Document:

Execution
        Draft

       

    

    AGREEMENT
      AND PLAN OF MERGER

     

    BY
      AND AMONG

     

    LUMASENSE
      TECHNOLOGIES, INC.,

     

    RED
      ACQUISITION CORPORATION

     

    AND

     

    MIKRON
      INFRARED, INC.

     

    DATED
      AS OF FEBRUARY 8, 2007

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

    

      
        	 	 	 	
                Page

              
	ARTICLE
                I	 	
                1

              
	
                1.1

              	
                Certain
                  Defined Terms

              	 	
                1

              
	
                1.2

              	
                Other
                  Defined Terms

              	 	
                6

              
	 	 	 	 
	ARTICLE
                II THE MERGER	 	
                7

              
	
                2.1

              	
                Effective
                  Time of the Merger

              	 	
                7

              
	
                2.2

              	
                Closing

              	 	
                7

              
	
                2.3

              	
                Effects
                  of the Merger

              	 	
                8

              
	
                2.4

              	
                Directors
                  and Officers

              	 	
                8

              
	 	 	 	 
	ARTICLE
                III CONVERSION OF SECURITIES	 	
                8

              
	
                3.1

              	
                Conversion
                  of Capital Stock

              	 	
                8

              
	
                3.2

              	
                Exchange
                  of Certificates

              	 	
                9

              
	 	 	 	 
	ARTICLE
                IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	
                11

              
	
                4.1

              	
                Organization,
                  Standing and Power; Subsidiaries

              	 	
                11

              
	
                4.2

              	
                Capitalization

              	 	
                12

              
	
                4.3

              	
                Authority;
                  No Conflict; Required Filings and Consents

              	 	
                14

              
	
                4.4

              	
                SEC
                  Filings; Financial Statements; Reporting Requirements

              	 	
                15

              
	
                4.5

              	
                No
                  Undisclosed Liabilities; Indebtedness

              	 	
                18

              
	
                4.6

              	
                Absence
                  of Certain Changes or Events

              	 	
                18

              
	
                4.7

              	
                Taxes

              	 	
                18

              
	
                4.8

              	
                Owned
                  and Leased Real Properties

              	 	
                19

              
	
                4.9

              	
                Intellectual
                  Property

              	 	
                20

              
	
                4.10

              	
                Agreements,
                  Contracts and Commitments; Government Contracts

              	 	
                22

              
	
                4.11

              	
                Litigation;
                  Product Liability; Product Recalls

              	 	
                24

              
	
                4.12

              	
                Environmental
                  Matters

              	 	
                24

              
	
                4.13

              	
                Employee
                  Benefit Plans

              	 	
                25

              
	
                4.14

              	
                Compliance
                  With Laws

              	 	
                28

              
	
                4.15

              	
                Permits

              	 	
                28

              
	
                4.16

              	
                Labor
                  Matters

              	 	
                28

              
	
                4.17

              	
                Insurance

              	 	
                29

              
	
                4.18

              	
                Inventory

              	 	
                30

              
	
                4.19

              	
                Tangible
                  Personal Property

              	 	
                30

              
	
                4.20

              	
                Customers
                  and Suppliers

              	 	
                30

              
	
                4.21

              	
                Accounts
                  Receivable

              	 	
                30

              
	
                4.22

              	
                Opinions
                  of Financial Advisors

              	 	
                30

              
	
                4.23

              	
                Brokers

              	 	
                31

              
	
                4.24

              	
                Certain
                  Approvals

              	 	
                31

              
	
                4.25

              	
                Unlawful
                  Payments

              	 	
                31

              
	
                4.26

              	
                Affiliate
                  Transactions

              	 	
                31

              
	
                4.27

              	
                No
                  Other Representations or Warranties

              	 	
                31

              

      

      
         

        
          
            
            

          

          
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        	ARTICLE
                V REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE	 	
                32

              
	BUYER
                SUBSIDIARY	 	
                
                  32

                

              
	
                5.1

              	
                Organization,
                  Standing and Power

              	 	
                
                  32

                

              
	
                5.2

              	
                Authority;
                  No Conflict; Required Filings and Consents

              	 	
                
                  32

                

              
	
                5.3

              	
                Information
                  Provided

              	 	
                33

              
	
                5.4

              	
                Operations
                  of the Buyer Subsidiary

              	 	
                34

              
	
                5.5

              	
                Financing

              	 	
                
                  34

                

              
	
                5.6

              	
                Brokers

              	 	
                
                  34

                

              
	
                5.7

              	
                Shares

              	 	
                
                  34

                

              
	 	 	 	 
	ARTICLE
                VI CONDUCT OF BUSINESS	 	
                
                  34

                

              
	
                6.1

              	
                Covenants
                  of the Company

              	 	
                
                  34

                

              
	
                6.2

              	
                Confidentiality

              	 	
                35

              
	 	 	 	 
	ARTICLE
                VII ADDITIONAL AGREEMENTS	 	
                35

              
	
                7.1

              	
                No
                  Solicitation

              	 	
                35

              
	
                7.2

              	
                Proxy
                  Statement

              	 	
                40

              
	
                7.3

              	
                Nasdaq
                  Quotation

              	 	
                
                  40

                

              
	
                7.4

              	
                Access
                  to Information

              	 	
                
                  40

                

              
	
                7.5

              	
                Shareholders
                  Meeting

              	 	
                41

              
	
                7.6

              	
                Cooperation;
                  Further Action

              	 	
                
                  41

                

              
	
                7.7

              	
                Public
                  Disclosure

              	 	
                43

              
	
                7.8

              	
                Company
                  Stock Plans

              	 	
                
                  43

                

              
	
                7.9

              	
                Shareholder
                  Litigation

              	 	
                
                  43

                

              
	
                7.10

              	
                Notification
                  of Certain Matters

              	 	
                
                  43

                

              
	
                7.11

              	
                Directors’
                  and Officers’ Indemnification and Insurance

              	 	
                44

              
	
                7.12

              	
                Loans
                  to Company Employees, Officers and Directors

              	 	
                45

              
	
                7.13

              	
                Takeover
                  Statutes and Laws

              	 	
                45

              
	
                7.14

              	
                Standstill
                  Agreements; Confidentiality Agreements

              	 	
                45

              
	 	 	 	 
	ARTICLE
                VIII CONDITIONS TO MERGER	 	
                46

              
	
                8.1

              	
                Conditions
                  to Each Party’s Obligation To Effect the Merger

              	 	
                
                  46

                

              
	
                8.2

              	
                Additional
                  Conditions to Obligations of the Buyer and the Buyer
                  Subsidiary

              	 	
                
                  46

                

              
	
                8.3

              	
                Additional
                  Conditions to Obligations of the Company

              	 	
                48

              
	 	 	 	 
	ARTICLE
                IX TERMINATION AND AMENDMENT	 	
                49

              
	
                9.1

              	
                Termination

              	 	
                49

              
	
                9.2

              	
                Effect
                  of Termination

              	 	
                50

              
	
                9.3

              	
                Fees
                  and Expenses

              	 	
                
                  50

                

              
	
                 

              	 	 	 
	ARTICLE
                X MISCELLANEOUS	 	
                51

              
	
                10.1

              	
                Amendment

              	 	
                
                  51

                

              
	
                10.2

              	
                Extension;
                  Waiver

              	 	
                
                  51

                

              
	
                10.3

              	
                Non−Survival
                  of Representations, Warranties and Agreements

              	 	
                52

              
	
                10.4

              	
                Notices

              	 	
                52

              

      

      
         

        
          
            
            

          

          
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                10.5

              	
                Entire
                  Agreement

              	 	
                
                  53

                

              
	
                10.6

              	
                No
                  Third Party Beneficiaries.

              	 	
                
                  53

                

              
	
                10.7

              	
                Assignment.

              	 	
                
                  53

                

              
	
                10.8

              	
                Severability.

              	 	
                
                  53

                

              
	
                10.9

              	
                Counterparts
                  and Signature.

              	 	
                54

              
	
                10.10

              	
                 Interpretation.

              	 	
                
                  54

                

              
	
                10.11

              	
                Governing
                  Law.

              	 	
                
                  54

                

              
	
                10.12

              	
                Remedies.

              	 	
                
                  54

                

              
	
                10.13

              	
                Submission
                  to Jurisdiction.

              	 	
                
                  54

                

              
	
                10.14

              	
                Waiver
                  Of Jury Trial.

              	 	
                55

              

      

    

    

    Exhibit
      A Form
      of
      Amended and Restated Certificate of Incorporation of the Surviving
      Corporation

     

    
      
        
        

      

      
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        Table
          of Contents

      

    

     

    AGREEMENT
      AND PLAN OF MERGER

     

    THIS
      AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of February 8, 2007,
      is by and among LumaSense Technologies, Inc., a Delaware corporation (the
“Buyer”), Red Acquisition Corporation, a New Jersey corporation and a
      wholly-owned subsidiary of the Buyer (the “Buyer Subsidiary”), and Mikron
      Infrared, Inc., a New Jersey corporation (the “Company”).

     

    WHEREAS,
      the Boards of Directors of the Buyer and the Company deem it advisable and
      in
      the best interests of each corporation and their respective shareholders that
      the Buyer acquire the Company in order to advance the long-term business
      interests of the Buyer and the Company;

     

    WHEREAS,
      the acquisition of the Company shall be effected through a merger (the “Merger”)
      of the Buyer Subsidiary into the Company in accordance with the terms of this
      Agreement and the NJBCA, as a result of which the Company shall become a
      wholly-owned subsidiary of the Buyer; and

     

    WHEREAS,
      in order to induce the Buyer to enter into this Agreement and cause the Merger
      to be consummated, concurrently with the execution and delivery of this
      Agreement, certain shareholders of the Company are entering into Support
      Agreements (the “Support
      Agreements”)
      in
      favor of the Buyer and, among other things, granting the Buyer an irrevocable
      proxy to vote all securities of the Company beneficially owned by such
      shareholders in favor of the adoption of this Agreement and the approval of
      the
      Merger.

     

    NOW,
      THEREFORE, in consideration of the foregoing and the respective representations,
      warranties, covenants and agreements set forth below, the Buyer, the Buyer
      Subsidiary and the Company agree as follows:

     

    ARTICLE
      I

     

    1.1 Certain
      Defined Terms.
      As used
      in this Agreement, the following terms have the meanings ascribed thereto in
      this Article:

     

    Action
      means
      any claim, action, suit, arbitration, mediation, inquiry, proceeding or
      investigation by or before any Governmental Entity, arbitrator or
      mediator.

     

    Affiliate
      when
      used with respect to any party shall mean any person who is an “affiliate” of
      that party within the meaning of Rule 405 promulgated under the Securities
      Act.

     

    Agreement
      has the
      meaning attributed thereto in the Preamble.

     

    Business
      Day means any day that is not a Saturday, a Sunday or other day on which banks
      are required or authorized by Law to be closed in The City of New
      York.

     

    Buyer
      has the
      meaning attributed thereto in the Preamble.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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      Agreement
        and Plan of Merger – Page
        2

       

       

    

    Buyer
      Material Adverse Effect
      means
      any material adverse change, event, circumstance or development with respect
      to,
      or any material adverse effect on, (i) the business, assets, liabilities,
      capitalization, prospects, condition (financial or otherwise), or results of
      operations of the Buyer and its Subsidiaries, taken as a whole or (ii) the
      ability of the Buyer or the Buyer Subsidiary to consummate the transactions
      contemplated by this Agreement. For the avoidance of doubt, the parties agree
      that the terms “material”, “materially” or “materiality” as used in this
      Agreement with an initial lower case “m” shall have their respective customary
      and ordinary meanings, without regard to the meanings ascribed to Buyer Material
      Adverse Effect or Company Material Adverse Effect.

     

    Buyer
      Subsidiary
      has the
      meaning attributed thereto in the Preamble.

     

    Company
      has the
      meaning attributed thereto in the Preamble.

     

    Company
      Balance Sheet
      means
      the consolidated, audited balance sheet of the Company as of October 31,
      2006.

     

    Company
      Board
      means
      the Board of Directors of the Company.

     

    Company
      Disclosure Schedule
      has the
      meaning attributable thereto in the first paragraph of Article IV.

     

    Company
      IP Agreements
      means
      all (a) licenses of Intellectual Property by the Company or any of its
      Subsidiaries to any third party, (b) licenses of Intellectual Property by any
      third party to the Company or any of its Subsidiaries, other than non-exclusive
      object code licenses of commercially available Software, (c) other agreements
      between the Company or any of its Subsidiaries and any third party relating
      to
      the development or use of Intellectual Property, and (d) consents, settlements,
      decrees, orders, injunctions, judgments or rulings governing the use, validity
      or enforceability of the Company IP Rights.

     

    Company-Licensed
      IP Rights
      means
      Company IP Rights that are not Company-Owned IP Rights.

     

    Company
      Material Adverse Effect
      means
      any change in, or effect on, the business, operations, assets, liabilities
      or
      condition (financial or otherwise) of the Company and its Subsidiaries which,
      when considered either individually or in the aggregate together with all other
      adverse changes or effects with respect to which such phrase is used in this
      Agreement, is, or is reasonably likely to be, materially adverse to the
      business, operations, assets, liabilities or condition (financial or otherwise)
      of the Company and its Subsidiaries, taken as a whole, excluding effects
      resulting from (i) changes in general economic conditions or in the securities
      markets in general that do not affect the Company and its Subsidiaries in a
      materially disproportionate manner relative to other companies in the same
      industry, (ii) changes in the industries in which the Company and its
      Subsidiaries operate (including legal and regulatory changes) that do not
      specifically relate to the Company and its Subsidiaries and that do not affect
      the Company and its Subsidiaries in a materially disproportionate manner
      relative to other companies in such industry, (iii) acts taken pursuant to
      or in
      accordance with this Agreement at the request of the Buyer, or (iv) acts of
      terrorism or war (whether or not declared).

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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        Agreement
          and Plan of Merger – Page
          3

         

         

      

    

    Company-Owned
      IP Rights
      means
      Company IP Rights that are owned by the Company or any of its
      Subsidiaries.

     

    Company
      Product or Service
      means
      any product or service produced, manufactured, marketed, licensed, sold,
      furnished or distributed by the Company or any of its Subsidiaries at any time
      prior to the Closing Date.

     

    Encumbrance
      means
      any security interest, pledge, mortgage, lien, charge, hypothecation, option
      to
      purchase or lease or otherwise acquire any interest, conditional sales
      agreement, claim, restriction, covenant, easement, right of way, title defect,
      adverse claim of ownership or use, transfer restriction, voting agreement,
      proxy
      or other limitation on voting rights, or other encumbrance of any kind, other
      than any obligation to accept returns of inventory in the ordinary course of
      business and other than those arising by reason of restrictions on transfers
      under federal, state and foreign securities Laws.

     

    ERISA
      means
      the Employee Retirement Income Security Act of 1974, as amended, and the rules
      and regulations promulgated thereunder.

     

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

     

    Governmental
      Entity
      means
      any court, arbitrational tribunal, administrative agency or commission or other
      governmental or regulatory authority, agency or instrumentality or any stock
      market or stock exchange on which the Shares are listed for
      trading.

     

    Governmental
      Order
      means
      any order, writ, judgment, injunction, decree, stipulation, determination or
      award entered by or with any Governmental Entity.

     

    Indebtedness
      means,
      with respect to any Person, without duplication, (A) all obligations of such
      Person for borrowed money, or with respect to deposits or advances of any kind
      to such Person, (B) all obligations of such Person evidenced by bonds,
      debentures, notes or similar instruments, (C) all obligations of such Person
      upon which interest charges are customarily paid, (D) all obligations of such
      Person under conditional sale or other title retention agreements relating
      to
      property purchased by such Person, (E) all obligations of such Person issued
      or
      assumed as the deferred purchase price of property or services (excluding
      obligations of such Person or creditors for raw materials, inventory, services
      and supplies incurred in the Ordinary Course of Business), (F) all capitalized
      lease obligations of such Person, (G) all obligations of others secured by
      any
      lien on property or assets owned or acquired by such Person, whether or not
      the
      obligations secured thereby have been assumed, (H) all obligations of such
      Person under interest rate or currency hedging transactions (valued at the
      termination value thereof), (I) all letters of credit issued for the account
      of
      such Person and (J) all guarantees and arrangements having the economic effect
      of a guarantee by such Person of any Indebtedness of any other Person.

