EXHIBIT 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is dated as of January 30, 2006, by
and between X-RITE, INCORPORATED, a Michigan corporation with its principal
office located at 3100 44th Street, S.W., Grandville, Michigan 49418 (“X-Rite”),
and Thomas J. Vacchiano, an individual resident at 17 Little Britain Road, New
Windsor, New York 12553 (“Executive”).

 

PREAMBLE:

 

X-Rite desires to employ Executive and to obtain the benefits of the covenants
by, and restrictions imposed on, Executive contained herein; and

 

Executive desires to be employed by X-Rite and is willing to be bound by the
covenants and restrictions imposed on Executive herein, all on the terms and
conditions set forth herein.

 

THEREFORE, X-Rite and Executive hereby agree as follows:

 

1. Employment. X-Rite hereby employs Executive, and Executive hereby accepts
employment, on the terms and subject to the conditions set forth herein.

 

2. Employment Period. Executive’s employment hereunder shall commence as of the
completion of the acquisition by X-Rite of a majority of the issued shares of
Amazys Holding AG (“Amazys”) pursuant to the Transaction Agreement between
X-Rite and Amazys dated January 30, 2006 (the “Commencement Date”) and shall
continue for a period of three (3) years unless earlier terminated as provided
in this Agreement (the “Employment Period”); provided, that in the event the
Board of Directors of X-Rite (the “Board of Directors”) determines to promote
Executive to the position of Chief Executive Officer of X-Rite in accordance
with Section 11 of this Agreement and the parties have not executed a new
employment agreement for Executive prior to the expiration of the initial three
(3) year period, the Employment Period shall be automatically extended for
successive one (1) year periods (commencing at the end of the previous period
whether it be the initial period or one of the one-year extension periods) until
such new employment agreement is executed.

 

3. Compensation. During the Employment Period, Executive shall be paid an annual
salary, annual performance bonuses, incentive compensation, stock options and
other fringe benefits, as determined from time to time by the Board of Directors
or the Compensation Committee thereof (the “Compensation Committee”), subject to
the following:

 

  (a) Base Salary. During the Employment Period, X-Rite shall pay to Executive a
salary at the annual rate of Three Hundred Ten Thousand and No/100 United States
Dollars ($310,000.00), subject to increase in the discretion of the Compensation
Committee (the “Base Salary”). Executive’s Base Salary shall be paid in
accordance with X-Rite’s normal payroll practices.

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  (b) Short-Term Incentive (Bonus). Executive will be entitled to participate in
any bonus plan or other incentive compensation program now or hereafter
applicable to X-Rite’s executives. Executive’s annual performance bonus
potential shall initially be sixty percent (60%) of his Base Salary if X-Rite
achieves “Average Performance” and ninety percent (90%) of his Base Salary if
X-Rite achieves “Excellent Performance,” each as defined in Exhibit A attached
hereto.

 

  (c) Long-Term Incentive. Executive will be entitled to participate in any
long-term incentive compensation program now or hereafter applicable to X-Rite’s
executives. Sixty percent (60%) of Executive’s total long-term incentive
compensation amount shall consist of restricted stock awards granted pursuant to
the terms and conditions of the X-Rite, Incorporated Restricted Stock Agreement
substantially in the form attached hereto as Exhibit B and forty percent
(40%) of Executive’s total long-term incentive compensation amount shall consist
of stock option awards granted pursuant to the terms and conditions of the
X-Rite, Incorporated Employee Stock Option Plan Officer Stock Option Agreement
substantially in the form attached hereto as Exhibit C.

 

  (d) Insurance and Other Fringe Benefits. Executive shall be offered such
insurance and other fringe benefits including, but not limited to, medical,
dental, long term disability, group life insurance, and accidental death and
dismemberment insurance, employee stock purchase plan, and 401(k) retirement
plan pursuant to X-Rite’s plans and policies in effect from time to time for its
executives.

