Document:

Unassociated Document

    STOCK
      PURCHASE AGREEMENT

    

    STOCK
      PURCHASE AGREEMENT made as of the __ day of April, 2007, among Aeroflex
      Incorporated, a Delaware corporation having its principal place of business
      at
      35 South Service Road, PO Box 6022, Plainview, NY 11803, (the “Purchaser”), and
      James Morgan residing at 16 Cabot Way Bedford, N. H. 03110 (“Morgan”), Fred
      Gilligan residing at 914 Back Mountain Road, Goffsttown, N. H. 03045
      (“Gilligan”), Donna Langan residing at 4 Westway Road, Wayland, MA 01778
      (“Langan”), Robert Fallon residing at 810 Washington Street, Stoughton, MA 02072
      (who, together with Charles Fallon and Brian Fallon, family members to whom
      he
      conveyed an interest in his shares of Micro-Metrics, Inc. common stock,
“Fallon”), John R.Williams PO Box 684, Rockport, Maine 04856 (“Williams”), and
      Ernest Joly, 17620 Caminto Balata, San Diego, California 92128 (“Joly”), as the
      actual or putative owners of all of the issued and outstanding capital stock
      of
      MICRO-METRICS, INC., a New Hampshire corporation having its principal place
      of
      business at 54 Grenier Field Road, Building C, Londonberry, NH 03053 (the
“Company”). Langan, Gilligan, Fallon, Williams and Joly are collectively
      sometimes referred to herein as the “Other Stockholders”, and together with
      Morgan, the “Stockholders”. 

    

    W
      I T N E S S E T H:

    

    A. The
      Stockholders are the owners of all of the issued and outstanding capital stock
      of the Company (the Stock”). The Company is engaged in the business of
      manufacturing and selling microwave diodes and related goods and accessories
      (the “Business”).

    

    B. The
      Purchaser and Stockholders have agreed to the sale by the Stockholders to the
      Purchaser of all of the Stock upon the terms and conditions hereinafter set
      forth;

    

    NOW,
      THEREFORE, in consideration of the foregoing recitals, which are made a material
      part of this Agreement and the covenants, warranties and mutual agreements
      herein set forth, and in reliance upon the representations and warranties
      contained herein, the parties do hereby agree as follows:

    

    ARTICLE
      ONE

    

    
      	
              1.

            	
              Transfer
                of Stock.

            

    

    

    In
      reliance on the representations and warranties contained herein and subject
      to
      all of the terms and conditions hereof, the Stockholders hereby agree to sell,
      assign, transfer and deliver to the Purchaser, and the Purchaser hereby agrees
      to purchase from the Stockholders on the Closing Date, all of the Stock.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      TWO

    

    
      	2.	
              Purchase
                Price.

            

    

    

    2.1. Purchase
      Price.
      In full
      consideration of the sale of the Stock to the Purchaser, and subject to the
      terms and conditions hereinafter set forth, at Closing, the Purchaser shall
      deliver to the Stockholders the sum of Ten Million ($10,000,000) dollars (the
      “Purchase Price”) (less the greater of [x] One Million [$1,000,000] dollars or
      [y] 10% of the Purchase Price as adjusted per Section 2.2 hereof, which shall
      be
      delivered to the Escrow Agents as provided in the Escrow Agreement), by wiring
      to the separate accounts of each of the Stockholders, pursuant to a letter
      of
      instruction signed by the Stockholders and provided to the Purchaser prior
      to
      the Closing, the pro rata portion of the same to which each Stockholder is
      entitled based on his or her equity ownership in the Company on the Closing
      Date, as delineated on Schedule 2.1 hereof (the “Stockholder Allocations”).

    

    
      
        2.2.
          Purchase
          Price Adjustment.
          

         

      

    

    (a)
      Not
      more than two days prior to the Closing Date, the Stockholders shall deliver
      to
      Purchaser a detailed statement identifying the amount of Bank Debt existing
      on
      the Closing Date, certified by the President of the Company (the “Bank Debt
      Statement”). 

    

    (b)
      Based
      on the Bank Debt Statement, an adjustment to the Purchase Price shall be made
      as
      follows: (i) the dollar amount by which the Bank Debt on the Closing Date is
      less than the Debt Target shall be added to the Purchase Price, and (ii) the
      dollar amount by which the Bank Debt is greater than the Debt Target shall
      be
      subtracted from the Purchase Price. The Purchase Price as adjusted pursuant
      to
      Section 2.2 is sometimes referred herein as the “Adjusted Purchase
      Price.”

    

    ARTICLE
      THREE

    

    
      	
              3.

            	
              The
                Closing.

            

    

    

    3.1. Place
      and Date.
      The
      closing of the transactions provided for in this Agreement shall take place
      at
      the offices of Moomjian, Waite, Wactlar & Coleman, LLP (or at such other
      place or manner as the parties may agree upon in writing) contemporaneously
      with
      the execution of this Agreement. The closing is referred to in this Agreement
      as
      the “Closing” and date of the closing is referred to herein as the “Closing
      Date”.

    

    
      
        3.2. 
          Documents
          to be Delivered by the Stockholders.

      

    

    

    The
      Stockholders shall execute and deliver or cause the Company to execute and
      deliver to the Purchaser the following:

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (i)
      duly
      issued certificates representing all of the Stock duly endorsed in blank, with
      blank Stock powers attached and with all required Stock transfer stamps
      attached;

    

    (ii)
      an
      Employment Agreement between Morgan and the Company, effective as of the Closing
      Date substantially in the form annexed hereto as Exhibit A (the “Morgan
      Employment Agreement”),

    

    (iii)
      a
      Lease Agreement for the Business Premises between JFD Realty, Inc, (“JFD”),
      formed for the purpose by the Stockholders who comprise all of the members
      thereof, as Lessor, and the Company as Lessee, substantially in the form annexed
      hereto as Exhibit B (the “Lease”);

    

    (iv)
      the
      Escrow Agreement among the Escrow Agents, Purchaser and the Stockholders and/or
      Stockholders Representative substantially in the form annexed hereto as Exhibit
      C (the “Escrow Agreement”);

    

    (v)
      to
      the extent that this Agreement required the Company to take any action in
      furtherance of the consummation thereof, a copy of resolutions of the
      Stockholders authorizing the execution, delivery and performance of this
      Agreement by the Company, and a certificate of the Company’s secretary or
      assistant secretary, dated the Closing Date, to the effect that such resolutions
      were duly adopted and are in full force and effect;

    

    (vi)
      An
      Agreement among the Stockholders and the Company, which terminates effectively
      as of the Closing Date, any and all outstanding agreements among the
      Stockholders and the Company relating to the Stock (collectively, the
“Stockholders Agreements”); 

    

    (vii)
      appropriate documentation evidencing: (A) the termination of all of the
      Company’s stock option agreements and stock option plans; (B) the termination or
      liquidation of liability accounts #2205 and #2210; (C) the payment in full
      of
      all notes receivable from officers of the Company as set forth on Schedule
      3.2(vii); (D) the assumption by the Stockholders of a deferred liability for
      rent in the approximate amount of $114,000 in connection with the lease of
      a
      facility by the Company in Rockport, Maine; and (E) the timely and legitimate
      exercise by Joly of his right to elect to have Stock reissued to him pursuant
      to
      a certain Stock Repurchase Agreement dated March 21, 2001 between Joly and
      the
      Company . 

    

    (viii)
      written resignations effective as of the Closing Date of such directors,
      officers, trustees and bank signatories of the Company as the Purchaser may
      request prior to the Closing Date, 

    

    (ix)
      a
      certificate dated the Closing Date executed by the Stockholders confirming
      that,
      individually and collectively, they have duly performed and complied with all
      covenants, agreements and conditions required by this Agreement to be performed
      or complied with by them prior to or on the Closing Date. 

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (x)
      all
      consents required under any of the Scheduled Contracts as a result of the
      transactions contemplated herein. 

    

    (xi)
      all
      such receipts, documents and instruments, or copies thereof, certified if
      requested, to which the Company is entitled and as may be reasonably requested
      by Purchaser or Purchaser’s counsel.

    

    (xii)
      all
      material licenses, permits, consents, approvals, authorizations, qualifications
      and orders of any Governmental Authority which are necessary for the
      consummation of the transactions contemplated hereby.

    

    (xiii)
      long form certificate as of a date not more than ten (10) days prior to the
      Closing Date attesting to the good standing of the Company as a corporation
      in
      its jurisdiction of incorporation. 

    

    (xiv)
      all
      payoff letters, releases, satisfactions, cancellations, acknowledgements,
      statements and other appropriate documentation evidencing the termination,
      liquidation or payment of Bank Debt as reflected in the computation of the
      Bank
      Debt Statement, as well as the termination any security interests in, and rights
      to, the Company’s assets and properties in connection therewith.

    

    (xv)
      Confidentiality and Non-Competition Agreements by each of the Other
      Stockholders, containing terms and conditions not inconsistent with Section
      6.5
      and Article 7.

    

    (xvi)
      such other documents and instruments as may be reasonably requested by the
      Purchaser to vest in Purchaser title to the Stock and place Purchaser in
      possession and control of the Company and its assets.

    

    3.3 Documents
      to be Delivered by the Purchaser.

    

    At
      the
      Closing, the Purchaser shall execute and deliver or cause to be executed and
      delivered to the Stockholders the following:

    

    (i)
      a
      copy of resolutions of the Board of Directors of Purchaser authorizing the
      execution, delivery and performance of this Agreement by Purchaser, and a
      certificate of its secretary or assistant secretary, dated the Closing Date,
      to
      the effect that such resolutions were duly adopted and are in full force and
      effect;

    

    (ii)
      the
      Escrow Agreement;

    

    (iii)
      the
      Lease;

    

    (iv)
      the
      Morgan Employment Agreement;

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (v)
      a
      certificate by an officer of Purchaser dated the Closing Date confirming that
      the Purchaser duly performed and complied with all covenants, agreements and
      conditions required by this Agreement to be performed or complied with by it
      prior to or on the Closing Date.

    

    (vi)
      all
      such receipts, documents and instruments, or copies thereof, certified if
      requested, to which the Stockholders are entitled hereunder and as may be
      reasonably requested.

    

    (vii)
      payment of the Adjusted Purchase Price pursuant to Section 2.1.

    

    (viii)
      Employment letters to Langan and Gilligan setting forth the severance benefits
      to which they would be entitled in the event their employment with the Company
      is terminated without just cause after the Closing Date. 

    

    3.4 Form
      of Documents.
      Unless
      specifically otherwise provided herein, all documents to be delivered pursuant
      to this Article 3 by one party to the other party to this Agreement shall be
      in
      form and substance reasonably satisfactory to such other party and its or their
      counsel.

    

    ARTICLE
      4

    REPRESENTATIONS
      AND WARRANTIES OF STOCKHOLDERS

    

    The
      Stockholders jointly and severally represent and warrant to the Purchaser as
      of
      the date hereof as follows:

    

    4.1. Organization
      and Qualification.
      The
      Company is a corporation duly organized, validly existing and in good standing
      under the laws of the State of New Hampshire and has all corporate power and
      authority to own, lease and operate its properties and assets and to carry
      on
      the Business as now being conducted. The Company is duly qualified or licensed
      and in good standing in each jurisdiction where the nature of the activities
      conducted by it or the character of the property or assets it owns, leases
      or
      operates, makes such qualification or licensing necessary, except in
      jurisdictions where the failure to be so duly qualified or licensed and in
      good
      standing has not had, and would not have, a Material Adverse Effect.

    

    4.2. Authorization
      of Agreements.
      The
      Stockholders have the requisite legal capacity, power and authority to execute,
      deliver and enter into this Agreement and the Related Documents and to perform
      their respective obligations under this Agreement and the Related Documents.
      This Agreement and each of the Related Documents, respectively, (i) has been
      duly executed and delivered by the Stockholders (or the Stockholders’
Representative) and (ii) constitutes the binding obligations of the Stockholders
      enforceable against them in accordance with its respective terms, except as
      the
      enforcement thereof may be subject to or limited by applicable bankruptcy,
      insolvency, reorganization, moratorium or other laws affecting the enforcement
      of creditors’ rights generally now or hereafter in effect and subject to the
      application of equitable principles and the availability of equitably
      remedies.

    

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    4.3. Subsidiaries.
      The
      Company has no Subsidiaries. The Company owns no interest, directly or
      indirectly, and has no commitment to purchase any interest, direct or indirect,
      in any other corporation, partnership or enterprise.

    

    4.4. Capital
      Stock.
      The
      Stock constitutes all of the authorized, issued and outstanding capital stock
      of
      the Company. There are no other equity interests in the Company. There has
      not
      been any change in the authorized, issued and outstanding capital stock of
      the
      Company from and after the Balance Sheet Date. All of the outstanding capital
      stock of the Company has been duly authorized and is validly issued, fully
      paid
      and non-assessable and is owned by the Stockholders. All outstanding capital
      stock of the Company was issued in compliance with the certificate of
      incorporation and by-laws of the Company and with Applicable Law. The
      Stockholders have and on the Closing Date will convey to the Purchaser, good,
      valid and marketable title to the Stock, free and clear of any Liens. Except
      as
      set forth on Schedule 4.4, there are no rights (whether by law, preemption,
      contracts or otherwise), subscriptions, warrants, options, conversion rights,
      commitments, understandings, arrangements or agreements of any kind authorized
      or outstanding to purchase or otherwise acquire from the any of the
      Stockholders, the Company or any other Person, any capital stock, or other
      securities or obligations of any kind convertible into or exchangeable for
      any
      capital stock of the Company or any other equity interest in the Company. There
      is no proxy, or any agreement, arrangement or understanding of any kind
      authorized or outstanding which restricts, limits or otherwise affects the
      ability to transfer or the right to vote any of the Stock. 

    

    4.5 No
      Conflicts.
      The
      execution, delivery and performance of this Agreement and the Related Documents
      and any other agreement or document contemplated herein or therein and the
      consummation of all of the transactions contemplated hereby and thereby: (i)
      do
      not and will not, with or without the giving of notice or the passage of time
      or
      both, violate or conflict with, or result in, a breach of any provision of
      the
      certificate of incorporation or by-laws of the Company; and (ii) do not and
      will
      not require the consent, waiver, approval, or authorization of, or registration,
      declaration or filing with, any Person or Governmental Authority; and (iii)
      do
      not and will not, with or without the giving of notice or the passage of time
      or
      both, violate or conflict with, or result in, a breach or termination of any
      provision of, or constitute a default under, or accelerate or permit the
      acceleration of, the performance required by the terms of, or result in, or
      give
      to any Person any right of payment or reimbursement under, or termination,
      cancellation, modification or acceleration of, or result in the creation of
      any
      Liens, except Permitted Liens, upon any of the assets or properties of the
      Company pursuant to, or otherwise give rise to any liability or obligation
      under, the certificate of incorporation or by-laws of the Company, any agreement
      (including, without limitation, any Scheduled Contract, or any other agreement
      or instrument or any Order or statute or regulation to which any of the
      Stockholders or the Company is a party or by which any of the Stockholders
      or
      the Company or any of their assets may be bound or governed; and (iv) will
      not
      terminate or result in the termination of any such agreement or instrument,
      or
      in any way affect or violate the terms and conditions of, or result in the
      cancellation, modification, revocation or suspension of any rights of the
      Company.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    4.6 Financial
      Statements.
      

    

    (a)
      Attached hereto as Schedule 4.6(a) are copies of (i) the Balance Sheet and
      (ii)
      the audited balance sheet and income statements for the Company for the year
      ended December 31, 2006, which have been provided to Purchaser (together with
      the Balance Sheet, the “Financial Statements”). 

    

    (b)
      The
      Financial Statements (i) are complete, true and correct in all material
      respects; (ii) present fairly the financial position and results of operations
      of the Company as of the dates thereof and for the periods then ended; and
      (iii)
      have been prepared in accordance with GAAP, applied on a consistent basis,
      except to the extent that the Balance Sheet lacks certain footnotes that would
      be required for a complete presentation in accordance with GAAP. 

    

    (c)
      Other
      than to the extent disclosed or reserved for in the Balance Sheet, or otherwise
      disclosed in the Schedules to this Agreement, the Company has no Liabilities,
      commitments or obligations of any nature whatsoever (whether accrued, absolute,
      contingent, known, unknown, asserted, unasserted or otherwise, and whether
      due
      or to become due) except Liabilities, commitments and obligations incurred
      in
      the Ordinary Course of Business since the Balance Sheet Date which do not
      exceed, in the aggregate, $50,000.

    

    (d)
      The
      books of account and other financial records of the Company are complete and
      accurate in all material respects and have been properly maintained in all
      material respects in accordance with Applicable Law.

    

    4.7 Taxes.
      

    

    (a)
      True
      and correct copies of the Company’s federal and state corporate income tax
      returns, (“Tax Returns”), for the tax years ended December 31, 2003 through
      December 31, 2006 have been delivered to, or made available for inspection
      by,
      the Purchaser. All Tax Returns of the Company have been timely filed, and each
      such Tax Return is true, correct and complete in all material
      respects.

    

    (b)
      All
      Liabilities of the Company to any jurisdiction for Taxes, fees or assessments
      payable to a Governmental Authority of every kind and nature, including interest
      thereon and penalties with respect thereto and Taxes payable under Treasury
      Regulation section 1.1502-6 or similar provisions under state, local or foreign
      law for the period ended December 31, 2006, have been timely paid by the Company
      or are accrued and provided for in accordance with GAAP in the Financial
      Statements for the period ended December 31, 2006. The Company has timely paid
      all Taxes due during the period from the Balance Sheet Date through the Closing
      Date. The Company has paid all franchise Taxes payable in the State of New
      Hampshire for the period through the Closing Date.

    

    (c)
      Except as otherwise set forth in Schedule 4.7(c), the Tax Returns of the Company
      have not been audited by any Governmental Authority during the past three years.
      Neither the Internal Revenue Service nor any other Governmental Authority has
      proposed any additional Taxes with respect to the Company or for which the
      Company may be liable or with respect to the Business. There are no pending
      or,
      to the Knowledge of the Stockholders, threatened, claims or assessment for
      Taxes. There are no pending or, to the Knowledge of the Stockholders,
      threatened, examinations with respect to Taxes by any Governmental
      Authority.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (d)
      Except as set forth on Schedule 4.7(d), the Company has not granted any waivers
      of any statutes of limitation with respect to any Taxes for any fiscal year.
      The
      Company has not requested any extension of time within which to file any
      currently unfiled Tax Returns.  

    

    (e)
      There
      are no Liens for Taxes (other than for current Taxes not yet due and payable)
      upon the properties or assets of the Company.

    

    (f)
      The
      Company is not liable for Taxes of any other Person and is neither currently
      under any contractual obligation nor a party to any tax sharing agreement or
      other agreement providing for payments by the Company with respect to
      Taxes.

    

    (g)
      The
      Company, as of the Closing Date, has not agreed, and will not be required,
      as a
      result of a change in method of accounting or otherwise, to include any
      adjustment under Code section 481 (or any corresponding provision of state,
      local or foreign law) in taxable income for any period after the Closing
      Date.

    

    (h)
      To
      the Knowledge of Stockholders, Schedule 4.7(h) lists all of the jurisdictions
      where the Company has been required or obligated to file Tax Returns, and except
      as set forth in Schedule 4.7(h), for the past five years, no written claim
      has
      been made by a Governmental Authority in a jurisdiction where the Company does
      not currently file Tax Returns that the Company may be subject to taxation
      by
      that jurisdiction.

    

    (i)
      The
      Company is not a party to any Contract, arrangement or plan that has resulted
      or
      could result separately, or in the aggregate, in the payment of an excess
      parachute payment within the meaning of Code Section 280G (or corresponding
      provision of state, local or foreign law).

    

    (j)
      Except as set forth on Schedule 4.7 (j), the Company has properly classified
      its
      workers as either employees or independent contractors for federal, state,
      local
      and foreign tax purposes and otherwise has provided to them accordingly
      appropriate Forms W-2 or 1099 for any payments made to them during the last
      5
      years.

    

    4.8. Litigation.
      Except
      as set forth on Schedule 4.8, there is no suit, claim, action, proceeding or
      investigation pending or, to the Knowledge of Stockholders, threatened by or
      against the Company before any Governmental Authority, in each case, (i) that
      individually, or in the aggregate, by its existence or as a result of its
      outcome could (A) have a Material Adverse Effect, (B) prevent, hinder or delay
      the execution and performance of this Agreement or the consummation of the
      transactions contemplated hereby, or (C) result in this Agreement being declared
      unlawful or cause the rescission of any of the transactions contemplated hereby
      or (ii) in which the amount of damages claimed exceeds $25,000, or which could
      result in an award or judgment against the Company in an amount greater than
      $25,000, and the Stockholders have no knowledge of any circumstances which
      reasonably could be expected to result in such a claim, action, suit, proceeding
      or investigation against the Company.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    4.9 Compliance
      with Applicable Law.
      The
      Company hold all permits, licenses, variances, exemptions, Order and approvals
      of all Governmental Authorities necessary for the lawful conduct of the Business
      in the same manner and extent to which it is currently conducted, except where
      failures to hold such permits, licenses, variances, exemptions, orders and
      approvals would not, individually or in the aggregate, have a Material Adverse
      Effect. Within the last three (3) years, the Company has not been charged with,
      or received notice of, any material violation of any Applicable Law, nor, to
      the
      Knowledge of the Stockholders, is there any threatened claim of such violation
      (including any investigation) or any basis therefor. Within the last three
      (3)
      years, the Company has conducted the Business in compliance in all material
      respects with Applicable Law.