     

    Intellectual
      Property
      means
      the rights associated with or arising out of any of the following: (i) domestic
      and foreign patents and patent applications, together with all reissuances,
      divisionals, continuations, continuations-in-part, revisions, renewals,
      extensions, and reexaminations thereof, and any identified invention disclosures
      (“Patents”);
      (ii)
      trade secret rights and corresponding rights in confidential information and
      other non-public information (whether or not patentable), including ideas,
      formulas, compositions, inventor’s notes, discoveries and improvements,
      know-how, manufacturing and production processes and techniques, testing
      information, research and development information, inventions, invention
      disclosures, unpatented blueprints, drawings, specifications, designs, plans,
      proposals and technical data, business and marketing plans, market surveys,
      market know-how and customer lists and information (“Trade
      Secrets”);
      (iii)
      all copyrights, copyrightable works, rights in databases, data collections,
      “moral” rights, mask works, copyright registrations and applications therefore
      and corresponding rights in works of authorship (“Copyrights”);
      (iv)
      all trademarks, service marks, logos, trade dress and trade names and domain
      names indicating the source of goods or services, and other indicia of
      commercial source or origin (whether registered, common law, statutory or
      otherwise), all registrations and applications to register the foregoing
      anywhere in the world and all goodwill associated therewith (“Trademarks”);
      (v)
      all computer software and code, including assemblers, applets, compilers, source
      code, object code, development tools, design tools, user interfaces and data,
      in
      any form or format, however fixed (“Software”);
      and
      (vi) all Internet electronic addresses, uniform resource locators and
      alphanumeric designations associated therewith and all registrations for any
      of
      the foregoing (“Domain
      Names”).

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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        Agreement
          and Plan of Merger – Page
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    Knowledge
      means,
      with respect to any particular matter pertaining to the Company or any
      Subsidiary, the actual knowledge of the chief executive officer, the executive
      vice president or the chief financial officer of the Company regarding such
      matter; provided that such officers shall be deemed to have made due and
      diligent inquiry of those employees, agents, consultants or other Persons whom
      such officers reasonably believe would have knowledge of the matters
      represented.

     

    Law
      means
      any statute, law, ordinance, regulation, rule, code, principle of common law
      and
      equity or other requirement of law of a Governmental Entity or any Governmental
      Order.

     

    Merger
      has the
      meaning attributed thereto in the Preamble.

     

    NJBCA
      means
      the New Jersey Business Corporation Act (Title 14A, NJSA §§ 1-1,
et
      seq.)
      , as
      amended.

     

    Ordinary
      Course of Business,
      with
      respect to any action, means such action is:

     

    (i) consistent
      with the recent past practices of such Person and is taken in the ordinary
      course of the normal day-to-day operations of such Person; and

     

    (ii) not
      required to be authorized by the board of directors of such Person.

     

    Permitted
      Encumbrance
      means:
      (i) liens for Taxes, assessments and governmental charges or levies imposed
      upon
      the Company or any of its Subsidiaries not yet due and payable or which are
      being contested in good faith by appropriate proceedings (provided such contests
      do not exceed $200,000 in the aggregate) or for which reserves have been
      established on the most recent financial statements included in the SEC Reports
      filed prior to the date hereof, (ii) Encumbrances imposed by Law which are
      not
      yet due and payable and have arisen in the ordinary course of business, (iii)
      pledges or deposits to secure obligations under workers’ compensation Laws or
      similar legislation or to secure public or statutory obligations, (iv)
      mechanics’, carriers’, workers’, repairers’ and similar Encumbrances imposed
      upon the Company or any of its Subsidiaries arising or incurred in the Ordinary
      Course of Business, (v) zoning, entitlement and other land use and environmental
      regulations by Governmental Entities, (vi) such other imperfections or
      irregularities in title, charges, easements, survey exceptions, leases,
      subleases, license agreements and other occupancy agreements, reciprocal
      easement agreements, restrictions and other customary encumbrances on title
      to
      real property; provided,
      that in
      the case of clauses (v) and (vi), none of the foregoing, individually or in
      the
      aggregate, have a Company Material Adverse Effect upon the continued use of
      the
      property to which they relate in the conduct of the business currently conducted
      thereon, (vii) as to any Leased Real Property, any Encumbrance affecting the
      interest of the lessor thereof, and (viii) liens relating to any Indebtedness
      described in clauses (i), (ii) and (iii) of the definition of
      Indebtedness.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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        Agreement
          and Plan of Merger – Page
          5

         

         

      

    

    Person
      means
      any individual, partnership, firm, corporation, association, trust,
      unincorporated organization, Governmental Authority, joint venture, limited
      liability company or other entity.

     

    SEC
      means
      the United States Securities and Exchange Commission.

     

    Securities
      Act
      means
      the Securities Act of 1933, as amended.

     

    Shares
      means
      the one-third cent par value common stock of the Company.

     

    Subsidiary
      means,
      with respect to a party, any corporation, partnership, joint venture, limited
      liability company or other business association or entity, whether incorporated
      or unincorporated, of which (i) such party or any other Subsidiary of such
      party is a general partner or a managing member (excluding partnerships, the
      general partnership interests of which held by such party and/or one or more
      of
      its Subsidiaries do not have a majority of the voting interest in such
      partnership), (ii) such party and/or one or more of its Subsidiaries holds
      voting power to elect a majority of the board of directors or other governing
      body performing similar functions, or (iii) such party and/or one or more of
      its
      Subsidiaries, directly or indirectly, owns or controls more than 50% of the
      equity, membership, partnership or similar interests.

     

    Taxes
      means
      all taxes, charges, fees, levies or other similar assessments or liabilities,
      including income, gross receipts, ad valorem, premium, value-added, excise,
      real
      property, personal property, sales, use, services, transfer, withholding,
      employment, payroll and franchise taxes imposed by the United States of America
      or any state, local or foreign government, or any agency thereof, or other
      political subdivision of the United States of America or any such government,
      and any interest, fines, penalties, assessments or additions to tax resulting
      from, attributable to or incurred in connection with any tax or any contest
      or
      dispute thereof.

     

    Tax
      Returns
      means
      all reports, returns, declarations, statements or other information required
      to
      be supplied to a taxing authority in connection with Taxes.

     

    A
      Triggering
      Event
      shall be
      deemed to have occurred if: (a) the Company Board shall have failed to recommend
      that the Company’s shareholders vote to approve the Agreement, or shall have
      withdrawn or modified in a manner adverse to the Buyer the Company Board
      Recommendation (it being understood and agreed that any “stop-look-and-listen”
communication by the Company Board to the shareholders of the Company pursuant
      to Rule 14d-9(f) of the Exchange Act shall not be deemed to constitute a
      withdrawal, modification or change of its recommendation of this Agreement);
      (b)
      the Company shall have failed to include in the Proxy Statement the Company
      Board Recommendation; (c) the Company Board fails to reaffirm the Company Board
      Recommendation, or fails to reaffirm its determination that the Merger is fair
      to and in the best interests of the Company’s shareholders, in a press release
      if so requested by the Buyer, within 10 days after the Buyer requests in writing
      that such recommendation or determination be reaffirmed; (d) the Company Board
      shall have approved, endorsed or recommended any Acquisition Proposal; (e)
      the
      Company shall have entered into any letter of intent or similar document or
      any
      Contract relating to any Acquisition Proposal, other than confidentiality
      agreements that the Company is required or permitted to enter into pursuant
      Section 7.1 of the Agreement; (f) a tender or exchange offer relating to
      securities of the Company shall have been commenced and the Company shall not
      have sent to its security holders, or filed with the SEC, within 10 Business
      Days after the commencement of such tender or exchange offer, a statement
      disclosing that the Company recommends rejection of such tender or exchange
      offer; or (g) the Company or any Representative of the Company shall have
      breached (or be deemed to have breached) in any material respect any material
      obligations set forth in Section 7.1 of this Agreement.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    1.2 Other
      Defined Terms.
      The
      following terms have the meanings defined for such terms in the Sections set
      forth below:

     

    
      	Term	Section
	
              Acquisition
                Proposal

            	
              7.1(d)

            
	
              Antitrust
                Laws 

            	
              7.6(b)

            
	
              Antitrust
                Order 

            	
              7.6(b)

            
	
              Benefit
                Plan

            	
              4.13(a)

            
	
              Certificate
                of Merger

            	
              2.1

            
	
              Certificates 

            	
              3.2(a)

            
	
              Closing 

            	
              2.2

            
	
              Closing
                Date 

            	
              2.2

            
	
              Code 

            	
              3.2(g)

            
	
              Company
                Board Recommendation

            	
              7.5

            
	
              Company
                Leases 

            	
              4.8(b)

            
	
              Company
                Material Contracts  

            	
              4.10(a)

            
	
              Company
                Permits 

            	
              4.15

            
	
              Company
                Preferred Stock 

            	
              4.2(a)

            
	
              Company
                SEC Reports  

            	
              4.4(a)

            
	
              Company
                Stock Options 

            	
              4.2(b)

            
	
              Company
                Stock Plans  

            	
              4.2(b)

            
	
              Company
                Shareholder Approval

            	
              4.3(a)

            
	
              Company
                Shareholders Meeting  

            	
              4.4(c)

            
	
              Company
                Voting Proposal  

            	
              4.3(a)

            
	
              Confidentiality
                Agreement 

            	
              6.2

            
	
              Costs

            	
              7.11(a)

            
	
              Effective
                Time 

            	
              2.1

            
	
              Environmental
                Law 

            	
              4.12(c)

            
	
              Environmental
                Permits

            	
              4.12(c)

            
	
              ERISA
                Affiliate 

            	
              4.13(c)

            
	
              Exchange
                Agent

            	
              3.2(a)

            
	
              Exchange
                Fund

            	
              3.2(a)

            
	
              Foreign
                Plan

            	
              4.13(a)

            
	
              GAAP

            	
              4.4(b)

            
	
              HLHZC

            	
              4.23

            
	
              HLHZFA

            	
              4.22

            
	
              HSR
                Act 

            	
              4.3(c)

            
	
              Indemnified
                Directors and Officers

            	
              7.11(a)

            
	
              Instruments
                of Indebtedness

            	
              4.10(a)

            
	
              Insurance
                Policies 

            	
              4.17

            
	
              Leased
                Real Property

            	
              4.8(b)

            
	
              Material
                Contract

            	
              4.10(a)

            
	
              Materials
                of Environmental Concern

            	
              4.12(c)

            
	
              Merger
                Consideration

            	
              3.1(a)

            
	
              Option
                Consideration

            	
              7.8(b)

            
	
              Outside
                Date 

            	
              9.1(b)

            
	
              Proxy
                Statement 

            	
              4.4(c)

            
	
              Regulation
                M-A Filing

            	
              4.4(c)

            
	
              Representatives

            	
              7.1(a)

            
	
              Requisite
                Regulatory Approvals

            	
              8.1(c)

            
	
              Regulation
                M-A Filing

            	
              4.4(c)

            
	
              Specified
                Time

            	
              7.1(a)

            
	
              Superior
                Proposal 

            	
              7.1(d)

            
	
              Surviving
                Corporation 

            	
              2.3

            
	
              Termination
                Fee

            	
              9.3(c)

            
	
              WARN
                Act

            	
              4.16(e)

            

    

    
      
         

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    ARTICLE
      II

     

    THE
      MERGER

     

    2.1 Effective
      Time of the Merger.
      Subject
      to the provisions of this Agreement, prior to the Closing, the Buyer shall
      prepare, and on the Closing Date or as soon as practicable thereafter the Buyer
      shall cause to be filed with the Secretary of State of the State of New Jersey,
      a certificate of merger (the “Certificate of Merger”) in such form as is
      required by, and executed by the Surviving Corporation in accordance with,
      the
      relevant provisions of the NJBCA and shall make all other filings or recordings
      required under the NJBCA. The Merger shall become effective upon the filing
      of
      the Certificate of Merger with the Secretary of State of the State of New Jersey
      or at such later time as is established by the Buyer and the Company and set
      forth in the Certificate of Merger (the “Effective Time”).

     

    2.2 Closing.
      The
      closing of the Merger (the “Closing”) shall take place at 10:00 a.m.,
      Eastern time, on a date to be specified by the Buyer and the Company (the
“Closing Date”), which shall be no later than the second Business Day after
      satisfaction or waiver of the conditions set forth in Article VII (other than
      delivery of items to be delivered at the Closing and other than satisfaction
      of
      those conditions that by their nature are to be satisfied at the Closing, it
      being understood that the occurrence of the Closing shall remain subject to
      the
      delivery of such items and the satisfaction or waiver of such conditions at
      the
      Closing), at the offices of Arent Fox LLP, 1675 Broadway, New York, New York
      10019, unless another date, place or time is agreed to in writing by the Buyer
      and the Company.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    2.3 Effects
      of the Merger.
      At the
      Effective Time (i) the separate existence of the Buyer Subsidiary shall
      cease and the Buyer Subsidiary shall be merged with and into the Company (the
      Company following the Merger is sometimes referred to herein as the “Surviving
      Corporation”), (ii) the amended and restated certificate of incorporation
      of the Company as in effect immediately prior to the Effective Time shall be
      amended and restated in its entirety in the form attached hereto as Exhibit
      A,
      and as
      so amended and restated shall be the certificate of incorporation of the
      Surviving Corporation, until further amended in accordance with the NJBCA and
      (iii) the by-laws of the Buyer Subsidiary as in effect immediately prior to
      the Effective Time shall be amended to change all references to the name of
      the
      Buyer Subsidiary to refer to the name of the Company, and, as so amended, such
      by-laws shall be the by-laws of the Surviving Corporation, until further amended
      in accordance with the NJBCA. The Merger shall have the effects set forth in
      Section 14A:10-6 of the NJBCA.

     

    2.4 Directors
      and Officers.
      The
      directors and officers of the Buyer Subsidiary immediately prior to the
      Effective Time shall be the initial directors and officers of the Surviving
      Corporation, each to hold office in accordance with the certificate of
      incorporation and by-laws of the Surviving Corporation.

     

    ARTICLE
      III

     

    CONVERSION
      OF SECURITIES

     

    3.1 Conversion
      of Capital Stock.
      As of
      the Effective Time, by virtue of the Merger and without any action on the part
      of the holder of any shares of the capital stock of the Company or capital
      stock
      of the Buyer Subsidiary:

     

    (a) Each
      of
      the Shares issued and outstanding immediately prior to the Effective Time (other
      than Shares held in the Company’s treasury or by any wholly-owned Subsidiary of
      the Company and Shares owned beneficially by the Buyer, the Buyer Subsidiary
      or
      any wholly-owned Subsidiary of the Buyer) shall be converted into and represent
      the right to receive $11.50 in cash per share of the Shares, without any
      interest thereon (the “Merger Consideration”).

     

    (b) Cancellation
      of Stock Owned by the Parties and Their Subsidiaries.
      All of
      the Shares that are owned by the Company as treasury stock or by any
      wholly-owned Subsidiary of the Company and any Shares owned by the Buyer, the
      Buyer Subsidiary or any other wholly-owned Subsidiary of the Buyer immediately
      prior to the Effective Time shall be cancelled and shall cease to exist and
      no
      stock of the Buyer or other consideration shall be delivered in exchange
      therefor.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (c) Capital
      Stock of the Buyer Subsidiary.
      Each
      share of the capital stock of the Buyer Subsidiary issued and outstanding
      immediately prior to the Effective Time shall be converted into and become
      one
      fully paid and nonassessable share of common stock, one-third cent par value
      per
      share, of the Surviving Corporation.

     

    (d) Treatment
      of Company Stock Options.
      Prior
      to
      the Effective Time, the Company (and/or, if appropriate, the Compensation
      Committee thereof) shall adopt appropriate resolutions and take all other
      actions necessary to provide that each Company Stock Option, whether or not
      then
      vested or exercisable, shall, at the Effective Time, be cancelled, and each
      holder thereof shall be entitled to receive a payment in cash as provided in
      Section 7.8(b)
      hereof
      (subject to any applicable withholding taxes). As provided herein, unless
      otherwise determined by the Buyer, the Company Stock Plans (and any feature
      of
      any other Benefit Plans or other plan, program or arrangement providing for
      the
      issuance or grant of any other interest in respect of the capital stock of
      the
      Company) shall terminate as of the Effective Time. After the date hereof, the
      Company will not issue any Company Stock Options or other options, warrants,
      rights or agreements which would entitle any person to acquire any capital
      stock
      of the Company or, except as otherwise provided in this Section 3.1(d)
      or in
      Section 7.8,
      to
      receive any payment in respect thereof.