 

  (e) Expense Reimbursement. Executive shall be entitled to payment and/or
reimbursement for all reasonable expenses, including, but not limited to,
expenses related to commuting between Executive’s home and X-Rite’s headquarters
in Michigan and reasonable living expenses in Michigan prior to any relocation
by Executive to Michigan, incurred by Executive in the course of performing his
duties and responsibilities hereunder which are consistent with X-Rite’s
policies in effect from time to time with respect to travel, entertainment and
other business expenses, subject to X-Rite’s expense reimbursement policy,
including requirements with respect to reporting and documentation of such
expenses.

 

  (f) Vacation. Executive will be entitled to four (4) weeks of vacation until
such time as his X-Rite service entitles him to additional vacation under
X-Rite’s vacation policy.

 

  (g) Leased Car Program. During the Employment Period, Executive will be
provided an automobile consistent with X-Rite’s executive automobile program.

 

  (h) Relocation Assistance. Executive shall be entitled to participate in
X-Rite’s Executive Corporate Relocation Program.

 

Notwithstanding anything to the contrary contained in this Section 3, all of
X-Rite’s practices, policies, and exhibits referenced are subject to change or
amendment in accordance with X-Rite’s historic practice or as provided therein.

 

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4. Duties. Executive’s duties shall be to serve as President and Chief Operating
Officer of X-Rite, and to perform such duties consistent with those positions as
the Board of Directors or Chief Executive Officer of X-Rite directs from time to
time. During the Employment Period, Executive shall report to the Chief
Executive Officer of X-Rite or his designee, shall devote substantially all his
business time and energy to the business and affairs of X-Rite and shall use his
best efforts to perform his duties as an executive of X-Rite. Executive shall
obtain prior approval before accepting a seat, or serving, on the board of
directors or advisory board of any other entity or organization, whether for
profit or nonprofit. Although Executive’s principal work location will be
X-Rite’s headquarters in Michigan, Executive shall not be required as a
condition of his employment to relocate his principal residence to Michigan
unless and until he is promoted to the position of Chief Executive Officer of
X-Rite.

 

5. Loyalty. Executive agrees that during the Employment Period he will not,
without the prior approval of the Board of Directors, either for himself or on
behalf of any other person, firm or corporation, directly or indirectly divert
or attempt to divert from X-Rite any business opportunity or business
whatsoever, or attempt to negatively influence any X-Rite customers or potential
X-Rite customers with whom Executive may have dealings.

 

6. Termination. Executive’s employment may be terminated as follows:

 

  (a) Death. If Executive dies during the Employment Period, this Agreement
shall terminate upon Executive’s death. If the Employment Period is terminated
as a result of Executive’s death, Executive’s heirs or estate shall be entitled
to receive his Base Salary accrued up to the date of termination of employment
and for a three (3) month period thereafter, but shall not be entitled to
receive any further salary, bonus, severance, compensation or benefits from
X-Rite. Such termination of this Agreement shall not, however, affect
Executive’s rights under any stock option incentive programs or agreements, or
restricted stock plans or agreements in which Executive participates or to which
Executive is a party, and all unvested stock options and restricted shares held
by Executive at the time of his death will vest upon such termination of
employment.

 

  (b) Disability. For purposes of this Agreement, “Disability” means a physical
or mental infirmity which impairs Executive’s ability to perform his duties
under this Agreement which continues for a period of at least one hundred eighty
(180) consecutive days. In the event of Executive’s Disability, this Agreement
may be terminated as of the end of such one hundred eighty (180) days by X-Rite.
If the Employment Period is terminated as a result of Executive’s Disability,
Executive shall be entitled to receive his Base Salary accrued up to the date of
termination of employment but shall not be entitled to receive any further
salary, bonus, severance, compensation or benefits from X-Rite except for any
benefits under applicable disability insurance. Such termination of this
Agreement shall not, however, affect Executive’s rights under any stock option
incentive programs or agreements, or restricted stock plans or agreements in
which Executive participates or to which Executive is a party, and all unvested
stock options and restricted shares held by Executive at the time of his
Disability will vest upon such termination of employment.