    

    
      
        4.10.
          Labor
          Matters.
          

      

    

    

    (a)
      There
      are no pending or, to the Knowledge of the Stockholders, threatened, charges,
      complaints, petitions or written grievances before any Government Authority
      relating to, or predicated upon, a violation of Applicable Law by the Company
      regarding employment, employment practices and terms and conditions of
      employment, including charges of unfair labor practices, unlawful discharge,
      discrimination, harassment or hostile work environment with respect to any
      of
      the Company’s employees, which charges, complaints, petitions or grievances have
      had or could have, individually or in the aggregate, a Material Adverse Effect,
      nor to the Knowledge of the Stockholders, is there any basis for any such
      charges, complaints, petitions or grievances. The Company is not a party to
      any
      collective bargaining agreement or other labor union contract applicable to
      the
      Company’s employees. To the Knowledge of the Stockholders, no activities or
      proceedings of any labor union to organize any of the Company’s employees have
      occurred. Within the last three (3) years, no strikes, slowdowns, work
      stoppages, lockouts have occurred nor, to the Knowledge of the Stockholders,
      have there been any threats thereof.

    

    (b)
      No
      key employee, or group of employees or any executive of the Company (A) has
      given written notice of his or her intention to resign prior to the Closing
      Date
      or within 12 months after the Closing Date or, to the Knowledge of the
      Stockholders, is intending to do so; or (B) would become entitled to any rights
      (including as to compensation) as a result of the Company entering into or
      the
      consummation of any of transactions contemplated by this Agreement.

    

    (c)
      There
      are no outstanding Orders or charges against the Company under any occupational
      health or safety legislation and, to the Knowledge of the Stockholders, none
      has
      been threatened. All material levies, assessments and penalties made against
      the
      Company pursuant to any applicable workers compensation legislation as of the
      date hereof have been paid by the Company and the Company has not been
      reassessed under any such legislation.

    

    4.11. No
      Adverse Changes.
      Except
      as set forth on Schedule 4.11, since December 31, 2006: (1) the Business of
      the
      Company has been conducted only in the Ordinary Course of Business; (ii) there
      has been no change in the condition (financial or otherwise), assets,
      liabilities, business, operations, affairs or prospects of the Company other
      than changes in the Ordinary Course of Business, none of which singly, and
      no
      combination of which in the aggregate, has had, or could reasonably be expected
      to have, a Material Adverse Effect (other than any change which has had a
      Material Adverse Effect resulting from general market conditions); and (iii)
      there has been no damage, destruction or loss or other occurrence or
      development, which, either singly or in the aggregate, has had a Material
      Adverse Effect, and, to the Knowledge of the Stockholders, there is no
      threatened occurrence or development which could reasonably be expected to
      have
      a Material Adverse Effect.

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    4.12. Conduct
      of Business.
      Since
      the December 31, 2006, except as set forth on Schedule 4.12, the Company has
      not: (i) created or incurred any Liability outside of the Ordinary Course of
      Business; (ii) mortgaged, pledged or subjected, to any Liens, except Permitted
      Liens, any of its properties, real or personal, or assets, tangible or
      intangible; (iii) discharged or satisfied any Lien or paid any obligation or
      Liability other than current Liabilities shown on the Balance Sheet that were
      paid in the Ordinary Course of Business, and Taxes and current Liabilities
      incurred since the Balance Sheet Date in the Ordinary Course of Business or
      under Contracts entered into in the Ordinary Course of Business; (iv) waived,
      released or compromised any claims or rights of material value under, or
      terminated or materially modified, any Scheduled Contract; (v) entered into
      any
      settlement, compromise or consent with respect to any claim, proceeding or
      investigation; (vi) sold, assigned, transferred, leased or otherwise disposed
      of
      any of its assets, tangible or intangible, or canceled any debts or claims
      except, in each case, for fair consideration in the Ordinary Course of Business;
      (vii) except for the Agreed Dividend, declared or paid any dividends, or made
      any other distribution on or in respect of, or directly or indirectly,
      purchased, retired, redeemed or otherwise acquired any shares of its capital
      stock, paid any notes or open accounts or paid any amount or transferred any
      asset to any Stockholder; (viii) made or become a party to, or become bound
      by,
      any Contract or renewed, extended, amended, modified or terminated any Contract
      or which in any one case involved an amount in excess of $10,000 (or in the
      aggregate an amount in excess of $50,000, but excluding therefrom the amount
      of
      Scheduled Contracts entered into in the Ordinary Course of Business); (ix)
      adopted or (except as otherwise required by Applicable Law) amended any Employee
      Benefit Plans, or paid, agreed to pay or entered into or modified any contract
      requiring it to pay, other than pursuant to an existing written agreement,
      any
      bonus, extra compensation, pension or severance pay to any of its officers
      or
      employees, or increased the rate or altered the form of compensation, including,
      without limitation, salaries, fees, commission rates, bonuses, profit sharing,
      incentive, pension, retirement or other similar payments, from that being paid
      during the year ended December 31, 2006 to any of its directors, officers or
      employees; (x) increased the compensation, fees or other remuneration payable
      or
      to become payable to any of its independent contractors, consultants or agents;
      (xi) issued or sold any shares of the capital stock or securities convertible
      into shares of its capital stock; (xii) announced or effected any material
      change in the form or manner of distribution of any of its products or services;
      (xiii) made deliveries or provided performance of services in connection with
      its backlog of orders other than in the Ordinary Course of Business; (xiv)
      made
      or effected any material change in the Company’s practice of pricing,
      discounting for sales of finished goods, ordering supplies and raw materials,
      shipping finished goods, accepting returns or honoring warranties, invoicing
      customers and collecting receivables; (xv) materially changed any of its
      accounting methods or principles used in recording transactions on its books
      or
      records or in preparing the Financial Statements; (xvi) took or failed to take
      any action that could reasonably be expected to have a Material Adverse Effect
      except as may have been warranted in the good faith business judgment of the
      Company in the Ordinary Course of Business; (xvii) incurred any Indebtedness
      for
      money borrowed; (xviii) entered into any Contract or commitment to do any of
      the
      foregoing; (xvii) incurred any Indebtedness for money borrowed; or (xix) entered
      into any other transaction or taken any other action not in the Ordinary Course
      of Business (except for transactions contemplated by this
      Agreement).

    

    
      
        
        

      

      
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    4.13. Title
      to and Condition of Assets.
      Except
      as set forth on Schedule 4.13, the Company has good, valid and marketable title
      to all of the assets and all of the personal and real property owned by it
      and
      valid leasehold interests in all of the assets and all of the real and personal
      property leased by it, free and clear of all Liens except Permitted Liens.
      The
      Company owns all of its equipment free and clear of all Liens except Permitted
      Liens. None of the Company’s assets is subject to any sublease, sublicense or
      other agreement granting to any other Person any right to the use or enjoyment
      of such assets. Other than those of the Company’s assets which are leased or
      licensed as set forth on Schedule 4.13, there are no assets used by the Company
      which are owned by any third party. Except as set forth on Schedule 4.13, all
      of
      the assets, properties and specialized operating systems owned, leased or
      licensed by the Company (i) are sufficient and adequate to carry on the Business
      of the Company as conducted prior to the Closing Date including the performance
      of all of the Scheduled Contracts in effect on the Closing Date, (ii) have
      been
      maintained in accordance with applicable industry standards or as otherwise
      required by any lease of other agreement and currently are in a good state
      of
      maintenance, repair and operating condition as required for the operation and
      use thereof in the Ordinary Course of the Business; and (iii) comply in all
      material respects with Applicable Law and with the terms and conditions of
      all
      leases and other agreements affecting or relating to any such
      property.

    

    
      
        4.14.
          Real
          Property.

      

    

     

    (a)
      Title
      to the Business Premises having been conveyed or transferred to JFD on or before
      the Closing Date, the Company does not currently own any Real Property. Schedule
      4.14(a) contains a list of all real property leased by the Company (“Leased Real
      Property” and together with the Business Premises, the “Real Property”).

    

    (b)
      Except as set forth in Schedule 4.14(b):

    

    (i)
      At
      the Closing, having acquired the same from the Stockholders or the Company
      in
      the manner described on Schedule 4.14(b)(i), JFD will have good and marketable
      title to the Business Premises, free and clear of any Liens except Permitted
      Liens;

    

    (ii)
      there are no condemnation proceedings, lawsuits, or administrative actions
      relating to the Business Premises pending or threatened in writing;

    

    (iii)
      the
      buildings and improvements on the Business Premises are located within the
      boundary lines of the described parcels of land, are not in violation of
      applicable setback requirements, zoning laws, and ordinances (and none of the
      properties or buildings or improvements thereon are subject to “permitted
      non-conforming use” or “permitted non-conforming structure” classifications),
      and do not encroach on any easement, and the land does not serve any adjoining
      property for any purpose, and the parcel is not located within any flood plain
      or subject to any similar type restriction for which any permits or licenses
      necessary to the use thereof have not been obtained, except in each case as
      would not have a Material Adverse Effect.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (iv)
      each
      facility located on the Business Premises has received all approvals of the
      appropriate Governmental Authorities (including licenses and permits) required
      in connection with the ownership or operation thereof, and has been operated
      and
      maintained in accordance with Applicable Law;

    

    (v)
      each
      facility located on the Business Premises is supplied with utilities and other
      services necessary for the operation of such facility, including gas,
      electricity, water, telephone, sanitary sewer, and storm sewer, all of which
      services are adequate in accordance with all Applicable Law and are provided
      via
      public roads or via permanent, irrevocable, appurtenant easements benefiting
      such parcel; and

    

    (vi)
      the
      Business Premises has the benefit of all necessary rights and easements required
      for the continued use of the same for the business purposes of the Company
      and
      such rights are not subject to any restriction, limitation or the right of
      any
      other Person to determine the same.

    

    (c)
      The
      Stockholders have delivered to Purchaser true and correct and complete copies
      of
      the leases and subleases listed in Schedule 4.14(a) (as amended to date), which
      such leases and subleases have not been amended or modified since the amendments
      furnished. With respect to each lease and sublease listed on Schedule
      4.14(a):

    

    (i)
      The
      Company enjoys quiet possession under all such leases or subleases;

    

    (ii)
      each
      lease or sublease will continue to be legal, valid, binding, enforceable, and
      in
      full force and effect on identical terms following the consummation of the
      transactions contemplated hereby;

    

    (iii)
      all
      of the terms and conditions of each lease or sublease have been observed or
      performed in all material respects and, to the Knowledge of the Stockholders,
      no
      party to any such lease or sublease is in breach or default, and no event has
      occurred which, with notice or lapse of time or both, would constitute a breach
      or default or permit termination, modification, or acceleration
      hereunder.

    

    (iv)
      The
      Company has not assigned, transferred, conveyed, mortgaged, deeded in trust,
      or
      encumbered any interest in any of the identified leaseholds or
      subleaseholds;

    

    (v)
      all
      facilities leased or subleased by the Company, (A) to the Knowledge of the
      Stockholders, have received all material approvals of Governmental Authorities
      required in connection with the operation thereof and (B) have been operated
      and
      maintained by the Company in all material respects in accordance with Applicable
      Law; and

    

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (vi)
      all
      facilities leased or subleased thereunder are supplied with utilities and other
      services necessary for the operation of said facilities in the Ordinary Course
      of Business of the Company.

    

    (vii)
      all
      improvements or alterations on Leased Real Property have been made in accordance
      with the terms of the pertinent Leases and Applicable Law and, except as set
      forth on Schedule 4.14(c) (vii), there is no obligation on the part of the
      Company to remove any of such alterations or improvements at the conclusion
      of
      the term of such Lease or otherwise.

    

    (d)
      Except as would not, individually or in the aggregate, have a Material Adverse
      Effect, there are no structural, electrical, mechanical, plumbing, roof, paving
      or other defects in any improvements located on any Real Property currently
      owned, leased or otherwise occupied, by the Company.

    

    (e)
      Except as set forth on Schedule 4.14(e), all of the Real Property is occupied
      solely by the Company and is being used exclusively for, and in connection
      with,
      the Business. None of the Real Property is subject to any Contract or
      understanding for its use by any Person other than the Company.

    

    
      
        4.15.
          Environmental
          Compliance.

      

    

    

    Except
      as
      set forth in Schedule 4.15:

    

    (i)
      The
      Business Premises and all of the Leased Real Property (while owned, leased,
      occupied or operated by the Company) have been and currently are in compliance
      with all Environmental Laws;

    

    (ii)
      There has been no Release or Hazardous Discharge into, on, from or under any
      of
      the Real Property or any real property formerly owned, leased or operated by
      the
      Company. 

    

    (iii)
      There are no pending or, to the Knowledge of the Stockholders, threatened,
      Environmental Actions against the Company or against any of the owners or
      operators of any facilities that received solid waste or Hazardous Substances
      generated by the Company.

    

    (iv)
      No
      Real Property that has been or currently is being leased, occupied, or operated
      by the Company has been, or is being used now by the Company for the generation,
      storage, manufacture, use, transportation, disposal or treatment of Hazardous
      Substances, except in material compliance with Environmental Laws;

    

    (v)
      The
      Company currently maintains all Environmental Permits necessary for the
      operation of the Business and the Company has been and is in compliance with
      such Environmental Permits, and there are no legal proceedings pending or
      threatened to revoke such Environmental Permits;

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (vi)
      The
      Company is not subject to any outstanding Order or a party to any agreement
      with
      any Governmental Authority or third party with respect to Environmental Laws
      or
      Remedial Action;

    

    (vii)
      There are no claims, actions or proceedings by any of the Company’s current or
      former employees pending, or to the Knowledge of the Stockholders, threatened,
      based on alleged injury to such employee’s health caused by exposure to any
      Hazardous Substance; and 

    

    (viii)
      Neither this Agreement nor the consummation of the transactions contemplated
      by
      this Agreement will impose any obligations for site investigation or cleanup,
      or
      to notify or obtain the consent of any Governmental Authority or third parties
      under any Environmental Laws (including any so-called “transaction-triggered” or
“responsible property transfer” laws and regulations).

    

    4.16. Intellectual
      Property and Information Technology.

    

    (a)
      All
      Intellectual Property currently used by the Company in the conduct of the
      Business is either owned by or validly licensed to the Company and is listed
      in
      Schedule 4.16(a).

    

    (i)
      the
      Company has not been alleged to have infringed upon, misappropriated or misused
      any Intellectual Property or proprietary information of another Person and,
      to
      the Knowledge of the Stockholders, the Company is not doing so. 

    

    (ii)
      to
      the Knowledge of the Stockholders, no Person is infringing upon,
      misappropriating, misusing or otherwise violating the Company’s rights to the
      Intellectual Property or its proprietary information.

    

    (b)
      The
      Intellectual Property is sufficient and appropriate for the Business as
      conducted currently by the Company. No Intellectual Property other than that
      owned or licensed by the Company is required for the Business as presently
      conducted. The Intellectual Property owned by the Company is free and clear
      of
      any Liens except Permitted Liens. No Intellectual Property that is material
      to
      the Business has been (i) licensed by the Company to any third party or (ii)
      if
      a Trade Secret, disclosed to any third party other than pursuant to a
      non-disclosure or confidentiality agreement or such other agreement intended
      to
      protect the Company’s proprietary rights therein.

    

    (c)
      All
      Information Technology used by the Company in the conduct of the Business and
      all material agreements or arrangements relating to the maintenance and support,
      security, disaster recovery management and utilization (including facilities
      management and computer bureau services agreements) of the Information
      Technology are described on Schedule 4.16(b).

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (d)
      All
      Information Technology currently used by or required to carry on the Business
      and fulfill the Scheduled Contracts is either owned by or validly leased or
      licensed to the Company. 

    

    (e)
      The
      Information Technology owned or used by the Company in the conduct of the
      Business has the capacity and performance necessary to fulfill the requirements
      it currently performs. 

    

    (f)
      The
      consummation of the transactions contemplated by this Agreement will not result
      in the diminution, license, transfer, termination or forfeiture of the Company’s
      rights in and to any of the Intellectual Property or the Information Technology
      currently used by the Company in the conduct of the Business.

    

    4.17. Brokers.
      Except
      as set forth on Schedule 4.17, 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 the Company or any of the Stockholders. 

    

    4.18. Material
      Contracts.

    

    (a)
      Schedule 4.18(a) the lists all Contracts as of March 31, 2007 having a value
      of
      $100,000 or more to which the Company is a party or its assets or properties
      are
      bound and which have not, as of the date hereof, been terminated or fully
      performed (“Material Contracts”). A true, correct and complete copy of each such
      Material Contract has been made available to Purchaser. To the Knowledge of
      the
      Stockholders, all of such Material Contracts are fully performable by the
      Company in accordance with their terms.

    

    (b)
      Except as disclosed on Schedule 4.18(b), regardless of whether oral or written,
      the Company is not a party to, or bound by, any of the following:

    

    (i)
      any
      Contracts providing for employment or consultation services with or by the
      Company; 

    

    (ii)
      any
      license, franchise or royalty Contracts;

    

    (iii)
      any
      Contracts pursuant to which any Lien (other than Permitted Liens) has been
      imposed on any of the Company’s properties or assets;

    

    (iv)
      any
      Contracts (other than this Agreement) providing for (A) the future disposition
      or acquisition of any of the Company’s properties or assets other than
      dispositions or acquisitions of Inventory in the Ordinary Course of Business
      or
      of assets having a fair market value of $50,000 or less, and (B) any merger
      or
      other business combination involving the Company or the Stock;

    

    (v)
      any
      Contract that limits or contains restrictions on the ability of the Company
      to
      incur or suffer to exist any Lien, to purchase or sell any assets, to change
      the
      lines of business in which it participates or engages or to engage in any merger
      or other business combination;

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (vi)
      any
      Contracts (excluding outstanding warranty obligations of the Company) that
      (A)
      involve the payment, pursuant to the terms of any such Contract, (1) by the
      Company of more than $25,000 annually or (2) to the Company of more than $25,000
      annually and (B) cannot be terminated within ninety (90) days after giving
      notice of termination without resulting in any material cost or penalty to
      the
      Company;

    

    (vii)
      any
      bid, tender, proposal or offer which, if accepted, will result in the Company
      becoming a party to any agreement or arrangement in which the aggregate payments
      to be received or paid by the Company would exceed $100,000;

    

    (viii)
      a
      lease or lease purchase agreement, mortgage, conditional sale or title retention
      agreement, indenture, security agreement, credit agreement, pledge or option
      with respect to any property, real or personal (tangible or intangible), in
      any
      capacity;

    

    (ix)
      Contracts for the purchase, provision or use of services, materials, supplies,
      inventory, machinery or equipment involving more than $50,000 in the
      aggregate;

    

    (x)
      a
      note, loan, credit or financing agreement or other Contract for money borrowed
      or other evidence of Indebtedness of the Company, all related security
      agreements and collateral documents, including any agreement for any commitment
      for future loans, credit or financing, and all other agreements that create
      a
      Lien other than Permitted Liens on any property or asset;

    

    (xi)
      a
      guarantee involving the Company or any of the Stockholders relating to the
      Company’s obligations;

    

    (xii)
      any
      distribution, brokerage (including, without limitation, any brokerage or
      finder’s agreement or arrangement with respect to any of the transactions
      contemplated by this Agreement) or advertising Contracts;

    

    (xiii)
      Contracts with investment bankers, accountants, attorneys, consultants or other
      independent contractors, including those relating to this
      Agreement;

    

    (xiv)
      agreements or Contracts with or among any of the Stockholders, former
      stockholders, current or former directors or officers of the Company or any
      Affiliates of such Persons;

    

    (xv)
      Contracts or arrangements which restrict the Company from engaging or competing
      in any business or in any location or from soliciting clients, employees or
      other service providers or which requires the Company to maintain the
      confidentiality of any material matter.  

    

    (xvi)
      any
      sales or agency agreements not cancelable within 60 days; 

    

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (xvii)
      Partnership or joint venture agreements;

    

    (xviii)
      Contracts containing a change of control or acceleration of performance
      provision that would be triggered by the closing of the transactions
      contemplated by this Agreement.

    

    (xix)
      a
      Tax sharing arrangement with any Person pursuant to which the Company or the
      Purchaser will have to make any payments based on the transactions contemplated
      by this Agreement and 

    

    (xx)
      Contracts not made in the Ordinary Course of Business;

    

    (c)
      The
      Stockholders have made available for inspection by the Purchaser, a copy of
      each
      written contract, agreement and other document (and has described each oral
      commitment or arrangement) listed in Schedule 4.18(a) or 4.18(b) hereto and
      all
      amendments thereto and any waivers granted thereunder, correct and complete
      in
      all material respects (collectively, the “Scheduled Contracts”). Except as
      specifically set forth on Schedules 4.18(a) and 4.18(b), the sale of the Stock
      to the Purchaser and the consummation of the other transactions contemplated
      by
      this Agreement are not a violation of, or grounds for, the modification or
      cancellation of any of the Scheduled Contracts or for the imposition of any
      penalty or the default of any security interests thereunder.

    

    (d)
      Except as described in Schedule 4.18(d) hereto, to the Knowledge of the
      Stockholder, all Scheduled Contracts are valid and binding agreements, in full
      force and effect and enforceable in accordance with their respective terms,
      except as the enforcement thereof may be subject to or limited by bankruptcy,
      insolvency, reorganization, moratorium or other laws affecting the enforcement
      of creditors’ rights generally now or hereafter in effect and subject to the
      application of equitable principles and the availability of equitable remedies.
      Except as described in Schedule 4.18(d), there is not, under any Scheduled
      Contract or any obligation, or covenant or condition contained therein, any
      existing default or breach by the Company, or, to the Knowledge of the
      Stockholders, by any other party, or any event, condition or act (including
      the
      consummation of the transactions contemplated by this Agreement) which, with
      the
      giving of notice, the lapse of time, or the happening of any other event or
      condition, (i) would constitute a default under, or a breach of, any provision
      of any Scheduled Contract or (ii) would permit the acceleration of any
      obligation of any party to any Scheduled Contract or the creation of a Lien
      other than Permitted Liens upon any of the Company’s assets. The Company has not
      assigned, delegated or otherwise transferred any of its rights or obligations
      with respect to any Scheduled Contract except in the Ordinary Course of
      Business. Except as set forth on Schedule 4.18(d), no party thereto has notified
      the Company of its intention to terminate or cancel any Scheduled
      Contract.

