March 2, 2007, Mihaylo announced that he intended to nominate five directors at the 2007 Inter-Tel Annual Meeting and would be introducing seven resolutions for a stockholder vote at the meeting. Consistent with their previous approach, defendants immediately attacked Mr. Mihaylo publicly for exercising the right of stockholders to nominate directors and propose resolutions.

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70. On March 12, 2007, Inter-Tel filed an 8-K with the SEC announcing that on March 6, 2007 the Inter-Tel Board had adopted Amended and Restated By-Laws (the “Restated By-Laws”). The 8-K described 11 specific changes to the by-laws, including:

• Revised to provide that stockholders holding at least 25% of the outstanding capital stock of the Company may call a special meeting of the stockholders, as compared to the previous standard permitting stockholders holding at least 10% of the outstanding capital stock of the Company to do so (Section 2.3);

• Revised to provide that the Chairman of the Board, the Chief Executive Officer and the Secretary are authorized to call a stockholder meeting at the request of stockholders holding at least 25% of the outstanding capital stock of the Company, as opposed to the prior version of the provision which granted such authority only to the President and Secretary (Section 2.3);

* * *

• Revised to permit notice to directors by facsimile, and eliminated notice by telegram (Section 8.1)

* * *

71. In a 12th bullet point, the 8-K indicated that the other changes made to the by-laws were insignificant:

• Revised to reflect other minor wording and conforming changes, including deletions of duplicative and outdated or inapplicable provisions, updated cross-references, and other similar changes.

72. The 8-K did not disclose that among the changes to the by-laws was the deletion of Section 2.16, the Consent By-Law whose validity is challenged in this action. Moreover, the 8-K misleadingly failed to disclose completely and accurately other changes in the Revised By-Laws that are not “minor wording and conforming changes,” including changes to several by laws the 8-K purported to describe. For example, in describing the changes to Section 2.3 relating to the ability of stockholders to call a special meeting, the 8-K did not mention that, whereas the prior version of Section 2.3 required that a special meeting of stockholders “shall be

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called” at the request in writing of stockholders owning at least 10% of Inter-Tel Delaware’s stock, that the version of Section 2.3 in the Revised By-Laws states that a special meeting of stockholders “may be called” by the Chairman of the Board, the Chief Executive Officer or the Secretary at the written request of stockholders owning at least 25% of Inter-Tel Delaware’s outstanding stock. Thus, while Section 2.3 previously contained mandatory language requiring the calling of a special meeting at the request of the designated percentage of the stockholders, the revised version deletes the mandatory language and instead indicates only that the designated officers may call a special meeting upon such stockholder request.

73. The Revised By-Laws also alter Section 2.4, which previously provided for written notice of an adjourned meeting if “the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed”, to provide that notice was only required if “the adjournment is for more than thirty (30) days.” Thus, there can now be successive adjournments of a stockholder meeting that delay the meeting far beyond 30 days from the original meeting date without any written notice being given to stockholders. The defendants also altered the term of directors under Section 3.1 by deleting the limitation that directors would hold office “until the expiration of the term for which elected.” The 8-K makes no mention of this change, though it describes other changes to Section 3.1. The 8-K describes a change to Section 8.1 to permit notice to directors by facsimile and eliminate notice by telegram, but fails to discuss the comparable changes to Section 3.8 or the deletion of the provision of that section that required that where notice was not communicated directly to the director or was given by facsimile or e-mail, that notice must be given also in another manner unless receipt of the notice had been confirmed by the director by phone, voicemail, e-mail, fax or telegram. This

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change will make it easier for the defendants to hold board meetings without the participation of Mihaylo and his designees.

74. The 8-K also did not disclose the change in the quorum requirement of Section 3.9 for board meetings from “a majority of the directors then in office” to “a majority of the total number of members.” This change appears calculated to ensure that Mihaylo designees (even if he succeeds in electing five directors at the 2007 Annual Meeting) will not constitute a quorum even if other directors resign or otherwise leave the Board. While the 8-K references changes to Section 4.3, it fails to mention the deletion of the requirement that the committees report their minutes of meetings to the Board. This change is calculated to avoid having Mihaylo and his designees aware of actions taken by the various committees from which they are excluded.

COUNT I

INVALIDITY OF THE § 203 PROVISION

75. Plaintiff repeats and realleges the allegations above as if fully set forth herein.

The Terms of Section 203

76. Section 203(a) of the DGCL prohibits Business Combinations with an Interested Stockholder for three years following the date such person became an Interested Stockholder:

Notwithstanding any other provisions of this chapter, a corporation shall not engage in any business combination with any interested stockholder for a period of three years following the time that such stockholder became an interested stockholder…

77. Section 203 contains three exclusions to the three-year moratorium on Business Combinations with Interested Stockholders. First, under § 203(a)(1), the prohibition on Business Combinations will not apply if prior to the stockholder becoming an interested stockholder, the Board of Directors approves either the Business Combination or the transaction which creates Interested Stockholder status (the “Prior Board Approval Exclusion”). The second exclusion

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(§ 203(a)(2)) applies when the transaction resulting in the stockholder becoming an Interested Stockholder causes that stockholder to own at least 85% of the corporation’s outstanding voting stock, as calculated pursuant to the terms of the statute (the “85% Exclusion”). The third exclusion is the Subsequent Board and Stockholder Approval Exclusion contained in § 203(a)(3), which requires both board and stockholder approval at or after the time Interested Stockholder status occurred:

At or subsequent to such time the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding stock which is not owned by the interested stockholder. (Emphasis added).

78. Section 203(b) identifies seven circumstances where § 203 will not apply, including subsections: (3) the stockholders adopt a by-law amendment expressly electing not to be governed by the section (the “Stockholder By-Law Opt-Out”); (4) the corporation’s stock is not traded on a major stock market and is not held of record by more than 2000 holders (the “Small Company Out”); (5) a stockholder becomes an interested stockholder inadvertently and promptly divests (the “Inadvertent Interested Stockholder Exception”); and (6) the business combination is proposed to compete with a major transaction approved or not opposed by the incumbent board (the “Competitive Business Combination Exception”).

The § 203 Provision’s Conflict with the Statute

79. Section (a) of the § 203 Provision states:

(a) The corporation shall not engage in any business combination with any interested [shareholder/stockholder] following the time that such [shareholder/stockholder] became an interested [shareholder/stockholder], unless at or subsequent to such time the business combination is approved by the board of directors and authorized at an annual or special meeting of [shareholder/stockholders, and not by written consent, by the affirmative vote of at least a majority of the outstanding voting

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stock which is not owned by the interested [shareholder/stockholder].

80. The § 203 Provision does not contain two of the three ways that 8 Del. C. § 203(a) allows to exempt a Business Combination with an Interested Stockholder: the Prior Board Approval Exclusion of Section 203(a)(l) and the 85% Exclusion of Section 203(a)(2). The § 203 Provision also requires a lower stockholder vote than the Subsequent Board and Stockholder Approval Exclusion of § 203 and enlarges § 203’s three year moratorium on Business Combinations with Interested Stockholders into a perpetual prohibition of any Business Combination with any Interested Stockholder. The § 203 Provision also does not contain any of the seven statutory optouts found in Section 203(b).

Violation of § 203 (a)

81. The § 203 Provision violates § 203(a) and Delaware public policy by converting the limited three-year moratorium on Business Combinations with an Interested Stockholder into a permanent ban on such transactions. Delaware made a deliberate choice to limit the restrictions of § 203 to three years and to not impose any continuing restrictions beyond that period.

Violation of § 203(a)(1)

82. Section 203(a)(l) specifically authorizes the board to waive the restrictions on Business Combinations through prior board approval of Interested Stockholder status or the Business Combination before the person becomes an Interested Stockholder. The absence of the Prior Board Approval Exclusion in the § 203 Provision means that the Provision precludes the Inter-Tel Board, now and forever, from waiving the Business Combination restrictions by granting approval of the combination or of Interested Stockholder status before the potential

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acquiror becomes an Interested Stockholder. This violates not only 8 Del. C. § 203(a), but also 8 Del, C. § 141 (a) and the Delaware common law of fiduciary duty.

83. Whether to waive the restrictions on Business Combinations by prior approval of Interested Stockholder status or a Business Combination pursuant to § 203(a)(1) is a decision for the Board to make in the exercise of its fiduciary duty. The § 203 Provision will deprive all future Boards of Inter-Tel the opportunity to discharge their fiduciary duty in an area of fundamental importance to the shareholders: negotiating a possible sale of the corporation. Indeed, Inter-Tel will not be able to enter into any agreement, arrangement or understanding with a prospective acquiror without making that acquiror an Interested Stockholder who will be subject to the § 203 Provision’s restrictions on Business Combinations. For example, if Inter-Tel needed to sell a 20% equity stake in the Company quickly in order to raise funds to avoid a financial crisis, it could not do so without subjecting the purchaser to restrictions on Business Combinations. The § 203 Provision is a defensive measure which would require the Inter-Tel board to breach its fiduciary duty because it could not waive the restrictions on Business Combinations regardless of whether doing so is in the corporation’s best interest. The § 203 Provision is invalid because it restricts the Inter-Tel Board in a way which limits the exercise of its fiduciary duties.

Violation of 8 Del C. § 203(a)(2)

84. The § 203 Provision prevents Inter-Tel’s stockholders from receiving and accepting an offer so attractive that more than 85% of the public stockholders wish to accept the offer, even though the Board opposes it. The provision interferes with the statutory right of stockholders such as plaintiff, who did not vote for the provision, to receive and accept tender offers at a price high enough to attract 85% support. It also places an unreasonable burden on

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tender offers. The § 203 Provision conflicts with Delaware’s public policy of balancing the restrictions on Business Combinations with exclusions that protect the stockholders’ right to receive offers for their shares.

Violation of 8 Del C. § 253

85. The § 203 Provision provides that “[t]he corporation shall not engage in any business combination with any interested stockholder.” There is no exception to this prohibition for short-form mergers with stockholders owning more than 90% of the corporation’s stock. The § 203 Provision conflicts with 8 Del. C. § 253, which reflects the intent of the Delaware General Assembly to permit short-form mergers without board or stockholder approval when greater than 90% ownership is achieved. The § 203 Provision imposes procedural requirements (i.e. board approval and a stockholder vote) that § 253 was specifically intended to eliminate and impinges on a specific statutory power to cause a short-form merger. The § 203 Provision precludes a short-form merger with an Interested Stockholder owning more than 90% of all outstanding shares, even if the transaction is exempt from § 203 under § 203(a)(1) or (2).

Violation of § 203(b)

86. The § 203 Provision’s omission of the Stockholder By-Law Opt-Out also violates the DGCL and public policy. The DGCL authorizes the stockholders to amend the by-laws. 8 Del. C. § 109. Section 203(b)(3) specifically authorizes the stockholders at any time to adopt by the affirmative vote of a majority of the shares entitled to vote a by-law amendment electing not to be governed by § 203. Thus, that section allows stockholders to eliminate the restrictions on Business Combinations imposed by the statute. Under § 203(d), the vote required for such a by-law amendment may not be increased by a certificate or by-law provision. The § 203 Provision, however, would render the statutory right of the stockholders to opt-out of the restrictions on

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Business Combinations useless. The restrictions of the § 203 Provision would apply and the stockholders cannot opt-out of those restrictions through a by-law amendment. Delaware’s public policy, as embodied in § 203, provides that the stockholders retain the right to eliminate § 203’s restrictions on Business Combinations by a majority vote on a by-law without the need for board approval. The § 203 Provision violates § 109 and § 203 of the DGCL and contravenes Delaware’s public policy.

87. The § 203 Provision also conflicts with § 203 because it omits other important opt-outs that the statute provides, such as the Inadvertent Interested Stockholder Exception, the Small Company Out and the Competitive Business Combination Exception. The elimination of the Competitive Business Combination Exception deprives the stockholders of an opportunity for a higher bid from an Interested Stockholder even where the board has agreed to (or has not opposed) a merger or other important corporate transaction with someone else. For example, the board could approve and recommend a self-interested management buyout at an unfair price, but the stockholders would not be able to receive a competing bid from an Interested Stockholder.

Lack of Board Determination

88. The § 203 Provision is also invalid because the Special Resolution only authorized Inter-Tel’s Board of Directors to determine whether to include that provision in the Delaware Certificate. The Board never made such a determination. Instead, the Special Committee determined to include the § 203 Provision in the Delaware Certificate. Moreover, the defendants have produced no evidence that the Board could or did authorize the committee to make that determination. Furthermore, changes were made to the § 203 Provision after the vote of the Inter-Tel Arizona stockholders that were not approved by either the Inter-Tel Arizona Board or the Special Committee. The § 203 Provision should also be invalidated because of the

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invalidity of the Reincorporation and the ineffectiveness of the shareholder vote on and board approval of the provision.

COUNT II

Invalidity of the Consent By-Law and Consent Provision

89. Plaintiff repeats and realleges the previous paragraphs as if fully set forth herein.

90. In pertinent part, 8 Del C. § 228(a) provides:

Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted … (emphasis added).

91. The Consent By-Law provides:

Action Without Meeting By Written Consent. All actions required to be taken at any annual or special meeting may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of all shares of outstanding voting stock …

The Consent By-Law conflicts with and violates § 228(a) by attempting to impose a unanimous vote requirement for actions by consent, when § 228(a) specifies that the vote required for consent action is “a minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.” Significantly, § 228(a) only allows its provisions to be changed if the certificate of incorporation provides otherwise. A by-law cannot alter the right to act by consent provided under 8 Del. C. § 228(a). Accordingly, the Consent By-Law is invalid.

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92. Article IV Section D of the Certificate of Inter-Tel Delaware is invalid. This Consent Provision was added to the Certificate in violation of Section 4.5 of the Reincorporation Agreement which provided that any amendment to the Agreement made subsequent to adoption of the Agreement by the stockholders of either of the Constituent Corporations shall not alter or change any terms of the Delaware Certificate or alter or change any terms or conditions of the Agreement which would adversely affect the holders of Inter-Tel Delaware common stock. The addition of the Consent Provision also violated the similar terms of 8 Del. C. §§ 251 (d) and 252. The Consent Provision is also invalid because of the invalidity of the Reincorporation.

93. The addition of Article IV Section D altered and changed terms of the Delaware Certificate after stockholder approval. It also adversely affected the holders of Inter-Tel Delaware common stock. First, the unanimous consent requirement in the Delaware By-laws (even if it were valid) could be amended by the stockholders without Board approval. In contrast, under 8 Del. C. § 242, an amendment of Article IV Section D would require Board approval, in addition to stockholder approval. Second, while under the Delaware By-laws, the unanimous consent requirement in the By-laws could be eliminated by a vote of a majority of the quorum, the stockholder vote required under § 242 for an amendment of Article IV Section D of the Delaware Certificate would be a majority of all outstanding shares. Third, the provision of the Delaware By-laws requiring unanimous action for consent is invalid and a nullity under Delaware law. Therefore, under the Delaware Certificate and Delaware By-laws presented to the stockholders of Inter-Tel Arizona, there was no valid restriction on the exercise of the power of written consent under § 228 of the DGCL. The unilateral insertion of the unanimous consent requirement in the Delaware Certificate was an attempt to impose restrictions on consents that

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would comply with § 228. By purporting to create such restrictions, the Consent Provision adversely affects the holders of Inter-Tel Delaware Common Stock.

94. The change of Inter-Del Delaware’s stock from no-par stock to par-value stock also violated § 4.5 of the Reincorporation Agreement and 8 Del. C. § 251(d). Because the terms of the Reincorporation Agreement were changed in material respects and in violation of the Reincorporation Agreement, the defendants were required to re-solicit the shareholders’ approval of the Reincorporation, as was represented to the stockholders in the Proxy Statement.

COUNT III

BREACH OF FIDUCIARY DUTY

95. Plaintiff repeats and realleges the previous paragraphs as if fully set forth herein.

96. The individual defendants owe fiduciary duties of loyalty, due care and good faith to the shareholders of Inter-Tel, and must act to maximize the value of their shares.

97. The individual defendants have a duty to consider all valid offers to purchase Inter-Tel and to seek through negotiations or other actions the best possible offer from Mihaylo or anyone else.

Defensive Measures

98. The individual defendants are engaged in a course of activities that violates their fiduciary duties to the Inter-Tel stockholders. They have manipulated the corporate machinery in order to entrench themselves in office. These activities include: (i) the Indemnification Agreements; (ii) the Advance Notice By-Laws; (iii) the Board Appointments; (iv) the New Compensation Arrangements; (v) their failure to seek a full and fair offer from Mihaylo; (vi) the Reincorporation; (vii) the § 203 Provision; (viii) the Mihaylo Settlement; (ix) the Consent By-Law and Consent Provision; (x) the amendments reflected in the Restated By-Laws; (xi)

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misleading and incomplete disclosure; and (xii) continuing failure to pursue a value-maximizing plan for the stockholders. These measures touch on issues of control. The defendants have also sought to impede the Mihaylo Offer and have formulated a plan to disenfranchise Inter-Tel’s stockholders by even preventing Mihaylo to call a special stockholders meeting. Defendants’ primary purpose in these activities was to entrench themselves. There was no legitimate threat to Inter-Tel, and defendants’ response was not reasonable in relation to any purported threat in light of already existing defensive measures

Decision to Include the § 203 Provision

99. The defendants breached their fiduciary duty by determining in June 2006 to place the § 203 Provision into the Delaware Certificate. Inclusion of the § 203 Provision was not a reasonable response to the threat the defendants purportedly perceived to Inter-Tel and its stockholders. The purported purpose of the provision was to give the board time to react to and negotiate with a potential bidder. The § 203 Provision was motivated by the fact that Mihaylo was not subject to the Arizona business combination statute and, if Inter-Tel reincorporated in Delaware, would not be subject to the provisions of § 203. However, other potential acquirers would be subject to the Arizona and Delaware business combination statutes. The provisions of § 203 give the board of a Delaware corporation the ability to react to and negotiate with a potential bidder. Thus, there was no need to subject potential acquirers other than Mihaylo to additional and duplicative restrictions on business combinations. The § 203 Provision could have been structured so that the provision applied only to those shareholders who had held 15% or more of Inter-Tel’s stock for more than three years as of the date the provision was added or were otherwise not subject to the statutory restrictions on business combinations on the date the provision became effective (i.e., Mihaylo). The § 203 Provision is unnecessarily broad and is

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unreasonable because it is not limited to Mihaylo but applies to potential acquirers who would be subject to statutory business combination restrictions.

100. The § 203 Provision is also unreasonable because it imposes perpetual restrictions on any business combination. In contrast, § 203 limits the restrictions on business combinations for only a three-year period. The defendants have given themselves, as directors, a permanent veto over any Business Combination with any Interested Stockholder. The defendants did not offer, in the Proxy Statement or otherwise, any reason why Inter-Tel had to have a restriction on business combinations of unlimited duration.

101. As the Proxy Statement and other documents plainly indicate, the stockholder vote on the § 203 Provision did not require that the provision be included in the Delaware Certificate. Rather, the defendants specifically reserved to the Inter-Tel Board the determination of whether to include the § 203 Provision in the Certificate of Inter-Tel Delaware. Thus, the defendants had the obligation to exercise their fiduciary duty in deciding whether to include the § 203 Provision as part of the corporate governance structure.

