AGREEMENT AND PLAN OF MERGER

BY AND AMONG

IEC Electronics Corp.,

VUT Merger Corp.

and

Val-U-Tech Corp.

Dated as of May 23, 2008

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AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of May 23, 2008 (this “Agreement”),
is entered into by and among IEC Electronics Corp., a corporation organized
under the laws of the State of Delaware (“Parent”), VUT Merger Corp., a
corporation organized under the laws of the State of New York (“Merger Sub”),
Val-U-Tech Corp., a corporation organized under the laws of the State of New
York (“Company”) and Kathleen Brudek, Michael Brudek and Nicholas Vaseliv (each,
a “Company Shareholder” and, together, the “Company Shareholders”) (“Parent,”
“Merger Sub”, “Company” and the “Company Shareholders” individually hereinafter
referred to as “Party” and collectively hereinafter referred to as the
“Parties”);
 
WHEREAS, Merger Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the New York Business Corporation Law
(“NYBCL”), will merge with and into Company (the “Merger”);
 
WHEREAS, the board of directors of Company has (i) determined that the Merger is
advisable and fair to the holders of Company Common Stock (as defined in
Section 3.04) and is in the best interests of such shareholders, (ii) advised,
authorized, approved and adopted this Agreement and the transactions
contemplated hereby and (iii) recommended approval and adoption of this
Agreement by the shareholders of Company (the “Company Shareholders”);
 
WHEREAS, Company Shareholders have advised, authorized, approved and adopted
this Agreement and the transactions contemplated hereby; and
 
WHEREAS, the Board of Directors of Parent has determined that the Merger is
advisable and in the best interests of Parent and its shareholders and the
boards of directors of Parent and Merger Sub and the sole shareholder of Merger
Sub have advised, authorized, approved and adopted this Agreement and the
transactions contemplated hereby.
 
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, and intending to be legally bound hereby, the Parties agree as
follows.
 
ARTICLE I
 
THE MERGER
 
SECTION 1.01 The Merger
 
Upon the terms and subject to the conditions set forth in this Agreement, and in
accordance with the NYBCL, at the Effective Time (as defined in Section 1.02)
Merger Sub shall be merged with and into Company, with Company being the
surviving corporation (hereinafter sometimes called “Surviving Corporation”) in
the Merger. Upon consummation of the Merger, the separate corporate existence of
Merger Sub shall cease, and Surviving Corporation shall continue to exist as a
New York corporation.
 

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SECTION 1.02 Closing Date; Effective Time
 
(a) Subject to the terms and conditions of this Agreement, including the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VII of this Agreement, the closing of the Merger (the “Closing” and the date of
such Closing, the “Closing Date”) will take place on May 29, 2008, at 10:00 a.m.
local time at the offices of Boylan, Brown, Code, Vigdor & Wilson, LLP, 2400
Chase Square, Rochester, New York, unless another date or place is agreed to in
writing by the Parties
 
(b) The Parties shall cause the Merger to be consummated on the Closing Date by
filing the Certificate of Merger, in the form attached hereto as Exhibit A (the
“Certificate of Merger”) and any other appropriate documents with the New York
Department of State, in such form as required by, and executed in accordance
with the relevant provisions of, the NYBCL (the date and time of such filing
being the “Effective Time”).
 
SECTION 1.03 Effect of the Merger
 
At the Effective Time, the effect of the Merger shall be as provided in the
applicable provisions of the NYBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in
Surviving Corporation, and all debts, liabilities and duties of Company and
Merger Sub shall become the debts, liabilities and duties of Surviving
Corporation.
 
SECTION 1.04 Certificate of Incorporation; Bylaws
 
(a) Unless otherwise determined by Parent prior to the Effective Time, at the
Effective Time, the certificate of incorporation of Company shall be the
certificate of incorporation of Surviving Corporation until thereafter amended
as provided by Law and such certificate of incorporation, except that Company’s
certificate of incorporation shall be amended and restated at the Effective Time
to have the same form and substance as the certificate of incorporation of
Merger Sub except that the name of the Surviving Corporation shall be Val-U-Tech
Corp.
 
(b) Unless otherwise determined by Parent prior to the Effective Time, at the
Effective Time, the bylaws of Merger Sub shall continue unchanged and shall be
the bylaws of Surviving Corporation until thereafter amended as provided by Law,
the certificate of incorporation of Surviving Corporation and such bylaws.
 
SECTION 1.05 Directors and Officers
 
At the Effective Time, the initial officers and directors of Surviving
Corporation shall be the persons listed on Exhibit B, each to hold office in
accordance with the certificate of incorporation and bylaws of Surviving
Corporation, in each case until their respective successors are duly elected or
appointed and qualified.
 
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SECTION 1.06 Classes and Series
 
As to Company and Merger Sub, the designation and number of outstanding shares
of each class and series, the specification of the classes and series entitled
to vote on this Agreement, and the specification of each class and series
entitled to vote as a class on this Agreement, is as follows:
 
(a) Company:
 
Designation of 
Number of 
Designation 
Classes and
each outstand- 
outstanding
of class and
series enti-
ing class and
shares of
series enti-
tled to vote
series of shares
each class
tled to vote
as a class

Common Stock
100
Common Stock
Common Stock

(b) Merger Sub:
 
Designation of 
Number of 
Designation
Classes and
each outstand- 
outstanding 
of class and
series enti-
ing class and 
shares of
series enti-
tled to vote
series of shares
each class
tled to vote
as a class

Common Stock
100
Common Stock
Common Stock

 
ARTICLE II
 
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
 
SECTION 2.01 The Merger
 
At the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Merger Sub, Company or the holders of any of the securities
referred to in this Section 2.01:
 
(a) Common Stock.
 
(i) Subject to Section 2.01(a)(ii), each share of Company Common Stock
(excluding any shares described in Section 2.01(b)) issued and outstanding
immediately prior to the Effective Time shall cease to be outstanding and shall
be converted into and exchanged for the right to receive the same proportion of
(a) (1) Five Million Five Hundred Thousand Dollars (US$5,500,000) (the “Cash
Purchase Price”), (2) Five Hundred Thousand (500,000) shares of common stock,
par value $0.01, of Parent, (“Parent Common Stock”), and (3) "Purchase Notes"
(as that term is hereinafter defined) that is (b) in the same as proportion as
such share of Company Common Stock is of all shares of Company Common Stock
outstanding on the Closing Date. The Purchase Notes shall be in the form of
Exhibit 2.01(a)(i) (hereinafter collectively referred to as "Purchase Notes" and
individually referred to as "Purchase Note") and shall be in an aggregate
principal amount equal to (x) 4,500,000, less (y) $1,050,000, (c) subject to
adjustment as provided herein. The shares of Parent Common Stock issuable to the
holders of Company Common Stock pursuant hereto, the Cash Purchase Price and the
Purchase Notes, together with the amount of cash in lieu of fractional shares of
Parent Common Stock payable pursuant to Section 2.01(e), are sometimes referred
to herein, collectively, as the “Merger Consideration”. All such shares of
Company Common Stock shall cease to be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing any such shares shall thereafter represent only the right to receive
the Merger Consideration. Except as otherwise provided herein or by applicable
law, the holders of certificates previously evidencing such shares of Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Company Common Stock. Each such
certificate previously evidencing such shares of Company Common Stock shall be
exchanged for the Merger Consideration applicable thereto.
 
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(ii) The Purchase Price and the Purchase Notes shall be increased or decreased,
as the case may be, in accordance with the following
 
(a) The Purchase Price and the Purchase Notes will be increased by one-half of
the amount by which, as of the Closing Date, the following are greater than, or
decreased by one-half of the amount by which the following are less than (as the
case may be), the amounts shown on the Balance Sheet of the Company as of
December 31, 2007 as audited by Rotenberg & Co. attached to this Agreement as
Exhibit 2.01(a)(ii) (the “Company Balance Sheet”):
 
i. cash and cash equivalents; 
 
ii. net inventory, which shall not include any inventory that is (x) more than
one (1) year old, (y) damaged or (z) not useable or saleable in the ordinary
course of the Company’s business within one (1) year after the Closing Date; and
 
iii. accounts receivable, which shall not include any account receivable as to
which the Company has received any notice of dispute, whether verbal or written,
or which is more than ninety (90) days old as of the Closing Date;
 
(b) The Purchase Price and the Purchase Notes will be decreased by one-half of
the amount by which, as of the Closing Date, the following are greater than, or
increased by one-half of the amount by which the following are less than (as the
case may be), the amounts shown on the Company Balance Sheet:
 
i. accounts payable;
 
ii. accrued payroll and vacation; and
 
iii. other current liabilities.
 
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(c) The Purchase Price and the Purchase Notes will be decreased by the amount of
any liabilities as of the Closing Date that are not shown on the Company Balance
Sheet.
 
(iii) The Purchase Price and the Purchase Notes shall be increased by one-half
of the amount by which the Company’s revenues from sales of its products and
services in the ordinary course of its business for the calendar year 2008
(determined in accordance with Subsection 2.01(a)(vii)) exceed $18,000,000.
 
(iv) The Purchase Price and the Purchase Notes shall be decreased (but not by
more than the amount of the Purchase Notes, after adjustment as provided
elsewhere in this Agreement) by the amount, if any, by which the Company’s
revenues from sales of its products and services in the ordinary course of its
business for the calendar year 2008 (determined in accordance with Subsection
2.01(a) (vii)) are less than $14,000,000.
 
(v) If sales by the Company to Harris Corporation of products and services for
the calendar year 2009 are less than $5,500,000, then the Purchase Price and the
Purchase Notes shall be reduced by one-half of (a) $5,500,000 less sales of
products and services to Harris Corporation during the calendar year 2009, less
(b) the amount, if any, by which all of the Company’s revenues from sales of its
products and services in the ordinary course of its business for the calendar
year 2009 (excluding the amount of its sales to Harris Corporation, ASML, ViaSat
and Telephonics) exceed $7,100,000.
 
As an example of the application of the foregoing formula, assume:
 
 
(x) the Company’s sales to Harris Corporation for the calendar year 2009 are
$4,000,000 and

 
(y) the Company’ total sales for the calendar year 2009 (other than sales to
Harris Corporation, ASML, ViaSat and Telephonics) are $8,100,000
 
Applying the foregoing, the Purchase Price and the Purchase Notes will be
reduced by one-half of
 
(xx) $1,500,000 (the excess of $5,500,000 over $4,000,000) less
 
(yy) $1,000,000 (the excess of $8,100,000 over $7,100,000)
 
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The reduction in the Purchase Price and the Purchase Notes will be ½ x
($1,500,000 - $1,000,000), or $250,000.
 
(vi) Promptly, but in no event more than forty-five (45) days, after the Closing
Date, the Parent shall cause its regularly engaged firm of independent certified
public accountants to conduct an audit the Company’s books and records as of the
Closing Date, and shall cause them to prepare a balance sheet of the Company as
of the Closing Date in accordance with GAAP (subject to the specific definitions
contained in Subsection 2.01(a)(ii)). Such balance sheet, shall be used in
determining the adjustments, if any, that the Parent believes to be required by
subsection 2.01(a)(ii). Parent shall deliver a copy of such balance sheet
together with a statement of the adjustments, if any, that the Parent believes
should be made to the Purchase Price and the Purchase Notes to the Shareholder
Representative (the “Parent Notice”), promptly after Parent has received such
balance sheet from its accountants. Following the delivery of the Parent Notice
to the Shareholder Representative, the Parent shall give and shall cause the
Company to give the Shareholder Representative and its representatives
reasonable access to all of the books and records of the Company, on reasonable
notice and during normal business hours, for so long and so often as reasonably
required by them, so that the Shareholder Representative can determine whether
or not the balance sheet and the proposed adjustments as set forth in the Parent
Notice are accurate. If the Shareholder Representative determines that the
Parent Notice (and the adjustments indicated thereon) was inaccurate, it shall
give notice (the “Shareholder Notice”) of such finding to the Parent no later
than thirty (30) days after delivery to the Shareholder Representative of the
Parent Notice. Such Shareholder Notice shall specify any items or amounts as to
which the Shareholder Representative disagrees and a detailed statement of the
basis of each of the Shareholder Representative’s objections. If no such
Shareholder Notice is given in accordance with this Subsection 2.01(a)(vi), the
Parent Notice (and the adjustments indicated thereon) shall be conclusive and
binding upon the parties.
 
If a Shareholder Notice is given and the parties are unable to resolve any
disagreements as to the adjustments required to the Purchase Price and the
Purchase Notes within thirty (30) days after the Shareholder Notice has been
given, the items or amounts in dispute shall be referred for resolution to the
Independent Accountants. Promptly, but no later than 20 days after acceptance of
the appointment as Independent Accountants, the Independent Accountants shall
determine, based primarily on written submissions by Parent and the Shareholder
Representative, which may be confirmed by independent review if the Independent
Accountants deem such review to be necessary, only those issues in dispute and
shall render a written report as to the resolution of the dispute and the
resulting adjustments to the Purchase Price and the Purchase Notes, which shall
be conclusive and binding on the parties. Parent shall permit the Independent
Accountants to review the books and records of the Company that relate to the
items in dispute, during normal business hours and upon reasonable notice. In
resolving any disputed item, the Independent Accountants (x) shall be bound by
the provisions of this Section 2.01 and (y) may not assign a value to any item
greater than the greatest value for such items claimed by either party or less
than the smallest value for such items claimed by either party. Parent and the
Shareholders (in the aggregate) shall each be responsible for one-half (½) of
the fees and expenses charged by the Independent Accountants for their services.
 
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No later than the third (3rd) business day following the date of final
determination of the adjustments, if any, required to the Purchase Notes in
accordance with this Subsection 2.01(a)(vi), the Shareholder Representative
shall deliver to the Parent the Purchase Notes delivered at the Closing and the
Parent shall deliver to the Shareholder Representative replacement Purchase
Notes, identical to the original Purchase Notes but adjusted as to principal
amount as provided herein.
 
(vii) In connection with the audit of the Parent’s financial statements for its
fiscal year ended November 30, 2008, the Parent shall cause its auditors to
determine and certify the Company’s revenues from sales of its products and
services in the ordinary course of its business for the calendar year 2008, net
of allowances, discounts, returns, shipping charges and similar costs, in
accordance with GAAP, and shall deliver a copy of such determination to the
Shareholder Representative. For purposes of making such determination, (A)
except as provided in the immediately following subsection (B), all revenues
from the performance of cable harness work from and after the Closing Date by
either Parent or the Company shall be included in determining the sales of the
Company, it being the intention of the Parties that all such work shall be
performed by the Company and not by Parent from and after the Closing Date, and
(B) notwithstanding the foregoing, no revenues from the performance of cable
harness work by either Parent or the Company for ASML, ViaSat and Telephonics
shall be included in determining the gross sales of the Company.
 
Parent shall deliver a copy of such auditor’s determination with a statement of
the adjustments, if any, that the Parent believes should be made to the Purchase
Price and the Purchase Notes pursuant to Subsection 2(a)(iv) to the Shareholder
Representative (the “Second Parent Notice”), promptly after Parent has received
such determination from its accountants. Following the delivery of the Second
Parent Notice to the Shareholder Representative, the Parent shall give and shall
cause the Company to give the Shareholder Representative and its representatives
reasonable access to such of the books and records of the Company, on reasonable
notice and during normal business hours, for so long and so often as reasonably
required by them, to the extent necessary to verify such determination and the
proposed adjustments as set forth in the Second Parent Notice are accurate. If
the Shareholder Representative determines that Second Parent Notice (and the
adjustments indicated thereon) was inaccurate, it shall give notice (the “Second
Shareholder Notice”) of such finding to the Parent no later than thirty (30)
days after delivery to the Shareholder Representative of the Second Parent
Notice. Such Second Shareholder Notice shall specify any items or amounts as to
which the Shareholder Representative disagrees and a detailed statement of the
basis of each of the Shareholder Representative’s objections. If no such Second
Shareholder Notice is given in accordance with this Subsection 2.01(a)(viii),
the Second Parent Notice (and the adjustments indicated thereon) shall be
conclusive and binding upon the parties.
 
If a Second Shareholder Notice is given and the parties are unable to resolve
any disagreements as to the adjustments required to the Purchase Price and the
Purchase Notes within thirty (30) days after the Second Shareholder Notice has
been given, the items or amounts in dispute shall be referred for resolution to
the Independent Accountants. Promptly, but no later than 20 days after
acceptance of the appointment as Independent Accountants, the Independent
Accountants shall determine, based primarily on written submissions by Parent
and the Shareholder Representative, which may be confirmed by independent review
if the Independent Accountants deem such review to be necessary, only those
issues in dispute and shall render a written report as to the resolution of the
dispute and the resulting adjustments to the Purchase Price and the Purchase
Notes, which shall be conclusive and binding on the parties. Parent shall permit
the Independent Accountants to review the books and records of the Company that
relate to the items in dispute, during normal business hours and upon reasonable
notice. In resolving any disputed item, the Independent Accountants (x) shall be
bound by the provisions of this Section 2.01 and (y) may not assign a value to
any item greater than the greatest value for such items claimed by either party
or less than the smallest value for such items claimed by either party. Parent
and the Shareholders (in the aggregate) shall each be responsible for one-half
(½) of the fees and expenses charged by the Independent Accountants for their
services.
 