    

    4.19. Inventory.
      Schedule 4.19 hereto sets forth a summary of the entire inventory of the Company
      as of the Balance Sheet Date, as reflected on the Balance Sheet (the
“Inventory”). The Inventory summarized in Schedule 4.19 and all additions
      thereto acquired since the Balance Sheet Date and on hand as of the Closing
      (not
      having been disposed of since the Balance Sheet Date in the Ordinary Course
      of
      Business) are in all material respects of a quantity and quality usable or
      saleable in the Ordinary Course of the Business, except as set forth on Schedule
      4.19, subject to the applicable reserve on the Balance Sheet. All additions
      to
      the Inventory acquired since the Balance Sheet Date were acquired in the
      Ordinary Course of Business. Finished goods in Inventory and the additions
      thereto conform to published specifications, are free from material defects
      and
      are marketable and saleable in the Ordinary Course of Business. All Inventory
      not written off or reserved against has been recorded on the books of the
      Company at the lower of cost or market value determined in accordance with
      GAAP,
      except as set forth on Schedule 4.19.

    

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    4.20. Accounts
      and Notes Receivable/Payable.
      Except
      as set forth on Schedule 4.20, all accounts and notes receivable of the Company
      as of the Balance Sheet Date or thereafter acquired by the Company have arisen
      in the Ordinary Course of Business, represent valid obligations to the Company
      arising from bona fide transactions in the Ordinary Course of Business and,
      except as set forth on Schedule 4.20, are not subject to claims or set-offs
      or
      other defenses or counterclaims. All accounts and notes payable by the Company
      as of the Balance Sheet Date arose in bona fide transactions in the Ordinary
      Course of Business. All items which are required by GAAP to be reflected as
      receivables and payables on the books and records of the Company are so
      reflected in a manner consistent with past practice.

    

    4.21. Insurance.
      Immediately prior to the Closing, the assets, properties and operations of
      the
      Company were insured under various policies of insurance. The Stockholders
      have
      delivered or otherwise made available to Purchaser previously complete and
      correct copies of such insurance policies. All such policies are in full force
      and effect, no notice of cancellation has been received, and there is no
      existing material default, or event which with the giving of notice or lapse
      of
      time or both, would constitute a material default, by any insured hereunder.
      To
      the Knowledge of the Stockholders, there currently is no basis for an insurance
      claim by the Company, under any of such policies.

    

    4.22. Product
      Warranties, Defects and Liabilities.
      There
      exists no pending or, to the Knowledge of the Stockholders, threatened, action,
      suit, inquiry, proceeding or investigation by or before any Governmental
      Authority relating to any product alleged to have been manufactured, distributed
      or sold by the Company, and alleged to have been defective or improperly
      designed or manufactured or in breach of any express or implied product
      warranty, and, to the Knowledge of the Stockholders, there exists no latent
      defect in the design or manufacture of any of the products of the Business.
      There exists no pending or, to the Knowledge of the Stockholders, threatened,
      product liability or warranty claims against the Company, except to the extent
      reserved for specifically on the Balance Sheet, and to the Knowledge of the
      Stockholders, there is no reasonable basis for any such suit, inquiry, action,
      proceeding, investigation or claim. Except as set forth in Schedule 4.22, there
      are no express product or service warranties relating to the Company’s products
      or services.

    

    4.23. Affiliate
      Transactions.
      The
      Company is not a party to, or bound by, any Contract with any of its Affiliates,
      other than on arms-length terms which are no less favorable to the Company
      than
      those which could be obtained with a third party which is not an Affiliate.
      No
      Affiliate of the Company owns or otherwise has any rights to or interests in
      any
      of the Company’s properties and assets.

    

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    4.24. Distributors,
      Customers and Suppliers.
      

    

    Except
      as
      described in Schedule 4.24(b), there are no Contracts to which the Company
      is a
      party under the terms of which (i) the Company is obligated to purchase any
      product or services from, or sell any product or services to, any other Person
      on an exclusive basis with respect to any geographic area or group of potential
      customers; or (ii) any other Person is similarly obligated to the
      Company.

    

    4.25. Employees.

    

    (a)
      Except as set forth on Schedule 4.25(a), each employee of the Company is
      employed on an at-will basis. Except as set forth on Schedule 4.25(a), the
      Company has not promised or represented or distributed any written material
      to
      any of the directors, officers, employees, consultants, agents or
      representatives of the Company that any of such Persons will be employed or
      engaged by or receive any particular benefits from (i) the Company or any of
      its
      Affiliates or (ii) the Purchaser or any of its Affiliates, in each case on
      or
      after the Closing Date. To the Knowledge of the Stockholders, no key employee
      and no group of employees of the Company has any plans to terminate or modify
      their status as an employee or employees of the Company (including upon
      consummation of the transactions contemplated hereby).

    

    (b)
      Schedule 4.25(b) sets forth a true, complete and correct list of all,
      independent contractors and consultants of the Company as of the Closing Date.
      Schedule 4.25(b) also set forth a true, complete and correct list of all
      outstanding loans to officers or employees. All income taxes, social security,
      unemployment and other taxes due and payable have been timely withheld by the
      Company from its employees for all periods in compliance with Applicable Law.
      Federal, state, local and foreign Tax Returns, as required by Applicable Law,
      have been filed by the Company for all periods for which returns were due with
      respect to employee income tax withholding, social security and unemployment
      taxes, and the amounts shown thereon to be due and payable have been paid,
      together with any interest and penalties that are due as a result of the
      Company’s failure to file such returns when due, and pay, when due, the amounts
      shown thereon to be due.

    

    (c)
      Except as set forth on Schedule 4.25(c), all obligations to individuals who
      are
      or have been directors, officers, employees, independent contractors,
      consultants, agents or representatives of the Company for wages, reimbursements,
      fees, commissions, bonuses, retirement, severance, deferred compensation,
      incentive, stock option, vacation, unemployment and other payments,
      distributions and benefits, and all contributions (voluntary or otherwise)
      to
      any payments under all employee benefit plans, have been paid in the Ordinary
      Course of Business through the Closing Date.

    

    
      
        4.26.
          Benefit
          Plans.

      

    

    

    (a)
      Schedule 4.26(a) hereto sets forth a true and complete list of each
      "employee welfare benefit plan" (as defined in Section 3(1) of ERISA)
      maintained by the Company, or any trade or business under common control with
      the Company within the meaning of Section 4001(a)(14) of ERISA (each, an “ERISA
      Affiliate”) or to which the Company or an ERISA Affiliate contributes or is
      required to contribute, in each case in which the Company’s employees
      participate (such employee welfare benefit plans being hereinafter collectively
      referred to as the "Welfare Benefit Plans"). With respect to each Welfare
      Benefit Plan, all contributions or premiums due by, or attributable to the
      period ending on, the Closing Date have been paid. Except for COBRA coverage,
      there are no Welfare Benefit Plans, Benefit Arrangements or other agreements
      that provide medical or death benefits to current or former employees of the
      Company beyond their retirement or termination of employment. The Stockholders
      have furnished or made available to Purchaser copies of each Welfare Benefit
      Plan, Pension Benefit Plan and Benefit Arrangement, the most recent annual
      report and summary plan description for each Welfare Benefit Plan, Pension
      Benefit Plan and Benefit Arrangement, where applicable, and a written summary
      of
      each other Welfare Benefit Plan, Pension Benefit Plan and Benefit Arrangement
      where no formal plan or summary exists.

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (b)
      Schedule 4.26(b) hereto sets forth a true and complete list of each
      "employee pension benefit plan" (as defined in Section 3(2) of ERISA)
      maintained by the Company or any ERISA Affiliate or to which the Company or
      an
      ERISA Affiliate contributes or is required to contribute, including any
      multiemployer employee welfare benefit plan, on behalf of officers and employees
      of the Company, or to which the Company or an ERISA Affiliate contributes or
      is
      required to contribute, including any multiemployer employee pension benefit
      plan, on behalf of officers and employees of the Company (such multiemployer
      and
      other employee pension benefit plans being hereinafter collectively referred
      to
      as the "Pension Benefit Plans"). No Pension Benefit Plan is a "defined benefit
      plan" (as defined in Section 3(35) of ERISA). Neither the Company nor any
      of its ERISA Affiliates has any liability or potential liability under Title
      IV
      of ERISA. With respect to each Pension Benefit Plan, all contributions due
      by or
      attributable to the period ending on the Closing Date have been made or accrued
      on the Latest Balance Sheet. 

    

    (c)
      Except as set forth on Schedule 4.26(c), to the Knowledge of the
      Stockholders, each Pension Benefit Plan, each Welfare Benefit Plan, each Benefit
      Arrangement and each related trust agreement and annuity contract and insurance
      policy, where applicable, complies currently and has complied for the past
      three
      (3) years, in each case in all material respects, both as to form and operation,
      with the provisions of (A) the Code and, with respect to each Pension
      Benefit Plan, such provisions to be tax qualified under Section 401(a) or
      403(a) of the Code; (B) ERISA; and (C) all other Applicable Laws; all
      necessary Government Approvals for the Pension Benefit Plans have been obtained;
      and favorable determination letters, copies of which have been made available
      to
      the Purchaser, as to the qualification under the Code of each of the Pension
      Benefit Plans, as amended, have been received from the Internal Revenue
      Service.

    

    (d)
      No
      Welfare Benefit Plan or Pension Benefit Plan or trustee or administrator thereof
      has engaged in any transaction that might subject the Company to a tax or
      penalty under Section 4975 of the Code or a penalty under Section 502 of ERISA.
      Except as set forth on Schedule 4.26(d), each Welfare Benefit Plan and each
      Pension Benefit Plan and, where applicable, each Benefit Arrangement has been
      administered to date in material compliance with its terms, the requirements
      of
      the Code for favorable tax treatment, ERISA and all other Applicable Laws and
      all reports required by any Government Authority with respect to each Welfare
      Benefit Plan, each Pension Benefit Plan and each Benefit Arrangement have been
      timely filed. 

    

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (e)
      Schedule 4.26(e) lists each material salary practice or arrangement and
      each deferred compensation plan, bonus plan, stock option plan, incentive
      compensation plan, employee stock purchase plan and any other employee benefit,
      retirement savings, insurance, sick pay, vacation pay or severance pay plan,
      agreement, arrangement or commitment or other compensatory plan or program,
      whether formal or informal, which is applicable to any employee of the Company
      in his or her capacity as an employee of the Company and not required under
      a
      previous subsection to be listed on Schedule 4.26(a) or 4.26(b)
      maintained by the Company or an Affiliate with respect to any of the Company’s
      employees (collectively, the “Benefit Arrangements” and together with Welfare
      Benefit Plans and Pension Benefit Plans sometimes referred to herein as
“Employee Benefit Plans”). 

    

    (f)
      Except as set forth on Schedules 4.26(a), 4.26(b) and 4.26(e), there is no
      Welfare Benefit Plan, Pension Benefit Plan or Benefit Arrangement which is
      sponsored or maintained by the Company.

    

    (g)
      There
      are no actions, suits or claims (other than routine claims for benefits) pending
      or, to the Knowledge of the Stockholders, threatened against the Company in
      connection with, or against, any Pension Benefit Plan, Welfare Benefit Plan
      or
      Benefit Arrangement, and there are no civil or criminal actions pending or,
      to
      the Stockholder’s Knowledge, threatened against any fiduciary, Pension Benefit
      Plan, Welfare Benefit Plan or Benefit Arrangement. 

    

    (h)
      Other
      than as set forth on Schedule 4.26(h), neither the execution and delivery of
      this Agreement nor the consummation of the transactions contemplated hereby
      will
      result in (a) any payment or transfer of money, property or other consideration
      (including, without limitation, severance, unemployment compensation or bonus
      payments) (whether or not such payment would constitute a “parachute payment” or
“excess parachute payment” within the meaning of Section 280G of the Code)
      becoming due to any employee or former employee of the Company; (b) any increase
      in the amount of compensation, benefits or fees payable to any such individual;
      (c) the acceleration of the accrual, vesting or timing of payment of any
      benefits, compensation or fees payable to any such individual; or (d) the
      acceleration or creation of any other additional rights, under any Benefit
      Arrangement, severance, parachute, employment, change in control or other
      agreement or arrangement by or to which the Company is a party. 

     

    4.27 Illegal
      Payments.
      Neither
      the Company nor any of its directors, officers, employees or agents, has (a)
      directly or indirectly given or agreed to give any illegal gift, contribution,
      payment or similar benefit to any supplier, customer, governmental official
      or
      employee or other person to assist in connection with any actual or proposed
      transaction or made or agreed to make any illegal contribution, or reimbursed
      any illegal political gift or contribution made by any other Person, to any
      candidate for federal, state, local or foreign public office (i) which violates
      any Applicable Law, including but not limited to, the Foreign Corrupt Practices
      Act of 1977, as amended, or might subject the Purchaser to any Damages or
      penalties in any civil, criminal or governmental litigation or proceeding or
      (ii) the non-continuation of which has had or might have a Material Adverse
      Effect (b) established or maintained any unrecorded fund or asset or made any
      false entries on any books or records for any purpose.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    4.28. Books
      and Records.
      The
      books and all corporate and financial records of the Company are complete and
      correct in all material respects and have been maintained by the Company in
      accordance with sound business practices and Applicable Law and other
      requirements and no notice has been received or allegation made that a register
      or book is incorrect or should be rectified. 

     

    4.29. Bank
      Debt Representation.
      The
      Bank Debt Statement is true and correct in all respects and, as of the Closing
      Date, the Bank Debt is not greater than the amount stated (the “Bank Debt
      Representation”).

    

    4.30 Backlog.
      Schedule 4.30 sets forth, truly and accurately, the backlog of orders for the
      products and services of the Company as of April 11, 2007. The backlog is based
      on valid and existing orders received from customers of the Company. None of
      the
      orders included in the backlog have been cancelled, and, to the Knowledge of
      the
      Stockholders, no customer is intending to cancel any of such orders.

    

    4.31 Disclosure.
      The
      representations and warranties contained in this Article 4 (including the
      schedules and exhibits required to be delivered by the Stockholders to Purchaser
      pursuant to this Agreement) and any certificate furnished by Stockholders to
      Buyer pursuant to this Agreement do not contain any untrue statement of a
      material fact or omit to state any material fact necessary,
      in
      light of the circumstances in which they were made and taking into account
      the
      express limitations set forth in each such representation and warranty, in
      order
      to make such representations and warranties not misleading.

     

    ARTICLE 5

    REPRESENTATIONS
      AND WARRANTIES OF BUYER

    

    Purchaser
      hereby represents and warrants to Stockholders as follows:

     

    5.1. Organization
      and Qualification.
      Purchaser is duly organized, validly existing and in good standing under the
      laws of its jurisdiction of incorporation and has all requisite power and
      authority to own, lease and operate its properties and to carry on its
      businesses as now being conducted. Purchaser is duly qualified or licensed
      and
      in good standing to do business in those jurisdictions in which the property
      owned, leased or operated by it or the nature of the business conducted by
      it
      makes such qualification or licensing necessary, except in such jurisdictions
      where the failure to be so duly qualified or licensed and in good standing
      would
      not have a Purchasers Material Adverse Effect. 

    

    5.2. Authority
      Relative to this Agreement.
      Purchaser
      has all
      necessary corporate power and authority to execute and deliver this Agreement
      and to consummate the transactions contemplated hereby. The execution and
      delivery of this Agreement and the consummation of the transactions contemplated
      hereby have been duly and validly authorized by the Board of Directors of
      Purchaser and no other corporate proceedings on the part of Purchaser are
      necessary to authorize this Agreement or to consummate the transactions
      contemplated hereby. This Agreement has been duly and validly executed and
      delivered by Purchaser and constitutes a valid, legal and binding agreement
      of
      Purchaser enforceable against Buyer in accordance with its terms.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    5.3. Consents
      and Approvals: No Violations.

    

    (a)
      No
      filing with or notice to, and no permit, authorization, consent or approval
      of,
      any Governmental Authority is necessary for the execution and delivery by
      Purchaser of this Agreement or the consummation by Purchaser of the transactions
      contemplated hereby, except where the failure to obtain such permits,
      authorizations, consents or approvals or to make such filings or give such
      notice would not have a Purchaser Material Adverse Effect.

    

    (b)
      Neither the execution, delivery and performance of this Agreement by Purchaser
      nor the consummation by Purchaser of the transactions contemplated hereby will
      (i) conflict with or result in any breach of any provision of the
      Certificate of Incorporation or Bylaws of Purchaser, (ii) result in a
      violation or breach of or constitute (with or without due notice or lapse of
      time or both) a default (or give rise to any right of termination, amendment,
      cancellation or acceleration or Lien) under any of the terms conditions or
      provisions of any Contract to which Purchaser is a party or by which Purchaser
      or any of its properties or assets may be bound or (iii) violate any
      Applicable Law binding on or applicable to Purchaser or any of its properties
      or
      assets except, in the case of (ii) or (iii), for violations, breaches or
      defaults which would not have a Purchaser Material Adverse Effect or an adverse
      effect on the ability of Purchaser to enter into and perform its obligations
      under this Agreement or any of the Related Documents.

     

    5.4. Litigation. There
      are
      no judicial or administrative actions, proceedings or investigations relating
      to
      Purchaser or its Affiliates pending or, to Purchaser’s knowledge, threatened,
      that question the validity of this Agreement or any Related Documents or any
      action to be taken by Purchaser in connection with this Agreement or any such
      Related Documents or that if adversely determined, would have a Material Adverse
      Effect.

     

    5.5. Brokers. No
      broker, finder or investment banker is entitled to any brokerage, finders or
      other fee or commission from Purchaser in connection with the transactions
      contemplated by this Agreement based upon arrangements made by or on behalf
      of
      Purchaser, or any of its Affiliates.

    

    5.6. Purchase
      of Stock for Investment.
      Purchaser represents that it is acquiring the Stock for its own account for
      investment purposes only and not with a view to, or for sale or resale in
      connection with any public distribution thereof, nor with any present intention
      of distributing or selling the same. Purchaser is an “accredited investor” as
      that term is defined in Rule 501 of Regulation D promulgated under the
      Securities Act of 1933, as amended.

     

    5.7. Disclosure.
      The
      representations and warranties contained in this Article 5 (including any
      schedules and exhibits required to be delivered by Purchaser to the Stockholders
      pursuant to this Agreement) and any certificate furnished or to be furnished
      by
      Purchaser to the Stockholders pursuant to this Agreement do not contain and
      will
      not contain any untrue statement of a material fact or omit to state any
      material fact necessary,
      in
      light of the circumstances in which they were made and taking into account
      the
      express limitations set forth in each such representation and warranty, in
      order
      to make such representations and warranties not misleading.

    

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    ARTICLE 6

    COVENANTS

     

    6.1. Additional
      Agreements; Reasonable Best Efforts.
      Subject
      to the terms and conditions herein provided, each of the parties hereto agrees
      to use its commercially reasonable best efforts to take or cause to be taken
      all
      action and to do or cause to be done all things reasonably necessary, proper
      or
      advisable under Applicable Law to consummate and make effective the transactions
      contemplated by this Agreement, including, without limitation,
      (a) contesting any legal proceeding challenging the transactions
      contemplated hereby, and (b) executing any additional instruments necessary
      to consummate the transactions contemplated hereby and thereby. If at any time
      after the Closing Date any further action is necessary to carry out the purpose
      of the Agreement then the Stockholders and proper officers and directors of
      the
      Purchaser, as the case may be, shall take all such necessary
      action.

     

    6.2. Expenses.
      Except
      as otherwise may be expressly provided in this Agreement, the Stockholders
      shall
      bear the fees and expenses incurred in connection with this Agreement and the
      transactions contemplated hereby and in connection with all obligations required
      to be performed by them or the Company under this Agreement including, but
      not
      limited to, all of the fees and expenses of the Company incurred prior to the
      Closing Date for legal, accounting and investment advice in connection with
      the
      transactions contemplated hereby, as well as the conveyance or transfer of
      the
      ownership of the Business Premises to the Stockholders or an entity in which
      they are members or shareholders prior to the Closing Date and the Lease. Except
      as otherwise may be expressly provided in this Agreement, the Purchaser shall
      bear its fees and expenses incurred in connection with this Agreement and the
      transactions contemplated hereby and in connection with all obligations required
      to be performed by it under this Agreement. 

    

    
      
        6.3
          Tax
          Matters.
          

      

    

    

    (a)
      The
      Stockholders shall pay any federal, state, local or foreign sales, transfer,
      stamp or similar taxes payable in connection with the sale and transfer of
      the
      Stock pursuant to this Agreement. 

    

    (b)
      The
      Stockholders and Purchaser hereby agree that the tax year of the Company for
      federal income tax purposes will end on the Closing Date and that the Company’s
      Subchapter S status for federal income tax purposes will terminate as of the
      Closing Date, in each case as required in accordance with rules applicable
      to a
      Subchapter S corporation making an election under Section 338(h)(10) of the
      Code. 

    

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    (c)
       (i)
      At
      the request of the Purchaser, the Stockholders shall timely make
      a joint
      election under Section 338(h)(10) of the Code (a “338(h)(10) Election”) with the
      Purchaser with respect to the purchase of the Stock. The Purchaser and the
      Stockholders shall, at the request of the Purchaser, make
      any
      analogous election with respect to state, local or foreign Taxes, to the extent
      that such election is separately available. The Purchaser and the Stockholders
      shall exchange completed and executed copies of (i) IRS Form 8023 and required
      schedules thereto, and (ii) to the extent required, any similar forms with
      respect to state, local or foreign Taxes, which shall in each case be completed
      in a manner consistent with the Final Allocation, as soon after the preparation
      of the Final Allocation as is reasonably practicable.