 

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  (c) Termination by X-Rite for Cause. X-Rite shall have the right to terminate
Executive’s employment for “Cause.” For purposes of this Agreement, “Cause”
shall be limited to Executive:

 

  (i) engaging in conduct involving dishonesty or fraud or being convicted of a
crime involving moral turpitude;

 

  (ii) engaging in conduct which is intentionally injurious to X-Rite,
monetarily or otherwise; or

 

  (iii) failing to perform assigned duties consistent with Section 4 above
(other than any failure resulting from an illness or other similar incapacity or
disability), provided that failing to achieve X-Rite’s business objectives shall
not solely by itself constitute Cause, or to comply with policies applicable to
all X-Rite executives, after a demand for performance or compliance is made in
writing to Executive which specifically identifies the manner in which it is
alleged that Executive has not substantially performed or complied, and,
provided, that Executive has not, in the reasonable judgment of X-Rite, cured
the failure described in the notice within ninety (90) days of such notice.

 

If the Employment Period is terminated by X-Rite for Cause, Executive shall be
entitled to receive his Base Salary accrued up to the date of termination of
employment but shall not be entitled to receive any further salary, bonus,
severance, compensation or benefits from X-Rite.

 

  (d) Termination by Executive for Good Reason. Executive shall have the right
to terminate his employment with X-Rite for “Good Reason” by providing written
notice of the termination to X-Rite within thirty (30) days of the occurrence of
any of the following:

 

  (i) without Executive’s express written consent, the assignment to Executive
of duties materially inconsistent with Executive’s position, responsibilities
and status with X-Rite as of the Commencement Date;

 

  (ii) the failure of the Board of Directors to determine, announce and execute
the promotion of Executive within eighteen (18) months following the
Commencement Date in accordance with Section 11;

 

  (iii) X-Rite’s failure to negotiate a new employment agreement for Executive
in good faith and in a reasonably timely manner upon any promotion of Executive
pursuant to Section 11 hereof;

 

  (iv) a reduction by X-Rite in Executive’s Base Salary as of the Commencement
Date greater than ten percent (10%); or

 

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  (v) a material breach by X-Rite of its obligations under this Agreement.

 

  (e) Termination by Notice. X-Rite and Executive shall each have the right to
terminate their employment relationship for reasons other than those provided
above in this Section 6 by giving written notice to the other party specifying
the date of termination, provided such notice is given at least thirty (30) days
prior to the specified date of termination. If X-Rite terminates this Agreement
pursuant to this Section 6(e), X-Rite shall have the obligations set forth in
Section 7(b). If the Employment Period is terminated by Executive other than for
“Good Reason”, Executive shall be entitled to receive his Base Salary accrued up
to the date of termination of employment but shall not be entitled to receive
any further salary, bonus, severance, compensation or benefits from X-Rite.

 

7. Severance Pay and Benefits.

 

  (a) Severance Pay After Change In Control. Concurrently with the execution of
this Agreement, Executive and X-Rite are entering into the Employment
Arrangement Effective Upon a Change in Control.

 

  (b) Severance Pay and Benefits After Termination by X-Rite Notice or by
Executive for “Good Reason”. If the Employment Period is terminated by X-Rite by
written notice under Section 6(e) of this Agreement, or by Executive under
Section 6(d)(i), (iv) or (v) of this Agreement, provided that Executive is not
in breach of any of the provisions of Section 8, 9 or 10 of this Agreement,
X-Rite shall provide to Executive:

 

  (i) severance pay equal to Executive’s monthly salary for the last full month
immediately preceding his termination for twelve (12) months; provided, that if
the Employment Period is terminated by X-Rite by written notice under
Section 6(e) of this Agreement, X-Rite shall provide to Executive severance pay
equal to Executive’s monthly salary for the last full month immediately
preceding his termination for the greater of (A) the number of months remaining
in the initial three (3) year term of this Agreement or (B) twelve (12) months;
provided further that the aggregate amount of the first seven (7) months of
installments shall be paid at the beginning of the seventh month following the
date of termination of employment and the remaining installments shall be paid
on a monthly basis thereafter;

 

  (ii)

the pro rata portion (based on the number of full months of service by Executive
in the year in which the Employment Period is terminated) of any annual
performance bonus to which Executive is entitled for the year in which the
Employment Period is terminated by X-Rite under Section 6(e) or by Executive
under Section 6(d)(i), (iv) or (v), payable within ninety (90) days following
the end of such year; provided that payment shall not occur prior to the six
(6) month anniversary of the date of termination of employment; and provided,
further, that if the Employment Period is terminated in the first six (6) months
of any year in which any

 

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annual performance bonus is payable, Executive shall be entitled to receive a
pro rata portion of such bonus based on six (6) months of service during such
year;

 

  (iii) payment of Executive’s continuation coverage premiums under the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended (“COBRA”),
for eighteen (18) months following the date of termination of employment; and

 

  (iv) immediate vesting of all stock options and restricted stock held by
Executive, which options will remain exercisable to the extent provided for in
the stock option and restricted stock agreements to which they relate.