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No later than the third (3rd) business day following the date of final
determination of the adjustments, if any, required to the Purchase Notes in
accordance with this Subsection 2.01(a)(vii), the Shareholder Representative
shall deliver to the Parent the Purchase Notes previously delivered to the
Shareholders and the Parent shall deliver to the Shareholder Representative
replacement Purchase Notes, identical to the original Purchase Notes but
adjusted as to principal amount as provided herein.
 
(vii) On or before January 31, 2010, the Parent shall deliver to the Shareholder
Representative its calculation of any adjustments required to be made to the
Purchase Price and the Purchase Notes pursuant to Subsection 2.01(a) (v) (the
“Third Parent Notice”). Following the delivery of the Third Parent Notice to the
Shareholder Representative, the Parent shall give and shall cause the Company to
give the Shareholder Representative and its representatives reasonable access to
such of the books and records of the Company, on reasonable notice and during
normal business hours, for so long and so often as reasonably required by them,
to the extent necessary to verify such calculation and the data upon which it is
based.. If the Shareholder Representative determines that Third Parent Notice
(and the adjustments indicated thereon) was inaccurate, it shall give notice
(the “Third Shareholder Notice”) of such finding to the Parent no later than
thirty (30) days after delivery to the Third Representative of the Third Parent
Notice. Such Third Shareholder Notice shall specify any items or amounts as to
which the Shareholder Representative disagrees and a detailed statement of the
basis of each of the Shareholder Representative’s objections. If no such Third
Shareholder Notice is given in accordance with this Subsection 2.01(a)(viii),
the Third Parent Notice (and the adjustments indicated thereon) shall be
conclusive and binding upon the parties.
 
If a Third Shareholder Notice is given and the parties are unable to resolve any
disagreements as to the adjustments required to the Purchase Price and the
Purchase Notes within thirty (30) days after the Third Shareholder Notice has
been given, the items or amounts in dispute shall be referred for resolution to
the Independent Accountants. Promptly, but no later than 20 days after
acceptance of the appointment as Independent Accountants, the Independent
Accountants shall determine, based primarily on written submissions by Parent
and the Shareholder Representative, which may be confirmed by independent review
if the Independent Accountants deem such review to be necessary, only those
issues in dispute and shall render a written report as to the resolution of the
dispute and the resulting adjustments to the Purchase Price and the Purchase
Notes, which shall be conclusive and binding on the parties. Parent shall permit
the Independent Accountants to review the books and records of the Company that
relate to the items in dispute, during normal business hours and upon reasonable
notice. In resolving any disputed item, the Independent Accountants (x) shall be
bound by the provisions of this Section 2.01 and (y) may not assign a value to
any item greater than the greatest value for such items claimed by either party
or less than the smallest value for such items claimed by either party. Parent
and the Shareholders (in the aggregate) shall each be responsible for one-half
(½) of the fees and expenses charged by the Independent Accountants for their
services.
 
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No later than the third (3rd) business day following the date of final
determination of the adjustments, if any, required to the Purchase Notes in
accordance with this Subsection 2.01(a)(viii), the Shareholder Representative
shall deliver to the Parent the Purchase Notes previously delivered to the
Shareholders and the Parent shall deliver to the Shareholder Representative
replacement Purchase Notes, identical to the original Purchase Notes but
adjusted as to principal amount as provided herein.
 
(b) Treasury Stock. All shares of capital stock of Company held in the treasury
of Company immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof and no amount shall be delivered or
deliverable in exchange therefor.
 
(c) Merger Sub Stock. Each share of common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time
(“Merger Sub Stock”) shall be converted into and exchanged for one (1) duly and
validly issued, fully paid and non-assessable share of common stock of the
Surviving Corporation.
 
(d) No Fractional Shares. No certificate or scrip representing any fractional
shares of Parent Common Stock shall be issued pursuant to Section 2.01(a), and
other than the right to receive the cash payment pursuant to this
Section 2.01(d) any such fractional interests shall not entitle the owner
thereof to any rights as a security holder of Parent. Notwithstanding any other
provision hereof, all holders of Company Common Stock otherwise entitled to
receive fractional shares of Parent Common Stock pursuant to Section 2.01(a)
shall be entitled to receive, in lieu thereof, cash (without interest) in an
amount equal to the product of (i) such fractional part of a share of Parent
Common Stock to which the holder of Company Common Stock would otherwise be
entitled under Sections 2.01(a) multiplied by the Average Parent Trading Price
as of the Closing Date. As promptly as possible after the determination of the
amount of cash to be paid to holders of fractional interests, Parent shall
forward payments to holders of such fractional interests subject to and in
accordance with the terms hereof.
 
SECTION 2.02 Exchange of Certificates and Merger Consideration
 
(a) Payment Procedures. At the Closing, upon surrender to Parent by each Company
Shareholder of the certificate or certificates (each a “Certificate” and
collectively, the “Certificates”) representing all of the shares of Company
Common Stock owned by such Company Shareholder immediately prior to the
Effective Time, together with any other documents required by Parent, Parent
shall issue and deliver to each such Company Shareholder his, her or its pro
rata share of the Merger Consideration, which shall consist of (i) a certificate
for Parent Common Stock which shall be registered in the name of such Company
Shareholder which shall bear legends as set forth on Exhibit 2.02(a), (ii) a
Purchase Note payable to such Company Shareholder; and (iii) the Cash Purchase
Price payable to such Company Shareholder, which together shall represent the
entire Merger Consideration. Until surrendered in accordance with the provisions
of this Section 2.02, each Certificate shall represent for all purposes only the
right to receive the applicable consideration set forth in Section 2.01, without
any interest thereon.
 
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(b) No Further Rights in Stock. All shares of Parent Common Stock issued upon
the surrender for exchange of Certificates in accordance with the terms of
Sections 2.01 and 2.02 (including any cash paid pursuant to this Article II)
shall be deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the shares of Company Common Stock theretofore represented
by such Certificates, and there shall be no further registration of transfer on
the stock transfer books of the Surviving Corporation of the shares of Company
Common Stock represented by such Certificates which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, any such Certificates
are presented to Parent or the Surviving Corporation for any reason, they shall
be canceled and exchanged as provided in this Article II, except as otherwise
provided by Law.
 
(c) Withholding of Tax. Parent shall be entitled to deduct and withhold from the
applicable amount of the Merger Consideration otherwise issuable to, and any
cash payment in lieu of fractional shares otherwise payable pursuant to this
Agreement to, any former holder of Company Common Stock such amounts as Parent
(or any Affiliate thereof) is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign Tax Law. To the extent that amounts are so withheld by Parent (or any
Affiliate thereof), such withheld amounts shall be treated for all purposes of
this Agreement as having been paid to the former holder of Company Common Stock
in respect of whom such deduction and withholding was made by Parent (or any
Affiliate thereof).
 
(d) Lost, Stolen or Destroyed Certificates. In the event any Certificate
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit setting forth that fact by the Person
claiming such lost, stolen or destroyed Certificate and, if required by Parent,
the posting by such Person of a bond in such reasonable amount as Parent may
direct as indemnity against any claim that may be made against Parent or the
Surviving Corporation with respect to such Certificate, Parent shall pay to such
Person the applicable Merger Consideration and any cash in lieu of fractional
shares with respect to such lost, stolen or destroyed Certificate.
 
(e) Distributions With Respect to Unexchanged Shares of Parent Common Stock. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock evidenced thereby until the holder of such
Certificate shall properly surrender such Certificate in accordance with the
requirements of Section 2.02(a). Subject to the effect of escheat, tax or other
applicable Laws, following surrender of any such Certificate, there shall be
paid to the holder of the Certificates evidencing whole shares of Parent Common
Stock issued in exchange therefor, without interest, (i) promptly, the amount of
dividends or other distributions with a record date after the Effective Time and
theretofore paid with respect to such whole shares of Parent Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Parent Common Stock. 
 
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SECTION 2.03 Certain Adjustments
 
If between the date hereof and the Effective Time, the outstanding shares of
Company Common Stock or of Parent Common Stock shall be changed into a different
number of shares by reason of any reclassification, recapitalization, split-up,
combination or exchange of shares, or any dividend payable in stock or other
securities shall be declared thereon with a record date within such period, the
Merger Consideration per share of Company Common Stock shall be adjusted
accordingly to provide the same economic effect as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
 
SECTION 2.04 Shareholders’ Representative
 
The Shareholder Representative shall, by virtue of the Merger, be appointed
attorney-in-fact and authorized and empowered to act, for and on behalf of any
or all of Company Shareholders (with full power of substitution in the
premises), in connection with the provisions of Article IX as they relate to
Company and Company Shareholders generally, and such other matters as are
reasonably necessary for the consummation of the transactions contemplated
hereby including, without limitation, (i) to compromise on their behalf with
Parent any claims asserted thereunder, (ii) to execute and deliver on behalf of
Company Shareholders any documents or agreements contemplated by or necessary or
desirable in connection with this Agreement, (iii) to administer and resolve any
disputes with respect to the computation of any adjustments to the Purchase
Price and the Purchase Notes and (iv) to take such further actions including
coordinating and administering post-closing matters related to the rights and
obligations of Company Shareholders (including exchanges of the Purchase Notes)
as are authorized in this Agreement (the above named representative, as well as
any subsequent representative of Company Shareholders appointed by Company
Shareholders being referred to herein as the “Shareholders’ Representative”).
The Shareholders’ Representative shall not be liable to any Company Shareholder,
Parent, the Surviving Corporation or their respective Affiliates or any other
Person with respect to any action taken or omitted to be taken by the
Shareholders’ Representative in his role as Shareholders’ Representative under
or in connection with this Agreement unless such action or omission results from
or arises out of fraud, gross negligence, willful misconduct or bad faith on the
part of the Shareholders’ Representative. Parent, Merger Sub and the Surviving
Corporation shall be entitled to rely on such appointment and treat such
Shareholders’ Representative as the duly appointed attorney-in-fact of each
Company Shareholder. Each Company Shareholder who votes in favor of the Merger
pursuant to the terms hereof, by such vote and without any further action, and
each Company Shareholder who receives Merger Consideration in connection with
the Merger, by acceptance thereof and without any further action, confirms such
appointment and authority.
 
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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF COMPANY 
AND COMPANY SHAREHOLDERS
 
Except as specifically set forth in this Agreement, Company and each of the
Company Shareholders hereby jointly and severally represents, warrants to and
agrees with Parent and Merger Sub as follows, in each case as of the date of
this Agreement and as of the Closing Date:
 
SECTION 3.01 Organization and Qualification
 
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York, and has the full and unrestricted
corporate power and authority to own, operate and lease its Assets, to carry on
its business as currently conducted, to execute and deliver this Agreement and
to carry out the transactions contemplated hereby. Company is duly qualified to
conduct business as a foreign corporation and is in good standing in the states,
countries and territories listed in Schedule 3.01, which are the only
jurisdictions where the nature of its business or the ownership, operation or
leasing of its Assets makes such qualification necessary.
 
SECTION 3.02 No Subsidiaries; Other Interests
 
Company has no Subsidiaries. Company has no equity investment or other interest
in, nor has Company made advances or loans to, any Person.
 
SECTION 3.03 Certificate of Incorporation and Bylaws
 
Company has furnished to Parent a true and complete copy of the certificate of
incorporation of Company, as currently in effect on the date of this Agreement,
and a true and correct copy of Company’s bylaws, as currently in effect on the
date of this Agreement, in each case certified by the corporate secretary of
Company. Company is not in violation of any of the provisions of its certificate
of incorporation or bylaws.
 
SECTION 3.04 Capitalization
 
The authorized capital stock of Company consists of two hundred (200) shares of
common stock, no par value per share, of which one hundred (100) shares of
common stock (the “Company Common Stock”) are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and non-assessable except
as provided in Section 630 of the NYBCL. No shares of common stock are held in
the treasury of Company. Schedule 3.04 sets forth the names and addresses of all
holders of record of Company Common Stock and the number and class of shares
held by each such shareholder. No other shares of Company Common Stock have been
reserved for any purpose. There are no outstanding securities convertible into
or exchangeable for Company Common Stock, any other securities of any Company
and no outstanding options, rights (preemptive or otherwise), or warrants to
purchase or to subscribe for any shares of such stock or other securities of
Company. There are no outstanding Agreements affecting or relating to the
voting, issuance, purchase, redemption, registration, repurchase or transfer of
Company Common Stock or any other securities of Company. Each of the outstanding
shares of Company Common Stock was issued in compliance with all applicable
federal and state Laws concerning the issuance of securities. There are no
obligations, contingent or otherwise, of Company to provide funds to, make any
investment (in the form of a loan, capital contribution or otherwise) in, or
provide any guarantee with respect to, any Person. There are no Agreements
pursuant to which any Person (other than Company) is or may be entitled to
receive any of the revenues or earnings, or any payment based thereon or
calculated in accordance therewith, of Company.
 
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SECTION 3.05 Authority; Binding Obligation
 
The execution and delivery by Company of this Agreement, the execution and
delivery by Company of all other Agreements, documents, certificates or other
instruments contemplated hereby, and the consummation by Company of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement and the other Agreements,
documents, certificates or other instruments contemplated hereby, or to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by Company and the Company Shareholder and
constitutes the legal, valid and binding obligation of Company and the Company
Shareholder, enforceable against each of them in accordance with its terms,
except as such enforceability may be subject to the effects of any applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar Laws affecting creditors’ rights generally and subject to the effects of
general equitable principles (whether considered in a proceeding in equity or at
law).
 
SECTION 3.06 No Conflict; Required Filings and Consents
 
(a) The execution, delivery and performance by Company and the Company
Shareholders of this Agreement and all other Agreements, documents, certificates
or other instruments contemplated hereby, the fulfillment of and compliance with
the respective terms and provisions hereof and thereof, and the consummation by
Company and the Company Shareholders of the transactions contemplated hereby and
thereby, do not and will not: (i) conflict with, or violate any provision of,
the certificate of incorporation or bylaws of Company; (ii) conflict with or
violate any Law applicable to Company, its Assets or the Company Shareholders;
(iii) conflict with, result in any breach of, or constitute a default (or an
event that with notice or lapse of time or both would become a default) or
result in the termination or acceleration, or create in another Person, a put
right, purchase obligation or similar right under any Agreement to which Company
or the Company Shareholders is a party or by which any of them, or any of the
Company’s Assets, may be bound; or (iv) result in or require the creation or
imposition of, or result in the acceleration of, any indebtedness or any
Encumbrance of any nature upon, or with respect to, Company or any of the Assets
now owned or hereafter acquired by Company.
 
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(b) Except as set forth on Schedule 3.06, the execution, delivery and
performance by Company and the Company Shareholders of this Agreement and all
other Agreements, documents, certificates or other instruments contemplated
hereby, the fulfillment of and compliance with the respective terms and
provisions hereof and thereof, and the consummation by Company of the
transactions contemplated hereby and thereby, do not and will not: (i) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Person not party to this Agreement, except (A) the filing
and recordation of the Certificate of Merger as required by the NYBCL and (B)
where the failure to obtain any consent, approval, authorization or permit or to
make any filing or notification otherwise required to be disclosed hereunder
would not have a Company Material Adverse Effect; or (ii) result in or give rise
to any penalty, forfeiture, Agreement termination, right of termination,
amendment or cancellation, or restriction on business operations of Company that
would have a Company Material Adverse Effect.
 
(c) All returns, reports, statements and other documents required to be filed by
Company with any Governmental Entity have been filed in a timely manner and
complied with and are true, correct and complete in all material respects (and
any related fees required to be paid have been paid in full). All material
records of every type and nature relating to the business, operations or Assets
of Company have been maintained in all material respects in accordance with good
business practices and the rules of any Governmental Entity and are maintained
at Company.
 
(d) No Governmental Entity or any other Person has notified Company that such
Governmental Entity or other Person intends to object to the transactions
contemplated hereunder which shall include for this purpose any objection to the
operations of the business of Company as part of Parent. Company is not aware of
any fact or circumstance related to it that would reasonably be expected to
(i) cause the filing of any objection to any application for any Governmental
consent required hereunder, (ii) lead to any delay in processing such
application or (iii) require any waiver of any Governmental rule, policy or
other applicable law.
 
SECTION 3.07 Intellectual Property
 
(a) Schedule 3.07 identifies each item of Intellectual Property (i) owned by
Company, (ii) owned by any third party and used by Company pursuant to license,
sublicense or other Agreement or (iii) otherwise used by Company and not
otherwise generally used by Persons similarly situated (including, in each case,
specification of whether each such item is owned, licensed or used by Company).
In addition, Company has not licensed (as licensor), sublicensed (as
sublicensor) or entered into any other agreement with respect to the use of any
Intellectual Property.
 