     

    3.2 Exchange
      of Certificates.
      The
      procedures for exchanging outstanding Shares for Merger Consideration pursuant
      to the Merger are as follows:

     

    (a) Exchange
      Agent.
      As of
      the Effective Time, the Buyer shall deposit with the Buyer’s transfer agent or
      another bank or trust company designated by the Buyer and reasonably acceptable
      to the Company (the “Exchange Agent”), for the benefit of the holders of Shares,
      for exchange in accordance with this Section 3.2,
      through
      the Exchange Agent, cash in an amount sufficient to pay the aggregate Merger
      Consideration (such consideration being hereinafter referred to as the “Exchange
      Fund”), payable pursuant to Section 3.1
      to
      holders of certificates which immediately prior to the Effective Time
      represented outstanding Shares (the “Certificates”).

     

    (b) Exchange
      Procedures.
      As soon
      as reasonably practicable after the Effective Time, the Exchange Agent shall
      mail to each holder of record of a Certificate (i) a letter of transmittal
      (which shall specify that delivery shall be effected, and risk of loss and
      title
      to the Certificates shall pass, only upon delivery of the Certificates to the
      Exchange Agent and shall be in such form and have such other provisions as
      the
      Buyer may reasonably specify) and (ii) instructions for effecting the
      surrender of the Certificates in exchange for each holder’s respective Merger
      Consideration. Upon surrender of a Certificate for cancellation to the Exchange
      Agent or to such other agent or agents as may be appointed by the Buyer,
      together with such letter of transmittal, duly executed, and such other
      documents as may reasonably be required by the Exchange Agent, the holder of
      each Certificate shall be entitled to receive in exchange therefor cash
      representing that number of whole Shares evidenced by such Certificate
      multiplied by the Merger Consideration, and the Certificate so surrendered
      shall
      immediately be cancelled. In the event of a transfer of ownership of Shares
      which is not registered in the transfer records of the Company, the payment
      representing the Merger Consideration payable to the registered holder may
      be
      paid to a person other than the person in whose name the Certificate so
      surrendered is registered, if such Certificate is presented to the Exchange
      Agent, accompanied by all documents required to evidence and effect such
      transfer and by evidence that any applicable stock transfer taxes have been
      paid. Until surrendered as contemplated by this Section 3.2,
      each
      Certificate shall be deemed at any time after the Effective Time to represent
      only the right to receive upon such surrender the payment contemplated by this
      Section 3.2.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (c) No
      Further Ownership Rights in Shares.
      All
      payments upon the surrender for exchange of Certificates in accordance with
      the
      terms hereof shall be deemed to have been paid in full satisfaction of all
      rights pertaining to such Shares, and from and after the Effective Time there
      shall be no further registration of transfers on the stock transfer books of
      the
      Surviving Corporation of the Shares which were outstanding immediately prior
      to
      the Effective Time. If, after the Effective Time, Certificates are presented
      to
      the Surviving Corporation or the Exchange Agent for any reason, they shall
      be
      cancelled and exchanged as provided in this Article II.

     

    (d) Termination
      of Exchange Fund.
      Subject
      to any applicable escheat or similar Law, any portion of the Exchange Fund
      which
      remains undistributed to the holders of Shares 180 days after the Effective
      Time
      shall be delivered to the Buyer, upon demand, and any holder of Shares who
      has
      not previously complied with this Section 3.2
      shall
      thereafter look only to the Buyer, as a general unsecured creditor, for payment
      of his, her or its claim for Merger Consideration.

     

    (e) Investment
      of Exchange Fund
      The
      Exchange Agent shall invest cash included in the Exchange Fund, as directed
      by
      the Buyer, on a daily basis, provided
      that no
      such investment or loss thereon shall affect the amounts payable pursuant to
      the
      provisions of this Article II. Any interest and other income resulting from
      such
      investments shall be paid to the Buyer.

     

    (f) No
      Liability.
      To the
      extent permitted by applicable Law, none of the Buyer, the Buyer Subsidiary,
      the
      Company, the Surviving Corporation or the Exchange Agent shall be liable to
      any
      holder of Shares delivered to a public official pursuant to any applicable
      abandoned property, escheat or similar Law. If any Certificate shall not have
      been surrendered prior to one year after the Effective Time (or immediately
      prior to such earlier date on which any cash payable to the holder of such
      Certificate pursuant to this Article III would otherwise escheat to or become
      the property of any Governmental Entity), any such cash in respect of such
      Certificate shall, to the extent permitted by applicable Law, become the
      property of the Surviving Corporation, free and clear of all claims or interest
      of any person previously entitled thereto.

     

    (g) Withholding
      Rights.
      Each of
      the Buyer and the Surviving Corporation shall be entitled to deduct and withhold
      from the consideration otherwise payable pursuant to this Agreement to any
      holder of Shares such amounts as it reasonably determines that it is required
      to
      deduct and withhold with respect to the making of such payment under the
      Internal Revenue Code of 1986, as amended (the “Code”), or any other applicable
      provision of Law. To the extent that amounts are so withheld by the Surviving
      Corporation or the Buyer, as the case may be, such withheld amounts shall be
      treated for all purposes of this Agreement as having been paid to the holder
      of
      the Shares in respect of which such deduction and withholding was made by the
      Surviving Corporation or the Buyer, as the case may be.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (h) Lost
      Certificates.
      If any
      Certificate shall have been lost, stolen or destroyed, upon the making of an
      affidavit of that fact by the person claiming such Certificate to be lost,
      stolen or destroyed and, if required by the Surviving Corporation, the posting
      by such person of a bond in such reasonable amount as the Surviving Corporation
      may direct as indemnity against any claim that may be made against it with
      respect to such Certificate, the Exchange Agent shall issue in exchange for
      such
      lost, stolen or destroyed Certificate, the Merger Consideration deliverable
      in
      respect thereof pursuant to this Agreement.

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    The
      Company represents and warrants to the Buyer and the Buyer Subsidiary that
      the
      statements contained in this Article IV are true and correct, subject to
      the exceptions set forth in the disclosure schedule delivered by the Company
      to
      the Buyer and the Buyer Subsidiary on or before the execution and delivery
      of
      this Agreement (the “Company
      Disclosure Schedule”).
      The
      Company Disclosure Schedule shall be arranged in paragraphs corresponding to
      the
      numbered and lettered paragraphs contained in this Article IV that contain
      references to such Company Disclosure Schedule; the disclosure in any paragraph
      shall qualify only such specifically enumerated paragraph and any other
      paragraph to which an explicit and clear cross-reference has been made. For
      purposes of this Agreement, each statement or other item of information set
      forth in the Company Disclosure Schedule shall be deemed to be a representation
      and warranty made by the Company in Article IV.

     

    4.1 Organization,
      Standing and Power; Subsidiaries.

     

    (a) Each
      of
      the Company and its Subsidiaries is a corporation duly organized, validly
      existing and in good standing under the Laws of the jurisdiction of its
      incorporation, has all requisite corporate power and authority to own, lease
      and
      operate its properties and assets and to carry on its business as now being
      conducted and as proposed to be conducted, and is duly qualified to do business
      and is in good standing as a foreign corporation in each jurisdiction listed
      in
      Section 4.1(a)
      of the
      Company Disclosure Schedule, which jurisdictions constitute the only
      jurisdictions in which the character of the properties it owns, operates or
      leases or the nature of its activities makes such qualification necessary,
      except for such failures to be so organized, qualified or in good standing,
      individually or in the aggregate, that have not had, and could not reasonably
      be
      expected to have a Company Material Adverse Effect. 

     

    (b) Section
      4.1(b)
      of the
      Company Disclosure Schedule sets forth a complete and accurate list of all
      of
      the Company’s Subsidiaries and the Company’s direct or indirect equity interest
      therein. Except as set forth in Section 4.1(b)
      of the
      Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
      directly or indirectly owns any equity, membership, partnership or similar
      interest in, or any interest convertible into or exchangeable or exercisable
      for
      any equity, membership, partnership or similar interest in, any corporation,
      partnership, joint venture, limited liability company or other business
      association or entity, whether incorporated or unincorporated, and neither
      the
      Company, nor any of its Subsidiaries, has, at any time, owned any Subsidiary
      or
      been a general partner or managing member of any general partnership, limited
      partnership, limited liability company or other entity. 

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (c) The
      Company has delivered to the Buyer complete and accurate copies of the
      certificate of incorporation and by-laws of the Company and of the charter,
      by-laws or other organizational documents of each Subsidiary of the Company,
      in
      each case as amended to date. The Company is not in default under, or in
      violation of, its certificate of incorporation or by-laws, and each of its
      Subsidiaries is not in violation of its comparable organizational documents.
      

     

    4.2 Capitalization.

     

    (a) The
      authorized capital stock of the Company consists of 15,000,000 Shares, and
      1,000
      shares of preferred stock, $0.01 par value per share (“Company Preferred
      Stock”). The rights and privileges of each class of the Company’s capital stock
      are as set forth in the Company’s certificate of incorporation. As of February
      7, 2007: (i) 5,588,556
      Shares
      were issued and outstanding, (ii) no Shares were held in the treasury of the
      Company or by Subsidiaries of the Company, and (iii) no shares of the Company
      Preferred Stock were issued or outstanding. 

     

    (b) Section
      4.2(b)
      of the
      Company Disclosure Schedule lists the number of Shares reserved for future
      issuance pursuant to stock options granted and outstanding as of the date of
      this Agreement and the plans or other arrangements under which such options
      were
      granted (collectively, the “Company
      Stock Plans”)
      and
      sets forth a complete and accurate list of (i) all holders of outstanding
      options to purchase Shares (such outstanding options, the “Company
      Stock Options”),
      whether or not granted under the Company Stock Plans, and (ii) all persons
      holding unvested Shares, indicating with respect to each Company Stock Option
      and each unvested Share, as applicable, the number of Shares subject to such
      Company Stock Option, the relationship of the holder to the Company, and the
      exercise or purchase price, the date of grant or issuance, the repurchase price
      payable per unvested Share, length of the repurchase period following the
      holder’s termination of service, vesting schedule and the expiration date
      thereof, including the extent to which any vesting has occurred as of the date
      of this Agreement, and whether (and to what extent) the vesting of such Company
      Stock Options or such Shares will be accelerated in any way by the transactions
      contemplated by this Agreement or upon termination of employment or service
      with
      the Company or the surviving Corporation, the Buyer or any Subsidiary of the
      Company following the Merger or otherwise. The Company has provided to the
      Buyer
      accurate and complete copies of all Company Stock Plans, and the forms of all
      stock option agreements evidencing Company Stock Options, and there are no
      agreements, understandings or commitments to amend, modify or supplement such
      documents.

     

    (c) Except
      (x) as set forth in this Section 4.2,
      and (y)
      as reserved for future grants under Company Stock Plans, (i) there are no equity
      securities of any class of the Company or any of its Subsidiaries (other than
      equity securities of any such Subsidiary that are directly or indirectly owned
      by the Company), or any security exchangeable into or exercisable for such
      equity securities, issued, reserved for issuance or outstanding and (ii) there
      are no options, warrants, equity securities, calls, rights, commitments or
      agreements of any character to which the Company or any of its Subsidiaries
      is a
      party or by which the Company or any of its Subsidiaries is bound obligating
      the
      Company or any of its Subsidiaries to issue, exchange, transfer, deliver or
      sell, or cause to be issued, exchanged, transferred, delivered or sold,
      additional shares of capital stock or other equity interests of the Company
      or
      any of its Subsidiaries or any security or rights convertible into or
      exchangeable or exercisable for any such shares or other equity interests,
      or
      obligating the Company or any of its Subsidiaries to grant, extend, accelerate
      the vesting of, otherwise modify or amend or enter into any such option,
      warrant, equity security, call, right, commitment or agreement. Neither the
      Company nor any of its Subsidiaries has outstanding any stock appreciation
      rights, phantom stock, performance-based rights or similar rights or
      obligations. There are no obligations, contingent or otherwise, of the Company
      or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
      of the capital stock of the Company or any of its Subsidiaries or to provide
      funds to or make any investment (in the form of a loan, capital contribution
      or
      otherwise) in the Company or any Subsidiary of the Company or any other entity,
      other than guarantees of bank obligations of Subsidiaries of the Company entered
      into in the Ordinary Course of Business. Neither the Company nor any of its
      Affiliates is a party to or is bound by any, and to the Knowledge of the
      Company, there are no, agreements or understandings with respect to the voting
      (including voting trusts and proxies) or sale or transfer (including agreements
      imposing transfer restrictions) of any shares of capital stock or other equity
      interests of the Company or any of its Subsidiaries. There are no registration
      rights, and there is no rights agreement, “poison pill” anti-takeover plan or
      other agreement or understanding to which the Company or any of its Subsidiaries
      is a party or by which it or they are bound with respect to any equity security
      of any class of the Company or any of its Subsidiaries or with respect to any
      equity security, partnership interest or similar ownership interest of any
      class
      of any of its Subsidiaries. 

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (d) Shareholders
      of the Company are not entitled to dissenters’ or appraisal rights under
      applicable state Law in connection with the Merger. 

     

    (e) All
      outstanding Shares are, and all Shares subject to issuance as specified in
      Section 4.2(b)
      above,
      upon issuance on the terms and conditions specified in the instruments pursuant
      to which they are issuable, will be, duly authorized, validly issued, fully
      paid
      and nonassessable and not subject to or issued in violation of any Encumbrance,
      purchase option, call option, right of first refusal, preemptive right,
      subscription right or any similar right under any provision of the NJBCA, the
      Company’s certificate of incorporation or by-laws or any agreement to which the
      Company is a party or is otherwise bound. 

     

    (f) All
      of
      the outstanding shares of the Capital Stock of each of the Company’s
      Subsidiaries are validly issued, fully paid and nonassessable and are owned,
      directly or indirectly by the Company free and clear of any Encumbrances, and
      none of such outstanding shares of capital stock have been issued in violation
      of any preemptive or similar right, purchase option, call or right of first
      refusal. There are no outstanding options, warrants, calls, stock appreciation
      rights, or other rights or commitments or any other agreements of any character
      relating to the sale, issuance or voting of, or the granting of rights to
      acquire any shares of the capital stock of any of the Company’s Subsidiaries, or
      any securities or other instruments convertible into, exchangeable for or
      evidencing the right to purchase any shares of the capital stock of any of
      the
      Company’s Subsidiaries. 

     

    (g) All
      Company Stock Options and all issued and outstanding Shares have been issued
      in
      compliance with the Securities Act and any applicable state blue sky Laws.
      Any
      consents of the holders of Company Stock Options which are required in
      connection with the actions contemplated by Section 7.8
      have
      been obtained, and such actions so contemplated comport with the requirements
      of
      the documents underlying any such derivative securities.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    4.3 Authority;
      No Conflict; Required Filings and Consents.

     

    (a) The
      Company has all requisite corporate power and authority to enter into this
      Agreement and, subject only to the adoption of this Agreement and the approval
      of the Merger (the “Company Voting Proposal”) by the Company’s shareholders
      under the NJBCA (the “Company Shareholder Approval”), to consummate the
      transactions contemplated by this Agreement. Without limiting the generality
      of
      the foregoing, the Company Board, at a meeting duly called and held, by the
      unanimous vote of all directors (i) determined that the Merger is fair and
      in
      the best interests of the Company and its shareholders, (ii) adopted this
      Agreement in accordance with the provisions of the NJBCA, (iii) directed that
      this Agreement and the Merger be submitted to the shareholders of the Company
      for their adoption and approval and resolved to recommend that the shareholders
      of the Company vote in favor of the adoption of this Agreement and the approval
      of the Merger and (iv) to the extent necessary, adopted a resolution having
      the
      effect of causing the Company not to be subject to any state anti-takeover
      statute, Law or regulation (including, without limitation, a “fair price,”
“moratorium,” or “control share acquisition” statute) that might otherwise apply
      to the Merger and any other transactions contemplated by this Agreement. The
      execution and delivery of this Agreement and the consummation of the
      transactions contemplated by this Agreement by the Company have been duly
      authorized by all necessary corporate action on the part of the Company, subject
      only to the required receipt of the Company Shareholder Approval. This Agreement
      has been duly executed and delivered by the Company and constitutes the valid
      and binding obligation of the Company, enforceable in accordance with its terms,
      subject to applicable bankruptcy, insolvency, fraudulent conveyance,
      reorganization, moratorium and similar laws affecting creditors’ rights and
      remedies generally and to general principles of equity.