102. In June 2006, the defendants, acting as the Special Committee, made a unilateral decision as to whether to place the § 203 Provision in the Delaware Certificate. By that time, Mihaylo had abandoned his 2006 proxy contest and had agreed to vote for, and in fact had voted for, the Reincorporation (as a result of which the anti-takeover provisions of the Delaware Certificate and Delaware By-Laws would be put into place). Mihaylo had also agreed to a procedure where he had a limited time to put forward an acquisition proposal for consideration by the Inter-Tel Board and then, if the Inter-Tel Board rejected his proposal, he would submit a non-binding acquisition proposal to the Inter-Tel stockholders at a special meeting. Thus, there was no imminent threat of a hostile takeover as might justify the restrictions of the § 203

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Provision. Indeed, Mihaylo ultimately narrowly lost a proxy contest on his non-binding proposal. Even in 2007, Mihaylo is only seeking minority representation on the Inter-Tel Board and how much representation he achieves will depend on a stockholder vote at the 2007 Annual Meeting.

103. The § 203 Provision unreasonably restricts proxy contests and tender offers. There is no incentive to wage a proxy contest to replace the Board before obtaining 15% ownership or pursuing a business combination because prior approval of the new Board will not be sufficient to permit Interested Stockholder status or a Business Combination, Indeed, the § 203 Provision would necessitate multiple stockholder votes to enable a Business Combination. The potential acquiror would first need to achieve a stockholder vote replacing the board. Given the Consent Provision, that vote could only occur at a stockholder meeting. The new Board could then approve the Business Combination and schedule a stockholders’ meeting to vote on the transaction. Then a second vote would be necessary to obtain approval of the Business Combination. The § 203 Provision also requires that vote to occur at a meeting. Similarly, there is no benefit to making a tender offer attractive enough to garner 85% participation because the remaining minority could block the Business Combination under the § 203 Provision. Furthermore, because the § 203 Provision only permits the Board and stockholder approvals to occur after the potential acquiror becomes an Interested Stockholder, the acquiror must first buy 15% or more of the outstanding stock before seeking board and stockholder approval.

104. The defendants were uninformed and misinformed about the effects of the § 203 Provision. Defendant Stout, Inter-Tel’s CEO, believed that Mihaylo would be subject to the restrictions of both the § 203 Provision and the statutory restrictions on business combinations. The defendants were also incorrectly told that it was not necessary to have the prior board

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approval exception and 85% exception in the § 203 Provision because those exceptions were contained in the statutes. However, the absence of such exceptions in the § 203 Provision means compliance with the statutory exceptions would not enable the acquirer to proceed with a business combination. Rather, an acquirer (other than Mihaylo) would still have to satisfy the § 203 Provision. Indeed, there would be disincentive for a potential acquirer to try to achieve greater than 85% ownership in a tender offer because under the § 203 Provision the small minority of shareholders who did not tender would still be able to block a business combination. The defendants also failed to recognize that for an acquirer other than Mihaylo, the majority vote provision of the § 203 Provision would not be advantageous, because the acquirer would still have to meet the two-thirds vote requirement in order to satisfy the subsequent board approval exception of § 203(a)(3).

105. The defendants failed to focus on and understand how the § 203 Provision would give Mihaylo the advantage over other bidders. Because of his 19.6% ownership, Mihaylo will be able to prevent an offeror from satisfying the 85% Exclusion if Mihaylo does not support the offer. The § 203 Provision gives Mihaylo a veto over an offer by a prospective acquirer with a substantial position in Inter-Tel’s stock. The only means by which an acquiror other than Mihaylo could be freed from the restrictions of the § 203 Provision will be through Subsequent Board and Stockholder Approval Exclusion, which requires a vote at a meeting by the disinterested stockholders, a vote which Mihaylo will dominate. Thus, the defendants essentially have made Mihaylo “the only game in town” as far as potential acquisition offers.

106. The § 203 Provision essentially means that to be free of the restrictions on Business Combinations, a potential acquiror other than Mihaylo must satisfy two of the exclusions of 8 Del. C. § 203(a), rather than just one, as required by the statute. Such a bidder

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would have to be exempted from § 203’s restrictions on Business Combinations under § 203(a)(1) or (2), but then will still be subject to the restrictions on Business Combinations unless the subsequent board and stockholder approval test under the § 203 Provision is also met. Alternatively, the Business Combination would still have to meet the two-thirds vote requirement of § 203(a)(3), as well as the lower vote requirement under the § 203 Provision.

Insertion of the Consent Provision in the Delaware Certificate

107. The Individual Defendants breached their fiduciary duties to the stockholders by authorizing the insertion of the Consent Provision into the Delaware Certificate and maintaining that the stockholders have no right to act by consent. The insertion of the Consent Provision into the Delaware Certificate was a unilateral action by the defendants. The principal purpose of that action was to deprive the stockholders of a right directly related to the stockholder franchise — the right to act by written consent of a majority of the shares. Because Inter-Tel is a public company, the unanimous consent requirement of the Consent Provision is a complete elimination of the stockholders’ right to vote by consent. The eradication of the ability to act by consent includes elimination of the stockholders’ right to remove and replace directors by consent. Thus, the Consent Provision involves issues of directorial control. Moreover, the Consent Provision was made part of the Delaware Certificate at a time when an offer by Mihaylo and Vector for control of Inter-Tel was pending before the Inter-Tel Board. Therefore, the Consent Provision was a defensive measure which touched upon issues of control.

108. The primary purpose of the Consent Provision was to impede the stockholders’ ability to exercise their franchise by consent to change control of the Company. The Consent Provision is preclusive—the stockholders cannot remove it without Board approval and cannot act by consent to remove and replace the incumbent Board. The insertion of the Consent

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Provision was not reasonable or proportionate in relation to any perceived threat posed by Mihaylo, particularly given Inter-Tel’s substantial arsenal of other defensive measures. Moreover, the Consent Provision prevents any action by consent, even actions totally unrelated to Mihaylo’s bid.

Sterilization of Directors

109. Defendants have improperly used the Special Committee and other board committees on which they serve as a vehicle for excluding Mihaylo and his designees from effectively participating in the board’s management of the corporation. The stockholders elected, and are entitled to the talents of, eleven directors, not eight. The defendants have improperly prevented three directors from completely discharging their fiduciary duties by systematically excluding them almost entirely from the board’s business.

110. The resolution providing for the Special Committee’s authority is void and invalid both on its face and as applied. The language of the resolution that permits a special committee to act as the entire board and to exclude three directors as to “all matters as to which the Special Committee may determine that Mihaylo and the other Mihaylo Nominees . . . may have . . . potential conflicting financial interests and/or loyalties” is impermissibly vague. In effect, the resolution authorizes the defendants to exclude three directors from meetings of the Board at which the Special Committee members determine their might be a potential conflict. Thus, the creation and use of the Special Committee has disenfranchised plaintiff and the Inter-Tel stockholders and denied them full representation on the Board. The resolution is also invalid as applied because the Special Committee has acted as the Inter-Tel Board on matters to which Mr. Mihaylo and his designees plainly do not have a conflicting financial interest or loyalty, including the Consent Provision and the Reincorporation.

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111. As a result of the foregoing breaches, plaintiff seeks equitable relief including rescission and declaratory relief requiring the individual defendants to consider fairly any offer for Inter-Tel and to pursue a value-maximizing transaction on the best available terms. Plaintiff also seeks invalidation of the § 203 Provision and Consent Provision because of defendants’ breach of fiduciary duty.

COUNT IV

BREACH OF DUTY OF DISCLOSURE

112. Plaintiff repeats and realleges the allegations above as if fully set forth herein.

Misleading Disclosure Concerning the

Differences Between § 203 and the § 203 Provision

113. The Proxy Statement’s description of the § 203 Provision is full of misleading statements and misleading partial disclosure. The Proxy Statement purported to describe “the principal differences between the statutory regime and the proposed charter provision” and represented that “[t]he proposed provision has been drafted to mirror in many respects Section 203.” Having made these partial disclosures, the defendants were required to provide a full, fair and accurate description of all the principal differences where the § 203 Provision does not mirror Section 203. Instead, the Proxy Statement’s description of the “‘principal differences” between § 203 and the § 203 Provision is misleadingly incomplete partial disclosure. The Proxy Statement did not mention at all numerous important differences between the statute and the certificate provision, including that the § 203 Provision does not contain:

(a) the Prior Board Approval Exclusion;

(b) the 85% Exclusion;

(c) the three year limit on the moratorium on Business Combinations; and

(d) the seven outs contained in § 203(b).

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114. A reasonable stockholder could not make an informed judgment on the special resolution without disclosure that the § 203 Provision does not contain most of the exclusions and opt-outs found in § 203. Indeed, the Proxy Statement’s assertion that there were only two “principal differences between the statutory regime and the proposed charter provision” misleadingly implied that the § 203 Provision did not modify other important features of § 203.

115. The Proxy Statement’s assertion that the § 203 Provision “would apply to all Interested Shareholders, regardless of when such an Interested shareholder (sic) acquired a 15% interest in the Company’s voting stock or for how long such an Interested Shareholder has held such an interest” is a misleading partial disclosure. Given the focus on Mihaylo, the disclosure makes it appear that the major change from § 203 was simply to include Mihaylo, though he had acquired his 15% interest well before § 203 or the § 203 Provision applied, and it held that interest for many years. The vague disclosure does not inform a reasonable stockholder that unlike § 203, the § 203 Provision has no three-year time limit, but will instead constitute a never- ending prohibition of Business Combinations with Interested Stockholders. The Proxy Statement fails to point out that bidders other than Mihaylo will be subject to both § 203 and the § 203 Provision.

116. The Proxy Statement’s representation that “rather than requiring the approval of two-thirds of the disinterested shareholders to consummate a business transaction as required by Section 203 of the Delaware Law, the proposed provision would require the approval of only a majority of disinterested shareholders” is also misleading and incomplete in material respects. The use of the words “rather” and “only” imply that the § 203 Provision is in place of or instead of § 203(a)(3). The Proxy Statement fails to disclose that § 203(a)(3) will still apply to all bidders other than Mihaylo, so that to obtain an exclusion for a Business Combination based on

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subsequent director and stockholder approval, it will still be necessary to get a two-thirds vote under the statute. Thus, in many circumstances the vote under the § 203 Provision will not be instead of the § 203(a)(3) vote; rather, the majority vote under the § 203 Provision will effectively be subsumed by the two-thirds vote requirement under the statute. The Proxy Statement also misleadingly describes the terms of the § 203 Provision as ‘“alterations” of § 203. This misleading partial disclosure suggests that the § 203 Provision will have the effect of changing the requirements of § 203, such as reducing the required vote for subsequent stockholder approval from two-thirds to a majority. Of course, a certificate provision cannot reduce the statutorily set vote under § 203(a)(3).

117. The Proxy Statement’s claim that the § 203 Provision provides “wider protections against takeover abuses by Interested Shareholders” than § 203 “without imposing more onerous approval burdens” is misleading and incomplete. The Proxy Statement fails to disclose that the “wider protections” include the elimination of important exclusions and outs contained in the statute. Furthermore, the claim that the § 203 Provision does not impose a more onerous approval burden is false. Bidders other than Mihaylo will be subjected to the requirements of both § 203 and the § 203 Provision. The § 203 Provision’s creation of a dual-approval requirement is more onerous than the approval burdens under the statute. Indeed, Inter-Tel’s counsel specifically discussed that the § 203 Provision would apply even if the Business Combination was outside the scope of § 203 under § 203(a)(2). However, this critical point was not disclosed to the stockholders.

118. The Proxy Statement also misleadingly claimed that the § 203 Provision merely “may have the effect of delaying an Interested Shareholder’s ability to acquire the corporation.” In fact, the restriction on business combinations is not subject to the three-year term specified by

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§ 203, but would go on in perpetuity. Thus, the provision may permanently bar, not merely delay, an acquisition by an Interested Stockholder.

Misleading Disclosure Concerning Amendment

Of the Reincorporation Agreement

119. The Proxy Statement’s description of the possibility that the Reincorporation Agreement would be amended after the vote of the Inter-Tel Arizona stockholders was materially misleading and incomplete. The Proxy Statement claimed that the Reincorporation Agreement could be amended at any time prior to the effective time of the Reincorporation, including after the shareholders have voted to adopt the proposal. In fact, the Reincorporation Agreement provided that subsequent to the adoption of the Reincorporation Agreement by the stockholders of Inter-Tel Arizona, the agreement could not be amended to change the kind of shares to be received in the Reincorporation, to alter or change any term of the Inter-Tel Delaware certificate or to alter or change any terms or conditions of the agreement to adversely affect the holders of Inter-Tel Arizona stock.

120. The Proxy Statement promised that Inter-Tel Arizona would re-solicit the shareholders’ approval “if the terms of the Reincorporation Agreement are changed in any material respects.” A reasonable stockholder reviewing the Proxy Statement and the terms of the Reincorporation Agreement would reasonably interpret these documents to mean that any alteration or change in the kind of shares or the Delaware Certificate would constitute a change to the terms of the Reincorporation Agreement in a material respect, particularly because the agreement in Section 4.5 specifically provided that those items could not be changed after the stockholder vote. Thus, defendants misled the stockholders by indicating that there would be a re-solicitation if there was a change in the items which the Reincorporation Agreement specifically provided could not be amended after the initial stockholder vote. The disclosure was

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also misleadingly incomplete to the extent that the defendants now claim that the Reincorporation Agreement and Delaware Certificate could be changed prior to the incorporation of Inter-Tel Delaware. Even though the Proxy Statement acknowledged that Inter-Tel Delaware had not yet been incorporated and that the Reincorporation Agreement had not yet been signed, it contained no disclosure indicating that the delay in the incorporation of Inter-Tel Delaware and the execution of the Reincorporation Agreement meant that the terms of those documents could be changed after the stockholder vote. To the contrary, the disclosure in the Proxy Statement, including the explicit terms of the Reincorporation Agreement annexed thereto, plainly indicated that the kind of shares and the terms of the Delaware Certificate could not be amended after the stockholder vote.

121. The Proxy Statement was materially misleading and incomplete in asserting that the Reincorporation Agreement could only be amended “subject to applicable law.” The defendants did not disclose their position that the applicable Delaware law on amendment of a merger agreement, 8 Del. C. § 251(d), would not apply as long as defendants delayed in incorporating Inter-Tel Delaware and executing the Reincorporation Agreement. Having represented that they would re-solicit shareholder approval of the Reincorporation if the terms of the Reincorporation Agreement were changed in any material respects, the defendants are precluded from relying on the vote of the Inter-Tel Arizona stockholders and are precluded from contending that changes to the kind of shares and the Delaware Certificate were not material, when the Reincorporation Agreement submitted to the stockholders expressly made them so.

Misleading Disclosure Concerning the Mihaylo Settlement

122. While the Proxy Statement purported to describe the Mihaylo Settlement, it did not disclose the Mihaylo Director Restrictions. A reasonable stockholder would have considered

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it important to know that the three directors likely to support a sale of the Company would be excluded from discussion and receipt of materials regarding Inter-Tel’s value and strategic plan and from consideration of any proposal to acquire the Company.

COUNT V

INVALIDITY OF THE REINCORPORATION

123. Plaintiff repeats and realleges the allegations above as if fully set forth herein.

124. The Reincorporation is invalid because the defendants failed to comply with either the Delaware merger statutes or the Arizona merger statutes.

Pertinent Statutory Provisions

125. Under § 252(c), in any merger of a Delaware corporation with a foreign corporation, the requirements of § 251(b) for approval by the Board of Directors and stockholders of the Delaware corporation apply. Section 252(c) also requires that the agreement of merger be adopted and approved by the foreign corporation “in accordance with the laws under which it is formed.” The Arizona merger statutes, Ariz. Rev. Stat. ¶¶ 10-1101A, 10-1103A-B, require that the plan of merger be approved by both the Board of Directors and the stockholders of the Arizona corporation. Under Ariz. Rev. Stat. ¶ 10-1103B1-2, for there to be proper approval of a plan of merger, there must be both a recommendation by the Board of Directors that the shareholders approve the plan of merger and approval of the plan by the shareholders entitled to vote thereon. The Reincorporation Agreement was both the “agreement of merger” required by § 252(b) of the DGCL and the “plan of merger” required by the Arizona merger statutes, Ariz. Rev. Stat. ¶¶ 10-1101, 10-1103. Like § 251(c), the Arizona merger statute in Ariz. Rev. Stat. ¶ 10-1103D requires that the notice of the stockholder meeting to approve the plan of merger must contain or be accompanied by a copy or summary of the plan of merger.

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Both Delaware law and Arizona law (8 Del. C. §251(b)(3); Ariz. Rev. Stat. 10-1101C1) require that the merger agreement indicate the certificate of incorporation terms that will govern the surviving corporation.

126. To comply with both Delaware and Arizona law, the defendants included a copy of the Reincorporation Agreement with the Proxy Statement. The text of the Reincorporation Agreement attached as Annex A provided for the merger to be accomplished “[i]n accordance with the provisions of this agreement, the Delaware General Corporation Law (“the “DGCL”) and the Arizona Business Corporation Act (“ABCA”).” PX 1, Annex A, p. A-1, §1.1. The first requirement for the effectiveness of the merger was that:

(a) This Agreement and the Merger shall have been adopted and approved by the stockholders of each Constituent Corporation in accordance with the requirements of the DGCL and the ABCA,

Thus, approval of the Reincorporation Agreement by the Inter-Tel Arizona stockholders and the stockholders of Inter-Tel Delaware was required by the merger statutes and the agreement itself. The Reincorporation Agreement as presented in the Proxy Statement is the only plan of merger that the Inter-Tel Arizona shareholders approved.

Non-Compliance With the DGCL

127. The Reincorporation did not comply with Sections 251 and 252 of the DGCL. Under 8 Del. C, § 252(c), the merger agreement for a merger with a non-Delaware corporation must be “adopted, approved, certified, executed and acknowledged... in the case of a Delaware corporation, in the same manner as is provided in § 251.” The provisions of 8 Del. C. §251(b) and (c) require three different actions to occur in a specific sequence in order to approve and implement a merger: (i) the board must approve the merger agreement, (ii) the agreement adopted by the board must be executed and acknowledged in accordance with 8 Del. C. § 103,

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and (iii) the agreement must be approved by the stockholders. If the director consent approving the merger agreement and the stockholder consent approving the merger agreement are invalid, the merger was not validly approved as required by §251 (b) and (c).

128. The first requirement of § 251(b), that the Board of Directors of Inter-Tel Delaware approve the Agreement of Merger, was not satisfied because at the time Stout signed the Consent of Sole Director purportedly approving the Reincorporation Agreement, he was not, in fact, a director of Inter-Tel Delaware because the corporation had not yet been formed.