(b) Company either owns or has adequate rights to use all of the Intellectual
Property that is necessary to, and currently used for, its business as now
conducted or currently proposed to be conducted, and such Intellectual Property
is free and clear of Encumbrances. Company has previously furnished to Parent
evidence of either ownership by Company of or license rights to use its
Intellectual Property.
 
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(c) There are no pending or, to Company’s knowledge, threatened claims against
Company alleging that the conduct of its business infringes any Intellectual
Property rights of others that would have a Company Material Adverse Effect. The
business of Company as now conducted or proposed to be conducted does not
infringe any third-party Intellectual Property rights.
 
(d) To Company’s knowledge, no third party is infringing upon any of Company’s
Intellectual Property, and Company has not notified any third party that it
believes such third party is interfering with, infringing, or misappropriating
any of Company’s Intellectual Property or engaging in any act of unfair
competition. Company has the right to bring an action for the infringement of
all of its Intellectual Property that is owned by Company.
 
(e) Except as set forth in the next sentence, Company has taken all steps that
are customary in its industry to protect Company’s rights in confidential
information and trade secrets of Company or provided by any other Person to
Company. Company does not require each employee, director, consultant or
contractor to execute a confidentiality and non-disclosure agreement. The names
of those of its present and former employees who have executed such agreements
are listed on Schedule 3.07, and copies of such agreements have been provided to
Parent.
 
(f) To Company's Knowledge, the operation of the business of Company as it
currently is conducted or currently proposed to be conducted by Company does not
and will not and will not when conducted by Parent or the Surviving Corporation
in substantially the same manner following the Closing, infringe or
misappropriate any Intellectual Property right of any person, violate any right
of any person (including any right to privacy or publicity), or constitute
unfair competition or trade practices under the laws of any jurisdiction.
 
(g) Neither this Agreement nor the transactions contemplated by this Agreement,
will result in (i) either Parent or the Surviving Corporation granting to any
third party any right to or with respect to any Intellectual Property right
owned by, or licensed to, either of them, (ii) either Parent’s or the Surviving
Corporation’s being bound by, or subject to, any non-compete or other
restriction on the operation or scope of their respective businesses, or
(iii) either Parent’s or the Surviving Corporation’s being obligated to pay any
royalties or other amounts to any third party in excess of those payable by
Parent or the Surviving Corporation, respectively, prior to the Closing.
 
SECTION 3.08 Financial Statements and Condition
 
(a) Company has prepared (i) the balance sheets of Company as of the end of the
fiscal year ending on December 31, 2005 and the statements of income, equity and
changes in financial position for fiscal year, compiled by Davie, Kaplan,
Chapman & Braverman, PC, (ii) the balance sheet of Company as of the end of the
fiscal year ending on December 31, 2006 and the statements of income, equity and
changes in financial position for such fiscal year, audited by Rotenberg & Co.,
(iii) the balance sheet of Company as of October 31, 2007 and the statements of
income, equity and changes in financial position for the period of the fiscal
year then ended, reviewed by Davie, Kaplan, Chapman & Braverman, PC, (iv) the
balance sheet of Company as of the end of the fiscal year ending on December 31,
2007 and the statements of income, equity and changes in financial position for
such fiscal year, audited by Rotenberg & Co., accompanied by the related report
of Rotenberg & Co. dated April 18, 2008 ("Rotenberg Management Letter"), (iii)
the unaudited balance sheet of the Company as of March 31, 2008, and the
unaudited statements of income, Company’s equity and changes in financial
position for the three-month period ended March 31, 2008 (collectively, the
“Company Financial Statements”). A true and complete copy of Company Financial
Statement has been delivered to Parent and is attached as Schedule 3.08.
 
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(b) Company Financial Statements, including, without limitation, the notes
thereto, (i) have been prepared in accordance with the books and records of
Company and (ii) present fairly the financial position of Company and its
results of operations and cash flows in accordance with GAAP applied on a basis
consistent with prior accounting periods, subject in the case of unaudited
statements, to normal year-end adjustments.
 
(c) Company does not expect any year-end audit adjustments for the current
fiscal year ending December 31, 2008. To the knowledge of Company, there are no
anticipated material charges or write-offs of a non-recurring nature for the
fiscal year ending December 31, 2008.
 
(d) Except as set forth in the Rotenberg Management Letter, Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
 
(e) Schedule 3.08 lists all of the changes in the methods of accounting or
accounting practices or policies of Company since its inception.
 
SECTION 3.09 Absence of Certain Developments
 
Since December 31, 2007:
 
(a) the business of Company has been conducted in all material respects only in
the Ordinary Course of Business;
 
(b) Company has not become liable in respect of any guarantee nor has it
incurred or otherwise become liable in respect of any debt, except for
borrowings, letters of credit and bankers’ acceptances in the Ordinary Course of
Business under credit facilities in existence on December 31, 2007;
 
(c) Company has not mortgaged, pledged or subjected to any lien any of its
property, business or assets, except for purchase money or similar security
interests granted in connection with the purchase of equipment or supplies in
the Ordinary Course of Business in an amount not exceeding $10,000 in the
aggregate;
 
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(d) Company has not made any declaration, setting aside or payment of any
dividend or other distribution with respect to, or repurchase of, any of its
capital stock or other equity interests;
 
(e) Company has not (i) acquired or leased from any other Person any material
assets, or sold or leased to any other Person or otherwise disposed of any
material assets (in each case except for assets acquired or sold in the Ordinary
Course of Business in connection with goods and services provided to customers);
(ii) entered into any contractual obligation relating to (A) the purchase or
sale of any capital stock, partnership interest or other equity interest in any
Person, (B) the purchase of assets constituting a business or (C) any merger,
consolidation or other business combination; (iii) entered into or amended any
lease of real property or material personal property (whether as lessor or
lessee); (iv) canceled or compromised any debt or claim other than accounts
receivable in the Ordinary Course of Business; (v) sold, transferred, licensed
or otherwise disposed of any material intangible assets other than in the
Ordinary Course of Business; (vi) waived or released any right of substantial
value; (vii) instituted, settled or agreed to settle any material action; or
(viii) entered into or consummated any transaction with any Affiliate;
 
(f) there has been no loss, destruction or damage to any material item of
property of Company, whether or not insured, which has had or could reasonably
be expected to have a Company Material Adverse Effect;
 
(g) other than in the Ordinary Course of Business and consistent with past
practices, Company has not made any changes in the rate of compensation payable
or paid, or agreed or orally promised to pay, conditionally or otherwise, any
extra compensation, or severance or vacation pay, to any director, officer,
employee, consultant or agent of Company;
 
(h) there has been no material labor trouble (including any work slowdown,
stoppage or strike) involving Company or any material change in any of its
personnel or the terms and conditions of the employment of such personnel;
 
(i) Company has not made any change in (x) its methods of accounting or
accounting practices, except as required by GAAP, or (y) its pricing policies or
payment or credit practices or failed to pay any creditor any amount owed to
such creditor when due or granted any extensions or credit other than in the
Ordinary Course of Business;
 
(j) Company has not made any loan, advance or capital contributions to, or any
other investment in, any Person;
 
(k) Company has not adopted or increased any benefits under any Plan in any
material manner;
 
(l) Company has not written up or written down any of its material Assets;
 
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(m) Company has not terminated or amended, or failed in any material respect to
perform obligations or suffered the occurrence of any default under any material
contractual obligation; and
 
(n) Company has not entered into any contractual obligation to do any of the
things referred to elsewhere in this Section 3.09.
 
SECTION 3.10 Absence of Undisclosed Liabilities
 
There are no material liabilities or obligations (whether absolute or
contingent, matured or unmatured, known or unknown) of Company, including but
not limited to liabilities for Taxes and that are not reflected, or reserved
against, in the audited balance sheet of Company as of December 31, 2007, except
for those that may have been incurred after December 31, 2007 in the Ordinary
Course of Business or that are not material in amount either individually or
collectively. Since December 31, 2007, Company has not incurred any material
liabilities or obligations (whether absolute or contingent, matured or
unmatured, known or unknown) other than in the Ordinary Course of Business. All
bonuses and incentive compensation (including, without limitation, all
compensation-related expenses) have been accrued on Company Financial Statements
based on GAAP and consistent with past practices.
 
SECTION 3.11 Litigation; Disputes
 
(a) Company has not received notice of, and there is no pending, or, to the
knowledge of Company or the Company Shareholders, threatened, action, suit,
claim, arbitration, proceeding or investigation against, affecting or involving
Company or its business or Assets, or the transactions contemplated by this
Agreement, at law or in equity, or before or by any domestic or foreign court,
arbitrator or Governmental Entity. Company is not (i) operating under or subject
to any order, award, writ, injunction, decree or judgment of any court,
arbitrator or Governmental Entity or (ii) in default with respect to any order,
award, writ, injunction, decree or judgment of any court, arbitrator or
Governmental Entity.
 
(b) Company has complied and is in compliance in all material respects with all
Laws, awards, orders, judgments, decrees and injunctions applicable to Company
and its business or Assets, including all federal, state and local Laws and
orders pertaining to employment or labor, safety, health, zoning and other
matters. Company has obtained and holds all permits, licenses and approvals
(none of which has been materially modified or rescinded and all of which are in
full force and effect) from all government authorities necessary in order to
own, use and maintain its Assets and to conduct its business as presently
conducted. None of such permits, licenses or approvals will be terminated or
modified as a result of the consummation of the merger.
 
SECTION 3.12 Real Property
 
(a) Schedule 3.12 lists each real property lease under which Company is the
lessee or lessor. Company is the owner and holder of the leasehold estates
purported to be granted to it by the leases listed in Schedule 3.12. Each such
lease is in full force and effect and, to the knowledge of Company, constitutes
a legal, valid and binding obligation of, and is legally enforceable in all
material respects against, the respective parties thereto. Company has in all
material respects performed all material obligations thereunder required to be
performed by any of them to date. To the knowledge of Company and the Company
Shareholders, no party is in default in any material respect under any of the
foregoing, and there has not occurred any event which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute such a material default.
 
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(b) Company does not own or hold interests (other than leasehold interests) in
any Real Property.
 
SECTION 3.13 Other Agreements; No Default
 
Schedules 3.12 and 3.13 list each Agreement to which Company is a party or by
which Company, or any of its Assets, is bound, and which (i) involves
expenditures or receipts by Company (other than contracts, commitments or
Agreements which do not require payments or yield receipts of more than $10,000
in any twelve (12) month period or more than $25,000 in the aggregate); or (ii)
contain covenants that limit the freedom of Company to engage in a line of
business or to compete with any third party (Agreements listed pursuant to
clauses (i) and (ii) above, collectively the “Company Contracts”). Each Company
Contract is in full force and effect, constitutes a valid and binding obligation
of and is legally enforceable in accordance with its terms against Company and,
to the knowledge of Company and the Company Shareholders, all Company Contracts
are valid, binding and enforceable obligations of the other parties thereto,
except as such enforceability may be subject to the effects of any applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar Laws affecting creditors’ rights generally or subject to the effects of
general equitable principles (whether considered in a proceeding in equity or at
law). Company has complied with all of the provisions of such Company Contracts
and is not in default thereunder, and there has not occurred any event which
(whether with or without notice, lapse of time, or the happening or occurrence
of any other event) would constitute such a default, and the execution of this
Agreement by Company and its performance hereunder will not cause, or result in,
a breach or default under any Company Contract. There has not been (A) any
failure by Company or, to the knowledge of Company and the Company Shareholders,
any other party to any such Company Contract to comply with all material
provisions thereof, (B) any default by Company or, to the knowledge of Company
and the Company Shareholders, any other party thereunder, or (C) to the
knowledge of Company and the Company Shareholders (X) any threatened
cancellation thereof or (Y) any outstanding dispute thereunder. Company is not a
guarantor or otherwise liable for any liability or obligation (including
indebtedness) of any other Person.
 
SECTION 3.14 Labor Relations
 
There are no collective bargaining or other labor union Agreements to which
Company is a party. There are, and for the past two (2) years have been, no
strikes, work stoppages, union organization efforts or lawsuits (other than
grievance proceedings) pending or, to the knowledge of Company and the Company
Shareholders, threatened or reasonably anticipated between Company and (a) any
current or former employees of Company or (b) any union or other collective
bargaining unit representing such employees. There is no unfair labor practice
charge or complaint, or other proceeding, against the Company pending, or to the
knowledge of the Company and the Company Shareholders, threatened before the
National Labor Relations Board or any similar state or foreign agency. Company
has complied and is in compliance with all Laws relating to employment, labor,
or the workplace, including, without limitation, Laws relating to wages, hours,
collective bargaining, safety and health, work authorization, equal employment
opportunity, immigration, withholding, unemployment compensation, worker’s
compensation, employee privacy and right to know, except where the failure so to
comply would not have a Company Material Adverse Effect. Company has not
incurred any liability under, and has complied in all respects with, the Worker
Adjustment Retraining Notification Act and the regulations promulgated
thereunder and does not reasonably expect to incur any such liability as a
result of actions taken or not taken prior to the consummation of the
transactions contemplated hereunder.
 
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SECTION 3.15 Pension and Benefit Plans
 
(a) Company has delivered to Parent prior to the execution of this Agreement
true and complete copies of the plan documents, summary plan descriptions,
summaries of material modification, all related trust agreements, insurance
contracts, or other funding arrangements, all related service provider
agreements, annual financial or actuarial valuation reports, the three most
recent Forms 5500 or 5500C/R (with accompanying schedules), registration
statements, and prospectuses for all pension, retirement, profit-sharing,
deferred compensation, stock option (including accompanying form agreements),
employee stock ownership, severance pay, vacation, bonus or other incentive
plans, employment or change in control agreements, medical, vision, dental or
other health plans, life insurance plans and other employee benefit plans or
fringe benefit plans, programs, arrangements or Agreements, including, without
limitation, all Company Benefit Plans. No Company Benefit Plan is or has been a
multiemployer plan within the meaning of Section 3(37) of ERISA or has any
withdrawal liability pursuant to ERISA Sections 4201 through 4225 with respect
to any such multiemployer plan. Company has set forth in Schedule 3.15 (i) a
list of all of Company Benefit Plans, (ii) a list of Company Benefit Plans that
are Company Pension Plans, (iii) a list of Company Benefit Plans that are
Company Stock Plans, and (iv) a list of the number of shares covered by,
exercise prices for, and holders of, all stock options granted and available for
grant under Company Stock Plans.
 
(b) From their inception, all Company Benefit Plans have been and are in
material compliance (in form and in operation) with the applicable terms of
ERISA and the Code and any other applicable Laws, including the terms of such
plans. All required reports, returns, and descriptions (including annual reports
(Forms 5500), summary annual reports, and summary plan descriptions have been
timely filed and/or distributed in accordance with the applicable requirements
of ERISA and the Code with respect to each Company Benefit Plan.
 
(c) All liabilities (contingent or otherwise) under any Company Benefit Plan are
fully accrued or reserved against in Company Financial Statement in accordance
with GAAP. Each Company Pension Plan that is subject to Title IV of ERISA or
Section 412 of the Code satisfies the minimum funding standards (without regard
to any waiver) provided for in Section 412 of the Code.
 
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(d) Company has no obligations for retiree health or other welfare benefits
under any Company Benefit Plan or otherwise (other than continuation coverage to
the extent required by Law), and there are no restrictions on the rights of
Company to unilaterally amend or terminate any such Company Benefit Plan at any
time without incurring any material liability thereunder.
 
(e) Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, golden parachute or otherwise) becoming due to
any person under any Company Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any Company Benefit Plan or (iii) result in any
acceleration of the time of payment or vesting of any such benefits. No Company
Benefit Plan, individually or collectively, provides for any payment by Company
any employee or independent contractor that is not deductible under Section
162(a)(1) or 404 of the Code or that is an "excess parachute payment" pursuant
to Section 280G of the Code.
 
(f) Each Company Benefit Plan which is intended to be qualified under Section
401(a) of the Code and exempt from taxation under Section 501(a) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and so exempt, the Company has delivered to Parent true and complete copies of
all such determination letters, and no fact or event has occurred that could
adversely affect such qualified or exempt status.
 
(g) No Company Benefit Plan is a Voluntary Employees’ Beneficiary Association
(“VEBA”) within the meaning of Section 501(c)(9) of the Code.
 
(h) Company has made or reserved all contributions (including employer
contributions and employee salary reduction contributions) and other payments
and paid all premiums required to be made or paid for each Company Benefit Plan
within the time periods prescribed by ERISA.
 
(i) Company is not now or has ever been a “substantial employer” as defined in
Section 4001(a)(2) of ERISA and no Company Benefit Plan has subjected or does
subject the Company to any liability under ERISA Sections 4063 or 4064.
 
(j)   There have been no “prohibited transactions” (as such term is defined in
ERISA Section 406 and Code Section 4975) with respect to any Company Benefit
Plan. No fiduciary of any Company Benefit Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
which shall subject Company, directly or indirectly, to any penalty or liability
for breach of fiduciary duty.
 