     

    (b) The
      execution and delivery of this Agreement by the Company do not, and the
      consummation by the Company of the transactions contemplated by this Agreement
      shall not, (i) conflict with, or result in any violation or breach of, any
      provision of the certificate of incorporation or by-laws of the Company or
      of
      the charter, by-laws, or other organizational document of any Subsidiary of
      the
      Company, (ii) except as set forth in Section 4.3(b)
      of the
      Company Disclosure Schedule, conflict with, or result in any violation or breach
      of, or constitute (with or without notice or lapse of time, or both) a default
      (or give rise to a right of termination, cancellation or acceleration of any
      obligation or loss of any benefit) under, or require a consent or waiver under,
      constitute a change in control under, require the payment of a penalty under
      or
      result in the imposition of any Encumbrance on the Company’s or any of its
      Subsidiaries’ assets under, any of the terms, conditions or provisions of any
      note, bond, mortgage, indenture, lease, license, contract or other agreement,
      instrument or obligation to which the Company or any of its Subsidiaries is
      a
      party or by which any of them or any of their properties or assets may be bound
      (iii) subject to obtaining the Company Shareholder Approval and compliance
      with the requirements specified in clauses (i) through (v) of Section
4.3(c)
      below,
      conflict with or violate any permit, concession, franchise, license, judgment,
      injunction, order, decree or Law applicable to the Company or any of its
      Subsidiaries or any of its or their properties or assets, or (iv) result in
      the creation of a material lien on any of the material properties or assets
      of
      the Company or any of its Subsidiaries, except in the case of clauses (ii)
      and
      (iii) of this Section 4.3(b)
      for any
      such conflicts, violations, breaches, defaults, terminations, cancellations,
      accelerations or losses that, individually or in the aggregate, could not
      constitute or could not reasonably be expected to constitute a Company Material
      Adverse Effect. There are no consents, waivers or approvals under any of the
      Company’s or any of its Subsidiaries’ agreements, licenses or leases required to
      be obtained in connection with the consummation of the transactions contemplated
      hereby.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (c) No
      consent, approval, license, permit, order or authorization of, or registration,
      declaration, notice or filing with any Governmental Entity is required by or
      with respect to the Company or any of its Subsidiaries in connection with the
      execution and delivery of this Agreement by the Company or the consummation
      by
      the Company of the transactions contemplated by this Agreement, except for
      (i)
      the pre-merger notification requirements under the Hart-Scott-Rodino Antitrust
      Improvements Act of 1976, as amended (the “HSR Act”), (ii) the filing of the
      Certificate of Merger with the Secretary of State of the State of New Jersey
      and
      appropriate corresponding documents with the Secretaries of appropriate
      authorities of other states in which the Company is qualified as a foreign
      corporation to transact business, (iii) the filing of the Proxy Statement with
      the SEC in accordance with the Exchange Act, (iv) the filing of such reports,
      schedules or materials under Section 13, Rule 14a-12 or other relevant sections
      under the Exchange Act as may be required in connection with this Agreement
      and
      the transactions contemplated hereby and (v) such consents, approvals, orders,
      authorizations, registrations, declarations and filings as may be required
      under
      applicable state securities Laws and the securities Laws of any foreign
      country.

     

    (d) The
      affirmative vote of the holders of a majority of the outstanding Shares on
      the
      record date for the Company Shareholders Meeting is the only vote of the holders
      of any class or series of the Company’s capital stock or other securities
      necessary for the adoption of this Agreement and for the consummation by the
      Company of the Merger and the other transactions contemplated by this Agreement
      and the Support Agreements. There are no bonds, debentures, notes or other
      indebtedness of the Company having the right to vote (or convertible into,
      or
      exchangeable for, securities having the right to vote) on any matters on which
      shareholders of the Company may vote. To the Knowledge of the Company, the
      Persons who have executed Support Agreements collectively beneficially own
      approximately 21.4% of the issued and outstanding Shares as of the date of
      this
      Agreement.

     

    4.4 SEC
      Filings; Financial Statements; Reporting Requirements.

     

    (a) The
      Company has filed all registration statements, forms, reports and other
      documents required to be filed by the Company with the SEC and/or the Nasdaq
      Stock Market since November 1, 2001, all of which are publicly available on
      the
      SEC’s EDGAR system. All such registration statements, forms, reports and other
      documents (including those that the Company may file after the date hereof
      until
      the Closing) are referred to herein as the “Company
      SEC Reports.”
Prior
      to the Closing, the Company will have furnished to the Buyer a true, correct
      and
      complete copy of any additional Company SEC Reports filed with the SEC or the
      Nasdaq Stock Market on or after the date hereof but prior to the Closing. The
      Company SEC Reports (i) were or will be filed on a timely basis, (ii) at the
      time filed, were or will be prepared in compliance in all material respects
      with
      the applicable requirements of the Securities Act and the Exchange Act, as
      the
      case may be, and the rules and regulations of the SEC thereunder applicable
      to
      such Company SEC Reports including the provision of all statements and
      certifications required by (x) the SEC’s order dated June 27, 2002 pursuant to
      Section 21(a)(1) of the Exchange Act, (y) Rule 13a-14 or 15d-14 under the
      Exchange Act or (z) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act of
      2002), and (iii) did not or will not at the time they were or are filed contain
      any untrue statement of a material fact or omit to state a material fact
      required to be stated in such Company SEC Reports or necessary in order to
      make
      the statements in such Company SEC Reports, in the light of the circumstances
      under which they were made, not misleading. No press releases or other public
      statement issued or made by the Company (with any statement pertaining to the
      Company made by an officer of Company being deemed for purposes of this Section
      4.4 to have been made by the Company) since November 1, 2001 as of their
      respective dates of issuance contained any untrue statement of a material fact
      or omitted to state a material fact required to be stated therein or necessary
      to make the statements made therein, in light of the circumstances under which
      they were made, not misleading. No Subsidiary of the Company is subject to
      the
      reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.
      There are no off-balance sheet or securitization structures or transactions
      with
      respect to the Company or any of its Subsidiaries that would be required to
      be
      reported or set forth in the Company SEC Reports. As used in this Section
4.4,
      the
      term “file” and variations thereof shall be broadly construed to include any
      manner in which a document or information is furnished, supplied or otherwise
      made available to the SEC.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) Each
      of
      the consolidated financial statements (including, in each case, any related
      notes and schedules) contained or to be contained in or incorporated by
      reference in the Company SEC Reports at the time filed (i) complied or will
      comply as to form in all material respects with applicable accounting
      requirements and the published rules and regulations of the SEC with respect
      thereto and (ii) were or will be prepared in accordance with United States
      generally accepted accounting principles (“GAAP”) applied on a consistent basis
      throughout the periods involved (except as may be indicated in the notes to
      such
      financial statements or, in the case of unaudited interim financial statements,
      as permitted by the SEC on Form 10-QSB or Form 10-Q under the Exchange
      Act). Each of the consolidated balance sheets (including, in each case, any
      related notes and schedules) contained or to be contained or incorporated by
      reference in the Company SEC Reports at the time filed fairly presented or
      will
      fairly present the consolidated financial position of the Company and its
      Subsidiaries as of the dates indicated and each of the consolidated statements
      of operations, shareholders’ equity and cash flows contained or to be contained
      or incorporated by reference in the Company SEC Reports (including, in each
      case, any related notes and schedules) fairly presents, or will fairly present,
      the results of operations, changes in shareholders’ equity and cash flows, as
      the case may be, of the Company and its Subsidiaries for the periods set forth
      therein, except that the unaudited interim financial statements were or are
      subject to normal and recurring year-end adjustments which were not or are
      not
      expected to be material in amount.

     

    (c) The
      information to be supplied by or on behalf of the Company for inclusion in
      any
      filing pursuant to Rule 14a-12 under the Exchange Act (each a “Regulation M-A
      Filing”), shall not at the time any Regulation M-A Filing is filed with the SEC,
      contain any untrue statement of a material fact or omit to state any material
      fact required to be stated therein or necessary in order to make the statements
      therein not misleading. The Proxy Statement will comply as to form in all
      material respects with the requirements of the Exchange Act and the rules and
      regulations thereunder, except that no representation or warranty is made by
      the
      Company with respect to statements made based on information supplied by the
      Buyer or the Buyer Subsidiary specifically for inclusion therein. The
      information to be supplied by or on behalf of the Company for inclusion in
      the
      proxy statement (the “Proxy Statement”) to be sent to the shareholders of the
      Company in connection with the meeting of the Company’s shareholders to consider
      the Company Voting Proposal (the “Company Shareholders Meeting”), which shall be
      deemed to include all information about or relating to the Company, the Company
      Voting Proposal and the Company Shareholder Meeting, shall not, on the date
      the
      Proxy Statement is first mailed to shareholders of the Company, or at the time
      of the Company Shareholders Meeting or at the Effective Time, contain any
      statement which, at such time and in light of the circumstances under which
      it
      shall be made, is false or misleading with respect to any material fact, or
      omit
      to state any material fact necessary in order to make the statements made in
      the
      Proxy Statement not false or misleading; or omit to state any material fact
      necessary to correct any statement in any earlier communication with respect
      to
      the solicitation of proxies for the Company Shareholders Meeting which has
      become false or misleading. If at any time prior to the Effective Time any
      fact
      or event relating to the Company or any of its Affiliates which should be set
      forth in an amendment or supplement to the Proxy Statement should be discovered
      by the Company or should occur, the Company shall promptly inform the Buyer
      of
      such fact or event.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (d) Since
      the
      enactment of the Sarbanes−Oxley Act of 2002, the Company has been and is in
      compliance in all material respects with (i) the applicable provisions of the
      Sarbanes−Oxley Act of 2002 and (ii) the applicable listing and corporate
      governance rules and regulations of the Nasdaq Capital Market.

     

    (e) The
      Company has designed disclosure controls and procedures to ensure that material
      information relating to the Company, including its consolidated Company
      Subsidiaries, is made known to the chief executive officer and the chief
      financial officer of the Company by others within those entities.

     

    (f) The
      Company has disclosed, based on its most recent evaluation prior to the date
      hereof, to the Company’s auditors and the audit committee of the Company Board
      (i) any significant deficiencies and material weaknesses in the design or
      operation of internal controls over financial reporting which are reasonably
      likely to adversely affect in any material respect the Company’s ability to
      record, process, summarize and report financial information and (ii) any fraud
      or allegation of fraud, whether or not material, that involves management or
      other employees who have a significant role in the Company’s internal controls
      over financial reporting.

     

    (g) As
      of the
      date hereof, to the Knowledge of the Company, the Company has not identified
      any
      material weaknesses in the design or operation of internal controls over
      financial reporting. To the Knowledge of the Company, there is no reason to
      believe that its auditors and its chief executive officer and chief financial
      officer will not be able to give the certifications and attestations required
      pursuant to the rules and regulations adopted pursuant to Section 404 of the
      Sarbanes−Oxley Act of 2002 when next due.

     

    (h) None
      of
      the Company’s Subsidiaries is subject to the reporting requirements of Sections
      13(a) or 15(d) under the Exchange Act. 

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    4.5 No
      Undisclosed Liabilities; Indebtedness. 

     

    (a) Neither
      the Company nor any of its Subsidiaries has any liabilities or obligations
      of
      any nature, whether or not accrued, contingent or otherwise, except for (i)
      liabilities and obligations that are specifically disclosed in type and amount
      on the Company Balance Sheet or in the notes thereto and (ii) liabilities and
      obligations incurred in the Ordinary Course of Business since October 31, 2006,
      that are not and could not, individually or in the aggregate with all other
      liabilities and obligations of the Company and its Subsidiaries, reasonably
      be
      expected to have a Company Material Adverse Effect. Without limiting the
      foregoing, the Company Balance Sheet reflects reasonable reserves in accordance
      with GAAP for contingent liabilities relating to pending litigation and other
      contingent obligations of the Company and its Subsidiaries (including
      liabilities under escheat and similar Laws).

     

    (b) Section
      4.5(b)
      of the
      Company Disclosure Schedule sets forth a complete and accurate list of all
      loan
      or credit agreements, notes, bonds, mortgages, indentures and other agreements
      and instruments pursuant to which any Indebtedness of the Company or any of
      its
      Subsidiaries is outstanding or may be incurred and the respective principal
      amounts outstanding thereunder as of the date of this Agreement. All of the
      outstanding Indebtedness of the type described in this Section 4.5(b)
      of the
      Company and each of its Subsidiaries may be prepaid by the Company or its
      Subsidiary at any time without the consent or approval of, or prior notice
      to,
      any other Person, and without payment of any premium or penalty.

     

    4.6 Absence
      of Certain Changes or Events.
      Since
      the date of the Company Balance Sheet, the Company and its Subsidiaries have
      conducted their respective businesses only in the Ordinary Course of Business
      and, since such date, there has not been (i) any change, event, circumstance,
      development or effect (whether or not covered by insurance) that, individually
      or in the aggregate, has had, or could reasonably be expected to have, a Company
      Material Adverse Effect or (ii) any other action or event that would have
      required the consent of the Buyer pursuant to Section 6.1
      of this
      Agreement had such action or event occurred after the date of this
      Agreement.

     

    4.7 Taxes.

     

    (a) 
      Except
      as set forth in Section 4.7 of the Company Disclosure Schedule: (i) all Tax
      Returns required to be filed by, or with respect to any activities of, the
      Company and its Subsidiaries prior to the date hereof have been filed (except
      those under valid extension), (ii) as of the date hereof, all Taxes of the
      Company and each of its Subsidiaries have been paid or adequately provided
      for
      on the most recent financial statements included in the Company SEC Reports
      filed prior to the date hereof (unless such Taxes are being contested in good
      faith) other than those Taxes accrued in the ordinary course of business since
      July 31, 2005, (iii) neither the Company nor any of its Subsidiaries has
      received written notice of any action, suit, proceeding, investigation, claim
      or
      audit against, or with respect to, any Taxes, (iv) there are no liens for Taxes
      (other than Taxes not yet due and payable) upon any of the assets of the Company
      or any of its Subsidiaries, (v) the Company and each of its Subsidiaries has
      withheld and paid all Taxes required to have been withheld and paid in
      connection with amounts paid or owing to any employee, independent contractor,
      creditor, stockholder, or other third party, (vi) neither the Company nor any
      of
      its Subsidiaries (A) has been a member of an affiliated group filing a
      consolidated federal income tax return (other than a group the common parent
      of
      which was the Company) or (B) has any liability for the Taxes of any Person
      (other than the Company, or any of its Subsidiaries) under Treasury regulation
      section 1.1502−6 (or any similar provision of state, local or foreign Law),
      (vii) neither the Company nor any of its Subsidiaries has distributed the stock
      of another company in a transaction that was purported or intended to be
      governed by section 355 or section 361 of the Code,
      (viii)
      neither the Company nor any of its Subsidiaries is a party to or is bound by
      any
      Tax sharing or Tax allocation agreement nor does the Company or any of its
      Subsidiaries have any liability or potential liability to another party under
      any such agreement, (ix) neither the Company nor any of its Subsidiaries has
      filed any disclosures under Section 6662 or comparable provisions of state,
      local or foreign Law to prevent the imposition of penalties with respect to
      any
      Tax reporting position taken on any Tax Return, (x) neither the Company nor
      any
      of its Subsidiaries has ever been a member of a consolidated, combined, unitary
      or aggregate group of which the Company was not the ultimate parent corporation
      and (xi) each of the Company and each of its Subsidiaries has in its possession
      receipts for any Taxes paid by it to foreign Governmental Entities.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) Neither
      the Company nor any of its Subsidiaries: (i) has been a United States real
      property holding corporation within the meaning of Section 897(c)(2) of the
      Code during the applicable period specified in Section 897(c)(l)(A)(ii) of
      the Code; (ii) has made any payments, is obligated to make any payments, or
      is a
      party to any agreement that could obligate it to make any payments that may
      be
      treated as an “excess parachute payment” under Section 280G of the Code
      (including, without limitation, as a result of the transactions contemplated
      hereby); (iii) has any actual or potential liability for any Taxes of any person
      (other than the Company and its Subsidiaries) under Treasury Regulation Section
      1.1502-6 (or any similar provision of Law in any jurisdiction), or as a
      transferee or successor, by contract, or otherwise; or (iv) is or has been
      required to make a basis reduction pursuant to Treasury Regulation Section
      1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b). The Company has
      not
      constituted either a “distributing corporation” or a “controlled corporation”
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution
      of
      stock intended to qualify for tax-free treatment under Section 355 of the
      Code.