    

    (ii)
      Unless the Purchaser determines it will not make a 338(h)(10) Election, the
      Purchaser shall, within sixty (60) days of the Closing Date, determine and
      provide to the Stockholders
      the
      allocation of the Adjusted Purchase Price, as determined for United States
      federal income tax purposes, among the assets deemed acquired for United States
      federal income tax purposes assuming a 338(h)(10) Election were made (the “Final
      Allocation”). The Final Allocation shall be made in accordance with the Code and
      any applicable Treasury Regulations. The Final
      Allocation may be redetermined
      by
      Purchaser upon the happening of any event reasonably requiring such
      redetermination, including a breach of the Bank Debt Representation. The Final
      Allocation, once determined, shall be annexed to this Agreement as Exhibit
      D,
      and any redetermination of the Final Allocation pursuant to the preceding
      sentence shall likewise be annexed to this Agreement with an appropriate
      designation. The Final Allocation (and any redetermination thereof) shall be
      binding on the Purchaser and the Stockholder for all Tax reporting
      purposes.

    

    (d)
      The
      Stockholders shall be liable for all Taxes of the Company for the period prior
      to and ending on the Closing Date (“the Pre-Closing Period”), other than sales,
      payroll and real property taxes to the extent not yet due and payable in the
      Ordinary Course of Business. Prior to the Closing, the Stockholders have
      received from the Company by way of a dividend, a distribution of thirty eight
      (38%) percent of the taxable income of the Company for calendar year 2006 to
      approximate the Stockholders’ liability for taxes for that year (the “Agreed
      Dividend”). In addition, the Stockholders, and not the Company, shall be liable
      for all Taxes or other liabilities arising from or in connection with the
      transfer, conveyance or dividending of the Business Premises to the Stockholders
      or an entity in which some or all of the stockholders are members or
      shareholders, as the case may be, including, but not limited to, real estate
      transfer taxes and mortgage recording fees and taxes. 

    

    (e)
      The
      Purchaser shall prepare the final Subchapter S Corporation federal and state
      corporation tax return for the Company. The Stockholders will be given a
      reasonable opportunity to review and comment upon such Tax Returns and
      amendments thereto prior to the filing of such Tax Returns. The Purchaser shall
      prepare and file all other Tax Returns of the Company as well as sales, payroll
      and similar type tax returns.

    

    (f)
      The
      Purchaser shall have control over the Audit of any Tax Return of the Company
      for
      any period (or portion thereof) ending on or before the Closing Date at the
      Stockholder’s expense; provided, that the Purchaser shall not compromise, settle
      or otherwise resolve any such Audit without the prior written consent of the
      Stockholders (which consent shall not be unreasonably delayed or withheld).
      The
      Stockholders, at the Stockholders’ expense, shall cooperate with the Purchaser
      with respect of any such Audit. For purposes hereof, "Audit" shall mean any
      audit, examination or investigation of a Tax Return or with respect to Taxes,
      including any administrative appeal therefrom and any litigation before any
      tribunal relating thereto. 

    

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    6.4. Access
      to Books and Records of the Company.
      After
      the Closing Date, the Purchaser shall permit the Stockholders and their
      professional representatives reasonable access, at reasonable intervals, during
      normal business hours and in a manner so as not to unreasonably interfere with
      the normal business operations of the Company, to relevant books, records
      (including tax records), contracts and documents of or pertaining to the Company
      and shall cooperate with the Stockholders in connection with tax audits and
      investigations of the Stockholders conducted by any Governmental Authority,
      and
      the preparation of Tax Returns by the Stockholders relating to periods of time
      prior to the Closing Date. The Stockholders will keep strictly confidential
      all
      such material and information that it receives from the Company and will not
      use
      such information except in connection with Audits, investigations and other
      tax
      related matters. 

    

    
      
        6.5.
          Confidentiality.
          

      

    

    

    (a)
      The
      Stockholders acknowledge that they have had access to, and use of, Confidential
      Information of the Company prior to the Closing. The Stockholders covenant
      that,
      without written authorization from the Company, none of them shall at any time
      hereafter, directly or indirectly, use for his, her or their own purposes or
      for
      the benefit of any Person other than the Company, any Confidential Information,
      or disclose any Confidential Information to any Person. 

    

    (b)
      Nothing herein shall prevent any disclosure required by Applicable Law or an
      Order of a Governmental Authority, provided
      that the
      Stockholders involved, prior to any such disclosure, shall give the Company
      prompt notice of any such requirement, shall cooperate with the Company in
      obtaining a protective order or other means of protecting the confidentiality of
      the Confidential Information at the Company’s cost, and shall disclose only that
      Confidential Information that is legally required to be disclosed. 

    

    (c)
      To
      the extent that the same may be appropriate, notwithstanding Section 8.7 hereof,
      the Company shall be entitled to seek injunctive relief without the necessity
      of
      posting a bond from any court of competent jurisdiction restraining any
      threatened or further violation of the covenant contained in Section 6.5(a)
      in
      addition to any other rights or remedies to which the Company may be entitled,
      including the recovery of damages from the Stockholders involved.

    

    6.6. Resignations
      of Directors and Officers.
      The
      Stockholders shall provide to the Purchaser written resignations effective
      as of
      the Closing Date of such directors, officers, trustees and bank signatories
      of
      the Company as the Purchaser may request prior to the Closing Date. In the
      event
      that the Purchaser requests any bank signatory or trustee resignations, the
      Stockholders shall cause to be delivered to Purchaser written instructions
      to
      each bank at which the Company has an account or credit facility or at which
      the
      Company rents a safe deposit box informing such bank of the said resignations
      and revoking the authority of said persons to act with respect to said account,
      credit facility or trust and to have access to said safe deposit box. The
      Stockholders shall also cause to be delivered to Purchaser, effective the
      Closing Date, the written surrender by all Persons holding powers of attorney
      from the Company of their authority and power to act under such powers of
      attorney.

    

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

    6.7 Minute
      Books, Stock Books and Corporate Records.
      The
      complete and correct minute books, certificate of incorporation, bylaws, stock
      ledgers, financial and other corporate records and the corporate seal of the
      Company shall be delivered to the Purchaser by the Stockholders on or before
      the
      Closing Date.

    

    ARTICLE
      7

    NON-COMPETITION;
      NON-SOLICITATION

    

    7.1. (a)
      Each
      of the Stockholders agrees that, as more fully set forth in the Morgan
      Employment Agreement and the Confidentiality and Non-Competition Agreements,
      in
      consideration of the payments made to him or her in connection with the sale
      of
      the Stock to the Company pursuant to this Agreement, for a period commencing
      on
      the Closing Date and continuing, at a minimum, (x) for Morgan, until the five
      (5) year anniversary of the Closing Date (the “Morgan Restrictive Period”) and
      (y) for the Other Stockholders, until the greater of (A) the three year
      anniversary of the Closing Date or (B) eighteen (18) months from the termination
      of any employment with any Affiliate of the Purchaser (the “Stockholder
      Restricted Period”), he or she shall not, directly or indirectly (A) offer or
      sell any products or services, or participate in any business which offers
      or
      sells any products or services, which compete in any geographic area of the
      Territory (as defined in Section 7.1(c) below) with the products or services
      offered or sold by the Company now or in the future, or (B) induce or attempt
      to
      induce, directly or indirectly, any customer of the Company to cease doing
      business, in whole or in part, with the Company or solicit the business of
      any
      such customer for any products or services which compete with any of the
      products or services offered or sold by the Company. Participation in a business
      shall include, but not be limited to, serving as a director, officer, employee,
      agent or representative or having a direct and indirect interest in the business
      as a stockholder, partner, joint venturer or any other financial interest;
      provided, however, that (i) ownership by the Stockholders of not more than
      two
      (2%) percent of the outstanding shares of stock of any such business listed
      on
      any national stock exchange or listed and actively traded on NASDAQ shall not
      be
      a violation of this covenant.

    

    Nothing
      herein shall preclude the Company at any time after the Closing from electing,
      in its sole discretion, to modify in any way the restriction in this Section
      7.1(a) with respect to any one or more of the Stockholders who are then
      currently employed by the Company. 

    

    (b)
      Morgan and each of the Other Stockholders agree that in consideration of the
      payments to him or her in connection with the sale of the Stock in the Company
      pursuant to this Agreement, for the Morgan Restrictive Period or the Stockholder
      Restrictive Period, as the case may be, he or she shall not either on his or
      her
      own account or for any Person, solicit, interfere with, or endeavor to cause
      any
      employee of the Company to leave his employment or induce or attempt to induce
      any such employee to breach his or her employment agreement with the
      Company.

    

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    (c)
      For
      purposes of this Article 7, ATerritory@
      shall
      mean the United States and Canada and any other country or place where the
      Company is engaging or has engaged in business in any material respect at any
      time during the Morgan Restricted Period or the Stockholder Restricted Period,
      as the case may be.

    

    (d)
      Morgan and each of the Other Stockholders acknowledge that both the geographic
      scope and length of the restrictions imposed, respectively, on Morgan and the
      Other Stockholders hereunder are fair and reasonable in the circumstances and
      are necessary and fundamental to the protection of the Business of the
      Company.

    

    7.2. Remedies.
      Notwithstanding Section 8.7 hereof, nothing herein contained shall be construed
      as prohibiting the Company from pursuing remedies available to it for any
      violation of the covenants in Section 7.1(a) and (b), including, but not limited
      to, any injunctive or other equitable relief hereinafter provided in Section
      7.3
      or the recovery of Damages from the Stockholders involved.

    

    7.3. Equitable
      Relief.
      The
      Stockholders acknowledge that the covenants contained in this Article 7 are
      a
      material and necessary inducement for the Purchaser to agree to the transactions
      contemplated hereby, that the Stockholders realized significant monetary benefit
      from these transactions, that violation of any of the covenants contained in
      this Article 7 will cause irreparable and continuing damage to the Purchaser,
      that the Purchaser shall be entitled to injunctive or other equitable relief
      from any court of competent jurisdiction (without the necessity of posting
      a
      bond) restraining any further violation of such covenants, and that such
      injunctive relief shall be cumulative and in addition to any other rights or
      remedies to which the Purchaser may be entitled. 

    

    7.4. Severability.
      In case
      any one or more of the terms or provisions contained in this Article 7 shall
      for
      any reason be held invalid, illegal or unenforceable, such invalidity,
      illegality or unenforceability shall not affect any other terms or provisions
      hereof, but such term or provision shall be deemed modified or deleted as or
      to
      the extent required by applicable law, and such modification or deletion shall
      not affect the validity of the other terms or provisions of this Article 7.
      In
      addition, if any one or more of the restrictions contained in this Article
      7
      shall for any reason be held to be unreasonable with regard to time, duration,
      geographic scope or activity, the parties contemplate and hereby agree that
      such
      restrictions shall be modified and shall be enforced to the full extent
      compatible with Applicable Law.

    

    ARTICLE
      8

    SURVIVAL
      OF REPRESENTATIONS & WARRANTIES;

    INDEMNIFICATION

    

    
      	
              8.

            	
              Survival
                of Representations and Warranties; Indemnification.

            

    

    

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

    8.1. Survival
      of Representations and Warranties.
      Except
      as otherwise expressly provided in this Agreement, all representations and
      warranties made hereunder or pursuant hereto or in connection with the
      transactions contemplated hereby shall not terminate, but shall survive the
      Closing and continue in effect until two (2) years following the Closing Date,
      except that: (a) the representations and warranties contained in Section 4.4
      and
      shall continue indefinitely; (b) the representations and warranties contained
      in
      Section 4.7 shall continue for so long as permitted by Applicable Law; and
      (c)
      the representations and warranties contained in Sections 4.15 and 4.16 shall
      continue for six (6) years; provided
      that, in
      each case, any such representation or warranty as to which a claim shall have
      been asserted during such survival period shall continue in effect until such
      time as such claim shall have been resolved or settled.

    

    8.2. Survival
      of Covenants and Agreements.
      Except
      as expressly provided in this Agreement, all covenants and agreements made
      hereunder or pursuant hereto or in connection with the transactions contemplated
      hereby shall not terminate but shall survive the Closing indefinitely, limited
      only by the applicable statutes of limitation governing the assertion of a
      claim
      for a breach thereof.

    

    8.3.
      Indemnification
      by Stockholders.
      Subject
      to Section 8.8 hereof, the Stockholders, jointly and severally, agree to
      indemnify and hold harmless the Company, the Purchaser, its Affiliates, their
      respective officers, directors, employees and agents and their respective
      successors and assigns (collectively, the “Purchaser Indemnified Parties”), from
      and against any claims, liabilities, losses, damages, costs and expenses
      (including, without limitation, reasonable expenses of investigation and
      attorneys’ fees and expenses) (any one such item being herein called a “Loss”
and all such items being herein collectively called “Losses”) which are caused
      by or arise out of: (a) any breach or default in the performance by the
      Stockholders of any covenant or agreement of the Stockholders contained herein,
      or in any certificate delivered pursuant hereto; (b) any breach of warranty
      or representation made by the Stockholders contained herein, or in any
      certificate delivered pursuant hereto, without regard to materiality other
      than
      under Section 4.11; (c) any breach of the Bank Debt Representation; (d) any
      defects in any product designed, developed, manufactured or sold by the Company
      prior to the Closing Date which result in the recall, withdrawal, or suspension
      from the market of any such products or which result in injury to Persons or
      property; (e) any Liability resulting from the Company’s payments of fees to
      consultants or independent contractors without proper tax documentation; (f)
      any
      Liability resulting from claims by Ohio for Commercial Activity Tax and
      Washington State for Business Occupation Tax (g) any and all actions, suits,
      proceedings, claims, demands, judgments, costs and expenses (including
      reasonable legal fees) incident to any of the foregoing. 

    

    8.4 Indemnification
      by Purchaser.
      Subject
      to Section 8.8, Purchaser agrees to indemnify and hold harmless the Stockholders
      and their respective successors and assigns (“Stockholder Indemnified Parties”)
      from and against any Losses which are caused by or arise out of: (a) any
      breach or default in the performance by Purchaser or the Company of any covenant
      or agreement of the Purchaser contained herein or in any certificate delivered
      pursuant hereto; (b) any breach of warranty or representation made by
      Purchaser contained herein or in any certificate delivered pursuant hereto;
      (c)
      any Liabilities arising out of the operation of the Business by the Company
      after the Closing Date; (d) any and all actions, suits, proceedings, claims,
      demands, judgments, costs and expenses (including reasonable legal fees)
      incident to any of the foregoing. 

    

    
      
        
        

      

      
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        8.5
          Procedure;
          Notice of Claims.

      

    

    

    (a)
      Any
      indemnified party (the “Indemnified Party”) seeking indemnification hereunder
shall,
      within the relevant limitation period provided for in Section 8.1, give to
      the
      party obligated to provide indemnification to such Indemnified Party (the
“Indemnifying Party”) a notice (a “Claim Notice”) describing in reasonable
      detail the facts giving rise to any claims for indemnification hereunder and
      shall include in such Claim Notice (if then known) the amount or the method
      of
      computation of the amount of such claim, and a reference to the provision of
      this Agreement, or any agreement, certificate or instrument executed pursuant
      hereto or in connection herewith upon which such claim is based; provided
      that a
      Claim Notice in respect of any action at law or suit in equity by or against
      a
      third party as to which indemnification will be sought shall be given promptly
      after the action or suit is commenced; and provided further
      that
      failure to give such notice promptly shall not relieve the Indemnifying Party
      of
      its obligations hereunder except to the extent it shall have been prejudiced
      by
      such failure. 

    

    (b)
      The
      Indemnifying Party shall have thirty (30) days after the giving of any Claim
      Notice pursuant hereto to (i) agree to the amount or method of determination
      set
      forth in the Claim Notice and to pay such amount to such Indemnified Party
      in
      immediately available funds or (ii) provide such Indemnified Party with written
      notice that it disagrees (and the reasons therefor) with the amount or method
      of
      determination set forth in the Claim Notice (the “Dispute Notice”). The
      Indemnified Party may commence at any time thereafter such legal action or
      proceedings as it deems appropriate to enforce the indemnification obligation
      of
      the Indemnifying Party pursuant to the provisions of Article 8. The failure
      to
      file a Dispute Notice within the time permitted shall be deemed to constitute
      an
      acknowledgement by the Indemnifying Party of its acquiescence to the amount
      and
      method of determination of the claim in the Claim Notice. 

    

    8.6 Procedure
      - Third Party Claims.

    

    (a)
      Promptly after receipt by an Indemnified Party of notice of the commencement
      of
      any proceeding against it by a third party (“Third Party Claim”), such
      Indemnified Party will, if a claim for indemnification is to be made against
      an
      Indemnifying Party, provide to the Indemnifying Party written notice of the
      commencement of such claim (together with copies of any legal papers served),
      provided,
      however
      that the
      failure to promptly notify the Indemnifying Party will not relieve the
      Indemnifying Party of any liability that it may have to any Indemnified Party,
      except to the extent that the Indemnifying Party demonstrates that the defense
      of such action is prejudiced or made more expensive by the Indemnified Party’s
      failure to give such notice.

    

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

    (b)
      If
      any Third Party Claim is brought against an Indemnified Party and such
      Indemnified Party gives notice to the Indemnifying Party of the commencement
      of
      such Third
      Party Claim,
      the
      Indemnifying Party shall have the right to assume the defense of any such
Third
      Party
      Claim at
      its expense, provided that (x) in the reasonable judgment of the Indemnified
      Party, the Indemnifying Party has adequate resources to undertake such defense
      and satisfy any indemnifiable Losses arising from such Third
      Party
      Claim
      and (y) the selection of counsel is approved by the Indemnified Party, which
      approval will not be unreasonably withheld. If the Indemnified Party so
      determines that the Indemnifying Party does not have adequate resources, or
      the
      Indemnifying Party shall elect not to assume the defense of any such
Third
      Party
      Claim,
      or fails to make such an election within twenty (20) days after it receives
      notice pursuant to Section 8.6(a), the Indemnified Party shall have the right
      to
      defend such Third
      Party
      Claim at
      the expense of the Indemnifying Party, and the
      Indemnifying Party will be bound by any determination made in such proceeding
      or
      any good faith compromise or settlement effected by the Indemnified Party to
      which the Indemnifying Party consents, which consent may not be unreasonably
      withheld, delayed or conditioned.
      The
      Indemnified Party shall have the right to participate in (but not control)
      the
      defense of a Third
      Party
      Claim
      defended by the Indemnifying Party hereunder and to retain its own counsel
      in
      connection with such Third
      Party
      Claim,
      but the fees and expenses of such counsel shall be at the Indemnified Party’s
      expense unless (i) the Indemnifying Party and the Indemnified Party have
      mutually agreed in writing to the retention of such counsel or (ii) the named
      parties in any Third
      Party
      Claim
      (included impleaded parties) include the Indemnifying Party and the Indemnified
      Party, and representation of the Indemnifying Party and the Indemnified Party
      by
      the same counsel would create a conflict (in which case the Indemnifying Party
      shall not be permitted to assume the defense of such Third
      Party
      Claim).
      Unless otherwise agreed by the Indemnifying Party, if the Indemnifying Party
      is
      obligated to pay the fees and expenses of counsel to the Indemnified Party
      with
      respect to a Third Party Claim, the Indemnifying Party shall be obligated to
      pay
      only the fees and expenses associated with one attorney or law firm (plus local
      counsel as required), as applicable, for the Indemnified Party.

    

    (c)
      If
      the Indemnifying Party assumes the defense of a Third Party Claim and
      subsequently determines that the Third Party Claim is not subject to
      indemnification by the Indemnifying Party hereunder, the Indemnifying Party
      shall give prompt notice of such fact to the Indemnified Party, after which
      the
      Indemnified Party shall have the right to reassume control of the defense of
      such Third Party Claim; provided
      that the
      failure by the Indemnifying Party to promptly notify the Indemnified Party
      of
      any such determination shall not result in any liability to the Indemnifying
      Party except to the extent that the Indemnified Party demonstrates that the
      defense of such action has been prejudiced or made more costly by the
      Indemnifying Party’s failure to give such notice. If the Indemnifying Party
      assumes the defense of a Third Party Claim and subsequently determines that
      such
      claim is not subject to indemnification by the Indemnifying Party hereunder,
      the
      Indemnifying Party shall have the right, following its delivery of the notice
      contemplated by the immediately preceding sentence, to withdraw from such
      defense, and such withdrawal shall not result in any liability to the
      Indemnifying Party except to the extent that the Indemnified Party demonstrates
      that the defense of such action has been prejudiced or made more costly by
      the
      timing of the Indemnifying Party’s withdrawal. 

    

    (d)
      If
      the Indemnifying Party assumes the defense of a Third Party Claim, (x) no
      compromise or settlement of such Third Party Claim may be effected by the
      Indemnifying Party without the Indemnified Party’s consent (which consent will
      not be unreasonably withheld, delayed or conditioned) unless (i) the sole relief
      provided is monetary damages that are paid in full by the Indemnifying Party,
      (ii) the compromise or settlement includes a complete release of the Indemnified
      Party, (iii) there is no finding or admission of any violation of law or any
      violation of the rights of any Person by the Indemnified Party, and (iv) there
      is no effect on any other Third Party Claims that may be made against the
      Indemnified Party; and (y) the Indemnified Party will have no liability with
      respect to any compromise or settlement of such claims effected without its
      consent as may be required pursuant to clause (x) above.

     

    
      
        
        

      

      
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    (e)
      Notwithstanding the foregoing, if the exclusive remedy sought under a Third
      Party Claim is for injunctive relief for which an Indemnified Party may be
      liable, the Indemnified Party may, by notice to the Indemnifying Party, assume
      the exclusive right to defend, compromise, or settle such proceeding, but the
      Indemnifying Party, although still liable for the payment of all reasonable
      legal fees, costs and expenses incurred in connection therewith, will not be
      bound by any determination of a proceeding so defended or any compromise or
      settlement effected without its consent which may not be unreasonably withheld,
      delayed or conditioned. In addition, if a Third Party Claim seeks both
      injunctive or other non-monetary relief and monetary damages, the Indemnified
      Party may, by notice to the Indemnifying Party, participate in the defense
      of
      such proceeding at its own cost. 