(k) No Company Benefit Plan has experienced a "reportable event" (as such term
is defined in Section 4043(b) of ERISA) that is not subject to an administrative
or statutory waiver from the reporting requirement.
 
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SECTION 3.16 Taxes and Tax Matters
 
(a) Company has paid all Taxes due and payable by it for or with respect to all
periods up to and including the date hereof (without regard to whether or not
such Taxes are or were disputed), whether or not shown on any Tax Return.
 
(b) Company has filed on a timely basis all Company Tax Returns that it was
required to file. All such Company Tax Returns were accurate and complete in all
material respects. Company is not the beneficiary of any extension of time
within which to file any Tax Return. No claim has ever been made by an authority
in a jurisdiction where Company does not file Company Tax Returns that any one
of them is or may be subject to taxation by that jurisdiction. Company has not
given any currently effective waiver of any statute of limitations in respect of
Taxes or agreed to any currently effective extension of time with respect to a
Tax assessment or deficiency. There are no security interests on any of the
assets of Company that arose in connection with any failure (or alleged failure)
to pay any Tax.
 
(c) Company has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party.
 
(d) Company and the Company Shareholders have no knowledge of any facts or
circumstances which could give rise to a reasonable expectation that any
authority may assess any additional Taxes for any period for which Company Tax
Returns have been filed. There is no dispute or claim concerning any liability
for taxes of Company either (i) claimed or raised by any authority in writing or
(ii) as to which Company or any Company Shareholders has knowledge based upon
personal contact with any agent of such authority. Company has delivered to
Parent copies of, and Schedule 3.16 sets forth a complete and accurate list of,
Company Tax Returns filed with respect to the taxable periods of Company ended
on or after December 31, 2005; indicates those Company Tax Returns that have
been audited; and indicates those Company Tax Returns that currently are the
subject of an audit.
 
(e) Except as set forth on Schedule 3.16(e), the unpaid Taxes of Company (i) did
not, as of the date of any financial statements of Company furnished to Parent
pursuant to Section 3.08, exceed the reserve for any Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the such financial statements
(rather than in any notes thereto) and (ii) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of Company in filing their Company Tax Returns.
 
(f) Company has not filed a consent under Section 341(f) of the Code, concerning
collapsible corporations. Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. Except
as set forth on Schedule 3.16(e), the Company has disclosed on its federal
income Company Tax Returns all positions taken therein that could reasonably be
expected to give rise to a substantial understatement of federal income Tax
within the meaning of Section 6662 of the Code. Company is not a party to any
Tax allocation or sharing agreement. Company (A)  has not been a member of an
“affiliated group,” as defined in Section 1504(a) of the Code, filing a
consolidated federal income Tax Return (other than a group the common parent of
which was Company) and (B) does not have any Liability for the Taxes of any
Person (other than any of Company) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract or otherwise.
 
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(g) Schedule 3.16 sets forth the following information with respect to Company
as of the date hereof: (i) the tax basis of Company in its assets; (ii) the
amount of any net operating loss, net capital loss, unused investment, foreign
tax or other credit, or excess charitable contribution allocable to Company; and
(iii) the amount of any deferred gain or loss allocable to Company arising out
of any “deferred intercompany transaction” as defined in Treas. Reg. Section
1.1502-13(a)(2).
 
(h) Company (and any predecessor of Company) has been a validly electing S
corporation within the meaning of Code §§ 1361 and 1362 at all times during its
existence and Company will be an S corporation up to and including the day
before the Closing Date.
 
(j) Company shall not be liable for any Tax under Code §1374 in connection with
the deemed sale of Company’s assets caused by the §338(h)(10) Election. Company
has not, in the past 10 years (A) acquired assets from another corporation in a
transaction in which Company’s Tax basis for the acquired assets was determined,
in whole or in part, by reference to the Tax basis of the acquired assets (or
any other property) in the hands of the transferor or (B) acquired the stock of
any corporation which is a qualified subchapter S subsidiary.
 
SECTION 3.17 Insurance
 
Schedule 3.17 lists all policies of title, asset, fire, hazard, casualty,
liability, life, worker’s compensation and other forms of insurance of any kind
owned or held by Company. All such policies: (a) are with insurance companies
reasonably believed by Company to be financially sound and reputable; (b) are in
full force and effect; (c) are sufficient for compliance by Company with all
requirements of Law and of all Agreements to which Company is a party; (d) are
valid and outstanding policies enforceable against the insurer; (e) insure
against risks of the kind customarily insured against and in amounts customarily
carried by companies similarly situated and by companies engaged in similar
businesses and owning similar Assets; and (f) have the policy expiration dates
set forth in Schedule 3.17.
 
SECTION 3.18 Arrangements With Related Parties
 
No present or former officer, director, shareholder or Person known by Company
or any Company Shareholder to be an Affiliate of Company, nor any Person known
by them to be an Affiliate of such Person, is currently a party to any
transaction or agreement with Company, including any agreement providing for any
loans, advances, the employment of, furnishing of services by, rental of its
Assets from or to, or otherwise requiring payments to, any such officer,
director, shareholder or Affiliate; provided, however that Michael Brudek and
Nicholas Vaseliv, who are Company Shareholders, are employees of the Company.
 
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SECTION 3.19 Books and Records
 
Except as set forth in the Rotenberg Management Letter, the books of account,
stock records, minute books and other corporate and financial records of Company
are complete and correct and have been maintained in accordance with reasonable
business practices for companies similar to Company, and Company will have prior
to Closing prepared and made available to Parent the minutes for all meetings,
and all written consents in lieu of such meetings, of the Board of Directors
and/or shareholders of Company held as of the date thereof.
 
SECTION 3.20 Assets
 
Company has good, valid and marketable title to all Assets owned by it,
including, without limitation, all material Assets reflected in Company
Financial Statement and all Assets acquired by Company since December 31, 2007
(except for Assets reflected in Company Financial Statement or acquired since
such date which have been sold or otherwise disposed of in the Ordinary Course
of Business), free and clear of all Encumbrances other than Permitted
Encumbrances. All personal property of Company is in operating condition and
repair and is suitable and adequate for the uses for which it is intended or is
being used. All Inventory of Company (i) consists of items which are good and
merchantable and of a quality and quantity presently usable and salable in the
Ordinary Course of Business within one (1) year from the Closing Date; and (ii)
has been reflected in Company Financial Statement in accordance with GAAP.
 
SECTION 3.21 Board Recommendation; Shareholder Approval
 
The Board of Directors of Company has unanimously adopted, in compliance with
the NYBCL, a resolution advising, authorizing, approving and adopting this
Agreement and the transactions contemplated hereby, and recommending approval
and adoption of this Agreement and the transactions contemplated hereby by
Company Shareholders. Company Shareholders have unanimously adopted by written
consent, in compliance with the NYBCL, a resolution authorizing, approving and
adopting this Agreement and the transactions contemplated hereby.
 
SECTION 3.22 Directors and Officers
 
Schedule 3.22 lists all current directors and officers of Company, showing each
such person’s name, positions, and annual remuneration, bonuses and fringe
benefits paid by Company for the current fiscal year and the most recently
completed fiscal year.
 
SECTION 3.23 State Takeover Statutes
 
No state takeover statute or similar statute or regulation of the State of New
York (and, to the knowledge of Company and the Company Shareholders after due
inquiry, of any other state or jurisdiction) applies or purports to apply to
this Agreement or the transactions contemplated hereby and no provision of the
certificate of incorporation, bylaws or other governing instruments of Company
or the terms of any rights plan or agreement of Company would, directly or
indirectly, restrict or impair the ability of Parent to vote, or otherwise to
exercise the rights of a shareholder with respect to, securities of Company that
may be acquired or controlled by Parent or permit any shareholder to acquire
securities of Company or of Parent or any of its Subsidiaries on a basis not
available to Parent in the event that Parent were to acquire securities of
Company
 
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SECTION 3.24 Environmental Matters
 
Company is in material compliance with all Environmental Laws. Company has no
material liability under any Environmental Law and to its Knowledge the Company
is not responsible for any liability of any other person under any Environmental
Law. There are no pending or, to the knowledge of Company and the Company
Shareholders, threatened actions, suits, claims, legal proceedings or other
proceedings based on, and Company has not directly or indirectly received any
notice of any complaint, order, directive, citation, notice of responsibility,
notice of potential responsibility, or information request from any Governmental
Entity or any other person arising out of or attributable to: (i) the current or
past presence at any part of the real property owned or leased by Company (the
“Real Property”) of Hazardous Materials or any substances that pose a hazard to
human health or an impediment to working conditions; (ii) the current or past
release or threatened release into the environment from the Real Property
(including, without limitation, into any storm drain, sewer, septic system or
publicly owned treatment works) of any Hazardous Materials or any substances
that pose a hazard to human health or an impediment to working conditions;
(iii) the off-site disposal of Hazardous Materials originating on or from the
Real Property; or (iv) any violation of Environmental Laws at any part of the
Real Property or otherwise arising from Company’s activities involving Hazardous
Materials.
 
SECTION 3.25 Government Contracts and Other Commitments
 
The Company has no contracts or subcontracts (at any tier) under prime contracts
with Governmental Entities, None of the Company’s Business activities require
that it or any of its employees obtain a security clearance from .any
Governmental Entity.
 
SECTION 3.26 Relations with Governments
 
Neither Company, nor to the knowledge of Company and the Company Shareholders,
any of Company’s officers, directors, employees or agents (or shareholders,
distributors, representatives or other persons acting on the express, implied or
apparent authority of Company) have paid, given or received or have offered or
promised to pay, give or receive, any bribe or other unlawful payment of money
or other thing of value, any unlawful discount, or any other unlawful
inducement, to or from any person or Governmental Entity in the United States or
elsewhere in connection with or in furtherance of the business of Company
(including, without limitation, any offer, payment or promise to pay money or
other thing of value (a) to any foreign official, political party (or official
thereof) or candidate for political office for the purposes of influencing any
act, decision or omission in order to assist Company in obtaining business for
or with, or directing business to, any person, or (b) to any person, while
knowing that all or a portion of such money or other thing of value will be
offered, given or promised to any such official or party for such purposes). The
business of Company is not in any manner dependent upon the making or receipt of
such payments, discounts or other inducements. Company has not otherwise taken
any action that would cause Company to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any applicable Laws of similar effect.
 
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SECTION 3.27 Broker’s Fees
 
Company has no any liability or obligation to pay any fees or commissions to any
broker, finder, or similar agent with respect to the transactions contemplated
by this Agreement.
 
SECTION 3.28 Product Warranties
 
All products and services provided by Company are sold, licensed or otherwise
provided pursuant to the terms contained in the form of Quotation set forth on
Schedule 3.28. The name of any person or firm to which any additional or
different terms have been provided, together with a copy of such terms, are set
forth on Schedule 3.28.
 
SECTION 3.29 Investment Representations
 
(a)  Each Company Shareholder is an “accredited investor” within the meaning of
Rule 501 promulgated under the Securities Act. By reason of such Company
Shareholder’s business and financial experience, and the business and financial
experience of those persons retained by such Company Shareholder to advise such
Company Shareholder with respect to such Company Shareholder’s investment in the
shares of Parent Common Stock to be received by such Company Shareholder in the
Merger, such Company Shareholder, together with such advisors, has such
knowledge, sophistication and experience in business and financial matters as to
be capable of evaluating the merits and risks of the prospective investment, and
is able to bear the economic risk of such investment and is able to afford a
complete loss of such investment. Such Company Shareholder acknowledges that
such Company Shareholder has been granted the opportunity to ask questions of,
and receive answers from, representatives of Parent concerning Parent and the
Parent Common Stock that such Company Shareholder is receiving in the Merger and
to obtain any additional information that such Company Shareholder deems
necessary to verify the accuracy of the answers such Company Shareholder
received from such representatives.
 
(b) Each Company Shareholder acknowledges that the shares of Parent Common Stock
to be received in the Merger have not been registered under the Act. Such
Company Shareholder is familiar with the provisions of Rule 144 and understands
that in the event all of the applicable requirements of Rule 144 are not
satisfied, registration under the Act or some other exemption from the
registration requirements of the Act will be required in order to dispose of the
Parent Common Stock to be received in the Merger, and that such Company
Shareholder may be required to hold such shares of Parent Common Stock for a
significant period of time prior to reselling them.
 
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(c) Each Company Shareholder is acquiring the shares of Parent Common Stock to
be received in the Merger for such Company Shareholder’s own account and not
with a view to distribution in violation of any securities laws. Such Company
Shareholder has no present intention to sell such Parent Common Stock in
violation of federal or state securities laws and such Company Shareholder has
no present arrangement (whether or not legally binding) to sell such shares of
Parent Common Stock to or through any person or entity; provided, however, that
by making the representations herein, such Company Shareholder does not agree to
hold such shares of Parent Common Stock for any minimum or other specific term
and reserves the right to dispose of such shares of Parent Common Stock at any
time in accordance with federal and state securities laws applicable to such
disposition.
 
(d) Each Company Shareholder acknowledges and understands that the terms of
issuance have not been reviewed by the SEC or by any state securities
authorities and that the shares of Parent Common Stock to be issued in the
Merger will be issued in reliance on the certain exemptions for non-public
offerings under the Act, which exemptions depend upon, among other things, the
representations made and information furnished by such Investor, including the
bona fide nature of such Investor’s investment intent as expressed above.
 
(e) Each Company Shareholder understands that the shares of Parent Common Stock
to be issued in the Merger will be offered and sold in reliance on a
transactional exemptions from the registration requirements of federal and state
securities laws and Parent is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings of
such Company Shareholder set forth herein in order to determine the
applicability of such exemptions and the suitability of such Investor to acquire
the shares of Parent Common Stock to be issued in the Merger.
 
SECTION 3.30 Disclosure
 
Neither this Agreement nor any written statement, report or other document
furnished or to be furnished by Company or Company Shareholders pursuant to this
Agreement or in connection with the transactions contemplated hereby contains,
or will contain, any statement which is false or misleading with respect to any
material fact or omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not
false or misleading. There is no fact known to Company or Company Shareholders
which has not been disclosed to Parent in this Agreement or the Schedules hereto
that could reasonably be expected to have a Company Material Adverse Effect.  
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUB
 
SECTION 4.01 Organization and Qualification
 
Parent is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Delaware, and has the full and unrestricted
corporate power and authority to own, operate and lease its Assets, to carry on
its business as currently conducted, to execute and deliver this Agreement and
to carry out the transactions contemplated hereby. Merger Sub is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New York, and has full and unrestricted corporate power and authority
to own, operate and lease its Assets, to carry on its business as currently
conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. Each of Parent and Merger Sub is duly
qualified to conduct business as a foreign corporation and is in good standing
in the states, countries and territories in which the nature of the business
conducted by it or the character of the Assets owned, leased or otherwise held
by it makes such qualification necessary, except where the failure to be so
qualified would not have a Parent Material Adverse Effect.
 
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SECTION 4.02 Authority; Binding Obligation
 
Each of Parent and Merger Sub has the full and unrestricted corporate power and
authority to execute and deliver this Agreement and to carry out the
transactions contemplated hereby. The execution and delivery by Parent and
Merger Sub of this Agreement and all other Agreements, documents, certificates
or other instruments contemplated hereby, and the consummation by Parent and
Merger Sub of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Merger Sub are necessary to authorize this Agreement
and the other Agreements, documents, certificates or other instruments
contemplated hereby, or to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly executed and delivered by Parent and
Merger Sub and constitutes a legal, valid and binding obligation of Parent and
Merger Sub, enforceable in accordance with its terms, except as such
enforceability may be subject to the effect of any applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws
affecting creditors’ rights generally and subject to the effect of general
equitable principles (whether considered in a proceeding in equity or at law).
 
SECTION 4.03 No Conflict; Required Filings and Consents
 
(a) The execution, delivery and performance by Parent and Merger Sub of this
Agreement and all other Agreements, documents, certificates or other instruments
contemplated hereby, the fulfillment of and compliance with the respective terms
and provisions hereof and thereof, and the consummation by Parent and Merger Sub
of the transactions contemplated hereby and thereby, do not and will not:
(i) conflict with, or violate any provision of, the certificate of incorporation
or the bylaws of Parent, or the certificate of incorporation or the bylaws of
Merger Sub; (ii) subject to the filing and recordation of the Certificate of
Merger as required by the NYBCL, conflict with or violate any Law applicable to
Parent or Merger Sub or any of their respective Assets; (iii) conflict with,
result in any breach of, constitute a default (or an event that with notice or
lapse of time or both would become a default) under any Agreement to which
Parent or Merger Sub is a party or by which Parent or Merger Sub or any of their
respective Assets may be bound; or (iv) result in or require the creation or
imposition of, or result in the acceleration of, any indebtedness or any
Encumbrance of any nature upon, or with respect to, Parent or Merger Sub; except
for any such conflict or violation described in clause (ii) above, any such
conflict, breach or default described in clause (iii) above, or any such
creation, imposition or acceleration described in clause (iv) above that would
not have a Parent Material Adverse Effect and that would not prevent Parent or
Merger Sub from consummating the Merger on a timely basis.
 