129. Stout’s action as purported incorporator appointing himself as sole director was invalid as well. The DGCL provides in § 108(a) that “[a]fter the filing of the certificate of incorporation an organization meeting of the incorporator...shall be held...for the purposes of adopting bylaws, electing directors…and transacting such other business as may come before the meeting.” 8 Del, C, §108(a) (emphasis added). Because § 108(c) only permits an incorporator to sign an instrument in lieu of an organization meeting for “[a]ny action permitted to be taken at the organization meeting,” the signing of the instrument plainly must also occur after the filing of the certificate of incorporation. Here, the Action of Incorporator of Inter-Tel Delaware purportedly adopting by-laws and electing Stout as initial director was admittedly signed on June 27, 2006, before the Inter-Tel Delaware Certificate of Incorporation was filed on June 28, 2006.

130. Section 251(b) next requires that the merger agreement “so adopted shall be executed and acknowledged in accordance with § 103 of this title.” While Stout purported to sign the Reincorporation Agreement as an officer of Inter-Tel Delaware, he was not, in fact, an officer of the corporation at the time he executed the agreement. Again, the corporation could not have had officers then because it had not yet been formed. Moreover, Stout’s purported actions as incorporator and sole director, including the appointment of officers, were invalid

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because the instruments and consents were executed before Inter-Tel Delaware’s Certificate of Incorporation was filed.

131. Under § 251(c), the agreement required by § 251(b) is to be submitted to the stockholders for approval. Only an agreement which complies with § 251 (b) may be submitted to the stockholders. The Reincorporation Agreement could not validly be submitted to the stockholders of Inter-Tel Delaware because it had not been approved by the Inter-Tel Delaware Board of Directors and had not been executed and acknowledged as required by § 103.

132. The Reincorporation Agreement was also not approved by the Inter-Tel Delaware stockholders as required by § 251(c). First, when Stout signed the Reincorporation Consent on behalf of Inter-Tel Arizona on June 27, 2006, Inter-Tel Arizona was not a stockholder because Inter-Tel Delaware did not even exist and consequently could have no stockholders. Secondly, Inter-Tel Arizona was not a stockholder because Stout did not have the requisite status as a director and officer of Inter-Tel Delaware to execute the Stock Purchase Agreement and issue shares of Inter-Tel Delaware stock to Inter-Tel Arizona.

133. A third reason § 251(c) was not satisfied is that the Reincorporation Consent is invalid under 8 Del. C. § 228(c), which requires that a stockholder consent “shall bear the date of signature.” Defendants’ documents and even an affidavit from counsel that defendants filed in this action establish that the date of signature of the Reincorporation Consent was June 27, 2006. Mr. Stout was specifically directed by counsel not to date the consent or other documents. An undated consent is invalid. The subsequent handwritten alteration of the consent by someone other than Stout to assert that the consent was “as of June 28, 2006” is ineffective because: (i) June 28 was not the date of signature, (ii) § 228(a) requires that the consent contain the date it was signed, not some “as of” date and (iii) the dating was not done by signer of the consent.

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Non-Compliance With Arizona Merger Statutes

134. The Reincorporation also failed to comply with the Arizona merger statutes. Under Arizona Revised Statute § 10-1101A, corporations may merge “if the board of directors of each corporation adopts, and, if required by § 10-1103, its shareholders approve, a plan of merger.” The items which the “plan of merger shall set forth” are identified in § 10-1101B, with additional terms that the “plan of merger may set forth” described in § 10-1101C.

135. Under Arizona Revised Statutes § 10-1103A “after adopting a plan of merger … the board of directors of each corporation that is a party to the merger and the board of directors of the corporation whose shares will be acquired in the share exchange shall submit the plan of merger … for approval by its shareholders.” Under § 10-1103B, for a plan of merger to be approved, two conditions must occur: “the board of directors shall recommend the plan of merger … to the shareholders” and the shareholders entitled to vote on the plan of merger must approve the plan. Section 10-1103D requires that the notice of the meeting to consider the plan of merger “shall contain or be accompanied by a copy or summary of the plan.”

136. Unlike 8 Del. C, § 251(d), the Arizona merger statutes do not contain any provision authorizing amendment of the plan of merger by the board of directors after stockholder approval has been obtained. Section 10-825E2 of the Arizona revised statutes provides that a board committee “shall not”:

2. Approve or submit to shareholders any action that requires the shareholders’ approval under this chapter.

Thus, because a merger requires shareholder approval, Arizona law does not permit a committee to approve a plan of merger.

137. Arizona Revised Statutes §10-1105A requires that after a plan of merger is approved by the shareholders, the surviving corporation must deliver to the Arizona

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Corporations Commission both the plan of merger and articles of the merger. On July 13, 2006, Inter-Tel filed with the Arizona Corporation Commission, Articles of Merger and the Reincorporation Agreement. Thus, defendants recognized that the Reincorporation Agreement was the statutorily required plan of merger. Under § 10-1106A6 when a merger takes effect, the shares of the corporation are converted into shares of the surviving corporation “and the former holders of the shares are entitled only to the rights provided in the plan of merger.”

138. The Reincorporation is invalid because of the defendants’ failure to comply with the merger provisions of the Arizona Revised Statutes, including Arizona Revised Statutes §§ 10-1101A, 10-1103, 10-825E2, 10-1105A. The Board of Directors of Inter-Tel Arizona did not adopt the Reincorporation Agreement, which constituted the plan of merger. When the board approved the Reincorporation on March 16, 2006, the Reincorporation Agreement had not even been drafted. The Board never approved the plan of merger (i.e., the Reincorporation Agreement) at any subsequent meeting. Therefore, the merger did not comply with Arizona Revised Statutes §§ 10-1101A and 10-1103A.

139. The Reincorporation is also invalid because the Special Committee purportedly approved a different plan of merger (i.e., a revised version of the Reincorporation Agreement) after the Inter-Tel Arizona stockholders had approved that agreement. The Arizona Merger Statutes do not authorize amendment of a plan of merger after stockholder approval. Moreover, under Arizona law only the board of directors can adopt a plan of merger. Thus, the Special Committee had no authority to adopt a revised plan of merger after the Inter-Tel Arizona stockholders had voted on the Reincorporation Agreement. Furthermore, the defendants have failed to produce minutes or other evidence showing that the Inter-Tel Arizona Board of Directors even purported to authorize the Special Committee to approve a plan of merger or

57

change the terms of the Reincorporation Agreement. Indeed, the Reincoiporation Agreement only purported to authorize the board of directors to amend the Reincorporation Agreement and even the board was not permitted, after approval by the shareholders of either constituent corporation, to alter the kind of securities to be received as merger consideration or the terms of the Certificate of Incorporation of the surviving corporation (i.e., Inter-Tel Delaware). The committee’s action violated Arizona law, the terms of the Reincorporation Agreement and the terms of the Mihaylo Settlement Agreement. Furthermore, changes to the kind of securities (i.e., changing the merger consideration from no par value stock to par value stock) and other changes to the Reincorporation Agreement were made without the approval of either the Board of Inter-Tel Arizona or the Special Committee. Finally, the defendants violated Arizona law by delivering to the Arizona Corporations Commission a plan of merger (i.e., the Reincorporation Agreement as altered after the shareholder vote) that was different from the plan of merger submitted to and approved by the shareholders.

140. By effecting a merger without compliance with the Delaware and Arizona merger statutes, defendants wrongfully exerted dominion over the property of plaintiff and the Class and committed a conversion of the shares of Inter-Tel Arizona owned by plaintiff and the Class. As defendants’ response to plaintiffs suit and the creation of the August 23, 2006 Action demonstrate, defendants have persisted in maintaining the invalid merger,

141. Plaintiff has no adequate remedy at law.

Class Action Allegations

142. Plaintiff brings this action on his own behalf and as a class action pursuant to Chancery Court Rule 23 on behalf of all public holders of shares of Inter-Tel’s common stock,

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excluding the defendants named herein and their affiliates, associates and consultants (the “Class”).

(a) The Class is so numerous that joinder of all members is impracticable. There are thousands of stockholders, residing in many states, who are in the Class.

(b) There are questions of law and fact that are common to the Class and that predominate over questions affecting any individual Class members. The common questions include whether defendants have breached their fiduciary duties to the members of the Class and whether the Reincorporation, the § 203 Provision, the Consent Provision and the Consent By-Law are invalid.

(c) The plaintiffs claims are typical of claims of other members of the Class. Plaintiff has the same interests as other members of the Class. Plaintiff is committed to prosecuting this action. Plaintiff has retained competent counsel experienced in litigation of this nature. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class.

(d) Plaintiff does not anticipate that there will be any difficulty in the management of this litigation.

143. For the above reasons, a class action is superior to other available methods for the fair and efficient adjudication of this controversy, and the requirements of Chancery Court Rule 23 are satisfied.

144. No demand on the Board of Directors of Inter-Tel is necessary because plaintiff’s claims of statutory violation, breach of fiduciary and breach of duty of disclosure are individual and class claims and, therefore, the demand requirement does not apply.

145. To the extent any of the claims are deemed derivative, demand on the Inter-Tel Board is excused. The directors are conflicted because the challenged measures are designed to preserve their control over the corporation.

146. The allegations above establish that the directors are not independent, and there is a reasonable doubt as to whether the defendant directors exercised reasonable business judgment

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in approving the challenged measures. Moreover, the § 203 Provision and other measures are for the primary purpose of entrenchment. Accordingly, the Business Judgment Rule does not apply, and no demand is required.

147. Demand is not required because:

(a) The Complaint alleges conduct that was not the product of a valid exercise of business judgment and involved an intentional, reckless or bad-faith abdication of defendants’ fiduciary duties;

(b) A majority of the board of directors of Inter-Tel is not disinterested and independent;

(c) The Inter-Tel directors abrogated their fiduciary responsibilities; and

(d) The challenged certificate and by-law provisions are void or voidable.

WHEREFORE, plaintiff and the Class pray for an Order and Judgment:

A. Declaring that defendants have violated their fiduciary duties to the plaintiff and the Inter-Tel stockholders by their adoption of defensive measures and their failure to pursue the best available transaction for the Inter-Tel stockholders and their failure to provide full and fair disclosure of all material facts;

B. Enjoining defendants from further violations of their duties in consideration of alternatives to maximize value for the Inter-Tel stockholders;

C. Declaring that the § 203 Provision, the Consent Provision, the Par Value Change and the Consent By-Law are invalid and unenforceable under Delaware law and directing the removal of those provisions from the certificate and by-laws of Inter-Tel Delaware and declaring that the Reincorporation is invalid;

D. Awarding such rescissory relief with respect to the Reincorporation, Par Value Change, Inter-Tel Delaware Certificate and By-laws as is practicable and equitable, including elimination of amendments in the Restated By-Laws;

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E. Awarding to plaintiff and the class damages as a result of defendants’ wrongful conduct and the conversion of their stock;

F. Certifying this action as a class action and designating plaintiff as class representative and plaintiff’s counsel as class counsel;

G. Awarding to plaintiff reasonable attorneys’ fees and expenses of this litigation; and

H. Awarding such other and further relief as the Court deems just and proper.

PRICKETT, JONES & ELLIOTT, P.A.
By:	/s/ Paul A. Fioravanti, Jr.
	Michael Hanrahan (Bar I.D. #941) Paul A. Fioravanti, Jr. (Bar I.D. #3808) Laina M. Herbert (Bar I.D. #4717) 1310 N. King Street P.O. Box 1328 Wilmington, DE 19899-1328 (302) 888-6500 Attorneys for Plaintiff

OF COUNSEL:

SCHIFFRIN, BARROWAY,

TOPAZ & KESSLER, LLP

Marc A. Topaz

Lee D. Rudy

280 King of Prussia Road

Radnor, PA 19087

(610) 667-7706

DATED: March 27, 2007

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EX-99.2

Exhibit 99.2

EXHIBIT A

TO

MOTION FOR LEAVE TO SUPPLEMENT

THE SECOND AMENDED COMPLAINT

Mercier v. Inter-Tel (Delaware), Incorporated,

Del. Ch., C.A. No. 2226-VCS

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN AND FOR NEW CASTLE COUNTY

VERNON A. MERCIER,	)
	)
Plaintiff,	)
	)
v.	)         Civil Action No. 2226- VCS
	)
INTER-TEL (DELAWARE), INCORPORATED,	)
NORMAN STOUT, ALEXANDER CAPPELLO, J.	)
ROBERT ANDERSON, JERRY W. CHAPMAN,	)
GARY D. EDENS, STEVEN E. KAROL, ROBERT	)
RODIN and AGNIESZKA WINKLER,	)
	)
Defendants.	)

SUPPLEMENT TO THE SECOND AMENDED COMPLAINT

Pursuant to Chancery Court Rule 15(d), Plaintiff hereby supplements the Second Amended Complaint in this action to include transactions, occurrences and events which have happened since the filing of the Second Amended Complaint.

A. The Mitel Merger

1. On April 26, 2007, Defendant Inter-Tel (Delaware), Incorporated (“Inter-Tel” or the “Company”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Mitel Networks Corporation, a Canadian corporation (“Mitel”) and Arsenal Acquisition Corporation (“Arsenal”), a wholly-owned subsidiary of Mitel, pursuant to which Arsenal will be merged with and into Inter-Tel, with Inter-Tel as the surviving corporation (the “Merger”). In the Merger, the stockholders of Inter-Tel will be cashed out for $25.60 per share in cash. The Merger Agreement and Merger were approved by only seven of Inter-Tel’s 11 directors. Director Steven Mihaylo voted against approval of the Merger Agreement and Merger, and two other directors, Dr. Anil K. Puri and Kenneth L. Urish, abstained from voting. One director, defendant Steven E. Karol, was not at the meeting at which the Merger and Merger Agreement

were approved. In order “to avoid any appearance of a conflict of interest,” defendant Norman Stout, the Company’s Chief Executive Officer, abstained as a member of the Special Committee from voting to recommend the Merger Agreement and Merger to the Board. He nevertheless was one of the seven directors who voted to approve the Merger and Merger Agreement at the Board meeting.

2. The standards and measurements defendants themselves applied to prior offers by Mr. Mihaylo and Vector Capital Corporation (“Vector”) demonstrate that defendants breached their fiduciary duty because they (i) failed to employ a fair process or provide a level playing field in pursuing a sale of the Company, (ii) failed to maximize value for Inter-Tel’s stockholders, (iii) deliberately excluded Mihaylo, Vector, financial buyers and others from the sale process, and (iv) entered into a Merger Agreement with no-shop and termination fee provisions, even though Vector had offered $26.50 per share before the board approved and the Company executed that agreement. The Individual Defendants also breached their fiduciary duties by having Inter-Tel make representations and covenants in the Merger Agreement that are false and incorrect. These representations and covenants may subject Inter-Tel to substantial harm, including potential damages for breach of contract, and may prevent plaintiff and the Inter-Tel public stockholders from receiving maximum value for their shares. Because of these untrue representations and agreements, the defendants have also subjected plaintiff and the other public stockholders to the risk that their investment may be adversely affected by, and their shares may be taken from them in, an invalid merger.

B. Terms of the Merger Agreement

3. In Section 4.01 of the Merger Agreement, Inter-Tel represents that it is “a corporation duly incorporated, validly existing and in good standing under the laws of the State

2

of Delaware” and that it has all corporate powers for operating its business. The Section further represents:

The Company has heretofore delivered to Parent true and complete copies of the certificate of incorporation and by-laws of the Company as in effect on the date hereof. The Company is not in violation of any of the provisions of its certificate of incorporation or by-laws.

Thus, the defendants have represented that the provisions of Inter-Tel’s certificate and by-laws are valid, including the Section 203 Provision and the Consent Provision challenged in this litigation. Moreover, they have represented that Inter-Tel was validly reincorporated into Delaware and, therefore, is duly incorporated and validly existing under Delaware law. These representations are wrong.

4. Section 4.02(a) of the Merger Agreement provides:

The execution, delivery and performance by the Company of this Agreement and consummation by the Company of the transactions contemplated hereby are within the Company’s corporate powers and, except for the Company Stockholder Approval (as defined below), have been duly authorized by all necessary corporate action on the part of the Company. The affirmative vote of the holders of a majority of the outstanding shares of Company Stock (the “Company Stockholder Approval”) in favor of the adoption of this Agreement is the only vote of the holders of any Company Securities necessary in connection with the consummation of the Merger.

Section 4.02(a) also represents that the Merger Agreement has been duly and validly executed and delivered by Inter-Tel and constitutes a legally valid and binding agreement of the Company. The representations in Section 4.02(a) assume the validity of the Reincorporation and that Inter-Tel is a Delaware corporation.

5. Section 4.02(a)’s representation that a vote of the holders of a majority of Inter-Tel’s outstanding common stock is the only stockholder approval necessary is inconsistent with

3

the defendants’ position that the Section 203 Provision in Inter-Tel’s certificate is valid. While the Merger Agreement represents that all provisions contained in Inter-Tel’s Certificate of Incorporation are in effect, it does not provide for any vote under the Section 203 Provision. However, if the Section 203 Provision were valid, then a vote under that provision would be a prerequisite for approval of the Merger. Under 8 Del. C. § 203(a), the prior approval of the Inter-Tel Board of interested stockholder status for Mitel and of the business combination (i.e. the Merger) would be sufficient to exempt Mitel and the Merger from the restrictions of Section 203. However, the Section 203 Provision does not contain an exemption for prior board approval.¹ Rather, that certificate provision requires that at or subsequent to the time the acquiror became an interested stockholder, the business combination must be approved at a stockholders’ meeting by “at least a majority of the outstanding voting stock which is not owned by the interested stockholder.”² Section B5 of the Section 203 Provision defines interested stockholder as any person that is the owner of 15% or more of the outstanding voting stock of Inter-Tel. Under Section B9(2)(A) of that provision, ownership includes any stock which a person individually or through any affiliate has the right to acquire whether immediately or only after time, pursuant to any agreement, arrangement or understanding. As a result of the Merger Agreement, Mitel has the right to acquire 15% or more of Inter-Tel’s outstanding stock pursuant to an agreement. Accordingly, upon execution of the Merger Agreement, Mitel became an interested stockholder under the terms of the Section 203 Provision. Because the Merger will be a merger of Inter-Tel with an interested stockholder, it is a business combination under Section B3(i) of the Section 203 Provision. Accordingly, if the Section 203 Provision were valid, the Merger would be subject to the non-waivable voting requirement of the Section 203 Provision.

¹ Defendants’Opening Brief in Support of Their Motion to Dismiss Plaintiff’s Second Amended Complaint, p. 13 (“Defendants’ Brief”) acknowledged that there is no prior board approval exclusion in the Section 203 Provision.

² Defendants’Brief, p. 14, asserts that this non-waivable vote requirement is valid under Delaware law.

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Neither the 8-K announcing the Merger, the Merger Agreement itself nor the Preliminary Proxy Statement discusses the Section 203 Provision, much less explains why the provision, if valid, would not apply to the Merger.

6. In Section 4.04 of the Merger Agreement, the defendants represented that:

The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and other transactions contemplated hereby do not and will not (i) violate, contravene, breach or conflict with the certificate of incorporation or by-laws of the Company.

However, unless the Section 203 Provision is invalid, Inter-Tel’s performance of the Merger Agreement and consummation of the Merger would violate the Section 203 Provision. Moreover, the representation in Section 4.04 assumes the validity of the Reincorporation and the validity of the certificate of incorporation and by-laws of Inter-Tel as a Delaware corporation.