    

    (f)
      With
      respect to any obligations of an Indemnifying Party and an Indemnified Party
      which arise pursuant to the provisions of this Article 8, the Indemnifying
      Party
      and the Indemnified Party agree to cooperate with each other as reasonably
      requested by the other.

     

    8.7
        Remedies.
      Subject
      to Section 6.5(c) and 7.2 hereof and except as otherwise may be specifically
      provided in this Agreement, the sole and exclusive remedy of the parties for
      breach of this Agreement shall be restricted to the indemnification rights
      set
      forth in this Article 8; provided,
      however,
      that no
      party hereto shall be deemed to have waived any rights, claims, causes of action
      or remedies if and to the extent such rights, claims, causes of action or
      remedies may not be waived under Applicable Law.

    

    
      
        8.8
          Certain
          Limitations.
          

      

    

    

    (a)
      Notwithstanding any other provision in this Agreement to the contrary, the
      parties to this Agreement shall only be liable to indemnify each other for
      compensatory damages, and, accordingly, in the absence of actual fraud, neither
      party shall be entitled to recover from the other special, indirect, punitive
      or
      consequential damages pursuant to this Article 8 unless, and then only to the
      extent that, the same are components of a Third Party Claim for which an
      Indemnified Party is seeking indemnification hereunder.
      

    

    (b)
      Each
      party’s aggregate liability for indemnification under Section 8.3 and 8.4 (b)
      respectively, as applicable, shall not exceed an amount equal to $5,000,000
      (the
“Liability Cap”); provided,
      however,
      the
      Liability Cap shall not apply to (i) any Losses of any Indemnified Party
      resulting from fraud on the part of the Indemnifying Party; (ii) any Losses
      of
      the Purchaser resulting from a breach of the representations and warranties
      contained in Section 4.4, which shall have a separate cap limitation of
      $10,000,000. 

    

    (c)
      The
      Stockholders shall not be liable for Losses under Section 8.3 unless and until
      such Losses exceed $150,000 in the aggregate, without taking into account
      materiality other than under Section 4.11 (the “Purchaser Basket Amount”), it
      being understood that the Stockholders shall not be liable, in any event, for
      the aggregate amount of Losses equal to the Purchaser Basket Amount;
provided,
      however,
      that
      the Purchaser Basket Amount shall not apply to (i) any Losses of the Purchaser
      Indemnified Parties resulting from fraud on the part of the Stockholders; (ii)
      any breach of the Bank Debt Representation; (iii) any expenses to be paid by
      the
      Stockholders pursuant to Section 6.2 and/or any Liabilities expressly assumed
      by
      the Stockholders pursuant to any section of this Agreement; and (iv) any
      liability of the Company for payroll taxes that were due and payable during
      the
      Pre-Closing Period but not paid; and (v) any of the Liabilities described in
      Sections 8.3 (e) and (f). 

    

    
      
        
        

      

      
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    (d)
      The
      Purchaser shall not be liable under Section 8.4(b) for Losses under such section
      unless and until such Losses exceed $150,000 in the aggregate (the
      “Stockholder Basket Amount”), it being understood that the Purchaser shall not
      be liable, in any event, for that portion of the aggregate amount of such Losses
      which is equal to the Stockholder Basket Amount; provided,
      however,
      that
      the Stockholder Basket Amount shall not apply to any Losses of the Stockholder
      Indemnified Parties resulting from fraud on the part of the Purchaser.

    

    (e)
      It is
      agreed that for the purpose of making a claim for indemnification, the
      expiration of any one survival period, as set forth in Section 8.1, of certain
      representations and warranties, shall not affect the ability to make any claim
      for indemnification hereunder under any other representations and warranties
      still surviving; provided
      that no
      party shall be entitled to make a claim for indemnification more than once
      on
      account of the same facts and circumstances or to aggregate the same for
      purposes of the Stockholder or Purchaser Basket Amounts. 

    

    8.9.
       Knowledge.
      An
      Indemnified Party’s knowledge of facts that would make any warranty or
      representation made to such Indemnified Party untrue or inaccurate in any way
      as
      of the Closing Date, nevertheless shall not constitute a defense to, or
      otherwise estop such party from asserting subsequently, any claim for
      indemnification for breach of such warranty or representation on the basis
      of
      those facts. 

    

    ARTICLE
      9

    DEFINITIONS

    

    9.1 Certain
      Definitions.
      The
      following terms, as used herein, have the following meanings:

    

    “Adjusted
      Purchase Price”,
      as
      defined in Section 2.2.

    

    “Agreed
      Dividend”, as defined in Section 6.3(d).

    

    "Affiliate”
      means, in respect of any Person, a Person that, directly or indirectly, through
      one or more intermediaries controls, is controlled by or is under common control
      with the first-mentioned Person.

    

    "Applicable
      Law" means, with respect to any Person, any domestic or foreign, federal, state
      or local statute, law, ordinance, policy, guidance, rule, administrative
      interpretation, regulation, order, writ, injunction, directive, judgment, decree
      or other requirement of any Governmental Authority applicable to such Person
      or
      any of its Affiliates or any of their respective properties, assets, officers,
      directors, employees, consultants or agents (in connection with such officer’s,
      director’s, employee’s, consultant’s or agent’s activities on behalf of such
      Person or any of its Affiliates). 

    

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    "Audit",
      as defined in Section 6.3(c).

    

    "Balance
      Sheet" means the balance sheet of the Company dated April 11, 2007.

    

    "Balance
      Sheet Date" means April 11, 2007.

    

    "Bank
      Debt" means the sum of (i) any long or short term Indebtedness to any lending
      institutions (ii) cash overdrafts; and (iii) deferred rent.

    

    "Benefit
      Arrangement", as defined in Section 4.26 (e). 

    

    "Business",
      as defined in the Recitals.

    

    "Business
      Day" means any day that is not a Saturday, Sunday or a day on which the banks
      in
      New York, New York are required or permitted to be closed.

    

    "Business
      Premises" means the land and improvements formerly owned by the Company located
      at 54 Grenier Field Road, Londonberry, New Hampshire. 

    

    "Closing
      Date", as defined in Section 3.1.

    

    "Code"
      means the Internal Revenue Code of 1986, as amended.

    

    "Confidential
      Information" means information not generally available to the public, including,
      without limitation, all computer software and database information, personnel
      information, financial information, customer lists, supplier lists, trade
      secrets, patented proprietary information, forms, information regarding
      operations, systems, services, know how, computer and any other processed or
      collated data, computer programs, pricing, marketing and advertising data,
      methods, forms, systems, services, designs, marketing ideas, products or
      processes (whether or not capable of being trademarked, copyrighted or
      patented).

    

    "Contracts"
      means all oral and written contracts, agreements, options, leases, licenses,
      mortgages, covenants, orders, commitments and other instruments of any kind.
      

    

    "Damages"
      means all demands, claims, actions or causes of action, assessments, losses,
      damages, costs, expenses, liabilities, judgments, awards, fines, sanctions,
      penalties, charges and amounts paid in settlement, including reasonable costs,
      fees and expenses of attorneys, accountants, consultants and other agents or
      independent contractors incurred in investigating, preparing for and defending
      any thereof.

    

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    "Debt
      Target" means six hundred thousand ($600,000) dollars of Bank Debt on the part
      of the Company as of the Closing Date.

    

    "Employee
      Benefit Plans", as defined in Section 4.26(e).

    

    "Environmental
      Actions" refers to any complaint, summons, citation, notice, directive, order,
      claim, litigation, investigation, proceeding, judgment, letter or other
      communication from any federal, state, local or municipal agency, department,
      bureau, office or other authority or any third party involving a Hazardous
      Discharge or any violation of any order, permit or Environmental Laws.

    

    "Environmental
      Law" means
      any
      applicable federal, state, local and foreign law, statute, ordinance,
      regulation, rule, judicial or administrative order or decree, permit license,
      approval, authorization or similar requirement of each and every federal, and
      pertinent state, local and foreign governmental agency or other governmental
      authority, pertaining to the protection of human health and safety or the
      environment including, without limitation, the Comprehensive Environmental
      Response Compensation and Liability Act (CERCLA), 42 U.S.C. 9601 et set,
      the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et seq.,
      the
      Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., the Water
      Pollution Control Act (FWPCA), 33 U.S.C. 1251 et seq., and the Occupational
      Safety and Health Act (OSHA), 42 U.S.C. 655.

     

    "Environmental
      Permit" means any Permit required under any applicable Environmental
      Law.

    

    "Environmental
      Liabilities" means any Losses, including the fees and expenses of environmental
      engineers and consultants, and the costs of investigation, feasibility studies
      and remediation arising from, out of or under any Environmental Law, Order,
      or
      Environmental Action.

    

    "ERISA"
      means the Employee Retirement Income Security Act of 1974, as
      amended.

    

    "Escrow
      Agents" means Moomjian, Waite, Wactlar & Coleman, LLP and Keefe & Keefe.

    

    "Escrow
      Agreement" means the Escrow Agreement, dated as of the date hereof, by and
      among
      the Stockholders, Purchaser and the Escrow Agents. 

    

    "Exchange
      Act" means the Securities Exchange Act of 1934, as amended.

     

    "Final
      Allocation”, as defined in Section 6.3(c)(ii).

    

    "Financial
      Statements", as defined in Section 4.6(a).

    

    "GAAP"
      means generally accepted accounting principles in the United States as in effect
      from time to time and applied consistently throughout the periods
      involved.

    

    
      
        
        

      

      
        35

        
          

        

      

      
        
        

      

    

     

    "Governmental
      Authority" means any foreign, domestic, federal, territorial, state or local
      governmental authority, quasi-governmental authority, instrumentality, court,
      government or self-regulatory organization, commission, tribunal or organization
      or any regulatory, administrative or other agency, or any political or other
      subdivision, department or branch of any of the foregoing.

    

    "Hazardous
      Discharge" means
      any
      releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
      injecting, escaping, leaching, disposing or dumping of Hazardous Substances
      which violates Environmental Laws.

    

    "Hazardous
      Substances"
      means
      any substances, compounds, chemicals or elements which are (i) defined or
      classified on the Closing Date as a hazardous substance, hazardous material,
      toxic substance, hazardous waste, pollutant or contaminant under any
      Environmental Law, or (ii) a petroleum hydrocarbon, including crude oil or
      any
      fraction thereof, (iii) hazardous, toxic, corrosive, flammable, explosive,
      radioactive, carcinogenic or a reproductive toxicant, or (iv) regulated pursuant
      to any Environmental Law. 

    

    "Indebtedness"
      of any Person means all obligations of such Person (a) for borrowed money,
      (b) evidenced by notes, bonds, debentures or similar instruments and
      (c)  in the nature of guarantees of the obligations described in
      clauses (a) and (b) above of any other Person.

    

    "Indemnified
      Party", as defined in Section 8.5(a).

    

    "Indemnifying
      Party”, as defined in Section 8.5(a).

    

    "Information
      Technology" means all computer hardware, software, networks, microprocessors,
      firmware and other information technology and communications equipment used
      in
      the operation of the Information Technology (“IT”) systems.

    

    "Intellectual
      Property" means any patent, patent application (or renewal) and docketed
      invention, trademark, trade name, trademark or trade name registration or
      application (or renewal), copyright or copyright registration or application
      (or
      renewal) for copyright registration, servicemark, brand mark or brand name
      or
      any pending application (or renewal) related thereto, or any trade secret,
      proprietary know-how, programs or processes or any similar rights, and each
      license or licensing agreement for any of the foregoing.

    

    "Inventory",
      as defined in Section 4.19. 

    

    "Knowledge
      of Stockholders" means the actual knowledge of any Stockholder as well as the
      actual knowledge of the collective group of Stockholders, and shall be deemed
      to
      include a representation that each of such individuals has made all usual and
      reasonable inquiries and all inquiries that would be reasonable in light of
      such
      individual’s knowledge.

    

    "Lease",
      as defined in Section 3.2(iii).

    

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

    "Liability
      Cap", as defined in Section 8.8(b).

    

    "Liability"
      means, with respect to any Person, any liability or obligation of such Person
      of
      any kind, character or description, whether known or unknown, absolute or
      contingent, accrued or unaccrued, liquidated or unliquidated, secured or
      unsecured, joint or several, due or to become due, vested or unvested,
      executory, determined, determinable or otherwise.

    

    "Lien"
      means, with respect to any asset, any mortgage, title defect or objection,
      lien,
      pledge, charge, security interest, hypothecation, restriction, encumbrance
      or
      charge of any kind in respect of such asset.

    

    "Material
      Adverse Effect" means any material adverse change in the business, properties,
      assets, liabilities, results of operations, condition (financial or otherwise)
      or prospects of the Company or its Business taken as a whole.

    

    "Material
      Contracts", as defined in Section 4.18(a).

    

    "Morgan
      Employment Agreement", as defined in Section 3.2(ii).

    

    "Order"
      means any order, execution, writ, injunction, judgment, decree, ruling,
      assessment or award.

    

    "Ordinary
      Course of Business" means the ordinary course of business consistent with past
      custom and practice (including, without limitation, with respect to quantity,
      quality and frequency.

    

    "Other
      Stockholders", as defined in the Preamble to this Agreement.

    

    "Pension
      Benefit Plan", as defined in Section 4.26(b).

    

    "Permitted
      Liens" means (i) Liens for any Tax or governmental assessments, charges or
      claims the payment of which is not yet due, or for any Tax the validity of
      which
      is being contested in good faith by appropriate proceedings and for which
      adequate reserves are maintained on the Financial Statements in accordance
      with
      GAAP; (ii) statutory Liens of landlords and Liens of carriers,
      warehousemen, mechanics, materialmen and other similar Persons and other Liens
      imposed by Applicable Law incurred in the Ordinary Course of Business for sums
      not yet delinquent or being contested in good faith and for which adequate
      reserves are maintained on the Financial Statements in accordance with GAAP;
      (iii) Liens relating to deposits made in the Ordinary Course of Business in
      connection with workers' compensation, unemployment insurance and other types
      of
      social security or to secure the performance of leases, trade contracts or
      other
      similar agreements; and (iv)  Liens securing executory obligations under
      any Lease that constitutes an "operating lease" under GAAP.

    

    "Person"
      means an individual, corporation, partnership, limited liability company,
      association, trust, unincorporated organization or other legal
      entity.

    

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    “Pre-Closing
      Period”, as defined in Section 6.3(d).

    

    "Purchase
      Price", as defined in Section 2.1.

    

    "Purchaser’s
      Basket Amount", as defined in Section 8.8(c).

    

    "Purchaser
      Indemnified Parties", as defined in Section 8.3.

    

    "Purchaser
      Material Adverse Effect” means any material adverse change in the business,
      properties, assets, liabilities, results of operations, condition (financial
      or
      otherwise) or prospects of the Purchaser or its business, taken as a whole.
      

    

    "Related
      Documents" means the Escrow Agreement and the Lease. 

    

    "Release"
      means
      any
      release, spill, emission, leaking, pumping, pouring, dumping, emptying,
      injection, deposit, disposal, discharge, dispersal, leaching, or migration
      on or
      into the indoor or outdoor environment or in, on, under, into or out of any
      property, including any property currently or at any time previously owned,
      leased or operated by the Company.

    

    "Remedial
      Action" means
      those response actions,
      including any investigation, testing or monitoring activities required by
      Environmental Law or by any Governmental Authority to clean up, remove, contain,
      treat, investigate or abate any Hazardous Substance on or in connection with
      any
      property (including, without limitation, actions to address Releases of
      Hazardous Substances to the environment as of the Closing Date, such as, for
      example, measures to address vapor intrusion from sub-surface contamination
      into
      indoor air.

    

    "Scheduled
      Contracts", as defined in Section 4.18(c).

    

    "Stock",
      as defined in the Recitals. 

    

    "Stockholders",
      as defined in the Preamble to this Agreement.

    

    "Stockholder
      Basket Amount", as defined in Section 8.8(d).

    

    "Stockholders’
      Agreements", as defined in Section 3.2(vi).

    

    "Stockholders
      Allocation", as defined in Section 2.1.

    

    "Stockholder
      Indemnified Parties", as defined in Section 8.4.

    

    "Stockholders
      Representative”, as defined in Section 10.1

    

    "Subsidiary"
      means, with respect to any Person, (i) any corporation as to which more
      than 10% of the outstanding stock having ordinary voting rights or power (and
      excluding stock having voting rights only upon the occurrence of a contingency
      unless and until such contingency occurs and such rights may be exercised)
      is
      owned or controlled, directly or indirectly, by such Person and/or by one or
      more of such Person's Subsidiaries and (ii) any partnership, joint venture
      or other similar relationship between such Person (or any Subsidiary thereof)
      and any other Person (whether pursuant to a written agreement or
      otherwise).

    

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

    "Tax"
      means all taxes imposed of any nature including federal, state, local or foreign
      net income tax, alternative or add-on minimum tax, profits or excess profits
      tax, franchise tax, gross income, adjusted gross income or gross receipts tax,
      employment related tax (including employee withholding or employer payroll
      tax,
      FICA or FUTA), real or personal property tax or ad valorem tax, sales or use
      tax, excise tax, stamp tax or duty, any withholding or back up withholding
      tax,
      value added tax, severance tax, prohibited transaction tax, premiums tax,
      environmental tax, intangibles tax or occupation tax, together with any interest
      or any penalty, addition to tax or additional amount imposed by any Governmental
      Authority (domestic or foreign) responsible for the imposition of any such
      tax.

    

    "Tax
      Return" means all returns, reports, forms or other information required to
      be
      filed with respect to any Tax.

    

    "Territory",
      as defined in Section 7.1(c).

    

    "Third
      Party Claim", as defined in Section 8.6(a).

    

    "Trade
      Secret" any formula, design, device, complication or other information which
      is
      used or held for use by a Business, which gives the holder thereof an advantage
      or opportunity for advantage over competitors which do not have or use the
      same,
      and which is not generally known by the public. 

    

    "338(h)(10)
      Election", as defined in Section 6.3(c)(i).

    

    "Welfare
      Benefit Plans", as defined in Section 4.26(a). 

    

    ARTICLE
      10

    STOCKHOLDERS’
      REPRESENTATIVE

    

    10.1. Appointment.
      By
      their execution of this Agreement, the Stockholders irrevocably appoint Morgan
      to act as the true and lawful agent of the Stockholders and attorney-in-fact
      with respect to all matters arising in connection with this Agreement and the
      Escrow Agreement (the “Stockholders Representative”). By his execution of this
      Agreement, Morgan accepts such appointment. 

    

    10.2. Powers
      and Authority.
      The
      Stockholders’ Representative shall have full power and authority to represent
      all of the Stockholders and their respective successors with respect to matters
      arising under this Agreement and the Escrow Agreement as hereinafter provided
      and all actions taken by the Stockholders’ Representative hereunder and
      thereunder shall be binding upon all such Stockholders and their successors
      as
      if expressly confirmed and ratified in writing by each of them and no
      Shareholder shall have the right to object, dissent, protest or otherwise
      contest the same. The Stockholders’ Representative shall take any and all
      actions which he believes are necessary or appropriate under this Agreement
      and
      the Escrow Agreement for and on behalf of the Stockholders, as fully as if
      the
      Stockholders were acting on their own behalf, including, without limitation,
      giving and receiving any notice or instruction permitted or required under
      this
      Agreement or the Escrow Agreement by the Stockholders’ Representative or any
      Stockholder, interpreting all of the terms and provisions of this Agreement
      and
      the Escrow Agreement, defending all Claims against the Stockholders pursuant
      to
      Article 8 hereof and the Escrow Agreement, consenting to, compromising or
      settling all Claims, conducting negotiations with Purchaser and its
      representatives regarding such Claims, dealing with Purchaser and the Escrow
      Agents under this Agreement and the Escrow Agreement with respect to all matters
      arising under this Agreement and the Escrow Agreement, taking any and all other
      actions specified in or contemplated by this Agreement and the Escrow Agreement,
      and engaging counsel, accountants or other Representatives of the Stockholders’
Representative in connection with the foregoing matters. 

    

    
      
        
        

      

      
        39

        
          

        

      

      
        
        

      

    

     

    10.3. Authorization.
      The
      Stockholders’ Representative has been appointed to act as the true and lawful
      agent of the Stockholders and attorney-in-fact with respect to the following
      matters arising in connection with this Agreement and the Escrow Agreement,
      including but not limited to the power and authority on behalf of each
      Stockholder (other than in his or her own right) to do any one or all of the
      following:

    

    (i) Receive
      all notices or documents given or to be given to any of the Stockholders by
      Purchaser pursuant hereto or to the Escrow Agent or in connection herewith
      or
      therewith and to receive and accept service of legal process in connection
      with
      any suit or proceeding arising under this Agreement or the Escrow
      Agreement;

    

    (ii) Deliver
      to Purchaser at the Closing all certificates and documents to be delivered
      to
      Purchaser by any of the Stockholders pursuant to this Agreement, together with
      any other certificates and documents executed by any of the Stockholders and
      deposited with the Stockholders’ Representative for such purpose;

    

    (iii) Engage
      counsel, and such accountants and other advisors for any of the Stockholders
      and
      incur such other expenses on behalf of any of the Stockholders in connection
      with this Agreement or the Escrow Agreement and the transactions contemplated
      hereby or thereby as may be appropriate; and

    

    (iv) Take
      such
      action on behalf of any of the Stockholders as the Stockholders’ Representative
      may in its sole discretion deem appropriate in respect of:

    

    (A)
      taking such action as the Stockholders’ Representative or any of the
      Stockholders is authorized to take under this Agreement or the Escrow
      Agreement;

    

    (B)
      receiving all documents or certificates and making all determinations, on behalf
      of any of the Stockholders, required under this Agreement or the Escrow
      Agreement;

    

    
      
        
        

      

      
        40

        
          

        

      

      
        
        

      

    

    (C)
      all
      such other matters as the Stockholders’ Representative may deem necessary or
      appropriate to consummate this Agreement or the Escrow Agreement and the
      transactions contemplated hereby and thereby; and 

    

    (D)
      all
      such action as may be necessary after the Closing Date to carry out any of
      the
      transactions contemplated by this Agreement, including, without limitation,
      the
      defense and/or settlement of any claims for which indemnification is sought
      pursuant to Article 8 of this Agreement and any waiver of any obligation of
      the
      Purchaser.