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(b) The execution, delivery and performance by Parent and Merger Sub of this
Agreement and all other Agreements, documents, certificates or other instruments
contemplated hereby, the fulfillment of and compliance with the respective terms
and provisions hereof and thereof, and the consummation by Parent and Merger Sub
of the transactions contemplated hereby and thereby, do not and will not:
(i) require any consent, approval, authorization or permit of, or filing with or
notification to, any Person not party to this Agreement, except (A) the filing
and recordation of the Certificate of Merger as required by the NYBCL; and (B)
where the failure to obtain any consent, approval, authorization or permit or to
make any filing or notification otherwise required to be disclosed hereunder
would not have a Parent Material Adverse Effect; or (ii) result in or give rise
to any penalty, forfeiture, Agreement termination, right of termination,
amendment or cancellation, or restriction on business operations of Parent or
Surviving Corporation that would have a Parent Material Adverse Effect.
 
(c) Subject to the filing and recordation of the Certificate of Merger as
required by the NYBCL, all returns, reports, statements and other documents
required to be filed by Parent and Merger Sub with any Governmental Entity with
respect to this agreement and the transaction contemplated hereby have been or
will be filed in a timely manner and are or will be, as the case may be, true,
correct and complete in all material respects (and any related fees required to
be paid have been paid or will be in full). All material records of every type
and nature relating to the business, operations or assets of Parent and Merger
Sub have been maintained in all material respects in accordance with good
business practices and are maintained at Parent.
 
(d) No Governmental Entity or any other Person has notified Parent or Merger Sub
that such Governmental Entity or other Person intends to object to the
transactions contemplated hereunder which shall include for this purpose any
objection to the operations of the business of Company as part of Parent.
Neither Parent nor Merger Sub are aware of any fact or circumstance related to
them with respect to this Agreement and the transactions contemplated hereby
that would reasonably be expected to (i) cause the filing of any objection to
any application for any Governmental consent required hereunder, (ii) lead to
any delay in processing such application or (iii) require any waiver of any
Governmental rule, policy or other applicable law.
 
SECTION 4.04 No Prior Activities of Merger Sub
 
Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
 
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SECTION 4.05 SEC Filings; Financial Statements
 
(a) All statements, reports, schedules, forms and other documents required to
have been filed by Parent with the SEC since December 31, 2006 (the “Parent SEC
Documents”) have been so filed. As of their respective dates (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such amendment or superseding filing): (i) each of the Parent SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii) none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
 
(b) The financial statements (including any related notes) contained in the
Parent SEC Documents (the “Parent Financial Statements”): (i) complied as to
form in all material respects with the published rules and regulations of the
SEC applicable thereto; (ii) were prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements or, in the case of unaudited statements,
as permitted by Form 10-Q of the SEC, and except that the unaudited financial
statements may not have contained footnotes and were subject to normal and
recurring year-end adjustments which were not, or are not reasonably expected to
be, individually or in the aggregate, material in amount), and (iii) fairly
presented in all material respects the consolidated financial position of Parent
and its consolidated subsidiaries as of the respective dates thereof and the
consolidated results of operations and cash flows of Parent and its consolidated
subsidiaries for the periods covered thereby.
 
SECTION 4.06 Brokers
 
Except for any investment banking firm engaged by Parent to deliver a fairness
opinion as contemplated by Section 7.02, no broker, finder or investment banker
is entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent.
 
ARTICLE V
 
PRE-CLOSING COVENANTS
 
SECTION 5.01 Conduct of Business of Company Until Effective Time
 
Company and the Company Shareholders hereby covenant and agree that, from the
date of this Agreement until the Effective Time, Company, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Parent,
will carry on its businesses only in the Ordinary Course of Business, use its
best efforts to preserve intact its business organizations and Assets, maintain
its rights and franchises, retain the services of its officers and employees and
maintain its relationships with customers, suppliers, licensors, licensees and
others having business dealings with it, and use its best efforts to keep in
full force and effect liability insurance and bonds comparable in amount and
scope of coverage to that currently maintained. Without limiting the generality
of the foregoing, Company will not:
 
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(a) (i) increase in any manner the compensation or fringe benefits of, or pay
any bonus to, any director, officer or employee; (ii) grant any severance or
termination pay (other than pursuant to the normal severance practices or
existing agreements of Company in effect on the date of this Agreement) to, or
enter into any severance agreement with, any director, officer or employee, or
enter into any employment agreement with any director, officer or employee or
otherwise without the prior written consent of Parent; (iii) establish, adopt,
enter into or amend any Company Benefit Plan or other arrangement, except as may
be required to comply with applicable Law; (iv) pay any benefit not provided for
under any Company Benefit Plan or other arrangement; (v) grant any awards under
any bonus, incentive, performance or other compensation plan or arrangement or
Company Benefit Plan or other arrangement (including the grant of stock options,
stock appreciation rights, stock-based or stock-related awards, performance
units or restricted stock, or the removal of existing restrictions in any
Company Benefit Plan or other arrangement or agreement or awards made
thereunder), (vi) take any action to fund or in any other way secure the payment
of compensation or benefits under any agreement or (vii) promote or fire any
director, officer or employee;
 
(b) declare, set aside or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
 
(c) (i) redeem, purchase or otherwise acquire any shares of capital stock of
Company or any securities or obligations convertible into or exchangeable for
any shares of capital stock of Company, or any options, warrants or conversion
or other rights to acquire any shares of capital stock of Company or any such
securities or obligations, or any other securities thereof; (ii) effect any
reorganization, recapitalization, merger or share exchange; or (iii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock;
 
(d) issue, deliver, award, grant or sell, or authorize the issuance, delivery,
award, grant or sale (including the grant of any limitations in voting rights or
other Encumbrances) of, any shares of any class of its capital stock (including
shares held in treasury but excluding shares issuable upon the exercise of
options outstanding on the date hereof in accordance with their terms as of the
date hereof), any securities convertible into or exercisable or exchangeable for
any such shares, or any rights, warrants or options to acquire, any such shares,
or amend or otherwise modify the terms of any such rights, warrants or options
the effect of which shall be to make such terms more favorable to the holders
thereof;
 
(e) acquire or agree to acquire, by merging or consolidating with, by purchasing
an equity interest in or a portion of the Assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
Assets of any other person (other than the purchase of assets from suppliers or
vendors in the Ordinary Course of Business);
 
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(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise subject to
any Encumbrance or dispose of, or agree to sell, lease, exchange, mortgage,
pledge, transfer or otherwise subject to any Encumbrance or dispose of, any of
its Assets, except for sales, dispositions or transfers in the Ordinary Course
of Business;
 
(g) propose or adopt any amendments to its certificate of incorporation, bylaws
or other comparable charter or organizational documents;
 
(h) make or rescind any express or deemed election relating to Taxes, settle or
compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes which would reasonably be
expected to result in a Company Material Adverse Effect, or change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of the federal income tax returns;
 
(i) make or agree to make any new capital expenditures;
 
(j) (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of Company, guarantee any debt
securities of another person, enter into any “keep well” or other agreement to
maintain any financial statement condition of another person or enter into any
agreement having the economic effect of any of the foregoing, except for
borrowings incurred in the Ordinary Course of Business, or (ii) make any loans,
advances or capital contributions to, or investments in, any other person other
than travel and payroll advances made to employees in the Ordinary Course of
Business;
 
(k) pay, discharge, settle or satisfy any claims, liabilities or obligations
(whether absolute or contingent, matured or unmatured, known or unknown), other
than the payments, discharges or satisfactions, in the Ordinary Course of
Business which are materially in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, Company Financial
Statement or waive any material benefits of, or agree to modify in any material
respect, any confidentiality, standstill or similar agreements to which Company
is a party;
 
(l) waive, release or assign any rights or claims, or modify, amend or terminate
any agreement to which Company is a party;
 
(m) make any change in any method of accounting or accounting practice or policy
other than those required by GAAP or a Governmental Entity;
 
(n) take any action or fail to take any action that would have a Company
Material Adverse Effect prior to or after the Effective Time or a material
adverse effect after the Effective Time, or that would adversely affect the
ability of Company prior to the Effective Time, or Parent or any of its
Subsidiaries after the Effective Time, to obtain consents of third parties or
approvals of Government Entities required to consummate the transactions
contemplated in this Agreement; or
 
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(o) authorize, or commit or agree to do any of the foregoing.
 
SECTION 5.02 Efforts to Satisfy Conditions
 
Parent and Company shall use their respective reasonable efforts to cause all
conditions to the obligations of Parent and Company set forth in Article VII to
be satisfied on or before the Closing Date.
 
SECTION 5.03 Other Actions
 
Parent and Company shall not, and shall not permit any of their respective
Affiliates to, take any action that would, or that could reasonably be expected
to, result in (a) any of the representations and warranties of such Party set
forth in this Agreement becoming untrue, or (b) any of the conditions to the
Merger set forth in Article VII not being satisfied.
 
SECTION 5.04 Certain Tax Matters
 
From the date hereof until the Effective Time, Company (a) will prepare and
timely file with the relevant Taxing authority all Company Tax Returns required
to be filed during such period (“Post-Signing Returns”), which Post-Signing
Returns shall be accurate in all material respects, or permitted extensions with
respect thereto, (b) will timely pay all Taxes due and payable with respect to
such Post-Signing Returns, (c) will pay or otherwise make adequate provision for
all Taxes payable by Company for which no Post-Signing Return is due prior to
the Effective Time, and (d) will promptly notify Parent of any action, suit,
proceeding, claim or audit pending against or with respect to Company in respect
of any Taxes.
 
SECTION 5.05 Access and Information
 
For so long as this Agreement is in effect, and subject to applicable Laws,
Company shall (a) afford to Parent and its officers, employees, accountants,
consultants, legal counsel and other representatives reasonable access during
normal business hours, subject to reasonable advance notice, to all of their
respective properties, Agreements, books, records and personnel and (b) furnish
promptly to Parent (i) a copy of each Agreement, document, certificate or other
instrument filed with, or received from any Governmental Entity and (ii) all
other information concerning its respective business, operations, prospects,
conditions (financial or otherwise), Assets, liabilities and personnel as Parent
may reasonably request.
 
SECTION 5.06 Access to Company Information
 
From the date hereof and through the Closing Date, Company shall, and shall
cause its accountants, counsel, investment bankers, financial advisors,
consultants and other representatives, to provide Parent and Parent’s
accountants, counsel, investment bankers, financial advisors, consultants and
other representatives, upon reasonable notice, access to, and make available,
all books, contracts, records, reports, properties and commitments of Company,
including, without limitation, Company’s Tax Returns and financial statements,
for Parent’s use in connection with Parent’s financing.
 
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SECTION 5.7 No Solicitation.
 
From the date of this Agreement until the Effective Time or the termination of
this Agreement pursuant to the terms of this Agreement, Company and the Company
Shareholders shall not and shall not permit any of their Affiliates, directors,
officers, employees, agents or representatives, including, without limitation,
any investment banker, attorney or accountant of Company (collectively,
“Representatives”) directly or indirectly, to (i) initiate, solicit, encourage
or otherwise facilitate (including by way of furnishing information), any
inquiries or the making of any proposal or offer that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal, (ii) enter into or
maintain or continue discussions or negotiate with any Person in furtherance of
such inquiries or to obtain an Acquisition Proposal, (iii) agree to, approve,
recommend, or endorse any Acquisition Proposal, (iv) disclose any non-public
information relating to Company or afford access to the properties, books or
records of Company to any person that has made or may reasonably be expected to
make a proposal regarding a Acquisition Proposal or that has advised Company
that it is or may be interested in making a proposal regarding a Acquisition
Proposal, or (v) authorize or permit any of its or their Subsidiaries or
Representatives to take any such action and Company and Company Shareholders
shall promptly notify Parent of any such inquiries and proposals received by any
of them or their Representatives, relating to any of such matters
 
SECTION 5.8 Tax Matters
 
(a) It is intended by the parties hereto that the Merger shall constitute a
taxable transaction and shall not constitute a tax-free reorganization within
the meaning of Section 368 of the Code. Each Party hereto and each Company
Shareholder agrees not to take any position contrary to such intention with any
Government Entity, including, without limitation, on any Tax returns or other
filings.
 
(b) At Parent’s option, Company and each Company Shareholder shall join with
Parent in making an election under Code § 338(h)(10) (and any corresponding
election under state, local, and foreign tax law) with respect to the purchase
and sale of Company Common Stock pursuant to the Merger hereunder (collectively,
a “338(h)(10) Election”). Company Shareholders shall include any income, gain,
loss, deduction, or other tax items resulting from the § 338(h)(10) Election on
their Tax Returns to the extent required by applicable law. Company Shareholders
shall also pay any Tax imposed on Company attributable to the making of the
§ 338(h)(10) Election, including (i) any Tax imposed under Code § 1374, (ii) any
tax imposed under Code § 338 and the regulations thereunder, or (iii) any state,
local or foreign Tax imposed on Company’s gain, and Company Shareholders shall
indemnify Parent and the Surviving Corporation against any Loss arising out of
any failure to pay any such Taxes.
 
(c) Parent, Company and Company Shareholders agree that the Merger Consideration
and the liabilities of Company (plus other relevant items) will be allocated to
the assets of Company for all purposes (including Tax and financial accounting)
in a manner consistent with Code §§ 338 and 1060 and the regulations thereunder.
Parent, Company and Company Shareholders shall file all Tax Returns (including
amended returns and claims for refund) and information reports in a manner
consistent with such allocation.
 
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ARTICLE VI
 
ADDITIONAL AGREEMENTS
 
SECTION 6.01 Appropriate Action; Consents; Filings
 
(a) Upon the terms and subject to the conditions set forth in this Agreement,
the Parties shall use their reasonable best efforts to take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the transactions contemplated by this Agreement as promptly
as practicable, including without limitation (i) executing and delivering any
additional instruments necessary, proper or advisable to consummate the
transactions contemplated by, and to carry out fully the purposes of, this
Agreement, (ii) obtaining from any Governmental Entities any material Licenses
required to be obtained or made by Parent, or Company, in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated herein, including, without limitation, the Merger,
and (iii) making all necessary filings, and thereafter making any other required
submissions, with respect to this Agreement and the Merger required any
applicable Law; provided that Parent and Company shall cooperate with each other
in connection with the making of all such filings, including providing copies of
all such documents to the non-filing Party and its advisors prior to filing and
discussing all reasonable additions, deletions or changes suggested in
connection therewith. Company and Parent shall furnish to each other all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable Law in connection with the
transactions contemplated by this Agreement.
 
(b) (i) Except as the Parties may otherwise agree, Company, any Company
Shareholder and Parent shall each give any notices to third parties, and use
their reasonable best efforts to obtain any third-party consents, approvals or
waivers (A) necessary, proper or advisable to consummate the transactions
contemplated in this Agreement; or (B) required to prevent a Company Material
Adverse Effect or a Parent Material Adverse Effect.
 
(ii) In the event that any of Company, any Company Shareholder or Parent shall
fail to obtain any third-party consent, approval or waiver described in Section
6.01(b)(i) of this Agreement, such Party shall use its reasonable best efforts,
and shall take any such actions reasonably requested by the other Parties, to
minimize any adverse effect upon Company and Parent and their respective
businesses resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent, approval or waiver.
 
(c) From the date of this Agreement until the Effective Time, Company and Parent
shall promptly notify each other in writing of any pending or, to the knowledge
of Company, Company Shareholders or Parent, threatened action, proceeding or
investigation by any Governmental Entity or any other Person (i) challenging or
seeking damages in connection with the Merger or the conversion of Company
Common Stock into the Merger Consideration pursuant to the Merger or the
transactions contemplated hereunder or (ii) seeking to restrain or prohibit the
consummation of the Merger or the transactions contemplated hereunder or
otherwise limit the right of Parent to own or operate all or any portion of the
business or Assets of Company. Company and Parent shall cooperate with each
other in defending any such action, proceeding or investigation, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed.
 
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SECTION 6.02 Disclosure
 
Prior to the Effective Time, each Party shall notify the other Parties in
writing of (i) any representation or warranty made by it in connection with this
Agreement becoming untrue or inaccurate, (ii) the occurrence or non-occurrence
of any event, the occurrence or non-occurrence of which would be likely to cause
any condition to the obligations of any Party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied or (iii) the
failure of Company, Parent or Merger Sub, as the case may be, to comply with or
satisfy any covenant, condition or Agreement to be complied with or satisfied by
it pursuant to this Agreement which would be likely to result in any condition
to the obligations of any Party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied; provided, however, the
delivery of any notice pursuant to this Section 6.02(a) shall not cure any
breach of any representation or warranty requiring disclosure of such matter as
of the date of this Agreement or otherwise limit or affect the rights and
remedies available hereunder to the Party receiving such notice.
 