     

    (c) None
      of
      the assets of the Company or any of its Subsidiaries: (i) is property that
      is
      required to be treated as being owned by any other person pursuant to the
      provisions of former Section 168(f)(8) of the Code; (ii) is “tax-exempt use
      property” within the meaning of Section 168(h) of the Code; or (iii) directly or
      indirectly secures any debt the interest on which is tax exempt under Section
      103(a) of the Code.

     

    (d) Neither
      the Company nor any of its Subsidiaries has undergone, or will undergo as a
      result of the transactions contemplated by the Agreement, a change in its method
      of accounting resulting in an adjustment to its taxable income pursuant to
      Section 481(a) of the Code.

     

    4.8 Owned
      and Leased Real Properties. 

     

    (a) Neither
      the Company, nor any of its Subsidiaries owns any real property.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) Section
      4.8(b)
      of the
      Company Disclosure Schedule sets forth a complete and accurate list of all
      real
      property leased, subleased, licensed or occupied as a tenant-at-will by the
      Company or any of its Subsidiaries (collectively “Leased Real Property”) and the
      location of the premises. Neither the Company nor any of its Subsidiaries nor,
      to the Knowledge of the Company, any other party to any lease, sublease, license
      or other agreement pertaining to the occupancy of any Leased Real Property
      by
      the Company or any of its Subsidiaries (the “Company Leases”), is in default in
      any material respect under any of the Company Leases. Each of the Company Leases
      is in full force and effect and is enforceable in accordance with its terms
      and
      shall not cease to be in full force and effect as a result of the transactions
      contemplated by this Agreement. Neither the Company nor any of its Subsidiaries
      leases, subleases or licenses any real property to any person other than the
      Company and its Subsidiaries. The Company has provided the Buyer with complete
      and accurate copies of all Company Leases.

     

    4.9 Intellectual
      Property. 

     

    (a) The
      Company or one of its Subsidiaries owns or is licensed to use all the
      Intellectual Property currently used for the operation of the business (the
      “Company
      IP Rights”).
      The
      Company IP Rights are all the Intellectual Property necessary to conduct the
      business of the Company or its Subsidiaries as currently conducted. The Company
      and its Subsidiaries have taken all necessary steps to establish, protect,
      preserve and maintain the Company’s and its Subsidiaries’ interest in the
      Company IP Rights.

     

    (b) Neither
      the execution, delivery and performance of this Agreement nor the consummation
      of the Merger and the other transactions contemplated by this Agreement will
      impair the rights of the Company, any of its Subsidiaries or the rights of
      the
      Surviving Corporation in any Company IP Rights. Except as set forth in Section
      4.9(b)(ii) of the Company Disclosure Schedule, neither the Company nor any
      of
      its Subsidiaries is paying any license fees, royalties, honoraria or other
      payments to any third person (other than salaries payable to employees and
      independent contractors not contingent on or related to use of their work
      product) as a result of the ownership, use, possession, license in, sale,
      marketing, advertising or disposition of any Company IP Rights, and none shall
      become payable as a result of the consummation of the transactions contemplated
      by this Agreement.

     

    (c) The
      operation of the Company’s and its Subsidiaries’ business as currently conducted
      does not infringe or misappropriate any Intellectual Property right of any
      third
      party or breach any Company IP Agreements. Except as set forth in Section 4.9(c)
      of the Company Disclosure Schedule, neither the Company nor any of its
      Subsidiaries has received any notice asserting that the development, use, sale,
      license or disposition of any Company Product or Service infringes or
      misappropriates, or would infringe or misappropriate, the Intellectual Property
      of any third party, and neither the Company nor any of its Subsidiaries has
      received any notice from any third party offering a license under any such
      third
      party Intellectual Property to avoid litigation or other claims.

     

    (d) Except
      as
      set forth in Section 4.9(d) of the Company Disclosure Schedule, no current
      or
      former employee, officer, consultant or independent contractor of the Company
      or
      any of its Subsidiaries (“Staff
      Member”):
      (i)
      is in material violation of any term or covenant of any employment contract
      relating to Intellectual Property, patent disclosure agreement, invention
      assignment agreement, nondisclosure agreement, or noncompetition agreement
      or
      similar contract with any third party by virtue of such Staff Member being
      employed by, or performing services for, the Company or any of its Subsidiaries;
      (ii) has failed to execute and deliver to the Company or the applicable
      Subsidiary an enforceable contract regarding the protection of the Company’s,
      its Subsidiaries’ or their customers’ or business partners’ Trade Secrets; (iii)
      has failed to execute and deliver an enforceable written contract assigning
      to
      the Company or one of its Subsidiaries all right, title and interest in any
      inventions and works of authorship, whether or not patentable, invented,
      created, developed, conceived and/or reduced to practice during the term of
      such
      Staff Member’s work for the Company or a Subsidiary, and all Intellectual
      Property rights therein; or (iv) has any right, license, claim or interest
      whatsoever in or with respect to any Company-Owned IP Rights.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (e) To
      the
      Knowledge of the Company, there is no unauthorized use, disclosure, infringement
      or misappropriation of any Company-Owned IP Rights by any third party or Staff
      Member. To the Knowledge of the Company, except as set forth in Section
      4.9(e)(i) of the Company Disclosure Schedule, the Company and its Subsidiaries
      own all right, title and interest in and to all Company-Owned IP Rights free
      and
      clear of any and all licenses, options, preemptive rights, rights of first
      refusal or first offer, or other adverse claims, restrictions or Encumbrances
      on
      title or transfer of any nature whatsoever. None of the Company-Owned IP Rights
      has been adjudicated invalid or unenforceable, in whole or in part, and to
      the
      Knowledge of the Company, the Company-Owned IP Rights are valid and enforceable.
      No Company-Owned IP Right is subject to any outstanding injunction, judgment,
      order, decree, ruling, charge, settlement or other disposition of any dispute
      regarding any Company-Owned IP Right. To the Knowledge of the Company, no
      Governmental Entity, university, college or other educational institution or
      research center has any right to (other than license rights for internal
      purposes), ownership of or right to royalties for Company-Owned IP Rights.
      To
      the Knowledge of the Company, the Company’s and its Subsidiaries’ rights to use
      the Company-Licensed IP is subject only to the terms and conditions of the
      Company IP Agreements listed in Section 4.9(e)(ii) of the Company Disclosure
      Schedule.

     

    (f) Section
      4.9(f)(i) of the Company Disclosure Schedule contains a true and complete list
      of (i) all worldwide registrations made by or on behalf of the Company and
      any
      of its Subsidiaries of any Company-Owned IP Rights with any Governmental Entity,
      and (ii) all applications filed by the Company and its Subsidiaries to secure
      its interest in Company-Owned IP Rights, and, where applicable, the jurisdiction
      in which each application has been applied for or filed (“Company
      Registered IP”).
      To
      the Knowledge of the Company, all Company Registered IP is valid, enforceable
      and subsisting and all necessary registration, maintenance and renewal fees
      in
      connection with such Company Registered IP have been paid in a timely manner
      and
      all necessary documents and articles in connection with such Company Registered
      IP have been filed in a timely manner with the relevant Governmental Entity
      for
      the purposes of maintaining such Company Registered IP (and Company-Licensed
      IP
      Rights in which the Company has a contractual right or obligation to pay
      registration, maintenance and renewal fees). There are no actions that must
      be
      taken by the Company or any of its Subsidiaries within 180 days of the Closing
      Date, including the payment of any registration, maintenance or renewal fees
      or
      the filing of any documents, applications or articles for the purpose of
      maintaining, perfecting or preserving or renewing any such Company Registered
      IP.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (g) Except
      as
      set forth in Section 4.9(g) of the Company Disclosure Schedule, neither the
      Company nor any of its Subsidiaries has agreed to indemnify any Person for
      any
      infringement of any Intellectual Property of any third party by any Company
      Product or Service that has been sold, licensed to third parties, leased to
      third parties, supplied, marketed, distributed or provided by the Company or
      any
      of its Subsidiaries.

     

    (h) To
      the
      Knowledge of the Company, the business of the Company and its Subsidiaries
      as
      currently conducted does not involve the use or development of, or engagement
      in, encryption technology, or other technology, the development,
      commercialization or export of which is restricted under applicable Law, and
      the
      Company and its Subsidiaries have been and are in compliance with all export
      restrictions applicable to such technology.

     

    (i) In
      each
      case in which Company or any of its Subsidiaries intended to acquire ownership
      of Intellectual Property from any third party (other than Staff Members), the
      Company or such Subsidiary (as the case may be) obtained a valid and enforceable
      assignment of all rights in such Intellectual Property (including the right
      to
      seek past and future damages with respect thereto) to the Company or any of
      its
      Subsidiaries and, to the extent necessary under applicable Laws, the Company
      or
      its applicable Subsidiaries have recorded each such assignment with the relevant
      Governmental Entities in a timely manner.

     

    4.10 Agreements,
      Contracts and Commitments; Government Contracts.

     

    (a) Except
      as
      set forth in the exhibit index for the Company’s Annual Report on Form 10-K for
      the year ended October 31, 2006 or in Section 4.10 (a) of the Disclosure
      Schedule, neither the Company nor any of its Subsidiaries is a party to or
      bound
      by (i) any agreement relating to the incurring of Indebtedness by the Company
      or
      any of its Subsidiaries in an amount in excess in the aggregate of $10,000,
      including any such agreement which contains provisions that restrict, or may
      restrict, the conduct of business of the issuer thereof as currently conducted
      (collectively, “Instruments of Indebtedness”), (ii) any “Material Contract” (as
      such term is defined in Item 601(b)(10) of Regulation S-K of the SEC); (iii)
      any
      non-competition or exclusive dealing agreement, or any other agreement or
      obligation which purports to limit or restrict in any respect (A) the ability
      of
      the Company or its Subsidiaries to solicit customers, (B) the manner in which,
      or the localities in which, all or any portion of the business of the Company
      and its Subsidiaries is or would be conducted, (C) the right of the Company
      or
      any of its Affiliates to make, sell or distribute any products or services
      or
      use, transfer, license, distribute or enforce any Intellectual Property rights
      of the Company or any of its Subsidiaries or (D) the ability or manner in which
      the Buyer or any of its Affiliates (other than the Company and its Subsidiaries)
      may conduct all or any portion of their respective businesses following the
      consummation of the transactions contemplated by this Agreement, (iv) any
      agreement providing for the indemnification or any guaranty by the Company
      or
      its Subsidiaries of any Person other than standard form indemnity provisions
      in
      agreements with customers of the Company or any of its Subsidiaries entered
      into
      in the Ordinary Course of Business, (v) any contract relating to the disposition
      or acquisition by the Company or any of its Subsidiaries after the date of
      this
      Agreement of a material amount of assets not in the Ordinary Course of Business
      or pursuant to which the Company or any of its Subsidiaries has any material
      ownership interest in any other Person or other business enterprise other than
      the Company’s Subsidiaries (including, without limitation, joint venture,
      partnership or other similar agreements), (vi) any agreement that grants any
      right of first refusal or right of first offer or similar right or that limits
      or purports to limit the ability of the Company or any of its Subsidiaries
      to
      own, operate, sell, transfer, pledge or otherwise dispose of any assets or
      business, (vii) any contract or agreement providing for any significant payments
      that are conditioned, in whole or in part, on a change of control of the Company
      or any of its Subsidiaries, (viii) any collective bargaining agreement, (ix)
      any
      employment, service or consulting agreement, or any other agreement or
      arrangement, with any current or former (A) employee, executive officer or
      member of the Company Board, or (B) employee, executive officer or managing
      director of any Subsidiary, that contains, in each case, any severance pay
      or
      post-employment liabilities or obligations (other than as required by Law),
      (x)
      any agreement material to the Company and its Subsidiaries, taken as a whole,
      pertaining to the use of or granting any right to use or practice any rights
      under any Intellectual Property, (xi) any agreements pursuant to which the
      Company or any of its Subsidiaries leases any material real property or leases
      any material real property to third parties, (xii) any contract or agreement
      material to the Company and its Subsidiaries, taken as a whole, providing for
      the outsourcing or provision of servicing of customers, technology or product
      offerings of the Company or its Subsidiaries, (xiii) any agreement, contract
      or
      commitment, or group of agreements, contracts or commitments, with a Person
      (or
      group of affiliated Persons), the termination or breach of which could
      reasonably be expected to have, individually or in the aggregate, a Company
      Material Adverse Effect, (xiv) any agreement, contract or commitment to license
      any third party to manufacture or reproduce any of the Company’s products or any
      agreement, contract or commitment to sell or distribute any of the Company’s
      products (except agreements with distributors or sales representatives in the
      normal course of business cancelable without penalty upon notice of 90 days
      or
      less and substantially in the form previously provided to the Buyer), (xv)
      any
      material settlement agreement, contract or commitment under which the Company
      or
      any of its Subsidiaries has ongoing obligations; (xvi) any other contract or
      other agreement not made in the Ordinary Course of Business that (A) is material
      to the Company and its Subsidiaries taken as a whole or (B) could reasonably
      be
      expected to materially delay or prevent the consummation of the Merger or any
      of
      the transactions contemplated by this Agreement (the agreements, contracts
      and
      obligations listed in clauses (i) through (xvi) being referred to herein as
      “Company Material Contracts”). None of the Company Material Contracts contains a
“most favored nation” clause or other term providing preferential pricing or
      treatment to a third party that, following the Merger, would in any way apply
      to
      the Buyer or any of its Subsidiaries. 

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) Each
      Company Material Contract is valid and binding on the Company (or, to the extent
      a Subsidiary of the Company is a party, such Subsidiary) and, to the Knowledge
      of the Company, any other party thereto, and each Company Material Contract
      is
      in written form and in full force and effect. Neither the Company nor any of
      its
      Subsidiaries is in breach or default under any Company Material Contract or
      is
      aware of any condition that with the passage of time or the giving of notice
      or
      both could result in such a breach or default, except in each case where any
      such breaches or defaults could not, individually or in the aggregate,
      reasonably be expected to result in a Company Material Adverse Effect. Neither
      the Company nor any Subsidiary of the Company knows of, or has received written
      notice of, any breach or default under (nor, to the Knowledge of the Company,
      does there exist any condition which with the passage of time or the giving
      of
      notice or both would result in such a breach or default under) any Company
      Material Contract by any other party thereto. Prior to the date hereof, the
      Company has made available to the Buyer true and complete copies of all Company
      Material Contracts.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    4.11 Litigation;
      Product Liability; Product Recalls.
      Except
      as disclosed in the Company SEC Reports filed prior to the date of this
      Agreement, there is no Action pending or, to the Knowledge of the Company,
      threatened against or affecting the Company or any of its Subsidiaries that:
      (i)
      individually or in the aggregate, constitute or could reasonably be expected
      to
      constitute a Company Material Adverse Effect; or (ii) seek to delay, alter
      or
      prevent the consummation of the transactions contemplated hereby, and as to
      each
      of the foregoing, to the Knowledge of the Company, there are no bases or grounds
      on which such a suit, proceeding, claim, arbitration or investigation could
      be
      commenced with a reasonable likelihood of success. There are no material
      judgments, orders or decrees outstanding against the Company or any of its
      Subsidiaries that could, individually or in the aggregate, constitute or could
      reasonably be expected to constitute a Company Material Adverse Effect or that
      could prevent or delay the consummation of the transactions contemplated hereby.
      No product liability claims have been asserted or, to the Knowledge of the
      Company, threatened against the Company or any of its Subsidiaries relating
      to
      products or product candidates developed, tested, manufactured, marketed,
      distributed or sold by the Company or any of its Subsidiaries. There is no
      design, manufacturing or other defect in any product category of the Company
      or
      any Subsidiary or any specifications relating thereto. Each of the products
      sold
      by the Company or any Subsidiary meets, and at all times has met, in all
      material respects, all standards for quality and workmanship prescribed by
      Law,
      industry standards, contractual agreements or the product literature of the
      Company or such Subsidiary. The Company is not aware of any pattern or series
      of
      claims against the Company or any of its Subsidiaries that could reasonably
      be
      expected to result in a generalized product recall relating to products sold
      by
      the Company or any of its Subsidiaries, regardless of whether such product
      recall is formal, informal, voluntary or involuntary.
      Neither
      the Company nor any of its Subsidiaries has any action, suit, proceeding, claim
      or arbitration against any other party pending before any Governmental
      Entity.