    

    All
      actions, decisions and instructions of the Stockholders’ Representative shall be
      conclusive and binding upon all of the Stockholders and no Stockholder nor
      any
      other Person shall have any claim or cause of action against the Stockholders’
Representative, and the Stockholders’ Representative shall have no liability to
      any Stockholder or any other Person, for any action taken, decision made or
      instruction given by the Stockholders’ Representative in connection with the
      Escrow Agreement or this Agreement, except in the case of his own gross
      negligence or willful misconduct.

    

    10.4. Indemnification
      of Stockholders’ Representative.
      The
      Stockholders’ Representative shall incur no liability to the Stockholders or the
      Escrow Agents or any other person with respect to any action taken or suffered
      by him in reliance upon any note, direction, instruction, consent, statement
      or
      other documents reasonably believed by the Stockholders’ Representative to be
      genuinely and duly authorized by at least a Majority in Interest of the
      Stockholders (or the successors or assigns thereto), nor for other action or
      inaction taken or omitted in good faith in connection herewith or with the
      Escrow Agreement, in any case except for liability to the Stockholders for
      its
      own gross negligence or willful misconduct. The Stockholders’ Representative
      shall be indemnified by the Stockholders for and shall be held harmless against
      any loss, liability or expense incurred without gross negligence or willful
      misconduct on the part of the Stockholders’ Representative as the Stockholders’
Representation and not as a Stockholder arising out of or in connection with
      his
      performance under this Agreement and the Escrow Agreement. This indemnification
      shall survive the termination of this Agreement. For all purposes hereunder,
      a
“Majority in Interest” of the Stockholders shall be determined on the basis of
      the Stockholder Allocations. The Stockholders’ Representative may, in all
      questions arising under this Agreement and the Escrow Agreement, rely on the
      advice of counsel and for anything done, omitted or suffered in good faith
      by
      the Stockholders’ Representative in accordance with such advice, the
      Stockholders’ Representative shall not be liable to the Stockholders or the
      Escrow Agents or any other Person. 

    

    10.5. Access
      to Information.
      The
      Stockholders’ Representative shall have reasonable access to information of and
      concerning any Claim and which is in the possession, custody or control of
      Purchaser and the reasonable assistance of Purchaser’s officers and employees
      for purposes of performing the Stockholders’ Representative’s duties under this
      Agreement or the Escrow Agreement and exercising his rights under this Agreement
      and the Escrow Agreement, including for the purpose of evaluating any Claim
      to
      the Escrow Fund by Purchaser; provided
      that
      the
      Stockholders’ Representative shall treat confidentially and not disclose any
      nonpublic information from or concerning any Claim to anyone (except to the
      Stockholders’ or in connection with any litigation relating to a dispute
      pursuant to this Agreement or the Escrow Agreement, and on a need-to-know basis
      to other individuals who agree to keep such information
      confidential).

    

    
      
        
        

      

      
        41

        
          

        

      

      
        
        

      

    

     

    10.6. Reasonable
      Reliance.
      In the
      performance of his duties hereunder, the Stockholders’ Representative shall be
      entitled to rely upon any document or instrument reasonably believed by him
      to
      be genuine, accurate as to content and signed by any Shareholder or Purchaser.
      The Stockholders’ Representative may assume that any person purporting to give
      any notice in accordance with the provisions hereof has been duly authorized
      to
      do so.

    

    10.7. Attorney-in-Fact.

    

    (a)
      The
      Stockholders’ Representative is hereby appointed and constituted the true and
      lawful attorney-in-fact of each Stockholder, with full power in his or her
      name
      and on his, or her behalf to act according to the terms of this Agreement and
      the Escrow Agreement; and in general to do all things and to perform all acts
      including, without limitation, executing and delivering notices contemplated
      by
      in connection with this Agreement and the Escrow Agreement.

    

    (b)
      This
      power of attorney and all authority hereby conferred is granted and shall be
      irrevocable and shall not be terminated by any act of any Stockholder, by
      operation of law, whether by such Stockholder’s death, disability protective
      supervision or any other event. Without limitation to the foregoing, this power
      of attorney is to ensure the performance of a special obligation and,
      accordingly, each Stockholder hereby renounces its, his or her right to renounce
      this power of attorney unilaterally any time before all rights of
      indemnification on the part of either the Stockholder Indemnified Parties and
      Purchaser Indemnified parties have terminated.

    

    (c)
      Notwithstanding the power of attorney granted in this Article 10, no agreement,
      instrument, acknowledgement or other act or document shall be ineffective by
      reason only of the Stockholders having signed or given such directly instead
      of
      the Stockholders’ Representative.

    

    10.8. Orders.
      The
      Stockholders’ Representative is authorized, in his sole discretion, to comply
      with final, nonappealable orders or decisions issued or process entered by
      any
      court of competent jurisdiction with respect to the Escrow Fund. If any portion
      of the Escrow Fund is disbursed to the Stockholders’ Representative and is at
      any time attached, garnished or levied upon under any Order, or in case the
      payment, assignment, transfer, conveyance or delivery of any such property
      shall
      be stayed or enjoined by any Order, or in case any Order, shall be made or
      entered by any court affecting such property or any part thereof, then and
      in
      any such event, the Stockholders’ Representative is authorized, in his sole
      discretion, but in good faith, to rely upon and comply with any such Order,
      which he is advised by legal counsel selected by him is binding upon him without
      the need for appeal or other action; and if the Stockholders’ Representative
      complies with any such order, writ, judgment or decree, he shall not be liable
      to any Stockholder or to any other Person by reason of such compliance even
      though such order, writ, judgment or decree may be subsequently reversed,
      modified, annulled, set aside or vacated.

    

    
      
        
        

      

      
        42

        
          

        

      

      
        
        

      

    

     

    10.9. Removal
      or Resignation of Stockholders’ Representative; Authority of Successor
      Stockholders’ Representative.

    

    (a)
      Stockholders who in the aggregate hold at least a Majority in Interest in the
      Escrow Fund shall have the right at any time during the term of the Escrow
      Agreement to remove the then-acting Stockholders’ Representative and to appoint
      a successor Stockholders’ Representative; provided,
      however, that
      neither
      such removal of the then acting Stockholders’ Representative nor such
      appointment of a successor Stockholders’ Representative shall be effective until
      the delivery to the Escrow Agents of executed counterparts of a writing signed
      by each such Stockholder with respect to such removal and appointment, together
      with an acknowledgment signed by the successor Stockholders’ Representative
      appointed in such writing that he or she accepts the responsibility of successor
      Stockholders’ Representative and agrees to perform and be bound by all of the
      provisions of this Agreement applicable to the Stockholders’ Representative. The
      removed Stockholders’ Representative shall thereafter be discharged from any
      further duties and liability under this Agreement. 

    

    (b)
      The
      Stockholders’ Representative may resign at any time upon giving at least thirty
      (30) days written notice to the other parties hereto and to the Stockholders;
      provided,
      however, that
      no such
      resignation shall become effective until the appointment of a successor
      Stockholders’ Representative in accordance with this Section. Stockholders who
      in the aggregate hold at least a Majority in Interest in the Escrow Fund shall
      appoint a successor Stockholders’ Representative and shall use their
      commercially reasonable efforts to make such appointment within thirty (30)
      days
      after receiving such notice. Such appointment of a successor Stockholders’
Representative shall not be effective until the delivery to the Escrow Agent
      of
      executed counterparts of a writing signed by each such Stockholder with respect
      to such removal and appointment, together with an acknowledgment signed by
      the
      successor Stockholders’ Representative appointed in such writing that he or she
      accepts the responsibility of successor Stockholders’ Representative and agrees
      to perform and be bound by all of the provisions of this Agreement applicable
      to
      the Stockholders’ Representative. The resigned Stockholders’ Representative
      shall thereafter be discharged from any further duties and liability under
      this
      Agreement. 

    

    (c)
      Each
      successor Stockholders’ Representative shall have all of the power, authority,
      rights and privileges conferred by this Agreement upon the original
      Stockholders’ Representative, and the term “Stockholders’ Representative” as
      used herein and in the Escrow Agreement shall be deemed to include any interim
      or successor Stockholders’ Representative.

    

    10.10. Expenses
      of Stockholders’ Representative.
      The
      Stockholders’ Representative shall be entitled to recover from the Stockholders
      reimbursement for out-of-pocket fees and expenses (including legal, accounting
      and other advisors’ fees and expenses, if applicable) incurred by the
      Stockholders’ Representative in performing under this Agreement and the Escrow
      Agreement in his capacity as Stockholders’ Representative and not as a
      Stockholder. The Stockholders’ Representative shall be entitled to recover from
      any distribution made to the Stockholders from the Escrow Fund from time to
      time
      the amount of any such unpaid fees and expenses.

    

    
      
        
        

      

      
        43

        
          

        

      

      
        
        

      

    

     

    10.11. Purchaser’s
      Reliance.
      Purchaser shall be entitled to rely on any and all action taken by the
      Stockholders Representative, without any liability to, or obligation to inquire
      of, any Shareholder, even if Purchaser or such party were aware of any actual
      or
      potential dispute among the Stockholders. Purchaser shall not be obliged to
      inquire into the authority of the Stockholders’ Representative or the
      genuineness of his signature on any writing, and Purchaser otherwise shall
      be
      fully protected in dealing with the Stockholders’ Representative in all
      respects. 

    

    ARTICLE 11

    MISCELLANEOUS

     

    11.1. Entire
      Agreement; Assignment; Amendments and Waivers. 

    

    (a)
      This
      Agreement (including the Schedules), the Related Documents and such other
      certificates, documents and agreements executed and delivered at the Closing
      constitute the entire agreement between the parties hereto with respect to
      the
      subject matter hereof and thereof and supersede all other prior agreements
      and
      understandings, both written and oral, between the parties with respect to
      the
      subject matter hereof and thereof. No representation, warranty, promise,
      inducement or statement of intention has been made by any party that is not
      embodied in this Agreement or such other documents, and none of the parties
      shall be bound by, or be liable for, any alleged representation, warranty,
      promise, inducement or statement of intention not embodied herein or
      therein.

    

    (b)
      This
      Agreement may not be assigned by operation of law or otherwise without the
      prior
      written consent of the other party.

    

    (c)
      This
      Agreement may not be amended or modified, and any of the terms, covenants,
      representations, warranties, or conditions hereof may not be waived, except
      by a
      written instrument executed by all of the parties hereto, or in the case of
      a
      waiver, by the party waiving compliance. Any waiver by any party of any
      condition, or of the breach of any provision, term, covenant, representation,
      or
      warranty contained in this Agreement, in any one or more instances, shall not
      be
      deemed to be nor construed as further or continuing waiver of any such
      condition, or of the breach of any other provision, term, covenant,
      representation, or warranty of this Agreement.

     

    11.2. Validity. If
      any
      provision of this Agreement or the application thereof to any person or
      circumstance is held invalid or unenforceable by a court of competent
      jurisdiction, then the remainder of this Agreement and the application of such
      provision to other persons or circumstances shall not be affected thereby and
      to
      such end the provisions of this Agreement are agreed to be
      severable.

     

    11.3.
      Notices.
      All
      notices, requests, claims, demands and other communications hereunder shall
      be
      in writing and shall be given (and shall be deemed to have been duly given
      upon
      receipt) by delivery in person, by facsimile or by registered or certified
      mail
      (postage prepaid, return receipt requested) to each other party as
      follows:

    

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

    

      
        	
                if
                  to Purchaser:

              	
                Aeroflex
                  Incorporated

              
	 	
                35
                  South Service Road

              
	 	
                PO
                  Box 6022

              
	 	
                Plainview,
                  New York 11803

              
	 	
                Telecopier:
                  (516) 694-0658

              
	 	
                Attention:
                  John Adamovich, Senior Vice President

              
	 	
                and
                  Chief Financial Officer

              
	 	 
	
                with
                  a copy to:

              	
                Moomjian,
                  Waite, Wactlar & Coleman, LLP. 

              
	 	
                100
                  Jericho Quadrangle

              
	 	
                Jericho,
                  York, NY 11753

              
	 	
                Telecopier:
                  (516) 937-5050

              
	 	
                Attention:
                  Edward S. Wactlar, Esq. 

              
	 	 
	
                if
                  to Stockholders:

              	
                c/o
                  James P. Morgan

              
	 	
                16
                  Cabot Way

              
	 	
                Bedford,
                  N.H 03110

              
	
                 

              	 
	
                with
                  a copy to:

              	
                Keefe
                  & Keefe

              
	 	
                Main
                  Street

              
	 	
                Wilton,
                  NH 03086 

                Telecopier:
                  (603) 654-6102

                Attention:
                  William Keefe

              

      

    

     

    or
      to
      such other address as the person to whom notice is given may have previously
      furnished to the others in writing in the manner set forth above.

    

    11.4.
      Governing
      Law.
      This
      Agreement shall be deemed to have been made in New York and shall be governed
      by, and construed in accordance with, the laws of the State of New York without
      regard or giving effect to the principles of conflicts of law
      thereof.

    

    11.5.
      WAIVER
      OF JURY TRIAL.
      TO THE
      EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE
      PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER
      AS
      PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN RESPECT OF
      ANY
      ISSUE OR ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR ANY RELATED
      AGREEMENT OR THE SUBJECT MATTER HEREOF, OR THEREOF OR IN ANY WAY CONNECTED
      WITH
      OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE
      WHETHER NOW EXISTING OR HEREAFTER ARISING. ANY PARTY HERETO MAY FILE AN ORIGINAL
      COUNTERPART OR A COPY OF THIS SECTION 11.5 WITH ANY COURT AS WRITTEN EVIDENCE
      OF
      THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY
      JURY.

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

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

     

    11.7. Parties
      in Interest. This
      Agreement shall be binding upon, and shall inure solely to the benefit of each
      party hereto and its successors and permitted assigns and nothing in this
      Agreement express or implied is intended to or shall confer upon any other
      person any rights, benefits or remedies of any nature whatsoever under or by
      reason of this Agreement.

     

    11.8. Specific
      Performance. The
      parties hereby acknowledge and agree that the failure of any party to perform
      its agreements and covenants hereunder, including its failure to take all
      actions as are necessary on its part to the consummation of the transactions
      contemplated hereby, will cause irreparable injury to the other parties, for
      which damages, even if available, will not be an adequate remedy. Accordingly,
      each party hereby consents to the issuance of injunctive relief by any court
      of
      competent jurisdiction to compel performance of such party's obligations and
      to
      the granting by any court of the remedy of specific performance of its
      obligations hereunder (without the requirement of posting a bond).

     

    11.9. Disclosure
      Generally. If
      and to
      the extent any information required to be furnished in any Schedule is disclosed
      in any other Schedule, such information shall be deemed to be included in such
      other Schedule to the extent that such disclosure is specifically identified.
      The inclusion of any information in any Schedule shall not be deemed to be
      an
      admission or acknowledgement by the Stockholders, in and of itself, that such
      information is material.

    

    11.10 Construction.
      Reference to “Stockholders” herein, unless otherwise indicated, shall mean each
      Stockholder as well as the Stockholders collectively. The use of the masculine
      form of any word includes the feminine version and vice versa, and the singular
      form of any word includes the plural and vice versa.

     

    11.11. Counterparts. This
      Agreement may be executed in one or more counterparts, each of which shall
      be
      deemed to be an original but all of which shall constitute one and the same
      agreement.

    
      
        
        

      

      
        46

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
      executed on its behalf as of the day and year first above written.

     

    
      
        	 	AEROFLEX
                INCORPORATED
	 	 	 
	 	By: 	
                /s/
                  Leonard Borow

              
	 	Name:
                Leonard Borow
	 	Title:  
                President and CEO
	 	 	 
	 	 	 
	 	/s/
                James Morgan
	 	James
                Morgan
	 	 	 
	 	 	 
	 	/s/
                Fred Gilligan 
	 	Fred
                Gilligan
	 	 	 
	 	 	 
	 	/s/
                Donna Langan
	 	Donna
                Langan
	 	 	 
	 	 	 
	 	/s/
                Robert Fallon
	 	Robert
                Fallon
	 	 	 
	 	 	 
	 	/s/
                Charles Fallon
	 	Charles
                Fallon
	 	 	 
	 	/s/
                Brian Fallon
	 	Brian
                Fallon
	 	 	 
	 	/s/
                John R. Williams
	 	John
                R. Williams
	 	 	 
	 	/s/
                Ernest Joly
	 	Ernest
                Joly
	 	 	 
	 	/s/
	 	Stockholder’s
                Representative

      

       

      
        
          
          

        

        
          47Unassociated Document

    Execution
      Copy

    
 

    EMPLOYMENT
      AGREEMENT

     

    THIS
      EMPLOYMENT AGREEMENT (this
      "Agreement"), made and entered into as of August 15, 2007 (the "Effective
      Date"), by and between Aeroflex Incorporated, a Delaware corporation, with
      its
      principal office located at 35 South Service Road, Plainview, New York 11803
      (together with its successors and assigns permitted under this Agreement,
      "Aeroflex") and Leonard Borow, who resides at 7582
      Isla
      Berde Way,
      Delray
      Beach, Florida 33446 ("Borow"), amends and restates in its entirety the original
      agreement made and entered into as of March 1, 1999 between Aeroflex and Borow,
      as subsequently amended (the "Prior Agreement").

     

    WITNESSETH:

     

    WHEREAS,
      pursuant
      to the Agreement and Plan of Merger by and among AX Holding Corp., AC
      Acquisition Corp (the "Merger Sub") and Aeroflex, dated as of May 25, 2007,
      Merger Sub shall be merged with and into Aeroflex and the separate corporate
      existence of Merger Sub shall cease and Aeroflex shall continue as the surviving
      corporation (the "Transaction");

     

    WHEREAS,
      Aeroflex
      has determined that it is in the best interests of Aeroflex and its stockholders
      to continue to employ Borow following the Transaction and to set forth in this
      Agreement the obligations and duties of both Aeroflex and Borow;
      and

     

    WHEREAS,
      Aeroflex
      wishes to assure itself of the services of Borow for the period hereinafter
      provided, and Borow is willing to be employed by Aeroflex for said period,
      upon
      the terms and conditions provided in this Agreement;

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOW,
      THEREFORE, in
      consideration of the premises and mutual covenants contained herein and for
      other good and valuable consideration, the receipt of which is mutually
      acknowledged, Aeroflex and Borow (individually a "Party" and together the
      "Parties") agree as follows:

     

    
      	
            	1.	
              DEFINITIONS.

            

    

     

    (a) "Beneficiary"
      shall
      mean the person or persons named by Borow pursuant to Section 17 below or,
      in
      the event that no such person is named who survives Borow, his
      estate.

     

    (b) "Board"
      shall
      mean the Board of Directors of Aeroflex.

     

    (c) "Cause"
      shall
      mean:

     

    (i) Borow's
      conviction of a felony involving an act or acts of dishonesty on his part and
      resulting or intended to result directly or indirectly in gain or personal
      enrichment at the expense of Aeroflex;

     

    (ii) willful
      and continued failure of Borow to perform his obligations under this Agreement,
      resulting in demonstrable material economic harm to Aeroflex, or

     

    (iii) a
      material breach by Borow of the provisions of Sections 12
      or 13
      below to the demonstrable and material detriment of Aeroflex.

     

    Notwithstanding
      the foregoing, in no event shall Borow's failure to perform the duties
      associated with his position caused by his mental or physical disability
      constitute Cause for his termination.

     

    For
      purposes of this Section 1(c), no act or failure to act on the part of Borow
      shall be considered "willful" unless it is done, or omitted to be done, by
      him
      in bad faith or without reasonable belief that his action or omission was in
      the
      best interests of Aeroflex. Any act or failure to act based upon authority
      given
      pursuant to a resolution adopted by the Board or based upon the advice of
      counsel for Aeroflex shall be conclusively presumed to be done, or omitted
      to be
      done, by Borow in good faith and in the best interests of Aeroflex.

     

    
      
        
        

      

      
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    (d) "Change
      in Control" shall
      have the same meaning as in the LLC Agreement. 

     

    (e) "Code"
      shall
      mean the Internal Revenue Code of 1986, as amended from time to
      time.

     

    (f) "Consulting
      Period" shall
      mean the period specified in Section 11 below during which Borow serves as
      a
      consultant to Aeroflex.

     

    (g) "Disability"
      shall
      mean the illness or other mental or physical disability of Borow, as determined
      by a physician acceptable to Aeroflex and Borow, resulting in his failure during
      the Employment Term or the Consulting Period, as the case may be, (i) to perform
      substantially his applicable material duties under this Agreement for a period
      of 90 consecutive days or 180 days in any 12 month period and (ii) to return
      to
      the performance of his duties within 30 days after receiving written notice
      of
      termination.

     

    (h) "Employment
      Term" shall
      mean the period specified in Section 2(b) below.

     

    (i) "Fiscal
      Year" shall
      mean the 12-month period beginning on July 1 and ending on the next subsequent
      June 30, or such other 12-month period as may constitute Aeroflex's fiscal
      year
      at any time hereafter.