SECTION 6.03 Public Announcements
 
Parent, Merger Sub and Company shall consult with each other before issuing or
making, and shall give each other the opportunity to review and comment upon,
any press release or other public statement with respect to the Merger and the
other transactions contemplated in this Agreement, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by Law.
 
SECTION 6.04 Obligations of Merger Sub
 
Parent shall take all action necessary to cause Merger Sub to perform its
obligations under this Agreement and to consummate the Merger on the terms and
conditions set forth in this Agreement.
 
SECTION 6.05 Transaction Expenses
 
Each Party to this Agreement shall bear their own expenses in connection
herewith, including, without limitation, the fees of each Party’s respective
legal counsel, financial advisors, accountants, brokers, finders or investment
bankers, but in no event shall such fees and expenses (including, without
limitation, the fees and expenses described in Section 3.27) incurred by or on
behalf of Company. Company shall make a good faith effort to pay all of its
expenses in connection with the Agreement and the transactions contemplated
hereby prior to Closing. In the event any of the foregoing expenses are not paid
prior to Closing or have not reduced the Transaction Value, Parent shall be
entitled to offset such excess expenses against the Purchase Notes (as if such
excess expenses were a Loss).
 
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SECTION 6.06 Director Resignations
 
Company shall deliver to Parent prior to the Closing the resignation of each
director and officer of Company, effective as of the Effective Time.
 
SECTION 6.07 Tax Advance
 
Within fifteen (15) days after filing the tax return of the Company for the
period January 1, 2008 through the Effective Time, Parent shall, or shall cause
the Surviving Company to, pay to the Company Shareholders (pro rata to the
number of shares of Company Stock owned by them as of the Closing Date) and
amount equal to forty-two percent (42%) of (a) the taxable income to be
allocated to each of them on Forms K-1 to be provided to them by the Surviving
Corporation with respect to such period, less (b) Four Hundred Forty-Eight
Thousand Two Hundred Thirty-six Dollars (448,236). The amount of such payments
shall be applied against the payments next becoming due under the Purchase Notes
after the date such payments are made to the Company Shareholders.
 
ARTICLE VII
 
CONDITIONS PRECEDENT
 
SECTION 7.01 Conditions to Obligations of Each Party Under This Agreement
 
The respective obligations of each Party to effect the Merger and the other
transactions contemplated herein shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or all of which may
be waived by agreement of Parent and Company, in whole or in part, to the extent
permitted by applicable Law:
 
(a) No Order. No Governmental Entity or federal or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, judgment, injunction or
other order (whether temporary, preliminary or permanent), in any case which is
in effect and which prevents or prohibits consummation of the Merger; provided,
however, that the Parties shall use their reasonable best efforts to cause any
such decree, judgment, injunction or other order to be vacated or lifted;
provided, further, that the failure to obtain a required consent or approval of
a Governmental Entity shall not form the basis for an assertion that this
condition is not satisfied.
 
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SECTION 7.02 Additional Conditions to Obligations of Parent and Merger Sub
 
The obligations of Parent and Merger Sub to effect the Merger and the other
transactions contemplated in this Agreement are also subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived by Parent, in whole or in part, to the extent permitted by
applicable Law:
 
(a) Representations and Warranties. Each of the representations and warranties
of Company and the Company Shareholders contained in this Agreement shall be
true and correct as of the date of this Agreement and shall be true and correct
(except that where any statement in a representation or warranty expressly
includes a standard of materiality, such statement shall be true and correct in
all respects giving effect to such standard) as of the Effective Time as though
made as of the Effective Time, except for (i) representations and warranties
which address matters only as of a particular date, which representations and
warranties shall be true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects giving
effect to such standard) as of such date and (ii) changes permitted by or
consistent with this Agreement.
 
(b) Agreements and Covenants. Company shall have performed or complied in all
respects with all Agreements and covenants required by this Agreement to be
performed or complied with by Company on or prior to the Effective Time.
 
(c) Opinion of Counsel. Parent shall have received from Olver Korts LLP, counsel
to Company, an opinion dated the Closing Date, which is reasonable and customary
for transactions of the type contemplated by this Agreement.
 
(d) No Challenge. There shall not be pending any enforcement action or similar
proceeding by any state or federal Governmental Entity that is likely to have a
Company Material Adverse Effect or, if such action arises in connection with the
transactions contemplated hereby, a Parent Material Adverse Effect.
 
(e) Company Material Adverse Effect. There shall not have occurred a Company
Material Adverse Effect (or any development that, insofar as reasonably can be
foreseen, is reasonably likely to result in any Company Material Adverse
Effect).
 
(f) No Litigation. There shall be no pending or threatened suit, action,
proceeding or investigation: (i) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, (ii) relating to the Merger and seeking to obtain from Parent or
Merger Sub any damages that may be material to Parent, (iii) seeking to prohibit
or limit in any respect Parent's ability to vote, receive dividends with respect
to or otherwise exercise ownership rights with respect to the stock of the
Surviving Corporation; (iv) which would materially and adversely affect the
right of the Surviving Corporation to own the assets or operate the business of
Company; or (v) which, if adversely determined, could have a Company Material
Adverse Effect or Parent Adverse Effect.
 
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(g) Consents. Company shall have procured all consents of third-parties and
Governmental Entities specified in Schedule 3.06. Parent shall have received the
approval of its primary lender to the consummation of the Merger and the
transactions contemplated by this Agreement.
 
(h) Bank Financing. Parent shall have entered into a loan agreement with a
commercial lender reasonably acceptable to Parent including, among other things,
the agreement of such lender to provide Parent with funds sufficient to pay or
cause to be paid the Cash Purchase Price and the Company Shareholders shall have
agreed to subordinate the Purchase Notes to the obligations of the Parent to
such lender on terms and conditions satisfactory to such lender, in its sole
discretion.
 
(i) Benefit Plans Termination. Company shall have terminated each of the Benefit
Plans on terms reasonably satisfactory to Parent, shall have provided evidence
reasonably satisfactory to Parent to ensure that no employee or former employee
of Company has any right under such plans and that all Liabilities of Company
under the Benefits Plans (including any Liabilities relating to services
performed prior to the Closing) are fully extinguished at no cost, and with no
Liability, to Company except for funding of retirement plans for fiscal 2008 and
for termination or rollover payments incident to termination of the Benefit
Plans.
 
(j) Dissenting Shareholders. There shall be no Dissenting Shareholders.
 
(k) Non-competition Agreements. Each of Company Shareholders shall have executed
and delivered to Parent a non-competition agreement in the form attached hereto
as Exhibit F.
 
(l) Employment Agreements. Each of Michael Brudek and Nicholas Vaseliv shall
have executed and delivered to Parent an employment agreement in the form
attached hereto as Exhibit G.
 
(m) Lease. Parent or the Surviving Corporation (at the option of Parent) having
entered into a lease agreement for the premises in which the Company currently
conducts its business, on terms (including term and rental payments) and
conditions satisfactory to Parent.
 
(n) Due Diligence Investigation. Parent shall not have identified anything
during its continuing business and legal due diligence investigation of Company
that has or in the reasonable judgment of Parent could be expected to have a
Company Material Adverse Effect.
 
(o) Fairness Opinion. If Parent elects, it shall have received an opinion from a
reputable investment banking firm selected by Parent as to the fairness, from a
financial point of view, to Parent of the aggregate Merger Consideration to be
paid to Company Shareholders pursuant to this Agreement.
 
(p) Officer’s Certificate. Parent shall have received a certificate, dated as of
the Closing Date, signed on behalf of Company by the its chief executive officer
and by each of the Company Shareholders (i) representing and warranting after
reasonable investigation that the conditions set forth in Section 7.02(a) and
Section 7.02(b) have been duly satisfied, (ii) certifying that Company Financial
Statement have been prepared in accordance with GAAP and fairly present, in all
material respects, the financial condition and results of operation of Company.
 
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(q) Secretary’s Certificate. Parent shall have received a certificate, dated as
of the Closing Date, signed by the Secretary of Company (i) attaching copies of
Company’s certificate of incorporation and bylaws, and any amendments thereto,
(ii) attaching a good standing certificate of Company, duly certified by the New
York Department of State, (iii) certifying that attached thereto are true and
correct copies of action by written consent or resolutions duly adopted by the
board of directors and shareholders of Company which authorize and approve the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated thereby, (iv) certifying that there are no
proceedings for the dissolution or liquidation of Company and (v) certifying the
incumbency, signature and authority of the officers of Company authorized to
execute, deliver and perform this Agreement and all other documents, instruments
or agreements related thereto executed or to be executed by Company.
 
SECTION 7.03 Additional Conditions to Obligations of Company
 
The obligations of Company to effect the Merger and the other transactions
contemplated by this Agreement are also subject to the satisfaction at or prior
to the Effective Time of the following conditions, any or all of which may be
waived by Company, in whole or in part, to the extent permitted by applicable
Law:
 
(a) Representations and Warranties. Each of the representations and warranties
of Parent and Merger Sub contained in this Agreement shall be true and correct
as of the date of this Agreement and shall be true and correct (except that
where any statement in a representation or warranty expressly includes a
standard of materiality, such statement shall be true and correct in all
respects giving effect to such standard) as of the Effective Time as though made
as of the Effective Time, except for (i) representations and warranties which
address matters only as of a particular date, which representations and
warranties shall be true and correct in all material respects (except that where
any statement in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all respects giving
effect to such standard) as of such date and (ii) changes permitted by or
consistent with this Agreement. Company shall have received a certificate of the
chief executive officer or chief financial officer of Parent to the foregoing
effect.
 
(b) Guarantees. Parent and Merger Sub shall have obtained the release of each of
the Company Shareholders from all personal guarantees of obligations of the
Company included, but not limited to, the lease by the Company of the premises
occupied by the Company for the conduct of its business.
 
(c) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all respects with all Agreements and covenants required by this
Agreement to be performed or complied with by them on or prior to the Effective
Time except for such noncompliance that does not have a Parent Material Adverse
Effect. Company shall have received a certificate of the chief executive officer
or chief financial officer of Parent and Merger Sub to that effect.
 
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(d) Opinion of Counsel. Company and Shareholders shall have received from
Boylan, Brown, Code, Vigdor & Wilson, LLP, counsel to Parent and Merger Sub, an
opinion dated the Closing Date, which is reasonable and customary for
transactions of the type contemplated by this Agreement.
 
(e) No Challenge. There shall not be pending any enforcement action or similar
proceeding by any state or federal Governmental Entity that is likely to have a
Parent Material Adverse Effect.
 
(f) Parent Material Adverse Effect. There shall not have occurred a Parent
Material Adverse Effect (or any development that, insofar as reasonably can be
foreseen, is reasonably likely to result in any Parent Material Adverse Effect).
 
(g) No Litigation. There shall be no pending or threatened suit, action,
proceeding or investigation: (i) challenging or seeking to restrain or prohibit
the consummation of the Merger or any of the other transactions contemplated by
this Agreement or (ii) which, if adversely determined, could have a Parent
Material Adverse Effect.
 
(h) Consents. Parent shall have received the approval of its primary lender to
the consummation of the Merger and the transactions contemplated by this
Agreement.
 
(i) Secretary’s Certificate. Company and Shareholders shall have received a
certificate, dated as of the Closing Date, signed by the Secretary of Parent and
Merger Sub (i) attaching copies of Parent’s and Merger Sub's certificate of
incorporation and bylaws, and any amendments thereto, (ii) attaching a good
standing certificate of Parent and Merger Sub, duly certified by the Delaware
Secretary of State and New York Department of State, respectively
(iii) certifying that attached thereto are true and correct copies of action by
written consent or resolutions duly adopted by the board of directors of Parent
and Merger Sub which authorize and approve the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated thereby, and (iv) certifying the incumbency, signature and
authority of the officers of Parent and Merger Sub authorized to execute,
deliver and perform this Agreement and all other documents, instruments or
agreements related thereto executed or to be executed by Parent and Merger Sub.
 
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ARTICLE VIII
 
TERMINATION, AMENDMENT AND WAIVER
 
SECTION 8.01 Termination
 
This Agreement may be terminated at any time (except where otherwise indicated)
prior to the Effective Time, whether before or after approval of this Agreement
and the Merger by Company Shareholders:
 
(a) by mutual written consent of Parent and Company;
 
(b) (i) by Parent, if any of the conditions provided in Section 7.02 have not
been met as of July 31, 2008 and such failure has not been cured within twenty
(20) business days following receipt by Company of written notice of such
failure describing the extent and nature thereof in reasonable detail, or to the
extent permitted by applicable Law, such conditions have not been waived in
writing by Parent;
 
(ii) by Company, if any of the conditions provided in Section 7.03 have not been
met as of the July 31, 2008 and such failure has not been cured within twenty
(20) business days following receipt by Parent of written notice of such failure
describing the extent and nature thereof in reasonable detail, or, to the extent
permitted by applicable law, such conditions have not been waived in writing by
Company.
 
(c) by either Parent or Company if any decree, permanent injunction, judgment,
order or other action by any court of competent jurisdiction or any other
federal or state (but not county or municipal) Governmental Entity preventing or
prohibiting consummation of the Merger shall have been filed or in effect;
 
(d) by either Parent or Company if the Merger shall not have been consummated by
July 31, 2008; provided however, that the right to terminate this Agreement
under this Section 8.01(e) shall not be available to (i) Parent, where Parent’s
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date,
or (ii) Company, where Company’s failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
 
(e) by either Parent or Company if any of the conditions provided in Section
7.01 have not been met as of July 31, 2008, or to the extent permitted by
applicable law, have not been waived by both Parties; and
 
(f) by Parent, if Company or the Company Shareholders breach their obligations
under Section 5.7. 
 
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SECTION 8.02 Effect of Termination
 
In the event of termination of this Agreement by either Parent or Company as
provided in Section 8.01, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Merger Sub or Company
or any of their respective directors or officers except (i) nothing herein shall
relieve any Party from liability for any breach hereof, (ii) each Party shall be
entitled to any remedies at law or in equity for such breach and (iii)
Sections 8.02 and 8.03 and Article IX shall remain in full force and effect and
survive any termination of this Agreement.
 
SECTION 8.03 Expenses; Termination Fees
 
Except as otherwise set forth in this Agreement, all costs and expenses incurred
by the parties hereto shall be borne solely and entirely by the party that has
incurred such costs and expenses, whether or not the Merger is consummated.
 
SECTION 8.04 Amendment
 
Subject to applicable Law, this Agreement may be amended by the Parties at any
time prior to the Effective Time. This Agreement may not be amended except by an
instrument in writing signed by the Parties.
 
SECTION 8.05 Extension; Waiver
 
At any time prior to the Effective Time, the Parties may (a) extend the time for
the performance of any of the obligations or other acts of the other Parties,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any Agreements, documents, certificates or other instruments
delivered pursuant hereto and (c) waive compliance with any of the Agreements or
conditions contained in this Agreement. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the Party or Parties to
be bound thereby. The failure of any Party to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
 
ARTICLE IX
 
SURVIVAL OF REPRESENTATIONS; REMEDIES
 
SECTION 9.01 Survival of Representations
 
All representations, warranties, covenants, indemnities and other agreements
made by any party to this Agreement herein, shall be deemed made on and as of
the Effective Time as though such representations, warranties, covenants,
indemnities and other agreements were made on and as of such date, and all such
representations, warranties, covenants, indemnities and other agreements shall
survive the two-year anniversary of the Closing Date; provided, however, that
(a) the representations set forth in Section 3.05 (Authority; Binding
Obligation) shall survive in perpetuity, (b) the representations set forth in
Section 3.01 (Organization and Qualification), Section 3.02 (No Subsidiaries),
Section 3.04 (Capitalization), Section 3.15 (Pension and Benefit Matters),
Section 3.16 (Tax and Tax Matters) and Section 3.24 (Environmental Matters)
shall survive until the expiration of the applicable statute of
limitations. Notwithstanding anything herein to the contrary, any
representation, warranty, covenant, agreement or indemnity which is the subject
of a claim which is asserted in writing prior to the expiration of the
applicable period set forth above shall survive solely with respect to such
claim until the final resolution thereof.
 
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SECTION 9.02 Indemnification by Company Shareholders
 
(a) Company Shareholders hereby agree to severally indemnify, defend and hold
Parent, the Surviving Corporation and their respective officers and directors,
and each person, if any, who controls or may control Parent or the Surviving
Corporation within the meaning of the Securities Act (all such persons
hereinafter are referred to individually as a “Parent Indemnified Person” and
collectively as “Parent Indemnified Persons,” but in no event shall any Company
Shareholder prior to the Effective Time be such a Parent Indemnified Person)
harmless against all Losses resulting from, imposed upon or incurred by any
Parent Indemnified Person, directly or indirectly, as a result of any of the
following, anything in this Agreement to the contrary notwithstanding:
 
(i)  any inaccuracy or breach of a representation or warranty of Company or the
Company Shareholder given or made by Company or the Company Shareholder in this
Agreement, in the Certificate of Merger, in any of the schedules to this
Agreement or in any certificate, document or agreement delivered by or on behalf
of Company or the Company Shareholders pursuant hereto; and
 
(ii) any failure by Company or the Company Shareholders to perform or comply
with any covenant or agreement contained in this Agreement, in the Certificate
of Merger or in any certificate, document or agreement delivered by or on behalf
of Company or the Company Shareholder pursuant hereto.
 