     

    4.12 Environmental
      Matters.

     

    (a) Except
      as
      would not reasonably be expected to have, individually or in the aggregate,
      a
      Company Material Adverse Effect, (i) the Company and each of its Subsidiaries
      comply and have complied with all applicable Environmental Laws, and possess
      and
      comply, and have complied, with all applicable Environmental Permits required
      under such Laws to operate as it currently operates; (ii) there are no, and
      there have not been any, Materials of Environmental Concern at any property
      currently or formerly operated by the Company or any of its Subsidiaries, under
      circumstances that have resulted in or are reasonably likely to result in
      liability of the Company or any of its Subsidiaries under any applicable
      Environmental Laws, except to the extent that the Company or any of its
      Subsidiaries may be vicariously liable for the actions of other Persons who
      kept
      or maintained Materials of Environmental Concern at any property currently
      or
      formerly operated by the Company or any of its Subsidiaries; and (iii) neither
      the Company nor any of its Subsidiaries has received any written notification
      alleging that it is liable for, or request for information pursuant to section
      104(e) of the CERCLA or similar foreign, state or local Law, concerning any
      release or threatened release of Materials of Environmental
      Concern.

     

    (b) Notwithstanding
      any other representations and warranties in this Agreement, the representations
      and warranties in this Section 4.12
      are the
      only representations and warranties in this Agreement with respect to
      Environmental Laws or Materials of Environmental Concern.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (c) For
      purposes of this Agreement, the following terms have the meanings assigned
      below: 

     

    Environmental
      Laws
      means
      all foreign, federal, state, or local statutes, common Law, regulations,
      ordinances, codes, orders or decrees relating to the protection of the
      environment, including the ambient air, soil, surface water or groundwater,
      or
      relating to the protection of human health from exposure to Materials of
      Environmental Concern including, but not limited to, the Comprehensive
      Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601
      et seq. (“CERCLA”); the Resource Conservation and Recovery Act, 42 U.S.C.
      Section 6901 et seq.; the Federal Water Pollution Control Act, as amended,
      33
      U.S.C. Section 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. Section
      2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401 et seq.; the Safe
      Drinking Water Act, 42 U.S.C. Section 300f et seq.; the Oil Pollution Act of
      1990, 33 U.S.C. Section 2701 et seq.; the German Soil Protection Act
      (Bundesbodenschutzgesetz), Section 4 et seq.; or any other Law of similar
      effect, each as amended from time to time..

     

    Environmental
      Permits
      means
      all permits, licenses, registrations, and other authorizations required under
      applicable Environmental Laws.

     

    Materials
      of Environmental Concern
      means:
      any hazardous, acutely hazardous, or toxic substance or waste defined or
      regulated as such under Environmental Laws, including the federal Comprehensive
      Environmental Response, Compensation and Liability Act and the federal Resource
      Conservation and Recovery Act; petroleum, asbestos, lead, polychlorinated
      biphenyls, radon, or toxic mold; and any other substance the exposure to which
      would reasonably be expected, because of hazardous or toxic qualities, to result
      in liability under applicable Environmental Laws.

     

    4.13 Employee
      Benefit Plans.

     

    (a) Section
      4.13(a) of the Company Disclosure Schedule sets forth a correct and complete
      list of all employee benefit plans, programs, agreements or arrangements,
      including pension, retirement, profit sharing, deferred compensation, stock
      option, change in control, retention, equity or equity-based compensation,
      stock
      purchase, employee stock ownership, severance pay, vacation, bonus or other
      incentive plans, all medical, vision, dental or other health plans, all life
      insurance plans, and all other employee benefit plans or fringe benefit plans,
      including “employee benefit plans” as that term is defined in Section 3(3) of
      ERISA, in each case, whether oral or written, funded or unfunded, or insured
      or
      self-insured, maintained by the Company or any of its Subsidiaries, or to which
      the Company or any of its Subsidiaries contributed or is obligated to contribute
      thereunder, or with respect to which the Company or any of its Subsidiaries
      has
      or may have any liability (contingent or otherwise), in each case, for or to
      (i)
      any current or former employees, directors, officers or consultants of the
      Company or any of its Subsidiaries located primarily in the United States and/or
      their dependents (collectively, the “Benefit Plans”), or (ii) any current or
      former employees, directors, officers or consultants of any of its Subsidiaries
      not located primarily in the United States and/or their dependents
      (collectively, the “Foreign Plans”). For purposes of this Agreement, the term
“plan,” when used with respect to Foreign Plans, shall mean a “scheme” or other
      employee benefit program or arrangement in accordance with specific country
      usage.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) All
      Benefit Plans that are intended to be subject to Code Section 401(a) and any
      trust agreement that is intended to be tax exempt under Code Section 501(a)
      have
      been determined by the Internal Revenue Service to be qualified under Code
      Section 401(a) and exempt from taxation under Code Section 501(a), and, to
      the
      Knowledge of the Company, nothing has occurred that would adversely affect
      the
      qualification of any such plan. Except as would not reasonably be expected
      to
      have, individually or in the aggregate, a Company Material Adverse Effect:
      (i)
      each Benefit Plan and any related trust subject to ERISA complies in all
      material respects with and has been administered in substantial compliance
      with,
      (A) the provisions of ERISA, (B) all provisions of the Code, (C) all other
      applicable Laws, and (D) its terms and the terms of any collective bargaining
      or
      collective labor agreements; (ii) neither the Company nor any of its
      Subsidiaries has received any written notice from any Governmental Entity
      questioning or challenging such compliance; and (iii) there are no unresolved
      claims or disputes under the terms of, or in connection with, the Benefit Plans
      other than claims for benefits which are payable in the ordinary course; (iv)
      there has not been any prohibited transaction (within the meaning of Section
      406
      of ERISA or Section 4975 of the Code) with respect to any Benefit Plan; (v)
      no
      Action has been commenced with respect to any Benefit Plan and, to the Knowledge
      of the Company, no such Action is threatened (other than routine claims for
      benefits in the normal course); (vi) there are no governmental audits or
      investigations pending or, to the Knowledge of the Company, threatened in
      connection with any Benefit Plan; and (vii) to the Knowledge of the Company,
      there are not any facts that could give rise to any liability in the event
      of
      any governmental audit or investigation.

     

    (c) Neither
      the Company nor any ERISA Affiliate of the Company (i) sponsors or contributes
      to a Benefit Plan that is a “defined benefit plan” (as defined in ERISA Section
      3(35)); (ii) has an “obligation to contribute” (as defined in ERISA Section
      4212) to a Benefit Plan that is a “multiemployer plan” (as defined in ERISA
      Sections 4001(a)(3) and 3(37)(A)); (iii) has any liability, contingent or
      otherwise, under Title IV of ERISA with respect to a Benefit Plan, either
      directly or through any ERISA Affiliate; (iv) except as stated in Section
      4.13(c) of the Company Disclosure Schedule, sponsors, maintains or contributes
      to any plan, program or arrangement that provides for post-retirement or other
      post-employment welfare benefits (other than health care continuation coverage
      as required by Law); and (v) sponsors a Foreign Plan that is a defined benefit
      pension plan intended to be registered or approved by any Governmental Entity.
      For purposes of this Section 4.13, “ERISA Affiliate” shall mean any trade or
      business, whether or not incorporated, that together with the Company would
      be
      deemed to be a single employer for purposes of Section 4001 of ERISA or Sections
      414(b), (c), (m), (n) or (o) of the Code.

     

    (d) Each
      Foreign Plan complies in all material respects with and has been administered
      in
      substantial compliance with the Laws of the applicable foreign country. Each
      Foreign Plan which, under the Laws of the applicable foreign country, is
      required to be registered or approved by any Governmental Entity, has been
      so
      registered or approved. All contributions to each Foreign Plan required to
      be
      made by the Company or the Company Subsidiaries through the Closing Date have
      been or shall be made or, if applicable, shall be accrued in accordance with
      country-specific accounting practices. No Action has been commenced with respect
      to any Foreign Plan and, to the Knowledge of the Company, no such Action is
      threatened (other than routine claims for benefits in the normal course). There
      are no governmental audits or investigations pending or, to the Knowledge of
      the
      Company, threatened in connection with any Foreign Plan.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (e) All
      reports, returns and similar documents with respect to all Benefit Plans or
      Foreign Plans required to be filed by the Company or any of its Subsidiaries
      with any Governmental Entity have been duly and timely filed. All material
      reports, returns and similar documents with respect to all Benefit Plans or
      Foreign Plans required to be distributed to any Benefit Plan or Foreign Plan
      participant have been duly and timely distributed.

     

    (f) Section
      4.13(f) of the Company Disclosure Schedule discloses whether each Benefit Plan
      that is an employee welfare benefit plan is (i) unfunded or self-insured, (ii)
      funded through a “welfare benefit fund,” as such term is defined in Code Section
      419(e) or other funding mechanism or (iii) insured. Each such employee welfare
      benefit plan may be amended or terminated (including with respect to benefits
      provided to retirees and other former employees) without liability (other than
      benefits then payable under such plan without regard to such amendment or
      termination) to the Company or any of its Subsidiaries at any time. Each of
      the
      Company and the Company’s Subsidiaries complies in all material respects with
      the applicable requirements of Section 4980B(f) of the Code or any similar
      state
      statute with respect to each Benefit Plan that is a group health plan within
      the
      meaning of Section 5000(b)(1) of the Code or such state statute. Neither the
      Company nor any of its Subsidiaries has any material obligations for retiree
      health or life insurance benefits under any Benefit Plan (other than for
      continuation coverage under Section 4980B(f) of the Code).

     

    (g) Except
      as
      may be required by Law, or as contemplated under this Agreement, neither the
      Company nor any of its Subsidiaries has any plan or commitment to create any
      additional Benefit Plans or Foreign Plans, or to amend or modify any existing
      Benefit Plan or Foreign Plan in such a manner as to materially increase the
      cost
      of such Benefit Plan or Foreign Plan to the Company or any of its
      Subsidiaries.

     

    (h) Neither
      the execution and delivery of this Agreement nor the consummation of the
      transactions contemplated hereby will cause or trigger (i) any material payment
      (including any bonus, severance, unemployment compensation, deferred
      compensation, forgiveness of indebtedness or golden parachute payment) to any
      current or former employee under any Benefit Plan or Foreign Plan; (ii) any
      increase in any material respect of any benefit otherwise payable under any
      Benefit Plan or Foreign Plan; (iii) any acceleration in any material respect
      of
      the time of payment or vesting of any such benefits under any Benefit Plan
      or
      Foreign Plan; or (iv) any material obligation to fund any trust or other
      arrangement with respect to compensation or benefits under a Benefit Plan or
      Foreign Plan. No payment or benefit which has been, will or may be made by
      the
      Company or any of its Subsidiaries with respect to any current or former
      employee located in the United States in connection with the execution and
      delivery of this Agreement or the consummation of the transaction contemplated
      hereby would be characterized as an “excess parachute payment” with the meaning
      of Section 280G(b)(1) of the Code or fail to be deductible under Section 162(m)
      of the Code.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (i) Neither
      the Company nor any of its Subsidiaries has classified any individual as an
      “independent contractor” or similar status who, according to a Benefit Plan or
      Foreign Plan or applicable Law, should have been classified as an employee
      or of
      similar status. To the Knowledge of the Company, neither the Company nor any
      of
      its Subsidiaries has any material liability by reason of any individual who
      provides or provided services to the Company or any of its Subsidiaries, in
      any
      capacity, being improperly excluded from participating in any Benefit Plan
      or
      Foreign Plan.

     

    (j) Correct
      and complete copies have been delivered or made available to the Buyer by the
      Company of all Benefit Plans and Foreign Plans (including all amendments and
      attachments thereto); written summaries of any Benefit Plan not in writing,
      all
      related trust documents; all insurance contracts or other funding arrangements
      to the degree applicable; the two most recent annual information filings (Form
      5500) and annual financial reports for those Benefit Plans (where required);
      the
      most recent determination letter from the Internal Revenue Service (where
      required); and the most recent summary plan descriptions for the Benefit Plans
      and in respect of defined Benefit Plans and Foreign Plans, the most recent
      actuarial valuation and any subsequent valuation or funding advice (including
      draft valuations).

     

    4.14 Compliance
      With Laws.
      The
      Company, each of its Subsidiaries and their respective businesses as previously
      conducted and as now being conducted have complied and do comply with, were
      not
      and are not in violation of, and have not received any notice alleging any
      violation with respect to, any applicable provisions of any Law with respect
      to
      the conduct of its business, or the ownership or operation of its properties
      or
      assets, except for failures to comply or violations that, individually or in
      the
      aggregate, have not had, and could not reasonably be expected to have, a Company
      Material Adverse Effect.

     

    4.15 Permits.
      The
      Company and each of its Subsidiaries have all permits, licenses and franchises
      from Governmental Entities required to conduct their businesses as now being
      conducted or as presently contemplated to be conducted (the “Company Permits”),
      except for such permits, licenses and franchises the absence of which,
      individually or in the aggregate, has not had, and could not reasonably be
      expected to have, a Company Material Adverse Effect. The Company and each of
      its
      Subsidiaries have complied
      with the
      terms of the Company Permits in all material respects. The
      transactions contemplated by this Agreement
      will not
      result in a default under or a breach or violation of, adversely affect the
      rights and benefits afforded the Company and its Subsidiaries by, or adversely
      affect the obligations imposed on the Company and its Subsidiaries in connection
      with, any Company Permit.

     

    4.16 Labor
      Matters. 

     

    With
      respect to employees of and service providers to
      the
      Company and each of its Subsidiaries:

     

    (a) The
      Company and its Subsidiaries comply and have
      complied
with
      all
      applicable domestic
      and foreign Laws
      respecting employment and employment practices, terms and conditions of
      employment and wages and hours, including without limitation any such
      Laws
      respecting employment discrimination, employee
      classification, workers’
      compensation, family and medical leave, the Immigration Reform and Control
      Act,
      and occupational safety and health requirements, and have
      complied with all employment agreements, and no
      claims,
      controversies,
      investigations,
      or
      suits
      are
      pending or, to the Knowledge of the Company,
      threatened with respect to such Laws
      or
      agreements,
      either
      by private individuals or by
      governmental agencies; and all employees are at-will. To
      the
      Knowledge of the Company, as
      of the
      date hereof, no facts or events exist that are likely to give rise to a
      violation of Section 4.16
      on or
      before the Effective Time.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) Neither
      the Company
      nor
any
      of
      its Subsidiaries is or has
      been
      engaged
      in any
      unfair
      labor practice,
      and
      there
      is not
      now, nor within the past three years
      has
      there been, any unfair labor practice complaint against the Company or
      any of
      its Subsidiaries pending
      or, to the Knowledge of the Company,
      threatened, before the National Labor Relations Board or any other comparable
      foreign or domestic authority or any workers’
      council.

     

    (c) No
      labor
      union represents or has ever represented the Company’s or any of its
      Subsidiaries’ employees and no collective bargaining agreement is or has been
      binding against the Company or any of its Subsidiaries. No
      grievance or arbitration proceeding arising out of or under collective
      bargaining agreements or employment relationships is
      pending, and no claims therefor
      exist or
      have, to the Knowledge of the Company,
      been
      threatened; no labor strike, lock-out, slowdown, or work stoppage is
or
      has
      ever been pending
      or threatened against or directly affecting the Company
      or any
      of its Subsidiaries.

     

    (d) To
      the
      Knowledge of the Company, no contractor, manufacturer, or supplier used by
      or
      under contract with Company or any of its Subsidiaries is in material violation
      of any Law relating to labor or employment matters.

     

    (e) Neither
      the Company nor any of its Subsidiaries has effectuated (i) a plant closing
      as
      defined in the Worker Adjustment and Retraining Notification Act of 1988, as
      amended from time to time (the “WARN Act”) affecting any site of employment or
      one or more operating units within any site of employment of the Company or
      Related Employer or (ii) a mass layoff as defined in the WARN Act, nor has
      the
      Company or any Related Employer been affected by any transaction or engaged
      in
      layoffs or employment terminations sufficient in number to trigger application
      of any similar state or local Law.

     

    (f) All
      persons who have
      performed
      services
      for the Company and its
      Subsidiaries and have been
      classified as independent contractors
      have
      satisfied the requirements of Law to be so classified, and the
      Company
      or the
      applicable Subsidiary
      of the Company has fully and accurately reported their compensation on IRS
      Forms
      1099 or
      other
      applicable tax forms for independent contractors when
      required to do so.

     

    (g) The
      Company and its Subsidiaries have complied with all applicable foreign Laws
      concerning employer contributions to any trade union, housing, unemployment,
      retirement, bonus and welfare funds and all other funds to which an employer
      is
      required by Law to contribute.