     

    (j) "Good
      Reason" shall
      mean, at any time during the Employment Term, without Borow's prior written
      consent or his acquiescence:

     

    (i) reduction
      in his then current Salary;

     

    
      
        
        

      

      
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    (ii) diminution,
      reduction or other adverse change in the bonus or incentive compensation
      opportunities available to Borow (with respect to the level of bonus or
      incentive compensation opportunities, the applicable performance criteria and
      otherwise the manner in which bonuses and incentive compensation are determined)
      in the aggregate from those available as of the Effective Date in accordance
      with Section 4(a) below;

     

    (iii) Aeroflex's
      failure to pay Borow any amounts otherwise vested and due him hereunder or
      under
      any plan or policy of Aeroflex;

     

    (iv) diminution
      of Borow's titles, position, authorities or responsibilities, including not
      serving on the Board;

     

    (v) assignment
      to Borow of duties incompatible with his position
      as a senior executive officer;

     

    (vi) imposition
      of a requirement that Borow report other than directly to Aeroflex's
      Board;

     

    (vii) a
      material breach of the Agreement by Aeroflex that is not cured within 10
      business days after written notification by Borow of such breach;
      or

     

    (viii) relocation
      of Aeroflex's corporate headquarters to a location more than 35 miles from
      the
      location first above described. 

     

    provided,
      that the divesture by Aeroflex of assets representing up to sixty percent (60%)
      of Aeroflex's EBITDA shall not result in a diminution of Borow's positions,
      authorities or responsibilities.

     

    Borow
      shall provide Aeroflex written notice specifying such event or deficiency
      constituting Good Reason within ninety (90) days following Borow's knowledge
      of
      the occurrence of such event and Aeroflex shall have thirty (30) days after
      receipt of such notice to cure the event or deficiency that would result in
      Good
      Reason.

     

    
      
        
        

      

      
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    (k) "LLC
      Agreement"
      shall
      mean the Amended and Restated Limited Liability Company Operating Agreement
      of
      VGG Holding LLC, dated as of August 15, 2007, as amended from time to
      time.

     

    (l) "Retirement"
      shall
      mean the voluntary termination of Borow's employment, other than due to
      Disability, death or for Good Reason.

     

    (m) "Salary"
      shall
      mean the annual salary provided for in Section 3 below, as adjusted from time
      to
      time.

     

    (n) "Spouse"
      shall
      mean, during the Employment Term and the Consulting Period, the woman who as
      of
      any relevant date is legally married to Borow.

     

    (o) "Subsidiary"
      shall
      mean any corporation of which Aeroflex owns, directly
      or indirectly, more than 50 percent of its voting stock.

     

    
      	
            	2.	
              EMPLOYMENT
                TERM, POSITIONS AND
                DUTIES.

            

    

     

    (a) Employment
      of Borow. Aeroflex
      hereby continues to employ Borow, and Borow hereby accepts continued employment
      with Aeroflex, in the positions and with the duties and responsibilities set
      forth below and upon such other terms and conditions as are hereinafter stated.
      Borow shall render services to Aeroflex principally at Aeroflex's corporate
      headquarters, but he shall do such traveling on behalf of Aeroflex as shall
      be
      reasonably required in the course of the performance of his duties
      hereunder.

     

    (b) Employment
      Term. The
      Employment Term shall commence on the Effective Date and shall terminate on
      August 15, 2012. In addition, the Employment Term shall automatically terminate
      upon any termination of Executive's employment pursuant Section 8.

     

    
      
        
        

      

      
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    (c) Titles
      and Duties.

     

    (i) Until
      the
      date of termination of his employment hereunder, Borow shall be employed as
      the
      Chief Executive Officer of Aeroflex, reporting to the Board. In his capacity
      as
      the Chief Executive Officer, Borow shall have the customary powers,
      responsibilities and authorities of chief executive officers of corporations
      of
      the size, type and nature of Aeroflex including, without limitation, authority,
      in conjunction with the Board as appropriate, to hire and terminate other
      employees of Aeroflex.

     

    (ii) During
      the Employment Term, until a Change in Control, Borow shall be a member of
      the
      Board of Directors of AX Holding Corp and the Board of Managers of VGG Holding
      LLC. 

     

    (d) Time
      and Effort.

    (i) Borow
      agrees to devote his best efforts and abilities and his full business time
      and
      attention to the affairs of Aeroflex in order to carry out his duties and
      responsibilities under this Agreement. 

     

    (ii) Notwithstanding
      the foregoing, nothing shall preclude Borow from (A) serving on the boards
      of a
      reasonable number of trade associations, charitable organizations and/or
      businesses not in competition with Aeroflex, (B) engaging in charitable
      activities and community affairs and (C) managing his personal investments
      and
      affairs; provided, however, that, such activities do not materially interfere
      with the proper performance of his duties and responsibilities specified in
      Section 2 (c) above.

     

    
      	
            	3.	
              SALARY.

            

    

     

    (a) Salary.
      Borow
      shall receive from Aeroflex an annual Salary, payable in accordance with the
      regular payroll practices of Aeroflex, in a minimum amount of $525,000. The
      Board agrees to review Borow's Salary annually during the Employment Term and
      Borow's Salary may be increased (but not decreased) by the Board in its sole
      discretion.

     

    
      
        
        

      

      
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    (b) Salary
      Increase. Any
      amount to which Borow's Salary is increased, as provided in Section 3(a) above
      or otherwise, shall not thereafter be reduced without his consent, and the
      term
      "Salary" as used in this Agreement shall refer to his Salary as thus
      increased.

     

    
      	
            	4.	
              BONUSES.

            

    

     

    (a) Annual
      Bonus.
      For
      each Fiscal Year ending during the Employment Term, Borow shall be eligible
      to
      receive an annual bonus of between 50% and 150% of Salary based upon the
      achievement of Aeroflex's EBITDA targets established by the Board. 50% of Salary
      will be awarded if the Aeroflex's EBITDA is $10,000,000 less than the EBITDA
      target established by the Board (the "Threshold EBITDA") and 150% of Salary
      will
      be awarded if Aeroflex’s EBITDA is $10,000,000 or more greater than the EBITDA
      target established by the Board. Borow's bonus shall be determined by linear
      interpolation to Aeroflex performance falling between the two targets. No annual
      bonus will be paid if Aeroflex's EBITDA is below the Threshold EBITDA. The
      EBITDA targets shall be equitably adjusted by the Board in the event of any
      divestiture, acquisition or other extraordinary event. The EBITDA target for
      fiscal year 2008 is $130 million.

     

    (b) Special
      Bonus.
      Borow
      shall be entitled to a payment of $886,590 and an additional payment of
      $3,700,000 in consideration for agreeing to comply with Section 13 of this
      Agreement, payable on the earlier of (x) January 2, 2008 or (y) Borow's
      termination of employment, (i) by Aeroflex without Cause (defined below) or
      (ii)
      by Borow for any reason.

     

    
      	
            	5.	
              EXPENSE
                REIMBURSEMENT; CERTAIN OTHER
                COSTS.

            

    

     

    During
      the Employment Term and any Consulting Period, Borow shall be entitled to prompt
      reimbursement by Aeroflex for all reasonable out-of-pocket expenses incurred
      by
      him in performing services under this Agreement, upon his submission of such
      accounts and records as may be reasonably required by Aeroflex. In addition,
      Borow shall be entitled to payment by Aeroflex of all reasonable costs and
      expenses, including attorneys' and consultants' fees and disbursements, incurred
      by him in connection with adoption of this Agreement.

     

    
      
        
        

      

      
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            	6.	
              PERQUISITES.

            

    

     

    (a) During
      the Employment Term and, any Consulting Period, Aeroflex shall provide Borow
      with the following perquisites:

     

    (i) an
      office
      of a size and with furnishings and other appointments, and exclusive personal
      secretarial and other assistance, at least equal to that provided to Borow
      by
      Aeroflex immediately prior to the Effective Date; and

     

    (ii) the
      use
      of an automobile and payment of related expenses on the same terms as are in
      effect immediately prior to the Effective Date or, if more favorable to Borow,
      as are made available generally to other executive officers of Aeroflex at
      any
      time thereafter.

     

    (b) During
      the Employment Term, Borow shall be entitled to use a plane maintained by
      Aeroflex for 10 hours per year, unused hours may be rolled forward into future
      years. Borow shall pay Aeroflex an amount for such use equal to the minimum
      amount of income imputed for such use as determined under applicable federal
      and
      state rules and regulations (the "Minimum Imputed Income Amount"). In the event
      Aeroflex does not maintain a plane, as long as Borow is employed by Aeroflex,
      then Aeroflex shall annually reimburse Executive for the cost associated with
      the use of a comparable plane for up to 10 hours less the Minimum Imputed Income
      Amount; provided, however, that, if Borow does not use the full ten hours in
      any
      given year, Aeroflex shall pay Borow the Minimum Imputed Income Amount for
      such
      unused hours. Any payments required under this Section 6(b) shall be made prior
      to the end of the calendar year for which such payments relate.

     

    
      
        
        

      

      
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            	7.	
              EMPLOYEE
                BENEFIT PLANS.

            

    

     

    (a) General.
      During
      the Employment Term, Borow shall be entitled to participate in all employee
      benefit plans and programs that are made available to Aeroflex's senior
      executives or to its employees generally, as such plans or programs may be
      in
      effect from time to time, including, without limitation, pension and other
      retirement plans, profit-sharing plans, savings and similar plans, group life
      insurance, accidental death and dismemberment insurance, travel accident
      insurance, hospitalization insurance, surgical insurance, major and excess
      major
      medical insurance, dental insurance, short-term and long-term disability
      insurance, sick leave (including salary continuation arrangements), holidays,
      vacation (not less than four weeks in any calendar year) and any other employee
      benefit plans or programs that may be sponsored by Aeroflex from time to time,
      including plans that supplement the above-listed types of plans, whether funded
      or unfunded.

     

    (b) Medical
      Care Reimbursement and Insurance. During
      the Employment Term and Consulting Period, Aeroflex shall reimburse Borow for
      100 percent of any medical expenses (that are medically necessary in the opinion
      of a medical doctor) incurred by him for himself and his Spouse that are not
      reimbursed by insurance or otherwise, offset by any amounts that are
      reimbursable by Medicare. Subject to Borow's compliance with Sections 12 and
      13
      and the execution of a general release in favor of Aeroflex, its affiliates
      and
      their current and former officers, directors and employees, in substantially
      the
      form attached as Exhibit A, which is not revoked, Aeroflex shall provide Borow
      and his Spouse during his lifetime with hospitalization insurance, surgical
      insurance, major and excess major medical insurance and dental insurance in
      accordance with the most favorable plans, policies, programs and practices
      of
      Aeroflex and its Subsidiaries made available generally to other senior executive
      officers of Aeroflex and its Subsidiaries as in effect from time to time. Any
      payments required under to be made this Section 7(b) shall be made no later
      than
      the end of the calendar year after the calendar year in which such expense
      is
      incurred.

     

    
      
        
        

      

      
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    (c) Life
      Insurance Benefit. In
      addition to the group life insurance available to employees generally, Aeroflex
      shall provide Borow with an individual permanent life insurance benefit in
      an
      initial amount of not less than approximately $1,000,000, the terms and
      conditions of such benefit to be more fully described in an insurance ownership
      agreement between Borow and Aeroflex.

     

    (d) Disability
      Benefit. In
      consideration of the benefit payable to Borow in the event of termination of
      his
      employment due to Disability, as provided in Section 8(e) below, or, if
      applicable, in the event of termination of Borow's consulting services due
      to
      Disability during the Consulting Period, as provided in Section 11(d) below,
      Aeroflex shall not be obligated to provide Borow with long-term disability
      insurance. Notwithstanding the foregoing, if Aeroflex does provide Borow with
      such insurance, he shall be the owner of any individual policies obtained and
      shall pay the premiums thereon.

     

    (e) Retirement
      Benefit. 

     

    (i) If
      Borow's employment terminates for any reason prior to the first anniversary
      of
      the Effective Date, Borow shall be entitled to the benefits provided under
      the
      Aeroflex Incorporated Supplemental Executive Retirement Plan (the "SERP"),
      payable in a lump-sum payment equal to the then present value of the retirement
      benefit to which Borow would have been entitled if he had remained employed
      under this Agreement until age 70, as calculated under the SERP; provided,
      however, that as of the Effective Date, Borow's accrued benefit under the SERP
      shall be frozen (i.e., except for the deemed service credit set forth in this
      Section 7(e)(i), only Service and Final Average Pay through the Effective Date
      shall be taken into account in computing Borow's benefit under the
      SERP).

     

    
      
        
        

      

      
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    (ii) Provided
      that Borow remains employed until the first anniversary of the Effective Date,
      Borow shall be entitled to a payment in full consideration of any benefits
      payable to Borow under the SERP, of $13,367,953, payable upon the earliest
      to
      occur of (x) Executive's termination of employment for any reason, (y) a Change
      in Control or (z) in calendar year 2008, upon the earlier to occur of (A)
      December 31, 2008 or (B) the date of any Distribution (as defined in the LLC
      Agreement), and increased from the Effective Date through the payment date
      by
      interest at an annual interest rate of 6%, compounded annually.

     

    (iii) Any
      payments to be made under this Section 7(e) shall be paid no later than the
      90th
      day
      following the applicable triggering event.

     

    
      	
            	8.	
              TERMINATION
                OF EMPLOYMENT.

            

    

     

    (a) Termination
      by Mutual Agreement. The
      Parties may terminate this Agreement by mutual agreement at any time. If they
      do
      so, Borow's entitlements shall be as the Parties mutually agree.

     

    (b) General.
      Notwithstanding
      anything to the contrary herein, in the event of termination of Borow's
      employment under this Agreement, he or his Beneficiary, as the case may be,
      shall be entitled to receive (in addition to payments and benefits under Section
      4(b) and subsections (c) through (h) below, as applicable):

     

    (i) his
      Salary through the date of termination;

     

    (ii) any
      unused vacation from prior years;

     

    (iii) any
      reimbursements payable in accordance with Sections 4 above of any business
      expenses incurred by Borow, through the date of termination but not yet paid
      to
      him;

     

    (iv) any
      other
      compensation or benefits, including without limitation employee benefits under
      plans described in Section 7 above, that have vested through the date of
      termination or to which he may then be entitled in accordance with the
      applicable terms and conditions of each grant, award or plan; and

     

    
      
        
        

      

      
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    (v) reimbursement
      in accordance with Sections 7(a) and (b) above of any business and medical
      expenses incurred by Borow or his Spouse, as applicable, through the date of
      termination but not yet paid to him.

     

    (c) Termination
      due to Retirement. In
      the
      event that Borow's employment terminates due to Retirement, he shall be
      entitled, in addition to the compensation and benefits specified in Section
      8(b), to the benefits provided under the SERP, as provided in Section 7(e)
      above
      and to any annual bonus for the current Fiscal Year based on actual performance
      of Aeroflex, prorated to the date of termination. The Consulting Period shall
      begin on the day following termination of Borow's employment by
      Retirement.

     

    (d) Termination
      due to Death. In
      the
      event that Borow's employment terminates due to his death, his Beneficiary
      shall
      be entitled, in addition to the compensation and benefits specified in Section
      8(b), to any annual bonus for the current Fiscal Year based on actual
      performance of Aeroflex, prorated to the date of termination.

     

    (e) Termination
      due to Disability. In
      the
      event of Disability, Aeroflex or Borow may terminate Borow's employment. If
      Borow's employment terminates due to Disability, he shall be entitled, in
      addition to the compensation and benefits specified in Section 8(b), to any
      annual bonus for the current Fiscal Year based on actual performance of
      Aeroflex, prorated to the date of termination.

     

    (f) Termination
      by Aeroflex for Cause. Aeroflex
      may terminate Borow's employment hereunder for Cause only upon written notice
      to
      Borow prior to any intended termination, which notice shall specify the grounds
      for such termination in reasonable detail. Cause shall in no event be deemed
      to
      exist except upon a finding reflected in a resolution approved by a majority
      (excluding Borow) of the members of the Board (whose findings shall not be
      binding upon or entitled to any deference by any court, arbitrator or other
      decision-maker ruling on this Agreement) at a meeting of which Borow shall
      have
      been given proper notice and at which Borow (and his counsel) shall have a
      reasonable opportunity to present his case.

     

    
      
        
        

      

      
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    In
      the
      event that Borow's employment is terminated for Cause, he shall be entitled
      only
      to the compensation and benefits specified in Section 8(b).

     

    (g) Termination
      Without Cause or by Borow for Good Reason.

     

    (i) Termination
      without Cause shall mean termination of Borow's employment by Aeroflex and
      shall
      exclude termination (A) due to Retirement, death, Disability or Cause or (B)
      by
      mutual agreement of Borow and Aeroflex. Aeroflex shall provide Borow 15 days'
      prior written notice of termination by it without Cause, and Borow shall provide
      Aeroflex 30 days' prior written notice of his termination for Good
      Reason.

     

    (ii) In
      the
      event of termination by Aeroflex of Borow's employment without Cause or of
      termination by Borow of his employment for Good Reason, subject to the execution
      of a general release in favor of Aeroflex, its affiliates and their current
      and
      former officers, directors and employees, in substantially the form attached
      as
      Exhibit A, which is not revoked, he shall be entitled, in addition to the
      compensation and benefits specified in Section 8(b), to:

     

    (A) his
      Salary, payable for the remainder of the Employment Term (assuming Borow's
      employment had not terminated) at the rate in effect immediately before such
      termination;

     

    
      
        
        

      

      
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    (B) annual
      bonuses for the remainder of the Employment Term (assuming Borow's employment
      had not terminated) (including a prorated bonus for any partial Fiscal Year)
      equal to the average of the highest annual bonuses (not to exceed 3 years)
      awarded to him during the Fiscal Years (not to exceed 10 years) commencing
      after
      the Effective Date (including, without limitation, any bonus awarded to Borow
      in
      the year of termination, which is unpaid as of the date of termination)
      (provided that if Borow is terminated prior to the payment of any annual bonus
      following the Effective Date, the annual bonus shall be 50% of Salary), such
      bonuses to be paid at the same time annual bonuses are regularly paid by
      Aeroflex to Borow;

     

    (C) continued
      medical reimbursement for the remainder of the Employment Term (assuming Borow's
      employment had not terminated) and thereafter the lifetime medical benefits
      described in Section 7(b) above;

     

    (D) continued
      participation in all employee benefit plans or programs available to Aeroflex
      employees generally in which Borow was participating on the date of termination
      of his employment until the end of the Employment Term (assuming Borow's
      employment had not terminated); provided; however, that (x) if Borow is
      precluded from continuing his participation in any employee benefit plan or
      program as provided in this clause (D), he shall be entitled to the after-tax
      economic equivalent, paid in a lump sum upon termination of Borow's employment,
      of the benefits under the plan or program in which he is unable to participate
      until the end of the Employment Term, and (y) the economic equivalent of any
      benefit foregone shall be deemed to be the lowest cost that Borow would incur
      in
      obtaining such benefit on an individual basis; and

     

    (E) other
      benefits in accordance with applicable plans and
      programs of Aeroflex.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (iii) Prior
      written consent by Borow to any of the events described in Section 1(j) above
      shall be deemed a waiver by him of his right to terminate for Good Reason under
      this Section 8(g) solely by reason of the events set forth in such
      waiver.

     

    
      	
            	9.	
              NO
                DUTY TO MITIGATE; NO
                OFFSET.

            

    

     

    Borow
      shall not be required to mitigate damages or the amount of any payment provided
      for under this Agreement by seeking other employment or otherwise, nor will
      any
      payment hereunder be subject to offset in the event Borow does receive
      compensation for services from any other source.

     

    
      	
            	10.	
              PARACHUTES.

            

    

     

    (a) Transaction.

     

    (i) Application.
      If,
      in
      connection with the Transaction, all, or any portion, of the payments provided
      under this Agreement, and/or any other payments and benefits that Borow receives
      or is entitled to receive from Aeroflex or a Subsidiary, whether or not under
      an
      existing plan, arrangement or other agreement, constitutes an "excess parachute
      payment" within the meaning of Section 280G(b) of the Code (each such parachute
      payment, a "Parachute Payment") and will result in the imposition on Borow
      of an
      excise tax under Section 4999 of the Code, then, in addition to any other
      benefits to which Borow is entitled under this Agreement, Aeroflex shall pay
      him
      an amount in cash equal to the sum of the excise taxes payable by him by reason
      of receiving Parachute Payments, plus the amount necessary to put him in the
      same after-tax position (taking into account any and all applicable federal,
      state and local excise, income or other taxes at the highest possible applicable
      rates on such Parachute Payments (including without limitation any payments
      under this Section 10) as if no excise taxes had been imposed with respect
      to
      Parachute Payments (the "Parachute Gross-up").

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (ii) Computation.
      The
      amount of any payment under this Section 10 shall be computed by a certified
      public accounting firm of national reputation selected by Aeroflex and
      acceptable to Borow. If Aeroflex or Borow disputes the computation rendered
      by
      such accounting firm, Aeroflex shall select an alternative certified public
      accounting firm of national reputation to perform the applicable computation.
      If
      the two accounting firms cannot agree upon the computations, Borow and Aeroflex
      shall jointly appoint a third certified public accounting firm of national
      reputation within 10 calendar days after the two conflicting computations have
      been rendered. Such third accounting firm shall be asked to determine within
      30
      calendar days the computation of the Parachute Gross-up to be paid to Borow,
      and
      payments shall be made accordingly.

     

    (iii) Payment.
      In
      any
      event, Aeroflex shall pay to Borow or pay on his behalf the Parachute Gross-up
      as computed by the accounting firm initially selected by Borow by the time
      any
      taxes payable by him as a result of the Parachute Payments become due, with
      Borow agreeing to return the excess amount of such payment over the final
      computation rendered from the process described in Section 10(b). Borow and
      Aeroflex shall provide the accounting firms with all information that any of
      them reasonably deems necessary in order to compute the Parachute Gross-up.
      The
      cost and expenses of all the accounting firms retained to perform the
      computations described above shall be borne by Aeroflex.

     

    In
      the
      event that the Internal Revenue Service ("IRS") or the accounting firm computing
      the Parachute Gross-up finally determines that the amount of excise taxes
      thereon initially paid was insufficient to discharge Borow's excise tax
      liability, Aeroflex shall make additional payments to him as may be necessary
      to
      reimburse him for discharging the full liability.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    If
      there
      is a reasonable basis for a refund claim with respect to excise taxes paid,
      as
      determined in the sole discretion of Aeroflex, Borow shall apply to the IRS
      for
      a refund of any excise taxes paid and remit to Aeroflex the amount of any such
      refund that he receives. Aeroflex shall reimburse Borow for his expenses in
      seeking a refund of excise taxes and for any interest and penalties imposed
      on
      excise taxes that he is required to pay.