(b) Notwithstanding anything in this Agreement to the contrary, Company
Shareholders shall not be responsible for any Loss pursuant to this Section 9.02
unless and until the aggregate amount of all of such Losses shall exceed
$100,000 in which case Company Shareholders jointly and severally shall be
liable for the amount by which the entire Loss exceeds $100,000.
 
SECTION 9.03 Procedure for Offset
 
(a) In the event, from time to time, any Parent Indemnified Person determines
that it has suffered a Loss for which indemnification is available pursuant to
this Agreement, the following procedure shall be followed:
 
(i) Parent Indemnified Person shall give written notice of any such claim (a
“Loss Notice”) to the Shareholders’ Representative specifying in reasonable
detail the amount of the claimed Loss (the “Loss Amount”) and the basis for such
Loss and whether the Parent intends to offset against the Purchase Notes.
 
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(ii) Within twenty (20) days after delivery of a Loss Notice, the Shareholders’
Representative shall provide to Parent and the Parent Indemnified Person (if not
the same Person), a written response (a “Response Notice”) in which the
Shareholders’ Representative will (i) agree that an offset in the full Loss
Amount may be made against the Purchase Notes, (ii) agree that an offset in an
amount equal to part, but not all, of the Loss Amount (the “Agreed Amount”) may
be made against the Purchase Notes or (iii) contest making any offset against
the Purchase Notes. The Shareholders’ Representative may contest an offset
against the Purchase Notes upon a good faith belief that all or such portion of
such offset does not constitute a Loss for which the Parent Indemnified Person
is entitled to indemnification under this Agreement. If no Response Notice is
delivered by the Shareholders’ Representative within such twenty (20) day
period, the Shareholders’ Representative shall be deemed to have agreed that an
offset in the full Loss Amount may be made against the Purchase Notes.
 
(iii) If the Shareholders’ Representative in the Response Notice agree (or are
deemed to have agreed pursuant to clause (ii) above) that an offset may be made
against the Purchase Notes in an amount equal to the Loss Amount, the Purchase
Note of each Company Shareholder shall be reduced proportionately in the same
percentage that each Company Shareholder’s Purchase Note bears to all Purchase
Notes.
 
(iv) If the Shareholders’ Representative in the Response Notice agrees that an
offset in an Agreed Amount may be made against the Purchase Notes, the Purchase
Note of each Company Shareholder shall be reduced proportionately in the same
percentage that such Company Shareholder’s Purchase Note bears to all Purchase
Notes.
 
(v) If the Shareholders’ Representative in the Response Notice contests an
offset against the Purchase Notes equal to all or any part of the Loss Amount
(the “Contested Amount”), the Parent Indemnified Person and the Shareholders’
Representative shall negotiate in good faith to resolve any such dispute. During
the period of such negotiation, and thereafter until the resolution of such
dispute, Parent shall make any payments due on the Purchase Notes, up to the
Contested Amount, to the Escrow Agent named in Subsection 9.03(a)(vi), to be
held and disbursed in accordance with the provisions of that Subsection.. The
Purchase Note of each Company Shareholder shall be reduced proportionately in
the same percentage that such Company Shareholder’s Purchase Note bears to all
Purchase Notes by an amount equal to the dollar amount of the award set forth in
such determination.
 
(vi) If the Parent claims that it is entitled to offset any Contested Sum
against the Purchase Notes, it shall make each of the payments due with respect
to the Purchase Notes coming due after the date of the Response Notice (up to,
but not in excess of, the Contested Sum) (together, the “Escrow Sum”) to Olver
Korts, LLP and Boylan, Brown, Code, Vigdor & Wilson, LLP, as Escrow Agent, to be
held and disbursed in accordance with the following:
 
(a) Retention of Escrow Sum. The Escrow Agent shall hold the Escrow Sum in an
interest bearing account of its choosing in accordance with the provisions of
this Subsection 9.03(a)(vi). Interest accumulated in such account shall be paid
to Parent and the Company Shareholders in the same proportion as each of them
shall become entitled to receive distribution of the Escrow Sum.
 
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(b) Distribution of Escrow Sum. Escrow Agent shall retain the Escrow Sum until
the resolution of dispute with respect to the Contested Sum in accordance with
the provisions of Subsection 9.03(a)(v). The Escrow Agent shall distribute the
Escrow Sum in accordance with the determination of a court of competent
jurisdiction with respect to the disputes giving rise to the deposit in escrow
of the Escrow Sum; provided, however, that if the Parent and the Shareholders
Representative shall instruct the Escrow Agent in writing as to the manner in
which it shall distribute the Escrow Sum, the Escrow Sum shall be distributed in
accordance with such instructions.
 
(c) Escrow Agent's Responsibility. The Escrow Agent may rely and shall be
protected in acting upon any documents which may be submitted to them in
connection with its duties hereunder and which it believes to be genuine and to
have been signed or presented by the proper party or parties, and the Escrow
Agent shall have no liability or responsibility with respect to the form,
execution or validity thereof. The Escrow Agent shall not be responsible for any
act or failure to act on their part except in the case of their own bad faith or
gross negligence
 
(d) Action By Escrow Agent. The Escrow Agent may act only jointly and not
severally with respect to any matters relating to the Escrow Sum. The action by
the Escrow Agent shall not preclude either of them from representing or
continuing to represent its client is connection with this Agreement and the
transactions contemplated hereby. The fees of Olver Korts, LLP for acting as
Escrow Agent shall be paid by the Company Shareholders and the fees of Boylan,
Brown, Code, Vigdor & Wilson, LLP for acting as Escrow Agent shall be paid by
Parent.
 
(b) The indemnity and other obligations of each Company Shareholder under this
Agreement shall first be satisfied through the exercise by Parent of the right
of offset against the aggregate outstanding amount of the Purchase Notes.
Following its exhaustion of its offset rights as set forth above, Parent shall
have the right to enforce the remaining indemnity obligations of Company
Shareholders pursuant to Section 9.02 hereof against each Company Shareholder.
 
(c) Provided that Parent makes payments of Contested Amounts to the Escrow Agent
identified in Subsection 9.03(vi) in accordance with that Subsection, the
exercise of any such right of offset or reimbursement by Parent in good faith,
whether or not ultimately determined to be justified, will not constitute a
breach of this Agreement or a default under any Purchase Note. Neither the
exercise of nor the failure to exercise such right of offset or reimbursement
will constitute an election of remedies or limit Parent in any manner in the
enforcement of any other remedies available to Parent except as otherwise
expressly set forth in this Agreement.
 
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SECTION 9.04 Third Party Claims.
 
The obligations and liabilities of Company Shareholders with respect to their
respective indemnities pursuant to this Article IX, resulting from any Third
Party Claim shall be subject to the following terms and conditions:
 
(a) The party seeking indemnification (the “Indemnified Party”) must give the
party obligated to indemnify (the “Indemnifying Party”), notice of any Third
Party Claim which is asserted against, resulting to, imposed upon or incurred by
the Indemnified Party and which may give rise to liability of the Indemnifying
Party pursuant to this Article IX, stating (to the extent known or reasonably
anticipated) the nature and basis of such Third Party Claim and the amount
thereof; provided that the failure to give such notice shall not affect the
rights of the Indemnified Party hereunder except to the extent (i) that the
Indemnifying Party shall have suffered actual damage by reason of such failure,
or (ii) such failure or delay materially adversely affects the ability of the
Indemnifying Party to defend, settle or compromise such Third Party Claim.
 
(b) Subject to Section 9.04(c) below, if the Indemnifying Party assumes
responsibility for Losses arising out of such Third Party Claim, then the
Indemnifying Party shall have the right to undertake, by counsel or other
representatives of its own choosing, the defense of such Third Party Claim at
the Indemnifying Party’s risk and expense.
 
(c) In the event that (i) the Indemnifying Party shall elect not to undertake
such defense, (ii) within a reasonable time after notice from the Indemnified
Party of any such Third Party Claim, the Indemnifying Party shall fail to
undertake to defend such Third Party Claim, or (iii) there is a reasonable
probability that such Third Party Claim may materially and adversely affect the
Indemnified Party other than as a result of money damages or other money
payments, then the Indemnified Party (upon further written notice to the
Indemnifying Party) shall have the right to undertake the defense, compromise or
settlement of such Third Party Claim, by counsel or other representatives of its
own choosing, on behalf of and for the account and risk of the Indemnifying
Party. In the event that the Indemnified Party undertakes the defense of a Third
Party Claim under this Section 9.04, the Indemnifying Party shall pay to the
Indemnified Party, in addition to the other sums required to be paid hereunder,
the reasonable costs and expenses incurred by the Indemnified Party in
connection with such defense, compromise or settlement as and when such costs
and expenses are so incurred.
 
(d) Anything in this Section 9.04 to the contrary notwithstanding, (i) neither
the Indemnified Party nor the Indemnifying Party shall, without the other
party’s written consent (which consent shall not be unreasonably withheld or
delayed), settle or compromise such Third Party Claim or consent to entry of any
judgment which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party of a release from all
liability in respect of such Third Party Claim in form and substance
satisfactory to the Indemnified Party; (ii) in the event that a party hereto
undertakes defense of such Third Party Claim in accordance with this
Section 9.04, the other parties, by counsel or other representative of their own
choosing and at their sole cost and expense, shall have the right to participate
in the defense, compromise or settlement thereof and each party and its counsel
and other representatives shall cooperate with the other party and its counsel
and representatives in connection therewith; and (iii) the party that undertakes
the defense of such Third Party Claim in accordance with this Section 9.04 shall
have an obligation to keep the other parties informed of the status of the
defense of such Third Party Claim and furnish the other parties with all
documents, instruments and information that the other parties shall reasonably
request in connection therewith.
 
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SECTION 9.05 No Recourse Against Company
 
Company Shareholders hereby irrevocably waive any and all right to recourse
against Company and the Surviving Corporation with respect to any
misrepresentation or breach of any representation, warranty or indemnity, or
noncompliance with any conditions or covenants, given or made by Company in this
Agreement or any other agreements and documents executed or to be executed by
the Parties hereto in order to consummate the transactions contemplated by this
Agreement. No Company Shareholder shall be entitled to contribution from,
subrogation to or recovery against Company or the Surviving Corporation with
respect to any liability of any Company Shareholder that may arise under or
pursuant to this Agreement or any of the other agreements and documents executed
or to be executed by the Parties hereto in order to consummate the transactions
contemplated by this Agreement or such other agreements and documents
contemplated hereby.
 
SECTION 9.06 Specific Performance
 
(a) In addition to any other remedies which Parent or Merger Sub may have at law
or in equity, Company and the Company Shareholders hereby acknowledge that
Company and the transactions contemplated under this Agreement are unique, and
that the harm to Parent or Merger Sub resulting from breaches by Company or the
Company Shareholders of their obligation cannot be adequately compensated by
damages. Accordingly, Company and the Company Shareholders agree that Parent and
Merger Sub shall have the right to have all obligations, undertakings,
agreements, covenants and other provisions of this Agreement specifically
performed by Company and the Company Shareholders and that Parent and Merger Sub
shall have the right to obtain an order or decree of such specific performance
in any of the courts of the United States of America or any state or other
political subdivision thereof.
 
(b) In addition to any other remedies which Company Shareholders may have at law
or in equity, Parent and Merger Sub hereby acknowledge that the transactions
contemplated under this Agreement are unique, and that the harm to Company
Shareholders resulting from breaches by Parent or Merger Sub of their obligation
cannot be adequately compensated by damages. Accordingly, Parent and Merger Sub
agree that Company Shareholders shall have the right to have all obligations,
undertakings, agreements, covenants and other provisions of this Agreement
specifically performed by Parent and Merger Sub and that Company Shareholders
shall have the right to obtain an order or decree of such specific performance
in any of the courts of the United States of America or any state or other
political subdivision thereof.
 
SECTION 9.07 Remedies Cumulative
 
Subject to the limitations and qualifications set forth in this Article IX, the
remedies provided herein shall be cumulative and shall not preclude the
assertion by the parties hereto of any other rights or the seeking of any other
remedies against the other parties, or their respective successors or assigns.
 
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SECTION 9.08 Indemnity by Parent
 
Parent hereby agrees to indemnify, defend and hold Company Shareholders
(“Company Shareholder Indemnified Person” and collectively “Company Shareholder
Indemnified Persons,” but in no event shall any Company Shareholder prior to the
Effective Time be such a Company Shareholder Indemnified Person) harmless
against all Losses resulting from, imposed upon or incurred by any Company
Shareholder Indemnified Person, directly or indirectly, as a result of any of
the following, anything in this Agreement to the contrary notwithstanding:
 
(a)  any inaccuracy or breach of a representation or warranty of Parent or
Merger Sub given or made by Parent or Merger Sub in this Agreement, in the
Certificate of Merger, or in any certificate or agreement delivered by or on
behalf of Parent or Merger Sub pursuant hereto; and
 
(b) any failure by Parent or Merger Sub to perform or comply with any covenant
or agreement contained in this Agreement, in the Certificate of Merger or in any
certificate or agreement delivered by or on behalf of Parent or Merger Sub
pursuant hereto.
 
ARTICLE X
 
GENERAL PROVISIONS
 
SECTION 10.01 Notices
 
All notices and other communications given or made pursuant hereto shall be in
writing and shall be deemed to have been duly given or made as of the date
delivered, mailed or transmitted if delivered personally, mailed by registered
or certified mail (postage prepaid, return receipt requested) or sent by
overnight courier (providing proof of delivery) to the Parties at the following
addresses or sent by electronic transmission to the following facsimile numbers
(or at such other address or facsimile number for a Party as shall be specified
by like notice):
 

 
(a)
If to Parent or Merger Sub:

IEC Electronics Corp.
105 Norton Street

   
Newark, New York 14513

Facsimile: (315)332-4430
Attention: Chief Executive Officer
 
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With a copy (which shall not constitute notice) to:

Boylan, Brown, Code, Vigdor & Wilson, L.L.P.
2400 Chase Square
Rochester, New York 14604

 
Facsimile:
(585) 232-3528

 
Attention:
Robert F. Mechur, Esq.

 

 
(b)
If to Company prior to the Closing Date:

Val- U-Tech Corp.
115 A Victor Heights Parkway

   
Victor, New York 14564

Facsimile: (585) 924-8584

 
Attention:
Michael Brudek, President

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

Olver Korts LLP
Tobey Village Office Park
100 Office Park Way
Pittsford, NY 14534
Facsimile: (585) 387-5234
Attention: Matthew M. Korona, Esq.
 
If to Shareholders’ Representative:

Michael Brudek
127 Amann Road
Honeoye Falls, New York 14472

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

Olver Korts LLP
Tobey Village Office Park
100 Office Park Way
Pittsford, NY 14534
Facsimile: (585) 387-9234
Attention: Matthew M. Korona, Esq.
 
SECTION 10.02 Jurisdiction, Venue and Attorneys’ Fees
 
(a) In the event that any legal proceedings are commenced in any court with
respect to any matter arising under this Agreement, the Parties hereto
specifically consent and agree that:
 
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(i) the courts of the State of New York and/or the United States Federal Courts
located in the State of New York shall have exclusive jurisdiction over each of
the Parties and such proceedings; and
 
(ii) the venue of any such action shall be in Monroe County, New York and/or the
United States District Court for the Western District of New York
 
(b) In the event that any legal proceedings are commenced in any court with
respect to any matter arising under or relating to this Agreement or any of the
agreements executed in connection herewith, the prevailing party in such
proceeding shall be entitled to recover from the other party or parties its
reasonable attorneys’ fees, disbursement and expenses incurred in connection
with the investigation and prosecution or defense (as the case may be) in
connection with such proceeding.
 
SECTION 10.02 Headings
 
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
 
SECTION 10.03 Severability
 
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
Party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the Parties shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
 
SECTION 10.04 Entire Agreement
 
This Agreement (together with the Exhibits, Schedules and the other documents
delivered pursuant hereto) constitute the entire agreement of the Parties and
supersede all prior agreements and undertakings, both written and oral, among
the Parties, or any of them, with respect to the subject matter hereof.
 