7. Section 4.05(a) of the Merger Agreement represents that Inter-Tel has authorized capital of 100 million shares of “Company Stock” and that as of April 20, 2007, there were 27,161,823 shares of such stock issued, including 27,048,012 shares that are outstanding and 113,811 treasury shares. Section 1.01 of the Merger Agreement defines Common Stock as common stock, $0.001 par value of the Company. Thus, the Merger Agreement represents that Inter-Tel has par-value stock as a Delaware corporation. This is incorrect because the defendants improperly changed Inter-Tel’s stock from no-par value to par value. Furthermore, the Merger Agreement again assumes the validity of the Reincorporation.

8. In Section 4.12 of the Merger Agreement, Inter-Tel represents that since January 1, 2005, it has been in compliance with all Applicable Laws, a term which is defined in Section 1.01 to include all state laws. In fact, Inter-Tel has violated the Delaware General Corporation Law and the Arizona Corporation Law in connection with the Reincorporation, the alteration of

5

Inter-Tel Delaware’s certificate and by-laws and the alteration of the Reincorporation Agreement.

9. In Section 6.01 of the Merger Agreement, Inter-Tel covenants that prior to the consummation of the Merger, it will not amend its certificate of incorporation or by-laws or any material term of its stock. Thus, the defendants have contractually restricted the Company from correcting the defects in the Reincorporation and the Delaware certificate.

10. Section 11.04(b) of the Merger Agreement provides that Inter-Tel must pay Mitel a $20 million termination fee if any of several events occur, including (i) Inter-Tel accepting a superior proposal, (ii) the Inter-Tel board changes its recommendation with respect to the Merger and (iii) the Inter-Tel stockholders do not approve the Merger Agreement.

11. Section 6.03 of the Merger Agreement is a “No Solicitation” Provision which severely restricts Inter-Tel’s ability to solicit or pursue a better transaction for the stockholders. The provision is complicated, and it takes over two pages to summarize it in the Preliminary Proxy Statement. Section 6.03(a) prohibits even solicitation or encouragement of inquiries relating to an acquisition proposal and also bars in any way assisting a third party who has indicated an interest in the possibility of making an acquisition proposal (including providing information to the potential bidder). Inter-Tel and its directors also may not “recommend a Superior Proposal or withdraw, qualify or modify the Company Board Recommendation in a manner adverse to” Mitel. Except for extending the Confidentiality Agreements with Mihaylo and Vector, Inter-Tel also may not enter into, amend or modify any agreement in principle, letter of intent, term sheet, confidentiality agreement, acquisition agreement or other similar agreement or instrument (whether or not binding) relating to an acquisition proposal.

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12. Section 6.03(b) contains a purported “fiduciary out” which provides a very limited opportunity for Inter-Tel to discuss a bona fide acquisition proposal that is or is likely to lead to a Superior Proposal and to furnish information. Significantly, the fiduciary-out specifically contemplates and dictates the terms on which information can be provided to Vector. Of course, if the defendants thought it was possible that Vector would make a proposal superior to Mitel’s offer, then why did they not contact Vector and seek a bid before negotiating a merger agreement with Mitel? Indeed, on information and belief, the specific reference to Vector may have been added to the Merger Agreement after Vector, on April 25, 2006, proposed a merger at $26.50 before the Merger Agreement was signed.

13. Section 6.03(e) permits certain negotiations and discussions with Mihaylo if he submits an acquisition proposal. Thus, the defendants anticipated that Mihaylo might be willing to pay more for Inter-Tel, but in breach of their fiduciary duties, they failed to seek a bid from him and instead pursued negotiations exclusively with Mitel and entered into a Merger Agreement containing no-solicitation restrictions and providing for a $20 million termination fee.

C. The Preliminary Proxy Statement’s Description of Merger Discussions

14. On May 11, 2007, Inter-Tel filed a preliminary proxy statement with the Securities and Exchange Commission (the “Preliminary Proxy Statement”). The filing suggests that Inter-Tel plans to hold a special meeting of stockholders to vote on the Merger Agreement on or about July 15, 2007.

15. According to the Preliminary Proxy Statement, Inter-Tel held undisclosed discussions regarding a business combination with Mitel and others from as early as October 2003. During the period from June 2006 through November 2006 when Mr. Mihaylo and Vector were submitting offers to purchase the Company, defendant Stout was conducting discussions

7

with Mitel and others concerning a possible business combination with Inter-Tel. After Mihaylo’s resolution that Inter-Tel should be sold was narrowly defeated at a special meeting on October 24, 2006, Inter-Tel nevertheless continued to hold discussions with Mitel and others concerning a possible business combination from late November 2006 through March 2007. Most striking is that Inter-Tel, which supposedly was exploring all its strategic options, never contacted Mihaylo, Vector or others who had previously expressed interest in acquiring Inter-Tel to see if they were interested in pursuing a business combination.

16. According to the Preliminary Proxy Statement, Mitel contacted defendant Cappello on December 11, 2006 to continue discussions regarding a potential business combination between Inter-Tel and Mitel. On December 14, 2006, defendant Stout received a call from a representative of Francisco Partners which had previously submitted an expression of interest to Inter-Tel in September 2005. Defendants Cappello and Stout met with Mitel officers on January 16, 2007 to discuss a potential transaction, and Mitel revealed it had held discussions with Francisco Partners as a potential financial partner in the acquisition of Inter-Tel.

17. After Mihaylo sent a January 19, 2007 letter proposing nine points of action for Inter-Tel, the defendants proceeded to stall Mr. Mihaylo while pursuing further discussions with Mitel. On February 13, 2007, defendants Stout and Cappello updated the Special Committee on discussions with Mitel. Later that same day, defendant Stout met with Mitel and Francisco Partners to discuss further the proposed business combination, including Mitel’s proposed per-share price of $25. Mitel signed a Confidentiality Agreement on March 1, 2007, and due diligence and management meetings were held from March 1 through March 3, 2007.

18. After Mihaylo had notified Inter-Tel of his intention to nominate directors and wage a proxy contest at Inter-Tel’s 2007 Annual Stockholders Meeting, the Special Committee

8

met on March 5, 2007 to receive a report on the recent discussions with Mitel. According to the Preliminary Proxy Statement, despite the months of discussions with Mitel, Mitel’s $25 per-share proposal, the execution of the Confidentiality Agreement and three days of due diligence meetings, the Special Committee concluded that “Inter-Tel was not for sale.” The committee, however, authorized defendants Cappello and Stout to continue discussions with Mitel. Defendant Stout spoke with representatives of Francisco Partners on March 14, 2007 and spoke a number of times with representatives of Mitel and Francisco Partners during the last half of March. On March 16, the Special Committee was updated on recent discussions with Mitel and determined that discussions with Mitel and Francisco Partners should continue.

19. The Special Committee received a further update on March 23, 2007 and directed that “the draft Merger Agreement should be sent to Mitel and its advisors.” The Committee’s counsel sent a draft Merger Agreement to Mitel’s legal counsel on March 26, 2007. On March 30, 2007, Mihaylo filed preliminary proxy materials. Mihaylo and Inter-Tel continued to exchange and make public letters stating charges and countercharges. Meanwhile, revised versions of the Merger Agreement were circulated between Inter-Tel and Mitel on April 1, 2007 and April 6, 2007.

D. Defendants Enter Into the Merger Agreement Despite Vector’s Offer

20. At an April 12, 2007 Special Committee meeting, Stout attempted to blame Inter-Tel’s disappointing first quarter 2007 results on Mihaylo’s threatened proxy contest. There was also a further update on the discussions with Mitel. On April 16, 2007, representatives of Inter-Tel met with Mitel and Francisco Partners for “further discussions and negotiations regarding various open terms of the Merger Agreement, including price, termination rights, the amount of the termination fee and the terms of the proposed no solicitation provisions.” At this meeting, Mitel proposed a price of $25 per share in cash. At an evening meeting on April 16, 2007, the

9

Special Committee discussed the impact of the negative first quarter 2007 results, but determined that Mitel and Francisco Partners should be advised that “the $25.00 price was not acceptable and to encourage Mitel to present its best offer.” Significantly, the Special Committee did not suggest any counter-offer, nor did it seek bids from Vector, Mihaylo or other potential acquirors. At an April 19, 2007 meeting, the Special Committee was again updated on the Mitel negotiations and concluded that Inter-Tel should focus its energies exclusively on continuing to negotiate with Mitel for an increased price. Again, the Special Committee made no effort, and gave no direction, to seek other bids in the hope of maximizing shareholder value in a sale of Inter-Tel.

21. On April 21, 2007, Mitel indicated that it would consider paying more than $25 per share subject to resolution of other open issues in the Merger Agreement. On April 22, 2007, Mitel sent a revised proposal, including a revised draft of the Merger Agreement which reflected a price of $25.50 per share. On April 23, 2007, Mitel increased its offer only to $25.60 per share.

22. On April 23, 2007, the Special Committee discussed the proposed merger terms, including the no-shop provision and termination fee. At an April 23, 2007 Board meeting, ostensibly to discuss the status of management initiatives and issues raised by Mr. Mihaylo, defendant Cappello disclosed the negotiations concerning the proposed business combination with Mitel. This was apparently the first that Mr. Mihaylo and his two designees to the Board had heard about the negotiations. At a reconvened Board meeting on April 24, 2007, the directors were updated on the discussions of price with Mitel and Francisco Partners and discussions with Mitel’s financial advisor. While Mihaylo’s two designees to the board, Dr. Puri and Kenneth Urish, were updated on various financial analyses and information pertaining to the

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Mitel proposal and the Special Committee’s activities, Mr. Mihaylo was excluded from the update purportedly based on “the possibility that Mr. Mihaylo might want to make a competing bid.” Of course, during the months of discussions Inter-Tel had held with Mitel and others, there was no effort to solicit any competing bid from Mr. Mihaylo. After further discussions, the Board concluded that negotiations with Mitel should continue. From April 24 through April 26, 2007, further drafts of the Merger Agreement and other related documents were exchanged.

23. On April 25, 2007, Vector sent a letter to the Inter-Tel Board stating that since its last proposed offer to buy Inter-Tel, conditions had improved and that Vector Capital might consider making an all-cash offer at a price of $26.50 per share, noting that Mihaylo was not part of the proposal. At an April 25, 2007 meeting, the Special Committee discussed Vector’s letter and the potential impact of the pending release of Inter-Tel’s disappointing first quarter 2007 results on Vector’s $26.50 expression of interest. Despite Vector’s expression of interest, the defendants continued to negotiate definitive transaction documents with Mitel which included a no-shop provision and termination fee.

24. On the morning of April 26, 2007, Vector reaffirmed its expression of interest and indicated it now believed that a price above $27 per share should be justifiable. Vector also stated that it would be unlikely to participate in a post-signing market check. Rather than negotiate with Vector, defendants pursued a deal with Mitel that was not the best value reasonably available. In fact, defendants rushed to sign their deal with Mitel despite Vector’s willingness to pay more. At a meeting on April 26, 2007, the Special Committee, despite the pendency of Vector’s higher offer, voted to recommend to the full Board of Directors to approve the Merger Agreement with Mitel. Defendant Stout abstained “to avoid any appearance of a conflict of interest.” The Committee made excuses for ignoring Vector’s offers, including that it

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was “an expression of interest only” and subject to “due diligence.” Of course, the excuses the Committee offered were all the result of defendants’ decision to exclude Vector from the process. Had defendants sought a bid from Vector in a timely manner, Vector could have completed due diligence and submitted an unconditional bid. Thus, the defendants relied on their own exclusion of a known potential bidder from the process as a basis for ignoring an expression of interest that was at least $.90 per share more than the Mitel Merger price.

25. Seven of the ten directors present at the subsequent board meeting on April 26 (including Mr. Stout) voted to approve the Merger Agreement. The defendants again refused to pursue Vector’s superior proposal, claiming it was “subject to contingencies, confirmation and financing questions and was from a party that was not aware of Inter-Tel’s recent disappointing results of operations and had recently been unable to submit a bid above $23.25 a share.” Inter-Tel’s financial advisor, UBS, opined that “as of April 26, 2007, the $25.60 per share Merger Consideration to be received by holders of Inter-Tel Common Stock (excluding Steven G. Mihaylo and his affiliates) in the Merger, was fair, from a financial point of view, to such holders.” While UBS and the Board “noted that the Mitel price was significantly higher than the final offer submitted by Mr. Mihaylo and Vector Capital in August of 2006,” (i.e. eight months ago) Inter-Tel never sought a further offer from Mihaylo or Vector. The defendants claimed that Mihaylo’s resolution for a sale of Inter-Tel had “put Inter-Tel in play for potential bidders.” However, the defendants had insisted that Inter-Tel was not for sale and, though the vote was very close Mihaylo’s resolution was voted down by the Inter-Tel stockholders. Mihaylo voted against adoption of the Merger Agreement, and Dr. Puri and Mr. Urish abstained. Defendant Karol did not attend the meeting, but apparently favored the Merger. Significantly, Inter-Tel has subsequently announced that a $26.50 per-share proposal from Vector is a “superior proposal” to

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the Merger, as defined by the Merger Agreement. Yet the defendants approved the Merger and had Inter-Tel enter into the Merger Agreement after Vector had put $26.50 on the table.

26. The defendants breached their fiduciary duty by rushing to sign the Merger Agreement with Mitel, rather than exploring Vector’s interest in acquiring Inter-Tel at a higher price. Having failed to contact Vector during their negotiations with Mitel, even though Vector was a logical potential bidder, the defendants then subjected Inter-Tel to no-solicitation restrictions and a $20 million termination fee even after Vector confirmed it was actively interested in making a higher bid. They further breached their fiduciary duty by failing to solicit a bid from Mihaylo. They also failed to discharge their duty by arbitrarily excluding financial buyers when such bidders do frequently offer the highest price.

E. Vector’s Renewed Offer

27. According to the Preliminary Proxy Statement, on May 9, 2007, the Inter-Tel Board received a letter from an undisclosed financial buyer proposing to acquire Inter-Tel at an all cash price of $26.50 per share subject to due diligence. On May 10, 2007, the Special Committee determined that the proposal was likely to lead to a “superior proposal” under the Merger Agreement. However, the Preliminary Proxy Statement says that after the Special Committee’s counsel demanded execution of a Confidentiality Agreement, the financial buyer withdrew its letter. In its 8-K filed on May 16, 2007, Inter-Tel disclosed that Vector was the financial buyer who had submitted the $26.50 bid.

28. On May 15, 2007, Inter-Tel issued a press release announcing that its board had received a letter from Vector expressing an interest in acquiring Inter-Tel at an all-cash price of $26.50 per share subject to confirmatory due diligence, financing and other conditions. The Special Committee determined that Vector’s proposal was likely to lead to a “superior proposal” under the Merger Agreement. This confirms that when the defendants approved the Merger on

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April 26, 2007, they already had before them an expression of interest from Vector that was likely to lead to a superior proposal. Yet they had Inter-Tel enter into a Merger Agreement with a $20 million termination fee, which based on the 27,060,862 shares outstanding, represents nearly $.75 per share.

29. In proceeding with the Mitel Merger, the defendants have pretended the Section 203 Provision does not even exist (the Preliminary Proxy Statement does not even mention it). However, they are no doubt ready to invoke it against Vector, Mihaylo or other potential competing bidders.

F. The Improper Exclusion of Financial Buyers

30. The supposed justification for pursuing extensive negotiations with Mitel while not seeking bids from Vector and others was the false premise that financial bidders would not be willing or able to pay as much as Mitel because Mitel was a strategic buyer that might realize synergies from the transaction. However, the numerous acquisitions of substantial corporations by financial buyers in recent years plainly demonstrate that this purported justification for ignoring financial buyers was simply an excuse to avoid offering Vector and other financial buyers an opportunity to bid for Inter-Tel until management had signed up the deal with its preferred acquiror. Indeed, Vector, a financial buyer, promptly offered to acquire Inter-Tel at a price above the Mitel deal. Moreover, Mitel’s “financial partner,” Francisco Partners, is a financial buyer.

31. Unlike other circumstances where financial buyers would need incumbent management in order to run the acquired company, in the Inter-Tel situation alternative senior management might be readily available in the person of Steven Mihaylo, the founder and long-time CEO of the Company. Thus, particularly with respect to Vector, which had previously combined with Mihaylo to make an offer for the Company, incumbent management had a strong

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incentive to avoid allowing financial buyers (particularly Vector) to bid because such buyers might prefer Mr. Mihaylo as substitute management.

G. Defendants’ Attacks on the Prior Mihaylo/Vector Proposal Demonstrate the Process Was Unfair

32. The defendants’ support for the Mitel Merger is fundamentally at odds with the positions they took in opposing (i) the $23.25 Mihaylo/Vector offer made in August 2006, and (ii) Mihaylo’s precatory, non-binding resolution that the Inter-Tel Board arrange for a prompt sale of the Company to the highest bidder. The defendants opposed the $23.25 offer and Mihaylo’s resolution because they claimed that the Company should pursue “a long-term strategic plan that was approved by the Board in June 2006” and was only in “its early stages of implementation.” September 19, 2006 Inter-Tel Proxy Statement, p. 1. On October 20, 2006, Inter-Tel released a statement asserting that the Company’s new products were in the early stage of acceptance and that Inter-Tel’s management and the Special Committee “have complete confidence in the Company’s ability to execute on a strategic plan and thereby realize greater long-term value for Inter-Tel stockholders.” The defendants claimed in Inter-Tel’s September 19, 2006 Proxy Statement that:

The Special Committee does not believe this is the appropriate time to sell the Company.

However, the Preliminary Proxy Statement reveals that while the defendants repeatedly told the Inter-Tel stockholders that a prompt sale of the Company would not provide maximum value, at the same time they were out trying to sell the Company to Mitel. Inter-Tel questioned why if Mihaylo truly did not believe in the prospects of Inter-Tel’s new products, “why should he be offering to buy the entire Company?” But if management and the Special Committee believed in Inter-Tel’s prospects and had complete confidence in its long-term strategic plan, then why were they out trying to sell the Company to Mitel?

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33. In an October 18, 2006 press release, Defendant Cappello condemned Mihaylo’s offer as an “attempt to force a sale of the Company at an inopportune time and an inadequate price.” Yet at that same time, the Company, including Cappello, was continuing discussions to sell the Company to Mitel. They now want to sell the Company for a price that is only slightly above “the inadequate” offer of Mihaylo and Vector that was rejected by the defendants.

34. The defendants asserted in Inter-Tel’s September 19, 2006 Proxy Statement that because Mihaylo had already been afforded extensive due diligence over a 90 day period, there would not be a level playing field for all interested bidders to submit offers for the Company. Yet the defendants established a process which they allowed Mitel to conduct due diligence over several months of negotiations and then signed a Merger Agreement with Mitel that contained a no-shop provision and large termination fee. They even used the fact that Vector’s $26.50 offer was subject to due diligence as an excuse for disregarding the offer and signing up the Merger Agreement. Had Vector been included in the sale process and provided with the same opportunity as Mitel, it would have completed its due diligence before April 26, 2007. In short, the defendants deliberately created an unlevel playing field that did not permit all potentially interested bidders to submit offers for the Company on an equal footing.

35. The defendants’ rush to sign up the Merger Agreement with Mitel reflected the very sort of “fire sale” atmosphere that, in opposing the Mihaylo resolution, they said would force the Company to negotiate from a position of weakness and result in a reduced value for stockholders.