     

    (b) Change
      in Control.
      If, in
      connection with a Change in Control or other transaction following the Effective
      Date, Aeroflex determines in good faith that any payments or benefits (whether
      made or provided pursuant to this Agreement or otherwise) provided to Borow
      constitute "parachute payments" within the meaning of Section 280G of the Code
      (“Parachute
      Payments”),
      and
      may be subject to an excise tax imposed pursuant to Section 4999 of the Code,
      the Borow's Parachute Payments will be reduced to an amount determined by
      Aeroflex in good faith to be the maximum amount that may be provided to Borow
      without resulting in any portion of such Parachute Payments being subject to
      such excise tax (the amount of such reduction, the “Cutback
      Benefits”).
       Borow shall be entitled to select which Parachute Payments shall be
      reduced hereunder; provided that if Borow fails to so select, Aeroflex shall
      select which Parachute Payments will be reduced.  Notwithstanding the
      foregoing, Aeroflex shall use reasonable efforts to obtain the approval of
      the
      Cutback Benefits by Aeroflex's shareholders in the manner contemplated by
      Q&A 7 of Treas. Reg. Section 1.280G, it being understood and agreed that
      Aeroflex does not guarantee that such approval will be obtained.  If, and
      only if, Aeroflex determines that such approval is obtained, Borow shall be
      entitled to receive the Cutback Benefits without regard to the first sentence
      of
      this paragraph.

     

    (c) Any
      Parachute Gross-up payments due to Borow under this Section 10 shall be paid
      no
      later than the end of the calendar year following the calendar year in which
      Borow pays the excise tax to which such Parachute Gross-up payment
      relates.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    
      	
            	11.	
              CONSULTING
                PERIOD.

            

    

     

    (a) General.
      Effective
      upon the end of the Employment Term (but only if the Employment Term ends by
      reason of its expiration or, if earlier, upon termination of Borow's employment
      (i) by mutual agreement or (ii) by Retirement), Borow shall become a consultant
      to Aeroflex, in recognition of the continued value to Aeroflex of his extensive
      knowledge and expertise. Unless earlier terminated, as provided in Section
      11(e), the Consulting Period shall continue for three years.

     

    (b) Duties
      and Extent of Services.

     

    (i) During
      the Consulting Period, Borow shall consult with Aeroflex and its senior
      executive officers regarding its respective businesses and operations. Such
      consulting services shall not require more than 50 days in any calendar year,
      nor more than one day in any week, it being understood and agreed that during
      the Consulting Period Borow shall have the right, consistent with the
      prohibitions of Sections 12 and 13 below, to engage in full-time or part-time
      employment with any business enterprise that is not a competitor of
      Aeroflex.

     

    (ii) Borow's
      service as a consultant shall only be required at such times and such places
      as
      shall not result in unreasonable inconvenience to him, recognizing that he
      may
      have to accord priority to his other business commitments over the performance
      of services for Aeroflex. In order to minimize interference with Borow's other
      commitments, his consulting services may be rendered by personal consultation
      at
      his residence or office wherever maintained, or by correspondence through mail,
      telephone, fax or other similar mode of communication at times, including
      weekends and evenings, most convenient to him.

     

    (iii) During
      the Consulting Period, Borow shall not be obligated to serve as a member of
      the
      Board or to occupy any office on behalf of Aeroflex or any of its
      Subsidiaries.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (c) Compensation.
      During
      the Consulting Period, Borow shall receive from Aeroflex each year an amount
      equivalent to two-thirds of his Salary at the end of the Employment Term,
      payable and subject to annual increase as provided in Section 3
      above.

     

    (d) Disability.
      In
      the
      event of Disability during the Consulting Period, Aeroflex or Borow may
      terminate Borow's consulting services. If Borow's consulting services are
      terminated due to Disability, he shall be entitled to compensation, in
      accordance with Section 11(c), for the remainder of the Consulting
      Period.

     

    (e) Termination.
      The
      Consulting Period shall terminate after three years or, if earlier, upon Borow's
      death or upon his failure to perform consulting services as provided in Section
      11(b), pursuant to 30 days' written notice by Aeroflex to Borow of the grounds
      constituting such failure and reasonable opportunity afforded Borow to cure
      the
      alleged failure. Upon any such termination, payment of consulting fees and
      benefits (with the exception of lifetime medical benefits under Section 7(b)
      above) shall cease.

     

    (f) Other.
      During
      the Consulting Period, Borow shall be entitled to expense reimbursement
      (including secretarial, telephone and similar support services) and perquisites
      and medical benefits, pursuant to the terms of Sections 5, 6(a) and 7(b),
      respectively.

     

    
      	
            	12.	
              CONFIDENTIAL
                INFORMATION.

            

    

     

    (a) General.

     

    (i) Borow
      understands and hereby acknowledges that as a result of his employment with
      Aeroflex he will necessarily become informed of and have access to certain
      valuable and confidential information of Aeroflex and any of its Subsidiaries,
      joint ventures and affiliates, including, without limitation, inventions, trade
      secrets, technical information, computer software and programs, know-how and
      plans ("Confidential Information"), and that any such Confidential Information,
      even though it may be developed or otherwise acquired by Borow, is the exclusive
      property of Aeroflex to be held by him in trust solely for Aeroflex's
      benefit.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    (ii) Accordingly,
      Borow hereby agrees that, during the Employment Term and the Consulting Period
      and subsequent to both, he shall not, and shall not cause others to, use,
      reveal, report, publish, transfer or otherwise disclose to any person,
      corporation or other entity any Confidential Information without prior written
      consent of the Board, except to (A) responsible officers and employees of
      Aeroflex or (B) responsible persons who are in a contractual or fiduciary
      relationship with Aeroflex or who need such information for purposes in the
      interest of Aeroflex. Notwithstanding the foregoing, the prohibitions of this
      clause (ii) shall not apply to any Confidential Information that becomes of
      general public knowledge other than from Borow or is required to be divulged
      by
      court order or administrative process; provided that
      Borow
      shall give prompt written notice to Aeroflex of such requirement, disclose
      no
      more information than is so required, and cooperate with any attempts by
      Aeroflex to obtain a protective order or similar treatment.

     

    (b) Return
      of Documents. Upon
      termination of his employment with Aeroflex for any reason or, if applicable,
      upon expiration of the Consulting Period, Borow shall promptly deliver to
      Aeroflex all plans, drawings, manuals, letters, notes, notebooks, reports,
      computer programs and copies thereof and all other materials, including without
      limitation those of a secret or confidential nature, relating to Aeroflex's
      business that are then in his possession or control.

     

    (c) Remedies
      and Sanctions. In
      the
      event that Borow is found to be in violation of Section 12(a) or (b) above,
      Aeroflex shall be entitled to relief as provided in Section 14
      below.

     

    
      	
            	13.	
              NONCOMPETITION/NONSOLICITATION.

            

    

     

    (a) Prohibitions.
      During
      Borow's employment with Aeroflex and, if applicable, the Consulting Period
      and
      until the later of (x) the fifth anniversary of the Effective Date and (y)
      two
      years following the Borow's termination of employment for any reason or the
      Consulting Period, as applicable, Borow shall not, without prior written
      authorization of the Board, directly or indirectly, 

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    (i) whether
      individually, as a director, manager, member, stockholder, partner, owner,
      employee, consultant or agent of any business, or in any other capacity, other
      than on behalf of Aeroflex or a subsidiary, organize, establish, own, operate,
      manage, control, engage in, participate in, invest in, permit his name to be
      used by, act as a consultant or advisor to, render services for (alone or in
      association with any person, firm, corporation or business organization), or
      otherwise assist any person or entity that engages in or owns, invests in,
      operates, manages or controls any venture or enterprise which engages or
      proposes to engage in any business conducted by Aeoflex or any of its
      subsidiaries on the date of Borow's termination of employment or within twelve
      (12) months of Borow's termination of employment in the geographic locations
      where Aeroflex and its subsidiaries engage or propose to engage in such
      business;

     

    (ii) solicit
      or induce any customer of Aeroflex to cease purchasing goods or services from
      Aeroflex or to become a customer of any competitor of Aeroflex; or

     

    (iii) solicit
      or attempt to solicit any employee of Aeroflex or any of its subsidiaries (a
      "Current Employee") or any person who was an employee of Aeroflex or any of
      its
      subsidiaries during the twelve (12) month period immediately prior to the date
      Borow's employment terminates (a "Former Employee") to
      terminate such employee's employment relationship with Aeroflex in order, in
      either case, to enter into a similar relationship with Borow, or any other
      person or any entity or hire any employee or Former Employee.

     

    (b) Remedies
      and Sanctions. In
      the
      event that Borow is found to be in violation of Section 13(a) above, Aeroflex
      shall be entitled to relief as provided in Section 14 below.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (c) Exceptions.
      Notwithstanding
      anything to the contrary in Section 13(a) above, its provisions shall not be
      construed as preventing Borow from investing his assets in any business that
      is
      not a direct competitor of Aeroflex.

     

    
      	
            	14.	
              REMEDIES/SANCTIONS.

            

    

     

    Borow
      acknowledges that the services he is to render under this Agreement are of
      a
      unique and special nature, the loss of which cannot reasonably or adequately
      be
      compensated for in monetary damages, and that irreparable injury and damage
      may
      result to Aeroflex in the event of any breach of this Agreement or default
      by
      Borow. Because of the unique nature of the Confidential Information and the
      importance of the prohibitions against competition and solicitation, Borow
      further acknowledges and agrees that Aeroflex will suffer irreparable harm
      if he
      fails to comply with his obligations under Section 12(a) or (b) above or Section
      13(a) above and that monetary damages would be inadequate to compensate Aeroflex
      for any such breach. Accordingly, Borow agrees that, in addition to any other
      remedies available to either Party at law, in equity or otherwise, Aeroflex
      will
      be entitled to seek injunctive relief or specific performance to enforce the
      terms (without the posting of a bond), or prevent or remedy the violation,
      of
      any provisions of this Agreement. In addition, without limiting Aeroflex's
      remedies for any breach of any restriction on Borow set forth in Sections 12(a)
      or (b) above or Section 13(a) above, except as required by law, Aeroflex will
      have no obligation to pay or provide any of the amounts or benefits under
      Sections 7 or 8 above.

     

    
      	
            	15.	
              BENEFICIARIES/REFERENCES.

            

    

     

    Borow
      shall be entitled to select (and change, to the extent permitted under any
      applicable law) a beneficiary or beneficiaries to receive any compensation
      or
      benefit payable under this Agreement following his death by giving Aeroflex
      written notice thereof; provided, however, that absent any then effective
      contrary notice, his beneficiary shall be his surviving Spouse. In the event
      of
      Borow's death, or of a judicial determination of his incompetence, reference
      in
      this Agreement to Borow shall be deemed to refer, as appropriate, to his
      beneficiary, estate or other legal representative.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    
      	
            	16.	
              WITHHOLDING
                TAXES.

            

    

     

    All
      payments to Borow or his Beneficiary under this Agreement shall be subject
      to
      withholding on account of federal, state and local taxes as required by
      law.

     

    
      	
            	17.	
              INDEMNIFICATION
                AND LIABILITY INSURANCE.

            

    

     

    Nothing
      herein is intended to limit Aeroflex's indemnification of Borow, and Aeroflex
      shall indemnify him to the fullest extent permitted by applicable law consistent
      with Aeroflex's Certificate of Incorporation and By-Laws as in effect on the
      Effective Date, with respect to any action or failure to act on his part while
      he is an officer, director or employee of Aeroflex or any Subsidiary. Aeroflex
      shall cause Borow to be covered at all times by directors' and officers'
      liability insurance on terms no less favorable than provided to other directors'
      and officers'. Aeroflex shall continue to indemnify Borow as provided above
      and
      maintain such liability insurance coverage for him after the Employment Term
      and, if applicable, the Consulting Period, for any claims that may be made
      against him with respect to his service as a director or officer of Aeroflex
      or
      as a consultant to Aeroflex.

     

    
      	
            	18.	
              EFFECT
                OF AGREEMENT ON OTHER
                BENEFITS.

            

    

     

    The
      existence of this Agreement shall not prohibit or restrict Borow's entitlement
      to participate fully in compensation, employee benefit and other plans of
      Aeroflex in which senior executives are eligible to participate.

     

    
      	
            	19.	
              ASSIGNABILITY;
                BINDING NATURE.

            

    

     

    This
      Agreement shall be binding upon and inure to the benefit of the Parties and
      their respective successors, heirs (in the case of Borow) and assigns. No rights
      or obligations of Aeroflex under this Agreement may be assigned or transferred
      by Aeroflex except pursuant to (a) a merger or consolidation in which
      Aeroflex is not the continuing entity or (b) sale or liquidation of all or
      substantially all of the assets of Aeroflex, provided that the surviving entity
      or assignee or transferee is the successor to all or substantially all of the
      assets of Aeroflex and such surviving entity or assignee or transferee assumes
      the liabilities, obligations and duties of Aeroflex under this Agreement, either
      contractually or as a matter of law.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    
      	
            	20.	
              REPRESENTATIONS.

            

    

     

    The
      Parties respectively represent and warrant that each is fully authorized and
      empowered to enter into this Agreement and that the performance of its or his
      obligations, as the case may be, under this Agreement will not violate any
      agreement between such Party and any other person, firm or organization.
      Aeroflex represents and warrants that this Agreement has been duly authorized
      by
      all necessary corporate action and is valid, binding and enforceable in
      accordance with its terms.

     

    
      	
            	21.	
              ENTIRE
                AGREEMENT.

            

    

     

    Except
      to
      the extent otherwise provided herein, this Agreement contains the entire
      understanding and agreement between the Parties concerning the subject matter
      hereof and supersedes any prior agreements, whether written or oral, between
      the
      Parties concerning the subject matter hereof, including without limitation
      the
      Prior Agreement. Payments and benefits provided under this Agreement are in
      lieu
      of any payments or other benefits under any severance program or policy of
      Aeroflex to which Borow would otherwise be entitled.

     

    
      	
            	22.	
              AMENDMENT
                OR WAIVER.

            

    

     

    No
      provision in this Agreement may be amended unless such amendment is agreed
      to in
      writing and signed by both Borow and an authorized officer of Aeroflex. No
      waiver by either Party of any breach by the other Party of any condition or
      provision contained in this Agreement to be performed by such other Party shall
      be deemed a waiver of a similar or dissimilar condition or provision at the
      same
      or any prior or subsequent time. Any waiver must be in writing and signed by
      the
      Party to be charged with the waiver. No delay by either Party in exercising
      any
      right, power or privilege hereunder shall operate as a waiver
      thereof.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    
      	
            	23.	
              SEVERABILITY.

            

    

     

    In
      the
      event that any provision or portion of this Agreement shall be determined to
      be
      invalid or unenforceable for any reason, in whole or in part, the remaining
      provisions of this Agreement shall be unaffected thereby and shall remain in
      full force and effect to the fullest extent permitted by law.

     

    
      	
            	24.	
              SURVIVAL.

            

    

     

    The
      respective rights and obligations of the Parties under this Agreement shall
      survive any termination of Borow's employment with Aeroflex.

     

    
      	
            	25.	
              GOVERNING
                LAW/JURISDICTION.

            

    

     

    This
      Agreement shall be governed by and construed and interpreted in accordance
      with
      the laws of New York,
      without
      reference to principles of conflict of laws.

     

    
      	
            	26.	
              NOTICES.

            

    

     

    Any
      notice given to either Party shall be in writing and shall be deemed to have
      been given when delivered either personally, by fax, by overnight delivery
      service (such as Federal Express) or sent by certified or registered mail
      postage prepaid, return receipt requested, duly addressed to the Party concerned
      at the address indicated below or to such changed address as the Party may
      subsequently give notice of.

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    If
      to
      Aeroflex or the Board:

     

    Aeroflex
      Incorporated 

    35
      South
      Service Road 

    Plainview,
      NY 11803 

    Attention:
      General Counsel 

    FAX:
      (516) 694-4823

     

    With
      a
      copy to:

     

    Veritas
      Capital Management II, LLC

    660
      Madison Avenue, 14th Floor

    New
      York,
      New York 10021

    Attention:
      Robert B. McKeon

     

    And
      a
      copy to:

     

    Schulte
      Roth & Zabel LLP

    919
      Third
      Avenue

    New
      York,
      NY 10022

    
      	
            	Attention:	
              Benjamin
                Polk

            

    

    
      	
            	Telephone:	
              (212)
                756-2000

            

    

    
      	
            	Fax:	
              (212)
                593-5955

            

    

     

    If
      to
      Borow:

     

    Leonard
      Borow

    7582
      Isla
      Berde Way

    Delray
      Beach, Florida 33446

     

    
      	
            	27.	
              HEADINGS.

            

    

     

    The
      headings of the sections contained in this Agreement are for convenience only
      and shall not be deemed to control or affect the meaning or construction of
      any
      provision of this Agreement.

     

    
      	
            	28.	
              COUNTERPARTS.

            

    

     

    This
      Agreement may be executed in counterparts, each of which when so executed and
      delivered shall be an original, but all such counterparts together shall
      constitute one and the same instrument.

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the
      undersigned have executed this Agreement as of the date first written
      above.

    

    
      	 	 	 	
              Aeroflex
                Incorporated

            
	 	 	 	 
	 	 	 	 
	
              Attest:
                

            	
               

            	 	
              By:
                /s/
                John Adamovich

            
	 	 	 	 
	 	 	 	 
	 	 	 	 
	Witness: 	
              /s/

            	 	
              /s/
                Leonard Borow

            
	 	 	 	
              Leonard
                Borow

            
	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      Exhibit
        A

    

     

    GENERAL
      RELEASE

    

    I,
      Leonard Borow, in consideration of and subject to the terms and conditions
      set
      forth in the Employment Agreement dated as of August 15, 2007 (the "Employment
      Agreement") to which this General Release is attached, and other good and
      valuable consideration, do hereby release and forever discharge
      Aeroflex
      Incorporated (the "Company"), VGG Holding LLC, AX Holding Corp. and their
      current and former officers, directors, partners, members, shareholders,
      investors, employees, attorneys, agents, predecessors, successors, affiliates,
      assigns and legal representatives (together, the "Company Released
      Parties"), from
      any
      and all claims, charges, manner of actions and causes of action, suits, debts,
      dues, accounts, bonds, covenants, contracts, agreements, judgments, charges,
      claims, and demands whatsoever which I, my heirs, executors, administrators
      and
      assigns have, or may hereafter have against the Company Released Parties arising
      out of or by reason of any cause, matter or thing whatsoever, whether known
      or
      unknown, from the beginning of the world to the date hereof ("Claims"),
      including, without limitation, in connection with or relating to, my employment
      or termination of employment with the Company and its subsidiaries, the
      Employment Agreement, all employment-related matters arising under any federal,
      state or local statute, rule or regulation or principle of contract law or
      common law and any
      claims of employment discrimination, unlawful harassment or
      retaliation
      claims
      and claims arising under Title VII of the Civil Rights Act of 1964, 42 U.S.C.
§
2000 et seq.,
      the
      Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001
et seq.,
      the
      Fair Labor Standards Act (to the extent allowed by law), 29 U.S.C. § 201
et seq.,
      Age
      Discrimination in Employment Act of 1967, 29 U.S.C. § 621, et seq.,
      the
      Reconstruction Era Civil Rights Act, 42 U.S.C. § 1981 et seq.,
      the
      Americans with Disabilities Act of 1993, 42 U.S.C. § 12900 et seq.,
      the
      Family and Medical Leave Act of 1990 (to the extent allowed by law), 42 U.S.C.
§
12101, et seq.,
      the
      New
      York State Human Rights Law, N.Y. Exec. Law § 290 et seq.,
      the New
      York State Labor Law, N.Y. Labor Law § 1 et seq.,
      and the
      New York City Human Rights Law, N.Y.C. Admin. Code § 8-107 et seq.,
      provided, that this General Release shall not constitute a release of any Claims
      that arise from a breach of (i) Sections 4(b), 7, 8, 10, 11 and/or 17 of the
      Employment Agreement, (ii) the Contribution Agreement between VGG Holding LLC
      and me, (iii) the Amended and Restated Limited Liability Agreement of VGG
      Holding LLC, as amended from time to time or (iv) any benefit under any
      tax-qualified plan sponsored, maintained or contributed to by the
      Company.

     

    I
      acknowledge that I have been advised to consult with legal counsel. I
      acknowledge that I have been provided with the opportunity to review and
      consider this General Release for twenty-one (21) days from the date it was
      provided to me. If I elect to sign before the expiration of the twenty-one
      (21)
      days, I acknowledge that I will have chosen, of my own free will without any
      duress, to waive my right to the full twenty-one (21) day period. I understand
      that I may revoke this General Release within seven (7) days after my execution
      by sending a written notice of revocation to __________ at the Company at
      ____________________, received within the seven-day revocation
      period.

     

    I
      acknowledge that I have not relied on any representations or statements not
      set
      forth in the Employment Agreement or in this General Release. Unless otherwise
      publicly-filed by the Company, I will not disclose the contents or substance
      of
      this General Release to any third parties, other than my spouse, attorneys,
      accountants, or as required by law, and I will instruct each of the foregoing
      not to disclose the same. I am signing this General Release knowingly,
      voluntarily and with full understanding of its terms and effects.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
      General Release will be governed by and construed in accordance with the laws
      of
      the State of New York. If any provision in this General Release is held invalid
      or unenforceable for any reason, the remaining provisions shall be construed
      as
      if the invalid or unenforceable provision had not been included.

     

    In
      witness hereof, I have executed this General Release this 15th
      day of
      _____, 200_.

     

     

    
      	 	 
	 	 Leonard
              Borow

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