SECTION 10.05 Assignment
 
Neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the Parties hereto (whether by operation of Law or
otherwise) without the prior written consent of the other Parties; provided,
however, that Parent and Merger Sub shall have the right to assign this
Agreement without the prior written consent of Company to a direct or indirect
Subsidiary of the Parent, but no such assignment shall relieve Parent or Merger
Sub, as the case may be, of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
 
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SECTION 10.06 Parties in Interest
 
This Agreement shall be binding upon and inure solely to the benefit of each
Party, and nothing in this Agreement, express or implied, other than the right
to receive the Merger Consideration pursuant to Article II and the rights of the
Parent Indemnified Person pursuant to Article IX, is intended to or shall confer
upon any other Person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
 
SECTION 10.07 Mutual Drafting
 
Each Party has participated in the drafting of this Agreement, which each Party
acknowledges is the result of extensive negotiations between the Parties.
Consequently, this Agreement shall be interpreted without reference to any rule
or precept of law that states that any ambiguity in a document be construed
against the drafter.
 
SECTION 10.08 Governing Law
 
This Agreement shall be governed by, and construed in accordance with, the Laws
of the State of New York, regardless of the Laws that might otherwise govern
under applicable principles of conflicts of law.
 
SECTION 10.09 Counterparts
 
This Agreement may be executed and delivered in one or more counterparts, and by
the different Parties in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
 
SECTION 10.10 Singular and Plural
 
Any reference in this Agreement to the singular includes a reference to the
plural and vice versa.
 
ARTICLE XI
 
DEFINITIONS
 
For purposes of this Agreement, the following terms, and the singular and plural
thereof, shall have the meanings set forth below:
 
“Acquisition Proposal” shall mean any offer, proposal, letter of intent, inquiry
or expression or indication of interest (other than an offer, proposal, letter
of intent, inquiry or expression or indication of interest by Parent)
contemplating or otherwise relating to any Acquisition Transaction.
 
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“Acquisition Transaction” shall mean any transaction or series of related
transactions involving:
 
(a) any merger, consolidation, share exchange, business combination, issuance of
securities, direct or indirect acquisition of securities, tender offer, exchange
offer or other similar transaction in which (i) Company is a constituent
corporation, (ii) a Person or “Group” (as defined in the Exchange Act and the
rules promulgated thereunder) of Persons directly or indirectly acquires
beneficial or record ownership of securities representing more than 10% of the
outstanding securities of any class of voting securities of Company, or (iii)
Company issues securities representing more than 10% of the outstanding
securities of any class of voting securities of Company;
 
(b) any direct or indirect sale, lease, exchange, transfer, license, acquisition
or disposition of any business or businesses or of assets or rights that
constitute or account for 10% or more of the net revenues, net income or assets
of Company; or
 
(c) any liquidation or dissolution of Company.
 
“Act” means the Securities Act of 1933, as amended.
 
“Affiliate” means: (a) with respect to an individual, any member of such
individual’s family; (b) with respect to an entity, any officer, director,
shareholder, partner or investor of or in such entity or of or in any Affiliate
of such entity; and (c) with respect to a Person, any Person which directly or
indirectly, through one or more intermediaries, Controls, is Controlled by, or
is under common Control with such Person or entity.
 
“Agreement” means any agreement between or among two or more Persons with
respect to their relative rights and/or obligations or with respect to a thing
done or to be done, including, without limitation, agreements denominated as
contracts, leases, promissory notes, covenants, easements, rights of way,
commitments, arrangements and understandings.
 
“Assets” means assets of every kind and everything that is or may be available
for the payment of liabilities (whether inchoate, tangible or intangible),
including, without limitation, real and personal property.
 
“Average Parent Trading Price” for any date shall mean the average closing sales
price on The Over the Counter Bulletin Board (as reported in The Wall Street
Journal, or, if not reported therein, any other authoritative source) for the
five (5) trading-day period ending on trading day that is immediately prior to
such date.
 
“business day” means a day other than a Saturday, a Sunday or any other day on
which commercial banks in the City of New York are authorized or obligated to be
closed.
 
“Certificate” is defined in Section 2.02(a).
 
“Certificate of Merger” is defined in Section 1.02.
 
“Closing” is defined in Section 1.02.
 
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“Closing Date” is defined in Section 1.02.
 
“Code” means the United States Internal Revenue Code of 1986, as amended.
 
“Company” is defined in the Preamble to this Agreement.
 
“Company Balance Sheet” is defined in Section 2.01(a)(ii)(a).
 
“Company Benefit Plans” means all “employee benefit plans” as that term is
defined in Section 3(3) of ERISA, whether or not terminated, and trust
agreements and insurance contracts under or with respect to which Company has or
could have any liability, contingent, secondary or otherwise, and any other
benefit plan, program, practice, arrangement, or agreement (including without
limitation employment agreements) providing benefits of any kind to employees,
officers, directors, or independent contractors.
 
“Company Common Stock” is defined in Section 3.04.
 
“Company Contracts” is defined in Section 3.13.
 
“Company Financial Statement” is defined in Section 3.08(a).
 
“Company Material Adverse Effect” means any event, change or effect that,
individually or when taken together with any related events, is or is reasonably
likely to be materially adverse to the business, prospects, operations,
condition (financial or otherwise), Assets or liabilities of Company.
 
“Company Pension Plan” means any Company Benefit Plans that is an “employee
pension benefit plan,” as that term is defined in Section 3(2) of ERISA.
 
“Company Share Amount” means the aggregate number of shares of Company Common
Stock outstanding immediately prior to the Effective Time (including any such
shares that are subject to a repurchase option or risk of forfeiture under any
restricted stock purchase agreement or other agreement).
 
“Company Shareholders” has the meaning set forth in the Preamble to this
Agreement.
 
“Company Stock Plan” means any Company Benefit Plan pursuant to which Company is
or may become obligated to, or obligated to cause any other Person to, issue,
deliver or sell shares of capital stock of Company, or grant, extend or enter
into any option, warrant, call, right, commitment or agreement to issue, deliver
or sell shares, or any other interest in respect of capital stock of Company.
 
“Company Tax Returns” means all Tax Returns required to be filed by Company
(without regard to extensions of time permitted by law or otherwise).
 
“Control” (including the terms “Controlled by” and “under common Control with”)
means, as used with respect to any Person, possession of power (directly or
indirectly or as a trustee or executor) to direct or cause the direction of
management or policies of such Person (whether through ownership of voting
securities, as trustee or executor, by Agreement or otherwise).
 
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“Debt” shall mean without duplication (a) all outstanding indebtedness for
borrowed money of Company to any Person (including all interest accrued
thereon), (b) all obligations of Company arising from or incurred in connection
with the acquisition or purchase of capital assets (including the deferred
purchase price for such capital assets and all Capital Lease Obligations), (c)
any amounts that are required to be accrued on the balance sheet of Company for
bonuses payable to any employee, and (d) all accounts payable by Company other
than those incurred by Company in the Ordinary Course of Business of Company.
Normal accounts payables and accrued expenses incurred in the Ordinary Course of
Business of Company shall be excluded from the definition of Debt.
 
“Dissenting Shareholder” shall mean a shareholder of the Company who shall have
duly demanded appraisal of his shares of Company Common stock pursuant to
Section 623 of the NYBCL, complied with the provisions of such Section and not
withdrawn, failed to perfect or otherwise lost his right to such appraisal..
 
“Effective Time” is defined in Section 1.02.
 
“Encumbrance” means any mortgage, lien, pledge, encumbrance, security interest,
deed of trust, option, encroachment, reservation, order, decree, judgment,
condition, restriction, charge, Agreement, claim or equity of any kind.
 
“Environmental Laws” means any federal, state or local Law relating to public
health or safety, worker health or safety, or pollution, damage to or protection
of the environment including, without limitation, Laws relating to emissions,
discharges, releases or threatened release of Hazardous Materials into the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, generation,
disposal, transport or handling of any Hazardous Material.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and all Laws promulgated pursuant thereto or in connection therewith.
 
“GAAP” means United States generally accepted accounting principles,
consistently applied.
 
“Government Property” means property or equipment in the possession of or
directly acquired by a Governmental Entity and subsequently made available to
Company or any other property or equipment otherwise acquired by Company to
which a Governmental Entity has title.
 
“Governmental Entities” (including the term “Governmental”) means any
governmental, quasi-governmental or regulatory authority, whether domestic or
foreign.
 
“Hazardous Material” means (i) any “hazardous substance” as now defined pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. §9601(14); (ii) any “pollutant or contaminant” as defined in 42 U.S.C.
§9601(33); (iii) any material now defined as “hazardous waste” pursuant to 40
C.F.R. Part 261; (iv) any petroleum, including crude oil and any fraction
thereof; (v) natural or synthetic gas usable for fuel; (vi) any “hazardous
chemical” as defined pursuant to 29 C.F.R. Part 1910; and (vii) any asbestos,
polychlorinated biphenyl (“PCB”), radium, or isomer of dioxin, or any material
or thing containing or composed of such substance or substances.
 
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“Independent Accountants” means the firm of Mengel Metzger Barr & Co., LLP. In
the event that such firm declines or is unable to serve, “Independent
Accountants means the firm of Eldredge, Fox & Porretti, LLP.
 
“Intellectual Property” means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
all patent disclosures, industrial designs, utility models and all patents and
patent applications, together with all reissuances, continuations,
continuations-in-part, divisions, revisions, extensions, renewals and
reexaminations thereof, (b) all trademarks, service marks, trade dress, domain
names, web site addresses, logos, trade names, and corporate names, together
with all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all registered and
unregistered copyrights, all rights to database information, and all
applications, registrations, and renewals in connection therewith, (d) all mask
works and all applications, registrations, and renewals in connection therewith,
(e) all trade secrets and confidential business information (including research
and development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, software, databases, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (f) all rights,
including rights of privacy and publicity, to use the names, likenesses and
other personal characteristics of any individual, and (g) other proprietary
rights and (h) all copies and tangible embodiments thereof (in whatever form or
medium) existing in any part of the world (including all computer software and
related data and documentation).
 
“Inventory” means all new materials, work in progress, finished goods and
inventoriable supplies.
 
“Knowledge” will be deemed to be present with respect to Company when the matter
in question is known, or upon reasonable investigation, should have been known,
to Company. If the Company or any Company Shareholder has received written or
oral notice of any event circumstance or claim, the Company shall be deemed to
have Knowledge of such event circumstance or claim.
 
“Laws” means all foreign, federal, state and local statutes, laws, ordinances,
regulations, rules, resolutions, orders, tariffs, determinations, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified Person and to the businesses
and Assets thereof (including, without limitation, Laws relating to the
protection of classified information; the sale, leasing, ownership or management
of real property; employment practices, terms and conditions, and wages and
hours; building standards, land use and zoning; safety, health and fire
prevention; and environmental protection, including Environmental Laws).
 
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“License” means any franchise, grant, authorization, license, tariff, permit,
easement, variance, exemption, consent, certificate, approval or order of any
Governmental Entity.
 
“Losses” means all demands, losses, claims, actions or causes of action,
assessments, damages, liabilities, costs and expenses, including, without
limitation, interest, penalties and reasonable attorneys’ fees and
disbursements.
 
“Merger” is defined in the Preamble to this Agreement.
 
“Merger Consideration” is defined in Section 2.01(a)(i).
 
“Merger Sub” is defined in the Preamble to this Agreement.
 
“Merger Sub Stock” is defined in Section 2.01(d).
 
“Multiemployer Plan” means any “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA to which Company contributes, has an obligation to
contribute, or has at any time since September 2, 1974, contributed or been
obligated to contribute.
 
“NYBCL” is defined in the Preamble to this Agreement.
 
“Ordinary Course of Business” means ordinary course of business consistent with
past practices and reasonable business operations.
 
“Parent” is defined in the Preamble to this Agreement.
 
“Parent Common Stock” is defined in Section 2.01(a).
 
“Parent Material Adverse Effect” means any event, change or effect that,
individually or when taken together with any related events, is or is reasonably
likely to be materially adverse to the business, prospects, operations,
condition (financial or otherwise), Assets or liabilities of Parent and its
Subsidiaries, taken as a whole.
 
“Parent Notice” is defined in Section 2.01(a)(v)).
 
“Parent SEC Documents” is defined in Section 4.05.
 
“Party” and “Parties” are defined in the Preamble to this Agreement.
 
“Permitted Encumbrance” means (i) easements, rights of way, minor irregularities
of title, and liens for taxes not yet due and payable, (ii) landlord, warehouse
and materialmen’s liens and (ii) other Encumbrances similar to clauses (i) and
(ii); provided, however, that any or all of the foregoing do not materially
affect the utility or value of the Assets or other matters to which they relate.
 
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“Person” means an individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or other entity, or a
Governmental Entity.
 
“Plan” means any plan, program or arrangement, whether or not written, that is
or was an “employee benefit plan” as such term is defined in Section 3(3) of
ERISA and (a) which was or is established or maintained by Company; (b) to which
Company contributed or was obligated to contribute or to fund or provide
benefits; or (c) which provides or promises benefits to any person who performs
or who has performed services for Company and because of those services is or
has been (i) a participant therein or (ii) entitled to benefits thereunder.
 
“Post-Signing Returns” is defined in Section 5.04.
 
“Representatives” is defined in Section 5.7.
 
“Scheduled Closing Date” is defined in Section 2.04.
 
“Shareholder Notice” is defined in Section 2.01(a)(v)).
 
“Shareholders’ Representative” means Michael Brudek. If Michael Brudek is unable
or unwilling to serve as the Shareholders’ Representative, “Shareholders’
Representative” means Kathleen Brudek. If both Michael Brudek and Kathleen
Brudek are unable or unwilling to serve as the Shareholders’ Representative,
“Shareholders’ Representative” means Nicholas Vaseliv.
 
“Subsidiary” means a corporation, partnership, joint venture or other entity of
which any Person owns, directly or indirectly, at least fifty percent (50%) of
the outstanding securities or other interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body or otherwise exercise Control of such entity.
 
“Surviving Corporation” is defined in Section 1.01.
 
“Taxes” (including the terms “Tax” and “Taxing”) means all federal, state, local
and foreign taxes (including, without limitation, income, profit, franchise,
sales, use, real property, personal property, ad valorem, excise, employment,
social security and wage withholding taxes) and installments of estimated taxes,
assessments, deficiencies, levies, imports, duties, license fees, registration
fees, withholdings, or other similar charges of every kind, character or
description imposed by any Governmental Entity, and any interest, penalties or
additions to tax imposed thereon or in connection therewith.
 
“Tax Liabilities” means any action, suit, proceeding, audit, investigation or
claim pending or threatened in respect of any Taxes for which Company is or may
become liable, or any deficiency or claim for any such Taxes that has been to
Company’s knowledge proposed, asserted or threatened.
 
“Tax Returns” means all federal, state, local, foreign and other applicable
returns, declarations, reports and information statements with respect to Taxes
required to be filed with the United States Internal Revenue Service, and its
successors, or any other Governmental Entity or Tax authority or agency,
including, without limitation, consolidated, combined and unitary tax returns.
 
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“Third Party Claim” means any claim or other assertion of liability by any third
party.
 
“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan, as those terms are
defined in Part I of Subtitle E of Title IV of ERISA.
 
[Remainder of Page Intentionally Left Blank; Signature Page Follows.]
 
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IN WITNESS WHEREOF, the parties hereto have executed and delivered, this
Agreement or have caused this Agreement to be duly executed and delivered, as of
the date first set forth hereinabove.
 
IEC ELECTRONICS CORP.
   
By:
 
Name: W. Barry Gilbert
Title: Chief Executive Officer
   
VUT MERGER CORP.
   
By:
 
Name: W. Barry Gilbert
Title: President
   
VAL-U-TECH CORP.
   
By:
 
Name: Michael Brudek
Title: President
 
COMPANY SHAREHOLDERS:
       
Name: Kathleen Brudek
   
Name: Michael Brudek
   
Name: Nicholas Vaseliv

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The undersigned hereby acknowledges his appointment as the Shareholders’
Representative hereunder and his willingness to fulfill the duties of the
Shareholders’ Representative as contemplated by this Agreement.
 

 
Michael Brudek

The undersigned hereby acknowledges her appointment as the Shareholders’
Representative hereunder if Michael Brudek is unable or unwilling to serve as
the Shareholders’ Representative and her willingness to fulfill the duties of
the Shareholders’ Representative as contemplated by this Agreement.
 

 
Kathleen Brudek

The undersigned hereby acknowledges his appointment as the Shareholders’
Representative hereunder if both Michael Brudek and Kathleen Brudek are unable
or unwilling to serve as the Shareholders’ Representative and his willingness to
fulfill the duties of the Shareholders’ Representative as contemplated by this
Agreement.
 

 
Nicholas Vaseliv

 
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EXHIBIT A

FORM OF

CERTIFICATE OF MERGER
 

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EXHIBIT B
 
INITIAL OFFICERS AND DIRECTORS
OF
SURVIVING CORPORATION

Initial Officers

Office
 
Officer
Chairman
 
W. Barry Gilbert
President
 
Michael Brudek
Secretary
 
Robert F. Mechur

 
Initial Directors 

     

 

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EXHIBIT F

FORM OF
 
NON-COMPETITION AGREEMENT
 

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EXHIBIT G

FORM OF
 
EMPLOYMENT AGREEMENT

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