     

    4.17 Insurance.
      Each of
      the Company and its Subsidiaries maintains insurance policies (the “Insurance
      Policies”) with reputable insurance carriers against all risks of a character
      and in such amounts as are usually insured against by similarly situated
      companies in the same or similar businesses. Section 4.17
      of the
      Company Disclosure Schedule sets forth the insurance coverages maintained by
      the
      Company and its Subsidiaries. Each Insurance Policy is in full force and effect
      and is valid, outstanding and enforceable, and all premiums due thereon have
      been paid in full. None of the Insurance Policies shall terminate or lapse
      (or
      be affected in any other materially adverse manner) by reason of the
      transactions contemplated by this Agreement. The Company and each of its
      Subsidiaries has complied in all material respects with the provisions of each
      Insurance Policy under which it is the insured party. No insurer under any
      Insurance Policy has canceled or generally disclaimed liability under any such
      policy or indicated any intent to do so or not to renew any such policy. All
      material claims under the Insurance Policies have been filed in a timely
      fashion.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    4.18 Inventory.
      All
      inventory of the Company and each of its Subsidiaries, whether or not reflected
      on the Company Balance Sheet, consists of a quality and quantity usable and
      saleable in the Ordinary Course of Business of the Company and its Subsidiaries,
      except for obsolete items and items of below-standard quality, all of which
      have
      been written-off or written-down to net realizable value on the Company Balance
      Sheet. All inventories not written-off have been priced on the accounting basis
      (i.e., LIFO or FIFO) described in the Company’s audited financial statements for
      the year ended October 31, 2005. The quantities of each type of inventory,
      whether raw materials, work-in-process or finished goods, are not excessive
      in
      the present circumstances of the Company and its Subsidiaries.

     

    4.19 Tangible
      Personal Property.
      The
      Company and its Subsidiaries have legal and valid title to, or in the case
      of
      leased assets and properties, valid and subsisting leasehold interests in,
      all
      of the material tangible personal assets and properties used or held for use
      by
      the Company and its Subsidiaries in connection with the conduct of the business
      of the Company and its Subsidiaries, free and clear of all Encumbrances other
      than Permitted Encumbrances. Except as would not reasonably be expected to
      have,
      individually or in the aggregate, a Company Material Adverse Effect, all
      tangible personal property is in good condition, ordinary wear and tear
      excepted.

     

    4.20 Customers
      and Suppliers.
      No
      customer of the Company or any of its Subsidiaries that represented 5% or more
      of the Company’s consolidated revenues in the fiscal year ended October 31, 2006
      has indicated to the Company or any of its Subsidiaries that it will stop,
      or
      decrease the rate of, buying materials, products or services from the Company
      or
      any of its Subsidiaries. No material supplier or exclusive supplier of the
      Company or any of its Subsidiaries has indicated to the Company or any of its
      Subsidiaries that it will stop, or decrease the rate of, supplying materials,
      products or services to them or materially increase the pricing of such
      materials, products or services.

     

    4.21 Accounts
      Receivable.
      All
      accounts receivable of the Company or its Subsidiaries reflected on the Company
      Balance Sheet are valid receivables, arose from bona fide sales of goods and
      services in the Ordinary Course of Business, and are not subject to any setoffs
      or counterclaims.

     

    4.22 Opinions
      of Financial Advisors.
      Each of
      Houlihan Lokey Howard & Zukin Financial Advisors, Inc. (“HLHZFA”) and
      Capitalink, L.C. has delivered
      to the Company Board its written opinion (or oral opinion to be confirmed in
      writing), dated as of the date hereof, that, as of such date, the Merger
      Consideration is fair, from a financial point of view, to the holders of the
      Shares, and neither of such opinions has been withdrawn or modified.
      The
      Company has made available to the Buyer accurate and complete copies of all
      agreements under which fees, commissions or other amounts have been paid or
      may
      become payable and all indemnification and other agreements related to the
      engagement of HLHZFA and Capitalink, L.C.. 

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    4.23 Brokers.
      Except
      for Houlihan Lokey Howard & Zukin Capital, Inc. (“HLHZC”), an affiliate of
      HLHZFA , no agent, broker, investment banker, financial advisor or other Person
      is or shall be entitled, as a result of any action, agreement or commitment
      of
      the Company or any of its Affiliates, to any broker’s, finder’s, financial
      advisor’s or other similar fee or commission in connection with any of the
      transactions contemplated by this Agreement.
      The
      Company has made available to the Buyer copies of all agreements under which
      any
      such fees or commissions have been paid or may become payable and all
      indemnification and other agreements related to the engagement of HLHZC. Such
      copies are complete and accurate in all respects, except that the parameters
      for
      calculating the portion of the fee payable to HLHZC upon closing of the Merger
      has been redacted therefrom.

     

    4.24 Certain
      Approvals.
      The
      Company has taken all necessary action to ensure that no state anti-takeover
      statute, Law or regulation (including, without limitation, a “fair price,”
“moratorium,” or “control share acquisition” statute) applies to the Company,
      the Buyer, the Buyer Subsidiary, the Merger and this Agreement.

     

    4.25 Unlawful
      Payments.
      Neither
      the Company, any of its Subsidiaries, any director, officer, employee,
      shareholder, agent or representative of the Company or any of its Subsidiaries,
      nor any Person associated with or acting for or on behalf of the Company or
      any
      of its Subsidiaries, has directly or indirectly made any contribution, gift,
      bribe, rebate, payoff, influence payment, kickback, or other payment to any
      Person, private or public, regardless of what form, whether in money, property,
      or services (i) to obtain favorable treatment for the Company or any of its
      Subsidiaries or to secure contracts, (ii) to pay for favorable treatment for
      the
      Company or any of its Subsidiaries or for contracts secured, (iii) to obtain
      special concessions for the Company or any of its Subsidiaries or for special
      concessions already obtained or (iv) in violation of any legal
      requirement.

     

    4.26 Affiliate
      Transactions.
      There
      are
      no transactions, agreements, arrangements or understandings between (i) the
      Company or any of its Subsidiaries, on the one hand, and (ii) any Affiliate
      of
      the Company (other than the Company Subsidiaries), on the other hand, of the
      type that would be required to be disclosed under Item 404 of Regulation S−K
      under the Securities Act.

     

    4.27 No
      Other Representations or Warranties.

     

    (a) Except
      for the representations and warranties contained in this Article IV of this
      Agreement, in the Company Disclosure Schedule or any certificate or instrument
      furnished by the Company or any of its Subsidiaries pursuant to this Agreement
      or the disclosures in the Company SEC Reports, the Buyer acknowledges that
      neither the Company nor any other Person on behalf of the Company makes any
      other express or implied representation or warranty with respect to the Company
      with respect to any other information provided to the Buyer. Except in the
      case
      of fraud or willful misrepresentation, neither the Company nor any other Person
      will have or be subject to any liability or indemnification obligation to the
      Buyer or any other Person resulting from the distribution to the Buyer, or
      use
      by the Buyer of, any such information, including any information, documents,
      projections, forecasts or other material made available to the Buyer in the
      online data room to which the Buyer was given access, and pursuant to the
      confidential information memorandum and management presentations provided by
      the
      Company to the Buyer, in each case prior to the date of execution of this
      Agreement.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) In
      connection with investigation by the Buyer of the Company and its Subsidiaries,
      the Buyer has received or may receive from the Company and/or its Subsidiaries
      certain projections, forward-looking statements and other forecasts and certain
      business plan information. the Buyer acknowledges that there are uncertainties
      inherent in attempting to make such estimates, projections and other forecasts
      and plans, that the Buyer is familiar with such uncertainties, that the Buyer
      is
      taking full responsibility for making its own evaluation of the adequacy and
      accuracy of all estimates, projections and other forecasts and plans so
      furnished to it (including the reasonableness of the assumptions underlying
      such
      estimates, projections, forecasts or plans), and that, absent fraud or willful
      misrepresentation, the Buyer shall have no claim against anyone with respect
      thereto. Accordingly, the Buyer acknowledges that the Company makes no
      representation or warranty with respect to such estimates, projections,
      forecasts or plans (including the reasonableness of the assumptions underlying
      such estimates, projections, forecasts or plans).

     

    ARTICLE
      V

     

    REPRESENTATIONS
      AND WARRANTIES OF THE BUYER AND THE 

    BUYER
      SUBSIDIARY

     

    The
      Buyer
      and the Buyer Subsidiary represent and warrant to the Company that the
      statements contained in this Article IV are true and correct. 

     

    5.1 Organization,
      Standing and Power.
      Each of
      the Buyer and the Buyer Subsidiary is a corporation duly organized, validly
      existing and in good standing under the Laws of the jurisdiction of its
      incorporation, has all requisite corporate power and authority to own, lease
      and
      operate its properties and assets and to carry on its business as now being
      conducted and as proposed to be conducted, and is duly qualified to do business
      and is in good standing as a foreign corporation in each jurisdiction in which
      the character of the properties it owns, operates or leases or the nature of
      its
      activities makes such qualification necessary, except for such failures to
      be so
      organized, qualified or in good standing, individually or in the aggregate,
      that
      have not had, and could not reasonably be expected to have, a Buyer Material
      Adverse Effect. 

     

    5.2 Authority;
      No Conflict; Required Filings and Consents.

     

    (a) Each
      of
      the Buyer and the Buyer Subsidiary has all requisite corporate power and
      authority to enter into this Agreement and to consummate the transactions
      contemplated by this Agreement. The execution and delivery of this Agreement
      and
      the consummation of the transactions contemplated by this Agreement by the
      Buyer
      and the Buyer Subsidiary have been duly authorized by all necessary corporate
      action on the part of each of the Buyer and the Buyer Subsidiary (including
      the
      approval of the Merger by the Buyer in its capacity as the sole shareholder
      of
      the Buyer Subsidiary). This Agreement has been duly executed and delivered
      by
      each of the Buyer and the Buyer Subsidiary and constitutes the valid and binding
      obligation of each of the Buyer and the Buyer Subsidiary, enforceable in
      accordance with its terms, subject to applicable bankruptcy, insolvency,
      fraudulent conveyance, reorganization, moratorium and similar laws affecting
      creditors’ rights and remedies generally and to general principles of
      equity.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) The
      execution and delivery of this Agreement by each of the Buyer and the Buyer
      Subsidiary do not, and the consummation by the Buyer and the Buyer Subsidiary
      of
      the transactions contemplated by this Agreement shall not, (i) conflict
      with, or result in any violation or breach of, any provision of the certificate
      of incorporation or by-laws of the Buyer or the Buyer Subsidiary,
      (ii) conflict with, or result in any violation or breach of, or constitute
      (with or without notice or lapse of time, or both) a default (or give rise
      to a
      right of termination, cancellation or acceleration of any obligation or loss
      of
      any material benefit) under, require a consent or waiver under, constitute
      a
      change in control under, require the payment of a penalty under or result in
      the
      imposition of any Encumbrance on the Buyer’s or the Buyer Subsidiary’s assets
      under, any of the terms, conditions or provisions of any note, bond, mortgage,
      indenture, lease, license, contract or other agreement, instrument or obligation
      to which the Buyer or the Buyer Subsidiary is a party or by which any of them
      or
      any of their properties or assets may be bound, or (iii) subject to
      compliance with the requirements specified in clause (i), (ii), (iii) and (iv)
      of Section 5.2(c),
      conflict with or violate any permit, concession, franchise, license, judgment,
      injunction, order, decree, statute, Law, ordinance, rule or regulation
      applicable to the Buyer or the Buyer Subsidiary or any of its or their
      properties or assets, except in the case of clauses (ii) and (iii) of this
      Section 5.2(b)
      for any
      such conflicts, violations, breaches, defaults, terminations, cancellations,
      accelerations or losses that, individually or in the aggregate, could not
      reasonably be expected to have a Buyer Material Adverse Effect.

     

    (c) No
      consent, approval, license, permit, order or authorization of, or registration,
      declaration, notice or filing with, any Governmental Entity is required by
      or
      with respect to the Buyer or the Buyer Subsidiary in connection with the
      execution and delivery of this Agreement by the Buyer or the Buyer Subsidiary
      or
      the consummation by the Buyer or the Buyer Subsidiary of the transactions
      contemplated by this Agreement, except for (i) the pre-merger notification
      requirements under the HSR Act, (ii) the filing of the Certificate of Merger
      with the Secretary of State of the State of New Jersey and appropriate
      corresponding documents with the Secretaries of State of other states in which
      the Company is qualified as a foreign corporation to transact business, (iii)
      the filings of such reports, schedules or materials under the Exchange Act
      as
      may be required in connection with this Agreement and the transactions
      contemplated hereby and (iv) such consents, approvals, orders, authorizations,
      registrations, declarations and filings as may be required under applicable
      state securities Laws and the securities Laws of any foreign
      country. 

     

    5.3 Information
      Provided.
      None of
      the information supplied or to be supplied by the Buyer in writing specifically
      for inclusion in any Regulation M-A Filing or the Proxy Statement shall at
      the
      time the Regulation M-A Filing is filed with the SEC or the Proxy Statement
      is
      sent to shareholders of the Company to consider the Company Voting Proposal
      (as
      applicable), contain any untrue statement of a material fact or omit to state
      any material fact required to be stated therein or necessary in order to make
      the statements therein not misleading. If at any time prior to the Effective
      Time any fact or event relating to the Buyer or any of its Affiliates which
      should be set forth in an amendment or supplement to the Proxy Statement should
      be discovered by the Buyer or should occur, the Buyer shall promptly inform
      the
      Company of such fact or event.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    5.4 Operations
      of the Buyer Subsidiary.
      The
      Buyer Subsidiary was formed solely for the purpose of engaging in the
      transactions contemplated by this Agreement, has engaged in no other business
      activities and has conducted its operations only as contemplated by this
      Agreement.

     

    5.5 Financing.
      The
      Buyer has possession of, or has available to it under existing lines of credit,
      sufficient funds to consummate the transactions contemplated by this
      Agreement.

     

    5.6 Brokers.
      No
      agent, 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 Buyer or the Buyer Subsidiary for which the Company could have any liability
      if the Closing does not occur.

     

    5.7 Shares.
      Neither
      the Buyer nor the Buyer Subsidiary is, and at no time during the last three
      years has been, an “interested stockholder” of the Company as defined in Section
      14A:10A-3 of the NJBCA. Neither the Buyer nor the Buyer Subsidiary owns
      (directly or indirectly, beneficially or of record), or is a party to any
      agreement, other than the Support Agreements, arrangement or understanding
      for
      the purpose of acquiring, holding, voting or disposing of, in each case, any
      shares of capital stock of the Company (other than as contemplated by this
      Agreement).