 

  (c) Severance Pay and Benefits After Termination by Executive for “Good
Reason” or After Resignation. If the Employment Period is terminated by
Executive under Section 6(d)(ii) or (iii) or by Executive by written notice
under Section 11 of this Agreement, provided that Executive is not in breach of
any of the provisions of Section 8, 9 or 10 of this Agreement, X-Rite shall
provide to Executive:

 

  (i) severance pay equal to Executive’s monthly salary for the last full month
immediately preceding his termination for twenty-four (24) months; provided,
that the aggregate amount of the first seven (7) months of installments shall be
paid at the beginning of the seventh month following the date of termination of
employment and the remaining installments shall be paid on a monthly basis
thereafter;

 

  (ii) the pro rata portion (based on the number of full months of service by
Executive in the year in which the Employment Period is terminated) of any
annual performance bonus to which Executive is entitled for the year in which
Executive terminates the Employment Period under Section 6(d)(ii) or (iii) or
under Section 11, payable within ninety (90) days following the end of such
year; provided, that payment shall not occur prior to the six (6) month
anniversary of the date of termination of employment; and provided, further,
that if the Employment Period is terminated in the first six (6) months of any
year in which any annual performance bonus is payable, Executive shall be
entitled to receive a pro rata portion of such bonus based on six (6) months of
service during such year;

 

  (iii) payment of Executive’s continuation coverage premiums under COBRA, for
eighteen (18) months following the date of termination of employment; and

 

  (iv) immediate vesting of all stock options and restricted stock held by
Executive, which options will remain exercisable to the extent provided for in
the stock option and restricted stock agreements to which they relate.

 

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  (d) Compliance with Code Section 409A. It is intended that any amounts payable
under this Agreement and X-Rite’s and Executive’s exercise of authority or
discretion hereunder shall comply with the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended and the regulations and other guidance
issued thereunder (“Section 409A”), so as not to subject Executive to the
payment of interest and tax penalty which may be imposed under Section 409A.

 

  (e) No Mitigation of Severance Benefits. Executive shall not be required to
mitigate the amount of any severance benefits provided in this Section 7 by
seeking other employment or otherwise, nor shall the amount of any payment
provided in this Section 7 be reduced by any compensation earned by Executive as
a result of his employment with another employer after termination.

 

8. Confidentiality and Proprietary Information. Executive shall forever hold in
strictest confidence and shall not use or disclose any confidential information,
technique, process, development, or experimental work, trade secret, customer
lists, or other secret and confidential matter relating to the products,
services, sales, employees, or business of X-Rite. In addition, Executive agrees
that he will not use such information for his benefit or the benefit of any
third party. Executive also agrees that X-Rite owns and retains all rights to
any inventions, innovations, ideas, improvements, developments, methods,
designs, analyses, drawings, reports and all similar or related information
(whether or not patentable) which pertain to X-Rite’s historical, current, or
prospective businesses and that Executive may have developed by himself or with
others while employed by X-Rite (collectively, “Work Product”). Executive hereby
assigns all rights and interests that he may have in such Work Product to
X-Rite, and agrees to cooperate with X-Rite with respect to, and to sign
documents necessary to, perfect any of X-Rite’s intellectual property rights or
protections such as domestic or foreign copyrights or patents. In addition,
Executive and X-Rite have entered into the X-Rite Confidential and Proprietary
Information Agreement which shall remain in full force and effect,
notwithstanding execution of this Agreement.