36. The Special Committee also asserted that the $23.25 per-share offer presented by Vector and Mihaylo “did not represent your best offer.” Yet the Special Committee never sought

16

to elicit that best offer, even while it was negotiating with Mitel for a price that was not substantially more than the Vector/Mihaylo offer they had rejected as inadequate.

H. The Merger Price Is Unfair

37. The defendants’ own prior words and conduct in response to the Mihaylo/Vector Offer also proves the $25.60 merger price is unfair. The defendants repeatedly told the Inter-Tel stockholders that the $23.25 offer from Vector and Mihaylo was inadequate and did not reflect the intrinsic value of Inter-Tel. In opposing the Mihaylo/Vector Proposal, the defendants relied on statements that the Mihaylo/Vector $23.25 per-share offer was not compelling because it represented only a modest premium over the Company’s stock price and was below average for communications equipment transactions. Yet the same comments could be made about the Mitel transaction. The defendants criticized Mihaylo’s revised offer of $23.25 because it was only $.75 per share or approximately 3% more than his prior offer. After finding Mitel’s $25 offer was inadequate, the defendants accepted a mere $.60 increase in that offer—and increase of only about 2.4%, and they now claim the Mitel deal is terrific because it is a mere 10% more than the Mihaylo/Vector offer they rejected as inadequate and unfair.

38. In its October 2006 presentation to ISS, Inter-Tel asserted that:

• Mihaylo’s Offer Provides an Inadequate Acquisition Premium

• Mihaylo’s Offer is a Significant Discount to Some Analysts Price Targets for Inter-Tel on a Stand-Alone Basis

• Found by Special Committee with Advice of its Outside Advisors to be Inadequate and Not in the Best Interests of the Stockholders

Inter-Tel also claimed that it was an inopportune time to sell the Company because other likely buyers were currently occupied integrating major acquisitions.

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39. In its ISS presentation, Inter-Tel quoted an analyst who stated that a financial buyer should be paying in the mid-20s for Inter-Tel and that a strategic buyer should be paying in the high 20s. Yet now the defendants propose to sell Inter-Tel to a strategic buyer for only $25.60. The ISS presentation also noted that:

Current Wall Street analyst price targets average $23.00 for Inter-Tel on a stand-alone basis, excluding an acquisition premium.

—Price target range is as high as $28.00 for B. Riley.

In the ISS presentation, Inter-Tel also claimed that the Mihaylo resolution should be rejected because it would result in a potential auction with only one bidder. Yet then the defendants went out and essentially negotiated with only one bidder.

40. The inadequacy of the Mitel transaction at $25.60 per share is perhaps best demonstrated by comparing the premiums represented by that transaction with Inter-Tel’s own analysis in the ISS presentation of the “Inadequate Acquisition Premium” represented by the Mihaylo/Vector $23.25 offer. The Preliminary Proxy Statement asserts that the Special Committee and the Board are recommending the Merger because the $25.60 per-share consideration represents (i) approximately a 10.4% premium over the average price of Inter-Tel stock from January 1, 2007 through April 25, 2007, (ii) a premium of approximately 7% over the one-week calendar trailing average for the week ending April 26, 2007, (iii) a premium of approximately 7.6% over the $23.79 closing sale price of Inter-Tel’s common stock on April 26, 2007, the last trading day prior to the public announcement of the Merger Agreement and (iv) a premium of 10.1% over the $23.25 price offered by Mihaylo and Vector Capital in August of 2006. Significantly, the premium based on the trading prices during the three months ending April 26, 2007 is only 9%–obviously the defendants dropped April 26 and added the first several weeks of January to make the premium seem higher. The Preliminary Proxy Statement also does

18

not mention the premium over the average market price for the month prior to announcement of the Merger, which was only about 7.2%.

41. In asserting that the $23.25 Mihaylo/Vector offer provided an inadequate premium, Inter-Tel pointed out in the ISS presentation that selected technology transactions, which included 49 transactions since September 2005, showed an average one-day premium of 25.6%, a one-week average premium of 26.2%, a one-month average premium of 28.5% and a three-month average of 28.7% premium. The Mitel Merger fails to even approach the 20% plus premiums Inter-Tel cited in attacking the Mihaylo/Vector offer.

42. Inter-Tel also asserted in the ISS presentation that the Mihaylo/Vector offer provided an inadequate premium over recent market prices because as of September 27, 2006 it only represented a premium of (i) 6.8% over the one-day price, (ii) 6.3% over the one-week average, (iii) 5.2% over the one-month average and (iv) 8.8% over the three-month average. These premiums that defendants called inadequate are roughly comparable to the premiums in the Mitel transaction. Moreover, Inter-Tel’s stock price on September 27, 2006 reflected the pendency of Mihaylo’s $23.25 offer, which had been withdrawn long before the periods the Preliminary Proxy Statement selected for measuring the premium in the Mitel Merger.

43. Inter-Tel also asserted the Mihaylo/Vector offer provided an inadequate premium with respect to Inter-Tel’s share price as of March 3, 2006 because the following premiums were too low: (i) one-day premium of 17.8%, (ii) one-week average premium of 17.2%, (iii) one-month average premium of 13.9% and (iv) three-month average premium of 12.9%. These premiums were measured when no offer was pending-the same circumstance as the dates used to measure the Mitel premium. The premiums represented by the Mihaylo-Vector offer actually

19

were significantly higher than the premiums that the Mitel deal represents over Inter-Tel’s stock price during the period prior to the announcement of the Merger.

44. In short, using the premium analysis Inter-Tel employed to show that the Mihaylo-Vector $23.25 offer provided an inadequate premium demonstrates that the premium in the Mitel transaction is grossly inadequate.

I. Misleading and Incomplete Disclosure

45. The Preliminary Proxy Statement contains a description of the claims in this litigation which is misleading and incomplete. On page 48, the Preliminary Proxy Statement states:

In addition and as previously disclosed in Inter-Tel’s Annual Report on Form 10-K filed with the SEC on March 16, 2006, Inter-Tel and certain members of the Board of Directors are defendants in a stockholder class action suit filed on June 15, 2006 entitled Mercier v. Inter-Tel (Delaware) Inc. et al., No. 2226-VCS, in the Court of Chancery of the State of Delaware. Plaintiff alleges, among other claims, that the defendants breached their fiduciary duties by seeking to entrench themselves in office through a number of activities including alleged failure to pursue a ‘value maximizing plan’ for the stockholders. Inter-Tel has filed a motion to dismiss all of these claims, believes that the claims are without merit and intends to vigorously defend them.

46. The Preliminary Proxy Statement does not disclose (i) the existence of plaintiff’s claims challenging the validity of the Section 203 Provision, the Reincorporation and Inter-Tel’s par-value stock or (ii) that the defendants revised and then withdrew the Consent By-Law in response to plaintiff’s claims and inserted the Consent Provision into the Inter-Tel Delaware certificate. The misleading and incomplete description does not provide the Inter-Tel stockholders with information from which they might conclude that representations and covenants that Inter-Tel is making in the Merger Agreement may not be accurate. This

20

information is material so that stockholders can assess the risk that the Merger will not be consummated and the risk that their shares may be taken from them in an invalid merger.

47. Even assuming that a cross-reference to a 10-K would be a substitute for full and accurate disclosure, there was no description of this litigation in Inter-Tel’s 10-K filed March 16, 2006 for the simple reason that the litigation was not filed until three months later. Inter-Tel’s 10-K filed March 15, 2007 contains only the following uninformative description of the Delaware class action suit:

The Delaware action, as amended July 14, 2006, raises claims related to the reincorporation filing by Inter-Tel in Delaware and primarily seeks injunctive relief… The Company is in the process of evaluating and conducting discovery in the Delaware class action suit.

This incomplete description does not even reflect the Second Amended Complaint filed on March 27, 2007.

48. Plaintiff and the other public stockholders of Inter-Tel lack an adequate remedy at law.

WHEREFORE, Plaintiff requests, in addition to the relief sought by the Second Amended Complaint, the following relief:

A. A preliminary and permanent injunction against the Merger;

B. A preliminary and permanent injunction against enforcement of the Section 203

Provision, particularly against bidders other than Mitel;

C. In the alternative, if the Court determines that the Section 203 Provision is valid, a declaration that Mitel is an interested stockholder under that provision and that the Merger cannot be consummated because the vote required by that provision cannot be obtained;

D. A preliminary and permanent injunction against enforcement of the no-shop provision and termination fee provision of the Merger Agreement;

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E. An Order requiring defendants to conduct a fair auction of Inter-Tel open to all potential interested bidders, including Vector, Mihaylo, strategic buyers and financial buyers;

F. A declaration that representations and covenants in the Merger Agreement are invalid;

G. An award of damages against the defendants for their breach of fiduciary duty and other misconduct; and

H. Such other and further relief as the Court deems proper and just.

PRICKETT, JONES & ELLIOTT, P.A.

Michael Hanrahan (#941)

Paul A. Fioravanti, Jr. (#3808)

Laina M. Herbert (#4717)

1310 N. King Street

P. O. Box 1328

Wilmington, DE 19899-1328

(302) 888-6500

Attorneys for Plaintiff

Dated: May 18, 2007

OF COUNSEL:

SCHIFFRIN BARROWAY

TOPAZ & KESSLER, LLP

Marc A. Topaz

Lee D. Rudy

280 King of Prussia Road

Radnor, PA 19087

(610) 667-7706

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EX-99.3

Exhibit 99.3

MICHAEL K. JEANES, CLERK

RECEIVED NE OUTSIDE

DEPOSITORY

2007 APR 30    PM 5:51

Richard G. Himelrick, State Bar No. 004738

Salvador Ongaro, State Bar No. 017415

Frank R. Mead, State Bar No. 020577

THIRD FLOOR CAMELBACK ESPLANADE II

2525 EAST CAMELBACK ROAD

PHOENIX, ARIZONA 85016-4237

TELEPHONE: (602) 255-6000

FACSIMILE: (602) 255-0103

Nadeem Faruqi

Adam Gonnelli

FARUQI & FARUQI, LLP

369 Lexington Avenue, 10^th Floor

New York, New York 10017

(212) 983-9330

Mark C. Gardy

James S. Notis

GARDY & NOTIS, LLP

440 Sylvan Avenue

Englewood Cliffs, New Jersey 07632

(201) 567-7377

Attorneys for Plaintiff

SUPERIOR COURT OF ARIZONA

COUNTY OF MARICOPA

CV2007 – 007444

JOEL GERBER, on behalf of himself and others similarly situated,	Case No. :
Plaintiff,	CLASS ACTION COMPLAINT (Breach of Fiduciary Duty)
vs.
INTER-TEL INCORPORATED; NORMAN STOUT; ALEXANDER L. CAPPELLO; J. ROBERT ANDERSON; GERALD W. CHAPMAN; GARY D. EDENS; STEVEN E. KAROL; ROBERT RODIN; AGNIESZKA WINKLER; ANIL K. PURI; KENNETH L. URISH; STEVEN MIHAYLO; AND MITEL NETWORKS CORPORATION,
Defendants.

Plaintiff Joel Gerber, by his undersigned attorneys, as and for his complaint herein, alleges as follows:

NATURE OF THE ACTION

1. This is a stockholders’ class action on behalf of the public stockholders, of Inter-Tel Incorporated (“Inter-Tel” or the “Company”) to enjoin the proposed acquisition of the publicly owned shares of Inter-Tel’s common stock by Mitel Networks Corporation (the “Proposed Transaction”).

2. The Proposed Transaction is the product of a flawed process. The process undertaken by defendants was not designed to ensure the sale of Inter-Tel for the highest value. This process resulted in a proposed sale for inadequate consideration–$25.60 per share, a mere 7.6 per cent premium over the Company’s share price on April 26, 2007.

3. Each defendant violated applicable law by directly breaching and/or aiding the other defendants’ breaches of their fiduciary duties of loyalty, due care, independence, good faith and fair dealing.

4. Plaintiff and the Class assert claims for breaches of defendant’s fiduciary duties and self-dealing asserted under the law of the State of Delaware.

THE PARTIES

5. Plaintiff has been the owner of the common stock of the Company since prior to the transaction herein complained of and continuously to date.

6. Defendant Inter-Tel, a Delaware corporation with its principal executive headquarters located at 1615 South 52nd Street Tempe, Arizona, is a software

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telecommunications company. The Company employs approximately 2000 people and has sales offices in North America, the United Kingdom, Ireland, Australia and South Africa. Inter-Tel common stock is traded on the NASDAQ under the symbol “INTL.”

7. Defendant Norman Stout (“Stout”) is a member of the Board of Inter-Tel. He was elected to the Board and appointed Chief Executive Officer (“CEO”) of Inter-Tel on February 22, 2006. Mr. Stout previously served on the board from 1994 to 1998.

8. Defendant Alexander L. Cappello (“Cappello”) is a member of the Board of Inter-Tel. Mr. Cappello has been Chair of the Board of Inter-Tel since July of 2005, and a director since April 2005.

9. Defendant J. Robert Anderson (“Anderson”) is a member of the Board of Inter-Tel. Mr. Anderson has been a director of the Company since 1997 and serves as Chair of the Company’s Compensation Committee.

10. Defendant Gary D. Edens (“Edens”) is a member of the Board of Inter-Tel. Mr. Edens was elected to the board in October 1994, and currently serves as Chair of the Corporate Governance and Nominating Committee.

11. Defendant Steven E. Karol (“Karol”) is a member of the Board of Inter-Tel. Mr. Karol was elected to the board in February 2006.

12. Defendant Gerald W. Chapman (“Chapman”) is a member of the Board of Inter-Tel. Mr. Chapman was elected to the board in December 1999, and previously served as a director from 1989 to 1992.

13. Defendant Robert Rodin (“Rodin”) is a member of the Board of Inter-Tel. Mr. Rodin was elected to the Board in February 2006.

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14. Defendant Agnieszka Winkler (“Winkler”) is a member of the Board of Inter-Tel. Ms. Winkler was elected to the Board in April 2005.

15. Defendant Anil K. Puri (“Puri”) is a member of the Board of Inter-Tel. Mr. Puri was elected to the Board in May 2006.

16. Defendant Kenneth L. Urish is a member of the Board of Inter-Tel. Mr. Urish was elected to the Board in May 2006.

17. Defendant Steven Mihaylo is a member of the Board of Inter-Tel. Mr. Mihaylo, who founded the Company, served as CEO from 1969 until 2006 and Chair of the Board from 1969 to 1982 and from 1983 to 2005.

18. The defendants named in paragraphs 7 through 17 (the “Individual Defendants”) are in a fiduciary relationship with plaintiff and the other public stockholders of Inter-Tel and owe them the highest obligations of good faith and fair dealing.

JURISDICTION AND VENUE

19. This Court has jurisdiction over the claims asserted in this action because defendant Inter-Tel transacts business within the state. Moreover, Inter-Tel maintains its principal executive offices in Tempe, Arizona.

20. Venue is proper in this Court because the conduct at issue in the Complaint and the harm alleged occurred, in part, in Tempe, Arizona.

DUTIES OF THE INDIVIDUAL DEFENDANTS

21. In addition to the foregoing, by reasons of their positions as directors/and or officers of Inter-Tel, the Individual Defendants owe Inter-Tel and its shareholders a

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fiduciary obligation of trust, loyalty, good faith and due care, and were and are required to use their utmost ability to control and manage Inter-Tel in a fair, just, honest and equitable manner. The Individual Defendants were and are required to act in furtherance of the best interests of Inter-Tel and its shareholders so as to benefit all shareholders equally and not in furtherance of their own personal interest or benefit.

22. Moreover, where directors of a publicly traded corporation undertake a transaction that will result in fundamental changes such as: (I) a sale of control of the corporation or (ii) a sale of all or substantially all of the assets of the corporation, the directors have a fiduciary obligation to obtain the highest value reasonably available for the corporation and its shareholders. Moreover, if such transaction will result in a change of corporate control, the shareholders are entitles to receive a significant premium. By virtue of such duties, the directors may not take any action which:

(a) adversely affects the value provided to the corporation’s shareholders;

(b) will discourage or inhibit alternative offers to purchase control of the corporation or its assets;

(c) contractually prohibit them from complying with their fiduciary duties;

(d) will otherwise adversely affect their duty to search, secure and obtain the best value reasonably available under the circumstances for the corporation’s shareholders; and/or

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(e) will provide the directors with preferential treatment at the expense of, or separate from, the public shareholders.

23. In accordance with their duties of loyalty and good faith, the defendants, as directors and/or officers of Inter-Tel, are obligated to refrain from:

(a) participating in any transaction where the directors’ or officers’ loyalties are divided; and

(b) participating in any transaction where the directors or officers receive or are entitled to receive a personal financial benefit not equally shared by the public shareholders of the corporation.

24. Each Individual Defendant, by virtue of his or her position as a director and/or officer, owed to shareholders the fiduciary duties of loyalty, good faith and the exercise of due care and diligence in the management and administration of the affairs of the Company. Plaintiff alleges, however, that the conduct of the Individual Defendants complained of herein involves a breach, separately and together, of the fiduciary duties owed to plaintiff and the other public shareholders of Inter-Tel. These include a breach of the duties of loyalty, good faith and independence, to the extent they stood on both sides of the transaction and engaged in self-dealing and obtained personal benefits, including personal financial benefits not shared equally by plaintiff or the Class.

25. As a result of the Individual Defendants’ self dealing and divided loyalties, plaintiff and the Class will not receive adequate or fair value for their Inter-Tel common stock in the Proposed Transaction.

26. Because The Individual Defendants have breached their duties of loyalty,

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good faith and independence in connection with the Proposed Transaction, the burden of proving the inherent or entire fairness of the acquisition, including all aspects of its negotiation, structure, price and terms, is placed upon the Individual Defendants.

CLASS ACTION ALLEGATIONS

27. Plaintiff brings this action on his own behalf and as a class action pursuant to Arizona Rule of Civil Procedure Rule 23, on behalf of all Inter-Tel stockholders (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants’ actions as more fully described herein.

28. This action is properly maintainable as a class action.

29. The class of stockholders for whose benefit this action is brought is so numerous that joinder of all Class members is impracticable. As of April 2007, there were 27 million shares of Inter-Tel common stock outstanding, held by shareholders who are geographically dispersed throughout the United States.

30. There are questions of law and fact which are common to the Class including, inter alia, the following:

(a) whether the Individual Defendants have breached their fiduciary and other common law duties owed by them to plaintiff and the members of the Class;

(b) whether plaintiff and the other members of the Class will be damaged irreparably by defendants’ failure to take action designed to obtain the best value for the public shareholders’ interest in Inter-Tel;

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and

(c) whether the Individual Defendants are engaging in self-dealing in connection with the Proposed Transaction.

31. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff will fairly and adequately represent the Class.

32. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class and establish incompatible standards of conduct for the party opposing the Class.

33. Defendants have acted and are about to act on grounds generally applicable to the Class, thereby making appropriate final injunctive relief with respect to the Class as a whole.

SUBSTANTIVE ALLEGATIONS

34. On April 27, 2007, Inter-Tel announced that it had received a proposal from defendant Mitel Networks Corporation to purchase all outstanding shares of Inter-Tel for $26.50 per share in cash.