 

9. Non-Competition; Non-Solicitation. Executive agrees that during the
Employment Period and for a period of two (2) years thereafter, Executive shall
not: (i) participate directly or indirectly, in the ownership, management,
financing or control of any business which is, or is about to become, a
competitor of X-Rite or its subsidiaries; (ii) provide consulting services or
serve as an officer or director for any such business; or (iii) solicit for
employment or other services or employ or engage as a consultant or otherwise
any person who is or was an employee of X-Rite, or encourage or facilitate any
person who is or was an employee of X-Rite to terminate his or her employment
with X-Rite. Notwithstanding the foregoing, Executive shall not be prohibited
from owning stock of any corporation whose shares are publicly traded so long as
that ownership is in no case more than five percent (5%) of such shares of the
corporation. The time period for the restrictions set forth in this Section
shall be extended by the number of days in which Executive is in breach of such
restrictions.

 

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10. Non-Disparagement and Non-Interference. Executive covenants and agrees that
from the Commencement Date and thereafter, Executive will not disparage,
criticize, condemn, or impugn X-Rite, its related and affiliated companies,
their products nor its or their former or current owners, directors, officers,
employees, agents, insurers, and representatives. X-Rite covenants and agrees
that from the Commencement Date and thereafter, X-Rite will not disparage,
criticize, condemn, or impugn Executive or his service for X-Rite. Executive
also agrees that he will not directly or indirectly interfere with or adversely
affect X-Rite’s business relationships, reputation, contracts, pricing or other
relationships that X-Rite has with its former, current, or prospective
customers, suppliers, clients, employees, businesses, financial institutions,
shareholders, or others persons or entities with whom X-Rite interacts or
relates.

 

11. Succession. Within eighteen (18) months following the Commencement Date, the
Board of Directors shall determine, by written notice to Executive, whether to
promote Executive to the position of Chief Executive Officer of X-Rite. If the
Board of Directors determines to promote Executive to the position of Chief
Executive Officer of X-Rite, (i) such promotion shall occur on or before the
expiration of eighteen (18) months following the Commencement Date, (ii) X-Rite
will publicly announce Executive’s promotion and (iii) X-Rite and Executive will
negotiate a new employment agreement for Executive within a reasonable time
following Executive’s promotion, upon the execution of which this Agreement
shall terminate. In addition, it is expected that if the Board of Directors
determines to promote the Executive, upon such promotion, Executive will become
a member of X-Rite’s Board of Directors. If the Board of Directors determines
not to promote Executive to the position of Chief Executive Officer of X-Rite,
Executive shall be entitled to terminate this Agreement pursuant to
Section 6(d)(ii) by providing written notice to X-Rite and to receive the
severance pay and benefits provided in Section 7(c). If the Board of Directors
determines to promote Executive to the position of Chief Executive Officer of
X-Rite and Executive declines such promotion, X-Rite shall have the right to
terminate this Agreement by providing written notice to Executive. In the event
of such termination by X-Rite, Executive shall be entitled to receive his Base
Salary accrued up to the date of termination of employment but shall not be
entitled to receive any further salary, bonus, severance, compensation or
benefits from X-Rite. X-Rite confirms that it is the current intention of the
Board of Directors to promote Executive to the position of Chief Executive
Officer, subject to the approval of the Board of Directors at the appropriate
time. X-Rite reserves the right not to promote Executive.

 

12. Injunctive Relief and Other Remedies. In the event of the breach or
threatened breach by Executive of any of the provisions of Sections 8, 9 or 10
of this Agreement, X-Rite shall be entitled to specific performance and/or
injunctive or other equitable relief from a court of competent jurisdiction in
order to enforce or prevent any violations of the provisions hereof (without
posting a bond or other security) in addition and supplementary to any other
rights and remedies existing in X-Rite’s favor.

 

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13. Indemnification. Each party agrees to indemnify the other party and any and
all affiliates of the other party for any costs, expenses, and damages resulting
from a party’s breach of this Agreement. Such costs, expenses, and damages
include, but are not limited to, actual attorneys’ fees.