35. The boards of directors of both the Company and Mitel Networks approved the Proposed Transaction.

36. The consideration to be paid to Class members in the transaction, however,

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is unconscionable and unfair and grossly inadequate because, among other things, the intrinsic value of Inter-Tel common stock is materially in excess of the amount offered for those securities in the proposed acquisition given the stock’s current trading price and the Company’s prospects for future growth and earnings.

37. The offer has the effect of capping the market for Inter-Tel’s stock.

SELF-DEALING

38. By reason of their positions with Inter-Tel, the Individual Defendants are in possession of non-public information concerning the financial condition and prospects of Inter-Tel, and especially the true value and expected increased future value of Inter-Tel and its assets, which they have not disclosed to Inter-Tel’s public stockholders. Moreover, despite their duty to maximize shareholder value, the Individual Defendants have clear and material conflicts of interest and are acting to better their own interests at the expense of Inter-Tel’s public shareholders.

39. The Proposed Transaction will deny the plaintiff and the other members of the class their right to share proportionately in the future success and growth in profitability of Inter-Tel and its valuable assets, while permitting defendants to reap huge benefits from the contemplated transaction.

40. The price of $25.60 per Inter-Tel share to be paid to the class members is unconscionable, unfair and grossly inadequate. The terms of the Proposed Transaction constitutes unfair dealing as to the minority stockholders because, among other things, the intrinsic value of each share of Inter-Tel is materially in excess of $25.60, giving due consideration to the possibilities of growth and profitability of Inter-Tel in light of its

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business, earnings and earnings power, present and future.

41. Because the defendants are in possession of corporate information concerning Inter-Tel’s assets, businesses and future financial prospects, the degree of knowledge and economic power between defendants and the public stockholders is unequal.

42. By reason of their positions with Inter-Tel, the Individual Defendants are in possession of non-public information concerning the financial condition and prospects of Inter-Tel, and especially the true value and expected increased future value of Inter-Tel and its assets, which they have not disclosed to Inter-Tel’s public stockholders. Moreover, despite their duty to maximize shareholder value, the defendants have clear and material conflicts of interest and are acting to better their own interests at the expense of Inter-Tel’s public shareholders.

43. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations are required to:

• Obtain a current and objective valuation of Inter-Tel’s assets both as to its business and a valuation based on current business and future business to which it is entitled;

• Duly consider alternatives and act to secure the best available alternative to maximize value for the public shareholders;

• Act independently by placing the interest of Inter-Tel’s public stockholders above all else and by retaining truly independent advisors as a check thereon;

• Ensure that evaluation proceeds absent conflict of interest between defendants’ own interests and their fiduciary obligations;

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• Fairly and fully disclose all material information relating to the stock price process to the Company’s shareholders; and

• Suspend, reject or terminate the Proposed Transaction absent securing a per share price that is adequate and fair.

FIRST CAUSE OF ACTION

On Behalf of Plaintiff and the Class Against

the Individual Defendants for Breaches of Fiduciary Duty

44. Plaintiff repeats and alleges each allegation set forth herein.

45. The defendants have violated fiduciary duties of care, loyalty, candor and independence owed to the public shareholders of Inter-Tel and have acted to put their personal interests ahead of the interests of Inter-Tel’s shareholders.

46. By the acts, transactions and courses of conduct alleged herein, defendants, individually and acting as a part of a common plan, are attempting to unfairly deprive plaintiff and other members of the Class of the true value of their investment in Inter-Tel.

47. The Individual Defendants violated their fiduciary duties by entering into a transaction with Inter-Tel without regard to the fairness of the transaction to Inter-Tel’s shareholders.

48. As demonstrated by the allegations above, the Individual Defendants failed to exercise the care required, and breached their duties of loyalty, good faith, candor and independence owed to the shareholders of Inter-Tel.

49. Because the Individual Defendants dominate and control the business and corporate affairs of Inter-Tel, and are in possession of private corporate information concerning Inter-Tel’s assets, business and future prospects, there exists an imbalance and

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disparity of knowledge and economic power between them and the public shareholders of Inter-Tel which makes it inherently unfair for them to pursue any proposed transaction wherein they will reap disproportionate benefits to the exclusion of maximizing stockholder value.

50. By reason of the foregoing acts, practices and course of conduct, the defendants have failed to exercise ordinary care and diligence in the exercise of their fiduciary obligations toward plaintiff and the other members of the Class.

51. As a result of the actions of defendants, plaintiff and the Class have been and will be irreparably harmed in that they have not and will not receive their fair portion of the value of Inter-Tel’s assets and businesses and have been and will be prevented from obtaining a fair price for their common stock.

52. Unless enjoined by this Court, the defendants will continue to breach their fiduciary duties owed to plaintiff and the Class, and may consummate the Proposed Transaction which will exclude the Class from its fair share of Inter-Tel’s valuable assets and businesses, and/or benefit them in the unfair manner complained of herein, all to the irreparable harm of the Class, as aforesaid.

53. Plaintiff and members of the class have no adequate remedy at law. Only through the exercise of this Court’s equitable powers can plaintiff and the Class be fully protected from the immediate and irreparable injury that defendants’ actions threaten to inflict.

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SECOND CAUSE OF ACTION

On Behalf of Plaintiff and the Class Against

Mitel Networks Corporation for Aiding and Abetting the

Individual Defendants’ Breaches of Fiduciary Duty

54. Plaintiff incorporates each and every allegation set forth above as if fully set forth herein.

55. Mitel Networks Corporation has knowingly aided and abetted the Individual Defendants’ wrongdoing alleged herein. Mitel Networks is also an active and necessary participant in the Individual Defendants’ plan to complete the Proposed Transaction on terms that are unfair to Inter-Tel shareholders.

56. Plaintiff has no adequate remedy at law.

PRAYER FOR RELIEF

WHEREFORE Plaintiff demands judgment against each Defendant jointly and severally as follows:

A. for an order certifying that this action may be maintained as a class action on behalf of the Class;

B. appropriate injunctive and declaratory relief;

C. enjoining defendants, their agents, counsel, employees and all persons acting in concert with them form consummating the Proposed Transaction, unless and until the Company adopts and implements a procedure and process designed to obtain the highest possible price for shareholders;

D. reasonable attorneys’ fees and costs;

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E. pre- and post-judgment in and post-judgment interest; and

F. for such further relief as this Court deems necessary, just or proper.

DATED this 30th day of April, 2007.

TIFFANY & BOSCO, P.A.
By:	/s/ Frank R. Mead
	Richard G. Himelrick Salvador Ongaro Frank R. Mead Third Floor Camelback Esplanade II 2525 East Camelback Road Phoenix, Arizona 85016-4237
	Nadeem Faruqi Adam Gonnelli FARUQI & FARUQI, LLP 369 Lexington Avenue, 10th Floor New York, New York 10017 (212)983-9330
	Mark C. Gardy James S. Notis GARDY & NOTIS, LLP 440 Sylvan Avenue Englewood Cliffs, New Jersey 07632 (201) 567-7377
	Attorneys for Plaintiff

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EX-99.4

Exhibit 99.4

MICHAEL K JEANES, CLERK
BY	/s/ D. J. Gable	DEP
	FILED
07 APR 30    PM 4:42
PAID
8842865

Richard G. Himelrick, State Bar No. 004738

Salvador Ongaro, State Bar No. 017415

Frank R. Mead, State Bar No. 020577

THIRD FLOOR CAMELBACK ESPLANADE II

2525 EAST CAMELBACK ROAD

PHOENIX, ARIZONA 85016-4237

RGH@TBLAW.COM

SO@TBLAW.COM

FRM@TBLAW.COM

TELEPHONE: (602) 255-6000

FACSIMILE: (602) 255-0103

ROBBINS UMEDA & FINK, LLP

BRIAN J. ROBBINS

FELIPE J. ARROYO

ARSHAN AMIRI

610 West Ash Street, Suite 1800

San Diego, CA 92101

Telephone: (619) 525-3990

Facsimile: (619) 525-3991

[Additional counsel appear on signature page.]

Attorneys for Plaintiff

IN THE SUPERIOR COURT OF THE STATE OF ARIZONA

IN AND FOR THE COUNTY OF MARICOPA

C. ROBERT FARR, On Behalf of Himself	)	Case No. CV2007-007655
and All Others Similarly Situated,	)
	)
Plaintiff,	)	SHAREHOLDER CLASS
	)	COMPLAINT FOR BREACH OF
vs.	)	FIDUCIARY DUTY
INTER-TEL, INC., NORMAN STOUT, ALEXANDER L. CAPPELLO, J. ROBERT ANDERSON, GERALD W. CHAPMAN, GARY D. EDENS, AGNIESZKA WINKLER, ROBERT RODIN, STEVEN E. KAROL, ANIL K. PURI, AND KENNETH L. URISH,	)
	)
	)
	)
	)
	)
	)
	)
Defendants.	)
	)

Plaintiff, by his attorneys, submits this Complaint Based upon Self Dealing and Breach of Fiduciary Duty (the “Complaint”) against the defendants named herein.

SUMMARY OF THE ACTION

1. This is a stockholder class action brought by plaintiff on behalf of the holders of Inter-Tel, Inc. (“Inter-Tel” or the “Company”) common stock against Inter-Tel and its senior officers and directors arising out of their attempts to provide certain Inter-Tel insiders and directors with preferential treatment in connection with their efforts to complete the sale of Inter-Tel to Mitel Networks Corporation (“Mitel”) (the “Acquisition”). This action seeks equitable relief only.

2. In pursuing the unlawful plan to squeeze out Inter-Tel’s public stockholders for grossly inadequate consideration, the defendants have breached their fiduciary duties of loyalty, due care, independence, candor, good faith and fair dealing, and have aided and abetted such breaches by Inter-Tel’s officers and directors. Instead of attempting to obtain the highest value reasonably available for the Company’s stockholders, defendants spent a substantial effort tailoring the Acquisition to meet the specific needs of Mitel.

3. Indeed, Mitel’s offer is for $25.60 per share—a premium of less than 5% compared to the Company’s trading price on April 16, 2007. This minor premium does not represent the maximized value that Inter-Tel’s shareholders are entitled to.

4. Moreover, defendants’ primary motivation for entering into the Acquisition appears to be to head off a power struggle between the Board of Directors (“Board”) and the Company’s largest shareholder and ex-Chief Executive Officer (“CEO”) Steven Mihaylo (“Mihaylo”). Just recently, during March 2007, Mihaylo noticed the Board that he intended to present sweeping shareholder resolutions designed to increase his control over the Company.

5. Because defendants dominate and control the business and corporate affairs of Inter-Tel and are in possession of private corporate information concerning Inter-Tel’s assets, business and future prospects, there exists an imbalance and disparity of knowledge and economic power between them and the public shareholders of Inter-Tel, which makes it inherently unfair for them to pursue any proposed transaction wherein they will reap disproportionate benefits to the exclusion of maximizing stockholder value.

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6. In short, the Acquisition is designed to unlawfully divest Inter-Tel’s public stockholders of their holdings without providing them the maximized value they are entitled to. Defendants know that these assets will continue to produce substantial revenue and earnings.

JURISDICTION AND VENUE

7. This Court has jurisdiction over the cause of action asserted herein under Ariz. R. Civ. P. 4.2(a) and under A.R.S. §12-123 because this case is a cause not given by statute to other trial courts. This Court has jurisdiction over each defendant named herein because each defendant is either a corporation that conducts business in and maintains operations in Maricopa County, or is an individual who has sufficient minimum contacts with Arizona so as to render the exercise of jurisdiction by the Arizona courts permissible under traditional notions of fair play and substantial justice.

8. Venue is proper in this Court because one or more of the defendants either resides in or maintains executive offices in Maricopa County, a substantial portion of the transactions and wrongs complained of herein, including the defendants’ primary participation in the wrongful acts detailed herein and aiding and abetting and conspiracy in violation of fiduciary duties owed to Inter-Tel occurred in Maricopa County, and defendants have received substantial compensation in Maricopa County by doing business here and engaging in numerous activities that had an effect in Maricopa County.

PARTIES

9. Plaintiff C. Robert Farr is, and at all times relevant hereto was, a shareholder of Inter-Tel.

10. Defendant Inter-Tel, a Delaware corporation, provides converged voice and data business communications systems; related networking applications; and presence management, collaboration, and messaging applications.

11. Defendant Norman Stout (“Stout”) is Inter-Tel’s CEO. Stout is also an Inter-Tel director.

12. Defendant Alexander L. Cappello (“Capppello”) is Inter-Tel’s Chairman.

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13. Defendant J. Robert Anderson (“Anderson”) is an Inter-Tel director.

14. Defendant Gerald W. Chapman (“Chapman”) is an Inter-Tel director.

15. Defendant Gary D. Edens (“Edens”) is an Inter-Tel director.

16. Defendant Agnieszka Winkler (“Winkler”) is an Inter-Tel director.

17. Defendant Robert Rodin (“Rodin”) is an Inter-Tel director.

18. Defendant Steven E. Karol (“Karol”) is an Inter-Tel director.

19. Defendant Anil K. Puri (“Puri”) is an Inter-Tel director.

20. Defendant Kenneth L. Urish (“Urish”) is an Inter-Tel director.

21. The defendants named above in ¶¶11-20 are sometimes collectively referred to herein as the “Individual Defendants.”

DEFENDANTS’ FIDUCIARY DUTIES

22. Under Delaware law, in any situation where the directors of a publicly traded corporation undertake a transaction that will result in either: (i) a change in corporate control; or (ii) a break up of the corporation’s assets, the directors have an affirmative fiduciary obligation to obtain the highest value reasonably available for the corporation’s shareholders, and if such transaction will result in a change of corporate control, the shareholders are entitled to receive a significant premium. To diligently comply with these duties, the directors and/or officers may not take any action that:

(a) adversely affects the value provided to the corporation’s shareholders;

(b) will discourage or inhibit alternative offers to purchase control of the corporation or its assets;

(c) contractually prohibits themselves from complying with their fiduciary duties;

(d) will otherwise adversely affect their duty to search and secure the best value reasonably available under the circumstances for the corporation’s shareholders; and/or

(e) will provide the directors and/or officers with preferential treatment at the expense of, or separate from, the public shareholders.

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23. In accordance with their duties of loyalty and good faith, the defendants, as directors and/or officers of Inter-Tel, are obligated under Delaware law to refrain from:

(a) participating in any transaction where the directors’ or officers’ loyalties are divided;

(b) participating in any transaction where the directors or officers receive, or are entitled to receive, a personal financial benefit not equally shared by the public shareholders of the corporation; and/or

(c) unjustly enriching themselves at the expense or to the detriment of the public shareholders.

24. Plaintiff alleges herein that defendants, separately and together, in connection with the Acquisition, are knowingly or recklessly violating their fiduciary duties, including their duties of loyalty, good faith and independence owed to plaintiff and other public shareholders of Inter-Tel. Defendants stand on both sides of the transaction, are engaging in self dealing, are obtaining for themselves personal benefits, including personal financial benefits not shared equally by plaintiff or the Class, and choosing not to provide shareholders with all information necessary to make an informed decision in connection with the Acquisition. As a result of defendants’ self dealing and divided loyalties, neither plaintiff nor the Class will receive adequate or fair value for their Inter-Tel common stock in the proposed Acquisition.

25. Because defendants are knowingly or recklessly breaching their duties of loyalty, good faith and independence in connection with the Acquisition, the burden of proving the inherent or entire fairness of the Acquisition, including all aspects of its negotiation, structure, price and terms, is placed upon defendants as a matter of law.

THE ONGOING POWER STRUGGLE BETWEEN

MIHAYLO AND THE BOARD

26. During June 2006, Mihaylo, Inter-Tel’s founder, former chairman and CEO attempted a takeover of the Company with the aid of a private investment company. Mihaylo’s efforts were blocked by the Board, who refused to approve Mihaylo’s bid.

5

27. Refusing to give up, on March 2, 2007, Mihaylo noticed the Company that he intended to introduce a number of sweeping shareholder proposals at the Company’s next annual meeting. These proposals, coming under the guise of increasing shareholder value, included a proposal to reduce the size of the board from 11 to 7 members to reduce costs (thus increasing Mihaylo’s controlled board seats from 3 our of 11 to 3 out of 7) as well as a proposal for the Company to conduct a self-tender offer to return value to the Company’s shareholders (thus increasing Mihaylo’s 20% stake in the Company).

28. In response, the Individual Defendants concocted a scheme to sell off the Company and thus head off Mihaylo’s plans. Unfortunately, in their haste, the Individual Defendants failed to ensure that the Company’s shareholders would receive the maximized value that they are entitled to.

THE ACQUISITION

29. On April 26, 2007, Inter-Tel and Mitel jointly issued the following press release that announced the sale of Inter-Tel to Mitel:

Mitel Networks Corporation and Inter-Tel (Delaware) Incorporated, today announced they have signed a definitive merger agreement whereby Mitel will acquire Inter-Tel, a full-service provider of business communications solutions for US$25.60 per Inter-Tel share in cash, representing a total purchase price of approximately US$723 million.

Once completed, the merger creates a market leader in the US and UK SMB IP communications industry, the fastest growing sector of the IP communications market. The private company will have two trusted, customer focused brands and anticipated revenues of over US$800 million, twice those of Mitel today.

“We believe that this transaction will deliver superior value to Inter-Tel’s stockholders, and Mitel is the right partner to create additional growth opportunities for our employees and provide exceptional products and services to our customers for the long-term” said Alexander Cappello, Chairman of the Board of Inter-Tel.

“I believe this is a great fit and a win-win for all involved,” said Terence H. Matthews, Chairman of Mitel. “These are two entrepreneurial companies with the agility, flexibility and drive to win in the global market.”

The merger combines the strengths of Inter-Tel and Mitel in the IP communications market, providing increased scale to extend their leadership in the SMB sector and expand into the large business IP communications market. The combined company will bring together Mitel’s extensive global reach and Inter-Tel’s strong network across the US creating a formidable industry player.

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“By bringing together the unique strengths of each company, this transaction accelerates our growth strategy,” said Mitel CEO Don Smith. “Inter-Tel’s achievements, particularly in North America, include creating successful managed service offerings that we intend to extend to Mitel’s resellers and customers worldwide. Mitel’s scalable solutions and broad geographic reach will drive growth in the large enterprise sector complementing recent moves by Inter-Tel to expand its addressable market. We believe the merger will deliver value to customers, channel partners, employees and shareholders while making us the clear choice for new clients.”

“We believe this is an outstanding transaction for our stakeholders,” said Inter-Tel CEO Norman Stout. “Mitel and Inter-Tel have state-of-the-art products and complementary channels to market. In particular, we are excited about the opportunities this partnership represents for Inter-Tel’s associates and partners, who we believe will benefit from being part of a larger, growing and dynamic organization that can compete more effectively in the marketplace. We look forward to working with the Mitel team to ensure a rapid and seamless transition.”

The combined company, including Inter-Tel international subsidiaries such as Inter-Tel Europe, Swan Solutions and Lake Communications, will have solutions to address the needs of very small to large businesses globally. It will have market coverage in over 90 countries and customers in industries such as finance, healthcare, hospitality, retail, government and education.

The merger brings together two extensive product portfolios with strengths in unified communications, networking, management and applications such as messaging, contact centers, mobility and collaboration. Each company’s commitment to open industry standards, such as SIP, XML and CSTA, will enable the accelerated introduction of new and innovative business solutions. Partners who have developed solutions compatible with both companies’ products are expected to see a more compelling opportunity to extend their value proposition.

“Having rapidly achieved the next step in our long-term growth plans with this merger, we will for the near-term, withdraw Mitel from the IPO registration process,” said Don Smith. “We look forward to working with the Inter-Tel team to accelerate our position in the dynamic unified communications market.”

The boards of directors of both companies have approved the transaction and it is subject to the approval of Inter-Tel stockholders and other customary closing conditions, including regulatory approvals. The transaction is expected to close in the third quarter of 2007.

The transaction is being funded by a combination of equity and debt. The equity component is being led by Francisco Partners with participation by Morgan Stanley Principal Investments (“MSPI”). The debt funding is being arranged by Morgan Stanley on behalf of Mitel. Morgan Stanley was the financial advisor to Mitel. In addition, Genuity Capital Markets was the independent financial advisor to the board of Mitel with respect to the transaction. UBS Investment Bank was the financial advisor to Inter-Tel.

30. The Acquisition includes a $20 million termination fee that will foreclose superior bids for the Company.

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SELF-DEALING

31. By reason of their positions with Inter-Tel, the Individual Defendants are in possession of non-public information concerning the financial condition and prospects of Inter-Tel, and especially the true value and expected increased future value of Inter-Tel and its assets, which they have not disclosed to Inter-Tel’s public stockholders. Moreover, despite their duty to maximize shareholder value, the defendants have clear and material conflicts of interest and are acting to better their own interests at the expense of Inter-Tel’s public shareholders.

32. The proposed sale is wrongful, unfair and harmful to Inter-Tel’s public stockholders, and represents an effort by defendants to aggrandize their own financial position and interests at the expense of and to the detriment of Class members. Specifically, defendants are attempting to deny plaintiff and the Class their shareholder rights via the sale of Inter-Tel on terms that do not adequately value the Company. Accordingly, the Acquisition will only benefit defendants and Mitel.

33. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require:

• Withdraw their consent to the sale of Inter-Tel and allow the shares to trade freely – without impediments;

• Act independently so that the interests of Inter-Tel’s public stockholders will be protected;

• Adequately ensure that no conflicts of interest exist between defendants’ own interests and their fiduciary obligation to maximize stockholder value or, if such conflicts exist, to ensure that all conflicts be resolved in the best interests of Inter-Tel’s public stockholders; and

• Consider alternatives to the proposed Acquisition including the solicitation of bids from interested parties to assure that the Company’s shareholders are receiving the maximum value for their shares.

DEFENDANTS FAILED TO MAXIMIZE SHAREHOLDER VALUE

34. The Acquisition offers $25.60 per share to the Company’s shareholders—a premium of less than 5% compared to the Company’s trading price on April 16, 2007.

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Moreover, this offer comes after a number of reports of favorable earnings for Inter-Tel. Specifically, during February 2007, Inter-Tel announced strong earnings of .90 cents per share for fiscal 2006 compared to earnings of .66 cents per share for fiscal 2005—a 36% increase in earnings.

35. Inter-Tel’s stock price has reflected the Company’s increasing earnings potential as reflected in the following chart:

36. Moreover, Inter-Tel’s strong share performance will continue. In response to the Company’s strong earnings posting for fiscal 2007, analyst firm BOE Research Services, Inc. raised its intrinsic value estimate of the Company to $27 per share. Further, on April 23, 2007, Inter-Tel announced a new version of its Axxess Converged Communications System software (“Axxess”) that will be accretive to earnings. Unfortunately, the Acquisition does not fairly value Axxess or the Company’s remaining assets.

37. Thus, as a result of defendants’ conduct, Inter-Tel’s public stockholders have been and will continue to be denied the fair process and arm’s-length negotiated terms to which they are entitled in a sale of their Company. In order to meet their fiduciary duties, defendants are obligated to maximize shareholder value, not structure a preferential deal for

9

themselves. The proposed Acquisition, as structured, does not represent the maximized value that Inter-Tel shareholders are entitled to.

CLASS ACTION ALLEGATIONS

38. Plaintiff brings this action on his own behalf and as a class action on behalf of all holders of Inter-Tel stock who are being and will be harmed by defendants’ actions described below (the “Class”). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any defendants.

39. This action is properly maintainable as a class action.

40. The Class is so numerous that joinder of all members is impracticable. According to Inter-Tel’s Securities and Exchange Commission filings, there were more than 27 million shares of Inter-Tel common stock outstanding as of March 8, 2007.

41. There are questions of law and fact which are common to the Class and which predominate over questions affecting any individual Class member. The common questions include, inter alia, the following:

(a) whether the Individual Defendants have breached their fiduciary duties of undivided loyalty, independence or due care with respect to plaintiff and the other members of the Class in connection with the Acquisition;

(b) whether the defendants are engaging in self dealing in connection with the Acquisition;

(c) whether the defendants have breached their fiduciary duty to secure and obtain the best price reasonable under the circumstances for the benefit of plaintiff and the other members of the Class in connection with the Acquisition;

(d) whether the defendants are unjustly enriching themselves and other insiders or affiliates of Inter-Tel;

(e) whether the defendants have breached any of their other fiduciary duties to plaintiff and the other members of the Class in connection with the Acquisition, including the duties of good faith, diligence, honesty and fair dealing;

10

(f) whether the defendants have breached their fiduciary duties of candor to plaintiff and the other members of the Class in connection with the Acquisition by failing to disclose all material information concerning the Acquisition;

(g) whether the defendants, in bad faith and for improper motives, have impeded or erected barriers to discourage other strategic alternatives including offers from interested parties for the Company or its assets; and

(h) whether plaintiff and the other members of the Class would be irreparably harmed were the transactions complained of herein consummated.

42. Plaintiff’s claims are typical of the claims of the other members of the Class and plaintiff does not have any interests adverse to the Class.

43. Plaintiff is an adequate representative of the Class, has retained competent counsel experienced in litigation of this nature and will fairly and adequately protect the interests of the Class.

44. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for the party opposing the Class.

45. Plaintiff anticipates that there will be no difficulty in the management of this litigation. A class action is superior to other available methods for the fair and efficient adjudication of this controversy.

46. Defendants have acted on grounds generally applicable to the Class with respect to the matters complained of herein, thereby making appropriate the relief sought herein with respect to the Class as a whole.

CAUSE OF ACTION

Claim for Breach of Fiduciary Duties Against All Defendants

47. Plaintiff repeats and realleges each allegation set forth herein.

48. The Individual Defendants have knowingly and recklessly and in bad faith violated fiduciary duties of care, loyalty, good faith, candor and independence owed to the

11

public shareholders of Inter-Tel and have acted to put their personal interests ahead of the interests of Inter-Tel’s shareholders.

49. By the acts, transactions and courses of conduct alleged herein, the defendants, individually and acting as a part of a common plan, are attempting to unfairly deprive plaintiff and other members of the Class of the true value of their investment in Inter-Tel.

50. The Individual Defendants have knowingly or recklessly and in bad faith violated their fiduciary duties by entering into a transaction with Inter-Tel without regard to the fairness of the transaction to Inter-Tel’s shareholders and by failing to disclose all material information concerning the Acquisition to such shareholders.

51. As demonstrated by the allegations above, the defendants breached their duties of loyalty, good faith, candor and independence owed to the shareholders of Inter-Tel because, among other reasons:

(a) they failed to take steps to maximize the value of Inter-Tel to its public shareholders and they took steps to avoid competitive bidding, to cap the price of Inter-Tel’s stock and to give the Individual Defendants an unfair advantage and purposefully avoiding a proper auction, by, among other things, failing to solicit other potential acquirers or alternative transactions;

(b) they failed to properly value Inter-Tel;

(c) they ignored or did not protect against the numerous conflicts of interest resulting from the directors’ own interrelationships or connection with the Acquisition; and

(d) they failed to disclose all material information that would permit Inter-Tel’s stockholders to cast a fully informed vote on the Acquisition.

52. Because the Individual Defendants dominate and control the business and corporate affairs of Inter-Tel, and are in possession of private corporate information concerning Inter-Tel’s assets, business and future prospects, there exists an imbalance and disparity of knowledge and economic power between them and the public shareholders of Inter-Tel which makes it inherently unfair for them to pursue any proposed transaction

12

wherein they will reap disproportionate benefits to the exclusion of maximizing stockholder value.

53. By reason of the foregoing acts, practices and course of conduct, the Individual Defendants have knowingly or recklessly and in bad faith failed to exercise ordinary care and diligence in the exercise of their fiduciary obligations toward plaintiff and the other members of the Class.

54. Defendant Inter-Tel aided and abetted the Individual Defendants’ breaches of fiduciary duties.

55. Unless enjoined by this Court, the defendants will continue to breach their fiduciary duties owed to plaintiff and the Class, and may consummate the proposed Acquisition which will exclude the Class from its fair share of Inter-Tel’s valuable assets and businesses, and/or benefit them in the unfair manner complained of herein, all to the irreparable harm of the Class. Moreover, unless the Acquisition is enjoined by the Court, defendants will not engage in arm’s-length negotiations on the Acquisition terms, and will not supply to Inter-Tel’s stockholders sufficient information to enable them to cast informed votes on the Acquisition and may consummate the Acquisition, all to the irreparable harm of plaintiff and the members of the Class.

56. The Individual Defendants are engaging in self-dealing, are not acting in good faith toward plaintiff and the other members of the Class, and have breached and are breaching their fiduciary duties to the members of the Class.

57. Plaintiff and the members of the Class have an inadequate remedy at law. Only through the exercise of this Court’s equitable powers can plaintiff and the Class be fully protected from the immediate and irreparable injury which defendants’ actions threaten to inflict.

PRAYER FOR RELIEF

WHEREFORE, plaintiff demands injunctive relief, in his favor and in favor of the Class and against defendants as follows:

A. Declaring that this action is properly maintainable as a class action;

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B. Declaring and decreeing that the Acquisition agreement was entered into in breach of the fiduciary duties of defendants and is therefore unlawful and unenforceable;

C. Enjoining defendants, their agents, counsel, employees and all persons acting in concert with them from consummating the Acquisition, unless and until the Company adopts and implements a procedure or process to obtain the highest possible value for shareholders;

D. Directing defendants to exercise their fiduciary duties to obtain a transaction which is in the best interests of Inter-Tel’s shareholders until the process for the sale or auction of the Company is completed and the highest possible value is obtained;

E. Rescinding, to the extent already implemented, the Acquisition or any of the terms thereof;

F. Imposition of a constructive trust, in favor of plaintiff and the members of the class, upon any benefits improperly received by defendants as a result of their wrongful conduct;

G. Awarding plaintiff the costs and disbursements of this action, including reasonable attorneys’ and experts’ fees; and

H. Granting such other and further equitable relief as this Court may deem just and proper.

DATED: April 30, 2007	TIFFANY & BOSCO, P.A.
		/s/ Frank R. Mead
	By:	Richard G. Himelrick Salvador Ongaro Frank R. Mead Third Floor Camelback Esplanade II 2525 East Camelback Road Phoenix, Arizona 85016-4273 Telephone: (602) 255-6000 Facsimile: (602) 255-0103

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ROBBINS UMEDA & FINK, LLP
BRIAN J. ROBBINS
FELIPE J. ARROYO
ARSHAN AMIRI
610 West Ash Street, Suite 1800
San Diego, CA 92101
Telephone: (619) 525-3990
Facsimile: (619) 525-3991

LERACH COUGHLIN STOIA GELLER
    RUDMAN & ROBBINS LLP
DARREN J. ROBBINS
RANDALL J. BARON
A. RICK ATWOOD, JR.
655 West Broadway, Suite 1900
San Diego, C A 92101
Telephone: (619) 231-1058
Facsimile: (619) 231-7423

LAW OFFICES OF ALFRED G. YATES, JR.
ALFRED G. YATES, JR.
519 Allegheny Building
429 Forbes Avenue
Pittsburgh, PA 15219-1649
Telephone: (412) 391-5164
Facsimile: (412) 471-1033

Attorneys for Plaintiff

15

EX-99.5

Exhibit 99.5

HAGENS BERMAN SOBOL SHAPIRO LLP

ROBERT B. CAREY #011186

LEONARD W. ARAGON #020977

2425 East Camelback Road, Suite 650

Phoenix, Arizona 85016

Telephone: (602) 840-5900

Facsimile: (602) 840-3012

E-Mail: rcarey@hbsslaw.com leonard@hbsslaw.com

BULL & LIFSHITZ LLP

JOSHUA M. LIFSHITZ

18 East 41 Street

New York, New York 10017

Telephone: (212) 213-6222

Facsimile: (212) 213-9405

E-Mail: jml@nyclasslaw.com

Attorneys for Plaintiffs

THE SUPERIOR COURT OF THE STATE OF ARIZONA

IN AND FOR THE COUNTY OF MARICOPA

SUAN INVESTMENTS, INC.,	)
	)     No. CV2007 - 009063
Plaintiff;	)
	)
vs.	)
	)
NORMAN STOUT; ALEXANDER	)     CLASS ACTION COMPLAINT
CAPPELLO; J. ROBERT ANDERSON;	)
JERRY W. CHAPMAN; GARY D. EDENS;	)
STEVEN E. KAROL; ROBERT RODIN;	)
AGNIESZKA WINKLER; STEVEN G.	)
MIHAYLO; DR. ANIL K. PURI;	)
KENNETH L. URISH; INTER-TEL	)
(DELAWARE) INCORPORATED, a	)
Delaware Corporation.	)
	)
Defendants.	)
	)

Plaintiff, by and through its attorneys, alleges upon information and belief, except as to paragraph 1 which Plaintiff alleges upon knowledge, as follows:

1. Plaintiff is and has been at all relevant times a stockholder of Defendant Inter-Tel (Deleware) Incorporated (“Inter-Tel” or the “Company”).

2. Inter-Tel is a corporation duly organized and existing under the laws of the state of Delaware, with its principal executive offices located at 1615 South 52nd Street, Tempe, Arizona 85281. Inter-Tel provides converged voice and data business communications systems, related networking applications, presence management, and messaging applications. It also provides various products and services, such as managed services, network, local, and long distance services, networking technologies integration, Inter-Tel professional services, leasing services, peripheral telecommunications products, applications, and services developed by third parties. The Company was founded in 1969. It was formerly known as Inter-Tel, Incorporated and changed its name to Inter-Tel (Delaware), Incorporated in 2006. The company is headquartered in Tempe, Arizona. As of March 31, 2007, the Company has issued and has outstanding more than 27 million shares of common stock.

3. Defendant Norman Stout (“Stout”) has been Chief Executive Officer of the Company since February 22, 2006. He began his tenure at Inter-Tel in 1994 as a director. Four years later, he resigned from the board and joined Inter-Tel as Executive Vice President, Chief Administrative Officer, and President of Inter-Tel Software and Services. Prior to joining Inter-Tel, Mr. Stout was Chief Operating Officer of Oldcastle Architectural Products and had previously served as President of Oldcastle Architectural West. He currently serves on the board of directors of Hypercom Corporation, a public company headquartered in Phoenix, Arizona.

4. Defendant Alexander Cappello (“Cappello”) was elected as one of the Company’s directors in April 2005, and to Chairman at the July 2005 Board meeting. Since March 1996, Cappello has served as the Chairman and Chief Executive Officer of the Cappello Group, Inc., a global boutique merchant bank that includes Cappello Capital Corp.

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5. Defendant J. Robert Anderson (“Anderson”) is and has been a director of Inter-Tel during the relevant time period. He currently serves as the Chairman of the Company’s Compensation Committee.

6. Defendant Jerry W. Chapman (“Chapman”) is and has been a director of Inter-Tel during the relevant time period. He was elected to the board of directors of the Company in December 1999 and previously served as a director of the Company from 1989 to 1992. He currently serves as the Chairman of the Audit Committee.

7. Defendant Gary D. Edens (“Edens”) is and has been a director of Inter-Tel during the relevant time period. He has served as one of the Company’s directors since October 1994 and currently serves as the Chairman of the Company’s Corporate Governance and Nominating Committee.

8. Defendant Steven E. Karol (“Karol”) is and has been a director of Inter-Tel during the relevant time period.

9. Defendant Robert Rodin (“Rodin”) is and has been a director of Inter-Tel during the relevant time period.

10. Defendant Agnieszka Winkler (“Winkler”) is and has been a director of Inter-Tel during the relevant time period.

11. Defendant Steven G, Mihaylo (“Mihaylo”) is and has been a director of Inter-Tel during the relevant time period. He is the founder of Inter-Tel, and served as Chairman of the Board of Directors of Inter-Tel from July 1969 to October 1982 and from September 1983 to July 2005. He served as President of Inter-Tel from 1969 to 1983, from 1984 to December 1994, and from May 1998 to February 2005, He served as Inter-Tel’s Chief Executive Officer from the time of the Company’s formation in July 1969 to February 22, 2006. Mihaylo received a bachelor’s degree in business administration with a concentration in Accounting and Finance from California State University, Fullerton. In 2004, Mihaylo pledged $3 million to California State University, Fullerton (since increased to $4.5 million),

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payable over five years, the largest cash pledge in the history of California State University, Fullerton toward a new College of Business and Economics building that will bear his name. Mihaylo was initially approached by Defendant Puri, Dean of the College of Business and Economics and one of the Mihaylo Nominees, about making a donation to the College of Business and Economics. In 2005, California State University, Fullerton conferred an honorary doctorate of humane letters upon Mr. Mihaylo in recognition of excellence and extraordinary achievement in significant areas of human endeavor. Defendant Mihaylo is the beneficial owner of more than 18% of the Company’s common stock outstanding.

12. Defendant Dr. Anil K. Puri (“Puri”) is and has been a director of Inter-Tel during the relevant time period. He has served as the Dean of the College of Business and Economics at California State University, Fullerton from 1998 to present.

13. Defendant Kenneth L. Urish (“Urish”) is and has been a director of Inter-Tel during the relevant time period.

14. The defendants named in paragraphs 3 through 13 (sometimes collectively referred to herein as the “Individual Defendants”) are officers and/or directors of Inter-Tel and have a fiduciary relationship and responsibility to Plaintiff and the other common public stockholders of Inter-Tel and owe to Plaintiff and the other class members the highest obligations of good faith, loyalty, fair dealing, due care, and candor.

I. CLASS ACTION ALLEGATIONS

15. Plaintiff brings this action on its own behalf and as a class action, pursuant to Rule 23 of the Arizona Rules of Civil Procedure, on behalf of all common stockholders of Inter-Tel or their successors in interest, who are being and will be harmed by Defendants’ actions described below (the “Class”). Excluded from the Class are Defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any of the Defendants.