 

14. Executive Liability Insurance Coverage and Indemnification. Nothing in this
Agreement shall deprive Executive, both during and subsequent to the termination
of his employment pursuant to this Agreement, of the benefits of X-Rite’s
existing or hereafter obtained executive liability insurance coverage, subject
to the terms and conditions of such coverage, nor of any right to
indemnification under X-Rite’s Articles of Incorporation and Bylaws or under any
indemnification agreement between X-Rite and Executive, subject to the
limitations on indemnification set forth therein.

 

15. Binding Agreement. This Agreement is intended to bind and inure to the
benefit of and be enforceable by X-Rite, Executive and their respective heirs,
successors and assigns. Executive may not assign his rights or delegate his
duties or obligations hereunder without the prior written consent of X-Rite.
X-Rite may assign its rights and obligations hereunder, without obtaining the
consent of Executive, to any affiliate or subsidiary or to any person or entity
that acquires X-Rite or its business or assets, provided that X-Rite will
furnish Executive with notice of any such assignment.

 

16. Notice. All notices and other communications provided for in this Agreement
shall be in writing and shall be deemed to have been duly given when delivered
or mailed by United States registered mail, return receipt requested, postage
prepaid, addressed to Executive at the address set forth on the first page of
this Agreement, or to X-Rite at its principal executive offices to the attention
of the Secretary, or to such other address as either party may have furnished to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.

 

17. Modification or Waiver. No provisions of this Agreement may be amended,
modified, supplemented, waived, or discharged unless such waiver, modification,
supplement, or discharge is agreed to in writing signed by Executive and such
officer (other than Executive) as may be specifically designated by the Board of
Directors. No waiver by either party to this Agreement at any time of any breach
by the other party hereto of any condition or provision of this Agreement to be
performed by such other party, nor any compliance with any such condition or
provision by the party not required to so perform, shall be deemed a waiver of
similar or dissimilar provisions or conditions at that time or at any prior or
subsequent time. Failure to insist upon strict compliance with any of the terms,
covenants or conditions of this Agreement shall not be deemed a waiver of such
term, covenant or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed waiver or relinquishment
of such right or power at any other time.

 

18.

Governing Law. This Agreement was entered into in the State of Michigan and
shall be construed and interpreted in accordance with the laws of the State of
Michigan as applied to contracts made and to be performed in the State of
Michigan. Any action arising out of or to enforce this Agreement must be brought
in courts in the State of Michigan. The

 

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parties consent to the jurisdiction of the courts in the State of Michigan and
to service of process by registered mail, return receipt requested, or by any
other manner provided by law.

 

19. Arbitration. Except for matters arising pursuant to Sections 8, 9 or 10 of
this Agreement, any dispute between the parties with respect to this Agreement
shall be resolved exclusively by arbitration in accordance with the rules for
commercial arbitration promulgated by the American Arbitration Association. The
arbitration shall be conducted in Michigan and the award shall be final and
binding upon the parties and enforceable in any court of competent jurisdiction.

 

20. Severability. Whenever possible, each provision and term of this Agreement
will be interpreted in a manner to be effective and valid but if any provision
or term of this Agreement is held by a court of competent jurisdiction to be
prohibited or invalid, then such provision or term will be ineffective only to
the extent of such prohibition or invalidity, without invalidating or affecting
in any manner whatsoever the remainder of such provisions or terms or the
remaining provisions or terms of this Agreement. If any of the covenants set
forth in this Agreement are held by a court of competent jurisdiction to be
unreasonable, arbitrary, or against public policy, such covenants will be
considered divisible with respect to scope, time, and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding, and
enforceable against Executive. The rights and remedies under this Agreement are
cumulative and not alternative.

 

21. Miscellaneous. No agreements or representations, oral or otherwise, express
or implied, with respect to the specific subject matter hereof have been made by
either party except as set forth expressly in this Agreement. This Agreement is
intended to supersede and override any other agreement between the parties with
respect to the subject matter hereof, except as provided herein.

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, X-Rite has caused this Agreement to be executed by a duly
authorized corporate officer and Executive has executed this Agreement as of the
date and year first above written.

 

X-RITE:       EXECUTIVE: X-RITE, INCORPORATED         By:  

/s/    Michael C. Ferrara

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/s/    Thomas J. Vacchiano

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Name:   Michael C. Ferrara       Thomas J. Vacchiano Title:   CEO      
President and COO

 

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