16. This action is properly maintainable as a class action because:

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a. The Class is so numerous that joinder of all members is impracticable. As of March 31, 2007, the Company has issued and has outstanding more than 27 million shares of common stock, held by hundreds stockholders of record. Inter-Tel’s shares are actively traded on the NASDAQ. Members of the class are located throughout the United States;

b. There are questions of law and fact which are common to the Class including: whether Defendants have breached their fiduciary duties to Plaintiff and the Class and whether Plaintiff and the other members of the Class would be irreparably damaged if Defendants are not enjoined in the manner described below;

c. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of Plaintiff are typical of the claims of the other members of the Class and Plaintiff has the same interests as the other members of the Class. Accordingly, Plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class;

d. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for Defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; and

e. Defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate.

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II. BACKGROUND

A. The Mihaylo Resignation

17. On February 22, 2006, Mihaylo resigned from his position as the Chief Executive Officer of Inter-Tel and Stout was named as the Chief Executive Officer. On March 6, 2006, Mihaylo resigned as a director of Inter-Tel and filed a Schedule 13D with the Securities and Exchange Commission (“SEC”) disclosing that he had engaged legal counsel and a financial advisor, and was considering his alternatives with respect to his investment in Inter-Tel.

18. On April 7, 2006, Mihaylo submitted to Inter-Tel notice of his intent (a) to nominate three directors for election and (b) to submit certain stockholder resolutions to a vote of the Inter-Tel stockholders at the 2006 Annual Meeting of Stockholders. One of the proposed stockholder resolutions urged the Board of Directors to arrange for a sale of Inter-Tel to the highest bidder.

19. On April 21, 2006, Mihaylo and certain of his affiliates filed a preliminary proxy statement with the SEC in connection with Inter-Tel’s 2006 Annual Meeting of Stockholders relating to a number of proposals, including the election of three directors nominated by Mr. Mihaylo and the proposal urging the prompt sale of Inter-Tel.

B. The Settlement Agreement

20. On May 5, 2006, the Company filed a Schedule 14A with the SEC and a press release announcing that the Company and members of the Company’s Board of Directors entered into a settlement agreement (the “Settlement Agreement”) with Defendant Mihaylo and Summit Growth Management LLC (“Summit”), a wholly owned affiliate of Mihaylo. Pursuant to the Settlement Agreement, the Company increased the size of the board from eight members to eleven members and elected Defendants Mihaylo, Puri, and Urish (the “Mihaylo Nominees”) as members of the Board of Directors. In addition, the Settlement Agreement provides, among other things, that the Company will nominate and recommend

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the election of the Mihaylo Nominees for election to the Board of Directors at the 2006 Annual Meeting.

21. Pursuant to the Settlement Agreement, Mihaylo withdrew his proposals, proxy solicitation for the 2006 Annual Meeting, and vote in favor of the slate of 11 directors nominated by the Company, which slate would have included the Mihaylo Nominees. In accordance with the terms of the Settlement Agreement, the Company provided Mihaylo and his advisors and financing sources with access to confidential information regarding the Company, subject to a non-disclosure agreement, in order to facilitate his ability to make an all cash acquisition proposal should he choose to do so. The Company also agreed to review and make a determination with regards to any acquisition proposal submitted by Mihaylo in a timely manner. Prior to December 31, 2006, subject to earlier termination under certain circumstances, Mihaylo was not permitted to make an offer to acquire the Company other than pursuant to an all cash proposal to acquire all the shares of common stock (other than those held by Mihaylo), and would have to provide the Company with notice of the offer at least five (5) business days in advance. If the Board of Directors determines that the initial acquisition proposal, if any, submitted by Mihaylo prior to June 15, 2006, is not in the best interests of shareholders then, upon the request of Mihaylo made within the following two weeks, the Company will promptly call a special meeting of shareholders to consider any proposals submitted by Mihaylo to the Company. While the Company may not contest the calling of the special meeting as to a proposal urging the Board to arrange for the prompt sale of the Company to the highest bidder, the Company may contest the calling of the meeting for other purposes and the submission of any other proposal, and the Company may oppose any proposal set forth in Mihaylo’s request.

22. Subject to certain limitations discussed in the Settlement Agreement, the Company agreed not to adopt a bylaw or amend its articles or certificate of incorporation to prevent Mihaylo from calling any such special meeting. Nothing in the Settlement

7

Agreement prevents Inter-Tel from having discussions or entering into a definitive acquisition agreement with third parties.

23. On May 5, 2006 a special committee of the Board of Directors (the “Special Committee”), comprised of J. Robert Anderson, Alexander Cappello, Jerry Chapman, Gary Edens, Steven Karol, Robert Rodin, Agniezska Winkler, and Norman Stout was formed to address matters pertaining to Mihaylo and to assess potential acquisitions of Inter-Tel.

24. Pursuant to a Form 13D filing on May 18, 2006, Mihaylo, certain of his affiliates and Vector Capital Corporation (“Vector”), entered into a Memorandum of Understanding to outline certain understandings between them with respect to a potential acquisition of Inter-Tel later discontinued in March 2007.

C. The Mitel Discussions

25. Between August 2006 and August 2007, Inter-Tel, Mitel Networks Corporation (“Mitel”), and Francisco Partners held discussions concerning potential business combination transactions involving Inter-Tel.

26. On April 23, 2006, Mitel agreed to merge the two companies at an offer price of $25.60 per share for the Company (the “Merger”).

D. The Vector Proposal

27. On April 25, 2007 Vector sent a letter addressed to the Board of Directors in which it stated that they had become aware of “market rumors of a potential near-term sale of [Inter-Tel].” In that letter, Vector stated its view that since its last proposed offer to buy Inter-Tel, the debt and equity market environment had improved, Inter-Tel had continued to deliver good performance, cash balances had increased, and industry analysts had further validated the strengths of Inter-Tel’s new products. In the letter, Vector indicated that it might consider making an all-cash offer at a price of $26.50 per share, subject to due diligence and other confirmations. Vector stated in this letter that Mihaylo was not a part of its proposal.

8

28. On April 26, 2007 Vector indicated to the board that a price above $27.00 per share should be justifiable (the “$27.00 Proposal”).

III. THE CLAIMS FOR RELIEF

29. On April 26, 2007, following receipt of the $27.00 Proposal, the Board of Directors approved a merger agreement (the “Merger Agreement”) with Mitel. Of the ten directors present at the meeting, seven voted to approve the Merger Agreement and the Merger, Mihaylo voted against it, and Stout, Puri and Urish abstained from voting.

30. On April 27, 2007 the Company filed with the SEC notice that it had entered into the Merger Agreement with Mitel Networks Corporation, a corporation organized under the laws of Canada (“Parent”), and Arsenal Acquisition Corporation, a wholly-owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Parent.

31. Pursuant to the Merger Agreement and at the effective time of the Merger, each share of common stock of the Company, par value $0.001 per share (“Company Stock”), will be cancelled and converted into the right to receive $25.60 in cash without interest (the “Merger Consideration”). All stock options and other equity incentive awards issued under the Company’s equity incentive plans that are outstanding immediately prior to the effective time of the Merger will vest and will be canceled pursuant to the Merger in exchange for cash.

32. The proposed Merger is expected to close in the third quarter of 2007.

33. In addition, pursuant to the Merger Agreement and under certain circumstances, the Company must pay a termination fee of $20,000,000.

34. On May 9, 2007 the Board of Directors of Inter-Tel received an unsolicited letter from a financial buyer proposing to acquire Inter-Tel at an all-cash price of $26.50 per share subject to, among other things, confirmatory due diligence.

9

35. On May 16, 2007 the Company disclosed that it was Vector and announced that it had received another letter in which Vector expressed an interest in acquiring Inter-Tel for an all-cash price of $26.50 per share, subject to confirmatory due diligence, financing, and other conditions.

A. The Company Has Failed to Properly Shop The Company

36. Prior to agreeing to sell the Company, Defendants failed to conduct a bona fide auction or market check of the value of the Company. Indeed, the sale of the Company prior to final negotiations with Vector or others made it impracticable to conduct a bona fide market check or auction of the Company. The Individual Defendants have access to internal financial information about Inter-Tel that shows its true value, expected increase in value, and the benefits of virtually 100 percent ownership of the Company. Plaintiff and the other Class members are not privy to such information. To the detriment of Inter-Tel’s public stockholders, the Individual Defendants are using their positions of power, control, and access to such internal information to benefit themselves and others in the Merger.

37. Defendants’ actions in proceeding with the Merger as presently proposed is wrongful, unfair, and harmful to Inter-Tel’s public stockholders, and will deny them their right to share proportionately in the true value of Inter-Tel’s valuable assets, profitable business, and future growth in profits and earnings. Defendants have breached their fiduciary duties to Inter-Tel shareholders by causing the Company to enter into the Merger Agreement that provides for the sale of Inter-Tel at an unfair price, and deprives Inter-Tel’s public shareholders of maximum value to which they are entitled. The Individual Defendants have also breached their fiduciary duties by not taking adequate measures to ensure that the interests of Inter-Tel’s public shareholders are properly protected from overreaching by Defendants. Defendants owe fundamental fiduciary obligations to Inter-Tel stockholders to take all necessary and appropriate steps to maximize the value of their shares consistent with a bona fide market check of the value of the Company. In addition, the

10

Individual Defendants have the responsibility to act independently so that the interests of the Company’s public stockholders will be protected and to properly consider all bona fide offers for the Company. Further, the Directors of Inter-Tel must adequately ensure that no conflict of interest exists between the Individual Defendants’ own interests and their fiduciary obligations to maximize stockholder value or, if such conflicts exist, to ensure that all such conflicts will be resolved in the best interests of the Company’s stockholders.

38. As a result of Defendants’ acts and omissions, Plaintiff and the Class has been and will be damaged by the breaches of fiduciary duty, including that Plaintiff and the Class will not receive the fair value of Inter-Tel’s assets and businesses,

39. The Individual Defendants have breached their fiduciary duties and other common law duties owed to Plaintiff and members of the Class in that they have not, and are not, exercising independent business judgment and have acted, and are acting, to the detriment of the Class. But Defendants are proposing to sell the improving fortunes of the Company in exchange for material personal benefits.

B. The Company’s Financial Advisors Are Conflicted

40. On April 12, 2006 the Company engaged UBS Securities LLC (“UBS”) to serve as Inter-Tel’s financial advisor in connection with the Merger. The Board of Directors retained UBS to advise them in connection with a potential sale, merger or other similar transaction involving Inter-Tel and to provide other general financial advisory services reasonably requested by Inter-Tel. No information has been provided concerning any of the fees generated by the Merger or UBS’ financial advisory services,

41. In fact, because of UBS’ opinion, the Company did not seek out the Vector proposal or additional bids. According to the preliminary proxy filed with the SEC on May 10, 2007 (the “Proxy”), UBS reviewed with the Special Committee the various financial analyses with respect to the proposed transaction and delivered its oral opinion, an opinion that was subsequently confirmed by delivery of a written opinion dated April 26, 2007.

11

42. Viewing the data and methodology employed by UBS in generating its fairness opinion included with the Proxy together with failure to provide any information regarding the fees in connection with the Merger underscores that each member of the Board of Directors has failed to fulfill his or her obligations with the care an ordinarily prudent person in a like position would have used under similar circumstances. It is extraordinarily imprudent to accept and rely upon advice as to the fairness of the consideration being paid to shareholders under the Merger from an investment banker more motivated to ensure that the Merger Agreement is approved than that Inter-Tel’s Board has fulfilled its obligations to Company shareholders to engage in a process that allows them to receive an objective, independent opinion as to fair value.

C. Interests Of Inter-Tel’s Directors And Management Diverge From That Of The Company And Its Shareholders In The Merger.

43. The Board of Directors and senior management of Inter-Tel have interests in the Merger that diverge from the Company and its shareholders, including, the following:

a. Norman Stout, Inter-Tel’s Chief Executive Officer, entered into an employment agreement with Inter-Tel, pursuant to which he is entitled to certain severance and termination benefits if his employment is terminated under specified circumstances before or after the Merger.

b. Certain Inter-Tel officers and directors have entered into change of control agreements with Inter-Tel under which they are entitled to receive certain severance and termination benefits if their employment is terminated under specified circumstances before or after the Merger.

c. Pursuant to the Merger Agreement, the certificate of incorporation and bylaws of the surviving corporation will include provisions for exculpation and indemnification of directors and officers.

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d. Pursuant to the Merger Agreement, persons who are covered by Inter-Tel’s directors’ and officers’ liability insurance as of the date of the Merger Agreement will be maintained for six years.

e. Each of Inter-Tel’s directors and executive officers currently holds options to acquire Inter-Tel common stock or performance share awards to be issued Inter-Tel common stock upon achieving certain specified performance goals. All such stock options and performance share awards will be accelerated and fully vested upon the effective time of the Merger.

f. During February, March, and April 2007, members of the Special Committee periodically communicated with Mihaylo and his advisors in an unsuccessful effort to resolve Mihaylo’s issues short of a costly and disruptive proxy contest. These communications included, among other things, discussing the possibility that Inter-Tel might purchase Mihaylo’s shares.

g. On March 2, 2007 Mihaylo submitted to Inter-Tel his notice of intent (a) to nominate five directors for election and (b) to submit seven stockholder resolutions to a vote of Inter-Tel stockholders at the 2007 Annual Meeting of Stockholders.

44. The Individual Defendants have initiated an active sales process and thus have assumed enhanced duties to maximize shareholder value. Prior to agreeing to sell the Company, however, Defendants failed to conduct a bona fide market check or auction of the Company.

45. Defendants have refused to take the necessary steps to ensure that the Company’s shareholders will receive maximum value for their shares of Inter-Tel stock. Defendants have not announced their intention to conduct an active auction or to establish an open bidding process in order to maximize shareholder value in selling the Company.

46. As a result of the actions of the Individual Defendants, Plaintiff and the other members of the Class have been and will be damaged in that they have not and will not

13

receive their fair proportion of the value of the Company’s assets and businesses and/or have been and will be prevented from obtaining a fair and adequate price for their shares of the Company’s common stock

47. Unless enjoined by this Court, Defendants will continue to breach their fiduciary duties owed to Plaintiff and the Class, and will deprive the Class of the opportunity to maximize the value of their Inter-Tel holdings either in a transaction with Oracle or some other bona fide offeror, all to the irreparable harm of the Class.

COUNT ONE

(Breach of Fiduciary Duty Against Individual Defendants)

48. Plaintiff adopts by reference herein as if set forth fully herein each and every allegation set forth in this Consolidated Amended Complaint.

49. The Individual Defendants by engaging in fraud, self-dealing and/or unconscionable conduct, each have violated and breached their fiduciary duties of care, loyalty, candor and independence owed by each of the Individual Defendants to each public shareholder of Inter-Tel.

50. By the acts, failures to act, transactions and courses of conduct alleged herein, each of the Individual Defendants, acting individually and as a part of a common plan, are attempting to unfairly deprive plaintiffs and other members of the Class of the benefit of a fair and valid process for consideration of the Proposed Transaction, for the consideration of other transactions with different terms and for the true and fair value of their investment in Inter-Tel.

51. The Individual Defendants have violated and breached their fiduciary duties owed to plaintiffs and the Class by entering into the Proposed Transaction while failing to act in good faith, failing to act in a manner reasonably believed to be in the best interests of the Company (and/or, since the Company will no longer exist should the Proposed Transaction be allowed to proceed, in the best interests of plaintiffs and the Class who are

14

being forced to surrender their ongoing investment in the business of the Company), and failing to act with the care an ordinarily prudent person in a like position would use under similar circumstances.

52. As demonstrated by the allegations set forth herein, the Individual Defendants each have breached their duties of loyalty, good faith, candor and independence owed to the shareholders of Inter-Tel because, among other reasons:

• they failed to take steps to ensure that the public shareholders of Inter-Tel receive fair value for their shares; and

• they failed to make appropriate disclosures in the Proxy.

53. Because the Individual Defendants dominate and control the business and corporate affairs of Inter-Tel and are in possession of private corporate information concerning Inter-Tel’s assets, business and future prospects, there exists an imbalance and disparity of knowledge and economic power between them and the public shareholders of Inter-Tel which makes it inherently unfair for them to pursue any proposed transaction wherein they will reap benefits disproportionate to those enjoyed by the Company’s public shareholders and that override engaging in a process that ensures Inter-Tel’s public shareholders receiving fair value for their investment.

54. As a result of the actions of the Individual Defendants, plaintiffs and the Class will suffer irreparable injury by being prevented from obtaining a fair price for their common stock while having no appraisal rights or other opportunity to demonstrate the validity of their allegations that the price they are to receive under the Proposed Transaction in less than the value of their investment.

55. Unless enjoined by this Court, the Individual Defendants will continue to breach their fiduciary duties owed to plaintiffs and the Class, and may consummate the Proposed Transaction which will exclude the Class from its fair share of Inter-Tel’s valuable

15

assets and businesses, and/or benefit the Individual Defendants in an unfair manner as complained of herein, all resulting in the irreparable harm to plaintiffs and the Class.

COUNT TWO

(Conspiracy Against Defendants)

56. Plaintiff adopts by reference herein as if set forth fully herein each and every allegation set forth in this Complaint.

57. The conduct of the defendants as herein alleged constitutes an agreement by two and/or more persons to accomplish unlawful acts or to use unlawful means to accomplish acts not in themselves illegal.

58. As a result of the conduct of the defendants as herein alleged, plaintiff and the Class have suffered and/or will, in the future, suffer harm, including harm for which they have no adequate remedy at law.

COUNT THREE

(Aiding And Abetting Against Defendants)

59. Plaintiff adopts by reference herein as if set forth fully herein each and every allegation set forth in the Complaint.

60. The conduct of the defendants as herein alleged constitutes each defendant providing substantial assistance, aid and/or encouragement to the other defendants in their respective engagement in the tortuous conduct in which they engaged as herein alleged.

61. Each of the defendants that provided substantial assistance, aid and/or encouragement to the other defendants in their respective engagement in the tortuous conduct in which they engaged as herein alleged did so with actual knowledge that the conduct they assisted, aided and/or encouraged was wrongful and with actual knowledge that their respective assistance, aid and/or encouragement was in furtherance of such knowingly wrongful conduct.

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62. As a result of the conduct of the defendants as herein alleged, plaintiff and the Class have suffered and/or will, in the future, suffer harm, including harm for which they have no adequate remedy at law.

IV. PRAYER FOR RELIEF

WHEREFORE, Plaintiff prays for judgment and relief as follows:

A. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative;

B. Preliminarily and permanently enjoining the Defendants and all those acting in concert with them from consummating the transaction;

C. To the extent the transaction is consummated, rescinding it and setting it aside or awarding rescissory damages to Plaintiff and the Class;

D. Ordering Defendants, jointly and severally, to account to Plaintiff and the other members of the Class for all damages suffered and to be suffered by them as a result of Defendants’ breaches, as alleged herein;

E. Awarding Plaintiff a reasonable allowance for its attorneys’ and experts’ fees and expenses in connection with this matter; and

F. Granting such other and further relief as to the Court may seem just and proper.

RESPECTFULLY SUBMITTED this 22^nd day of May, 2007.

HAGENS BERMAN SOBOL SHAPIRO LLP
By	/s/ Robert B. Carey
	Robert B. Carey
	Leonard W. Aragon
	2425 East Camelback Road, Suite 650
	Phoenix, Arizona 85016

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	Joshua Lifshitz
	BULL & LIFSHITZ LLP
	18 East 41 Street
	New York, New York 10017
Attorneys for Plaintiff

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