     

    ARTICLE
      VI

     

    CONDUCT
      OF BUSINESS

     

    6.1 Covenants
      of the Company.
      Except
      as expressly provided herein or as consented to in writing by the Buyer, from
      and after the date of this Agreement until the earlier of the termination of
      this Agreement in accordance with its terms or the Effective Time, the Company
      shall, and shall cause each of its Subsidiaries to, act and carry on its
      business in the usual, regular and ordinary course in substantially the same
      manner as previously conducted, pay its debts and Taxes and perform its other
      obligations when due (subject to good faith disputes over such debts, Taxes
      or
      obligations), comply with all applicable Laws, rules and regulations, and use
      best efforts, consistent with past practices, to maintain and preserve its
      and
      each Subsidiary’s business organization, assets and properties, keep available
      the services of its present officers and employees and preserve its advantageous
      business relationships with customers, strategic partners, suppliers,
      distributors and others having business dealings with it to the end that its
      goodwill and ongoing business shall be unimpaired at the Effective Time. Without
      limiting the generality of the foregoing, and except as otherwise expressly
      required by this Agreement or as set forth on a correspondingly numbered
      subsection of Section 6.1
      of the
      Company Disclosure Schedule, the Company will not, and will not permit any
      of
      its Subsidiaries to, prior to the Effective Time, without the prior written
      consent of the Buyer:

     

    (a) adopt
      any
      amendment to its certificate of incorporation or by-laws or comparable charter
      or organizational documents;

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) sell,
      transfer, dispose of, pledge, hypothecate, grant a security interest in or
      otherwise encumber any capital stock owned by it in any of its
      Subsidiaries;

     

    (c) (i)
      issue, reissue or sell, or authorize the issuance, reissuance or sale of
      (A) shares of capital stock of any class, or securities convertible into
      capital stock of any class, or any rights, warrants or options to acquire any
      convertible securities or capital stock, of such Person other than the issuance
      by the Company of Shares pursuant to the exercise of Company Stock Options
      outstanding on the date hereof in accordance with the terms of such Company
      Stock Options or (B) any other securities in respect of, in lieu of, or in
      substitution for, capital stock outstanding on the date hereof, or (ii) make
      any
      other changes in its capital structure;

     

    (d) declare,
      set aside or pay any dividend or other distribution (whether in cash, securities
      or property or any combination thereof) in respect of any class or series of
      its
      capital stock except for dividends by any wholly-owned Subsidiary of the Company
      to the Company or another wholly-owned Subsidiary of the Company;

     

    (e) split,
      combine, subdivide, reclassify or redeem, purchase or otherwise acquire, or
      propose to redeem or purchase or otherwise acquire, any capital stock, or any
      of
      its other securities;

     

    (f) sell,
      transfer, lease, mortgage, encumber, license, pledge, abandon, cancel,
      surrender, allow to lapse or expire, or otherwise dispose of, encumber or
      subject to any material Lien, any assets or property (including Intellectual
      Property), except pursuant to existing contracts or commitments or the sale
      of
      goods in the Ordinary Course of Business;

     

    (g) acquire
      (whether by merger, consolidation, acquisition of stock or assets or any other
      form of transaction) any corporation, partnership or other business organization
      or division thereof or, except in the Ordinary Course of Business, any
      assets;

     

    (h) incur,
      guarantee, or modify in any material respect, any Indebtedness or make any
      loans, advances or capital contributions to, or investments in, any other Person
      (other than a Subsidiary of the Company), in each case, other than (but only
      to
      the extent such Indebtedness can be repaid without prepayment or other
      penalties) in the Ordinary Course of Business, (iii) other than in the Ordinary
      Course of Business, enter into, renew or amend in any material respect any
      contract or agreement which is or would be a Material Contract or would be
      material to the Company and its Subsidiaries taken as a whole, (iv) authorize
      any material new capital expenditures which are, in the aggregate, in excess
      of
      the capital expenditure budgets of the Company and its Subsidiaries set forth
      in
      Section 6.1 of the Company Disclosure Schedule, (v) other than in the Ordinary
      Course of Business commence or undertake any extraordinary sales events or
      significant discounting of products, or (vi) take any actions to materially
      change in a manner adverse to the Company or its Subsidiaries, relationships
      with material product vendors and suppliers;

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (i) sublease,
      license, grant any material easement affecting and/or transfer any interest
      in
      any Leased Real Property, or materially amend, extend or terminate any leasehold
      interest in any Leased Real Property;

     

    (j) except
      (i) as contemplated by this Agreement, (ii) to the extent required under any
      Benefit Plan or any Foreign Plan, or (iii) as required by applicable Law, (A)
      increase or decrease the compensation or fringe benefits of, or pay any bonus
      to, any current or former director, officer, employee or consultant of the
      Company or any of its Subsidiaries (except in the Ordinary Course of Business
      (including with regard to the timing and the basis upon which increases or
      payments are made) with respect to employees who are not directors or officers),
      (B) terminate or make any material amendment or modification to any existing
      Benefit Plan or Foreign Plan, (C) take any action to fund the payment of
      compensation or benefits under any Benefit Plan or Foreign Plan (except in
      the
      Ordinary Course of Business with respect to employees who are not directors
      or
      officers), (D) exercise any discretion to accelerate the vesting or payment
      or
      any compensation or benefit under any Benefit Plan or Foreign Plan, (E) grant
      any awards under any Benefit Plan or Foreign Plan (including the grant of stock
      options, stock appreciation rights, stock based or stock related awards,
      performance units, restricted stock units, or restricted stock) (except in
      the
      Ordinary Course of Business with respect to employees who are not directors
      or
      officers), (F) materially change any actuarial or other assumption used to
      calculate funding obligations with respect to any Benefit Plan or change the
      manner in which contributions to any Benefit Plan are made or the basis on
      which
      such contributions are determined, (G) adopt or enter into any new employee
      benefit plan, arrangement or employment contract or (H) hire or terminate any
      officer other than termination for cause;

     

    (k) enter
      into any transaction, agreement, arrangement or understanding between (i) the
      Company or any Subsidiary of the Company, on the one hand, and (ii) any
      Affiliate of the Company (other than the Company Subsidiaries), on the other
      hand, of the type that would be required to be disclosed under Item 404 of
      Regulation S−K;

     

    (l) settle
      or
      dismiss any Action threatened against, relating to or involving the Company
      or
      any of its Subsidiaries in connection with any business, asset or property
      of
      the Company and any of its Subsidiaries, other than in the Ordinary Course
      of
      Business but not, in any individual case, in excess of $50,000 or in a manner
      that would prohibit or materially restrict the Company from operating as it
      has
      historically;

     

    (m) other
      than in the Ordinary Course of Business, (i) make any material Tax election
      or
      change any method of accounting, (ii) enter into any settlement or compromise
      of
      any material Tax liability, (iii) file any amended Tax Return with respect
      to
      any material Tax, (iv) change any annual Tax accounting period, (v) enter into
      any closing agreement relating to any material Tax or (vi) surrender any right
      to claim a material Tax refund;

     

    (n) make
      any
      changes in accounting policies or procedures other than as required by GAAP
      or a
      Governmental Entity;

     

    (o) willfully
      take any action that would result in (i) any of its representations and
      warranties set forth in this Agreement that are qualified as to materiality
      becoming untrue, or (ii) any of such representations and warranties that
      are not so qualified becoming untrue in any material respect; or

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (p) agree
      to
      take, make any commitment to take, or adopt any resolutions of the Company
      Board
      or any board of directors or similar body of any Subsidiary in support of,
      any
      of the actions prohibited by this Section 6.1.

     

    6.2 Confidentiality.
      The
      parties acknowledge that the Buyer and HLHZC, acting on behalf of the Company,
      have previously executed a confidentiality agreement dated October 9, 2006
      (the
“Confidentiality Agreement”), which Confidentiality Agreement shall continue in
      full force and effect in accordance with its terms, except as expressly modified
      herein.

     

    ARTICLE
      VII

     

    ADDITIONAL
      AGREEMENTS

     

    7.1 No
      Solicitation.

     

    (a) No
      Solicitation or Negotiation.
      Except
      as expressly permitted in this Section 7.1,
      the
      Company shall not, nor shall it authorize or permit any of its Subsidiaries
      or
      any of its or their directors, officers, employees, investment bankers,
      attorneys, accountants or other advisors or representatives (such directors,
      officers, employees, investment bankers, attorneys, accountants, other advisors
      and representatives, collectively, “Representatives”) to directly or
      indirectly: 

     

    (i) solicit,
      initiate, encourage or take any other action to facilitate any inquiries or
      the
      making of any proposal or offer that constitutes, or could reasonably be
      expected to lead to, any Acquisition Proposal, including without limitation,
      amending or granting any waiver or release under any standstill or similar
      agreement with respect to any Shares;

     

    (ii) enter
      into, continue or otherwise participate in any discussions or negotiations
      regarding, furnish to any Person any information with respect to, assist or
      participate in any effort or attempt by any Person with respect to, or otherwise
      cooperate in any way with, any Acquisition Proposal; or

     

    (iii) make
      or
      authorize any statement, recommendation or solicitation in support of any
      Acquisition Proposal.

     

    The
      Company shall use its reasonable best efforts to take the necessary steps
      promptly to inform the Persons described in the first sentence of this Section
      7.1(a)
      of the
      obligations undertaken under this Section.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    Notwithstanding
      the foregoing, nothing contained in this Agreement shall prevent the Company
      or
      the Company Board from (i) taking and disclosing to its shareholders a position
      contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange
      Act
      (or any similar communication to shareholders in connection with the making
      or
      amendment of a tender offer or exchange offer) or from making any legally
      required disclosure to shareholders with regard to an Acquisition Proposal
      (provided that neither the Company nor its Company Board may recommend any
      Acquisition Proposal unless permitted by Section 7.1(b)
      below
      and the Company may not fail to make or withdraw, modify or change in a manner
      adverse to the Buyer all or any portion of the Company Board Recommendation
      unless permitted by Section 7.5
      (in
      which case the Buyer shall have the right to terminate this Agreement as set
      forth in Section 7.1(b)(ii)),
      and
      provided further that, notwithstanding anything herein to the contrary, any
      “stop-look-and-listen” communication by the Company or the Company Board to the
      shareholders of the Company pursuant to Rule 14d-9(f) promulgated under the
      Exchange Act shall not be considered a failure to make, or a withdrawal,
      modification or change in any manner adverse to the Buyer of, all or a portion
      of the Company Board Recommendation) or (ii) prior to the adoption of this
      Agreement by the Company’s shareholders in accordance with this Agreement, (A)
      providing access to its properties, books and records and providing information
      or data in response to a request therefor by a Person who has made an
      unsolicited bona fide written Acquisition Proposal if the Company Board receives
      from the Person so requesting such information an executed confidentiality
      agreement on terms substantially similar to those contained in the
      Confidentiality Agreement (except for such changes specifically necessary in
      order for the Company to be able to comply with its obligations under this
      Agreement and it being understood that the Company may enter into a
      confidentiality agreement without a standstill provision or with a standstill
      provision less favorable to the Company if it waives or similarly modifies
      the
      standstill provision in the Confidentiality Agreement), or (B) engaging in
      any
      negotiations or discussions with any Person who has made an unsolicited bona
      fide written Acquisition Proposal, if and only to the extent that prior to
      taking any of the actions set forth in clauses (A) or (B) of clause (ii), (x)
      the Company Board shall have determined in good faith, after consultation with
      its outside legal counsel and financial advisors, that such action is necessary
      in order for the Company Board to comply with its fiduciary duties under
      applicable Law and that such Acquisition Proposal will, or would reasonably
      be
      expected to, result in, a Superior Proposal, and (y) the Company shall have
      informed the Buyer promptly following (and in no event later than 24 hours
      after) the taking by it of any such action.

     

    (b)  Receipt
      of an Unsolicited Acquisition Proposal.
      Notwithstanding anything in this Section 7.1
      to the
      contrary, if, at any time prior to the adoption of this Agreement by the
      Company’s shareholders in accordance with this Agreement, the Company, the
      Company Board or any of the Representatives receives a bona fide written
      Acquisition Proposal that was unsolicited and that did not otherwise result
      from
      a material breach of Section 7.1(a):

     

    (i) the
      Company shall (A) promptly (and in no event later than 48 hours after receipt
      of
      an Acquisition Proposal) notify (which notice shall be provided orally and
      in
      writing and shall identify the Person making the Acquisition Proposal and set
      forth in reasonable detail its material terms and conditions) the Buyer that
      it
      has received an Acquisition Proposal and thereafter shall keep the Buyer
      reasonably informed of the status and material terms and conditions of any
      proposals or offers; and (B) make available to the Buyer (to the extent it
      has
      not already done so) all material non-public information made available to
      any
      Person making an Acquisition Proposal at substantially the same time as it
      provides it to such other Person; and 

     

    (ii) if
      the
      Company Board determines in good faith, after consultation with its financial
      advisors and outside legal counsel, in response to such bona fide written
      Acquisition Proposal, that such proposal is a Superior Proposal and that
      terminating this Agreement to accept such Superior Proposal and/or recommending
      such Superior Proposal to the shareholders of the Company is necessary in order
      for the Company Board to comply with its fiduciary duties under applicable
      Law,
      the Company may terminate this Agreement and/or the Company Board may approve
      or
      recommend such Superior Proposal to its shareholders, and immediately prior
      to
      or concurrently with the termination of this Agreement, enter into any
      agreement, understanding, letter of intent or arrangement with respect to such
      Superior Proposal, as applicable; provided,
      however,
      that
      the Company shall not terminate this Agreement pursuant to this sentence, and
      any purported termination pursuant to this sentence shall be void and of no
      force or effect, unless concurrently with such termination pursuant to this
      Section 7.1(b)(ii)
      the
      Company pays to the Buyer the Termination Fee payable pursuant to Section
9.3(c);
      and
provided,
      further,
      however, that the Company shall not exercise its right to terminate this
      Agreement and the Company Board shall not recommend a Superior Proposal to
      its
      shareholders pursuant to this Section 7.1(b)
      unless
      the Company shall have delivered to the Buyer a prior written notice advising
      the Buyer that the Company or the Company Board intends to take such action
      with
      respect to a Superior Proposal, specifying in reasonable detail the material
      terms and conditions of the Superior Proposal, this notice to be delivered
      not
      less than three Business Days prior to the time the action is taken, and, during
      this three Business Day period, the Company and its advisors shall negotiate
      in
      good faith with the Buyer to make such adjustments in the terms and conditions
      of this Agreement such that such Acquisition Proposal would no longer constitute
      a Superior Proposal.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (c) Termination
      of All Pending Discussions.
      The
      Company shall immediately cease and cause to be terminated any existing
      activities, discussions or negotiations with any Persons conducted heretofore
      with respect to any Acquisition Proposal. The Company also shall, if it has
      not
      already done so, promptly request, to the extent it has a contractual right
      to
      do so, that each Person, if any, that has heretofore executed a confidentiality
      agreement within the 12 months prior to the date of this Agreement in connection
      with its consideration of any Acquisition Proposal shall return or destroy
      all
      confidential information or data heretofore furnished to any Person by or on
      behalf of it or any of its Subsidiaries. 

     

    (d) Definitions.
      For
      purposes of this Agreement:

     

    (i) “Acquisition
      Proposal” means any inquiry, proposal or offer from any Person (other than from
      the Buyer and its Affiliates) relating to a tender offer or exchange offer,
      merger, reorganization, share exchange, consolidation or other business
      combination involving the Company and its Subsidiaries (or any of them) or
      any
      proposal or offer to acquire in any manner an equity interest representing
      a 10%
      or greater economic or voting interest in the Company, or the assets, securities
      or other ownership interests of or in the Company or any of its Subsidiaries
      representing 10% or more of the consolidated assets, revenues or earnings of
      the
      Company and its Subsidiaries, other than the transactions contemplated by this
      Agreement.

     

    (ii) “Superior
      Proposal” means an Acquisition Proposal (provided that for purposes of the
      definition of Superior Proposal, the term Acquisition Proposal shall have the
      meaning set forth in Section 7.1(d)(i),
      except
      that references to “10% or greater” and “10% or more” shall be deemed to be
      references to “90% or greater” and “90% or more,” respectively) that is
      reasonably capable of being consummated, taking into account all legal,
      financial, regulatory, timing, and similar aspects of, and conditions to, the
      proposal, the likelihood of obtaining necessary financing and the Person making
      the proposal, and, if consummated, would result in a transaction more favorable
      to the Company’s shareholders from a financial point of view than the
      transactions contemplated by this Agreement (after giving effect to any
      adjustments to the terms and provisions of this Agreements committed to in
      writing by the Buyer in response to such Acquisition Proposal). 

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    7.2 Proxy
      Statement.

     

    (a) As
      promptly as practicable after the execution of this Agreement, the Company
      shall
      prepare and file the Proxy Statement with the SEC. 

     

    (b) Each
      of
      the Buyer and the Company shall respond to any comments of the SEC, if any,
      and
      the Company shall use its best efforts to cause the Proxy Statement to be
      cleared under the Exchange Act and, as promptly as practicable after such
      filing, mailed to its shareholders at the earliest practicable time thereafter.
      Each of the Buyer and the Company shall notify the other promptly upon the
      receipt of any comments from the SEC or its staff or any other government
      officials and of any request by the SEC or its staff or any other government
      officials for amendments or supplements to the Proxy Statement or any filing
      pursuant to this Section or for additional information and shall supply the
      other with copies of all correspondence between such party or any of its
      representatives, on the one hand, and the SEC, or its staff or any other
      government officials, on the other hand, with respect to the Proxy Statement,
      the Merger or any filing pursuant to this Section. The Company shall use its
      best efforts to cause all documents that it is responsible for filing with
      the
      SEC or other regulatory authorities under this Section  to comply in all
      material respects with all applicable requirements of Law and the rules and
      regulations promulgated thereunder. Whenever any event occurs which is required
      to be set forth in an amendment or supplement to the Proxy Statement or any
      filing pursuant to this Section, the Buyer or the Company, as the case may
      be,
      shall promptly inform the other of such occurrence and cooperate in filing
      with
      the SEC or its staff or any other government officials, and/or mailing to
      shareholders of the Company, such amendment or supplement.

     

    (c) The
      Buyer
      and the Company shall promptly make all necessary filings with respect to the
      Merger under the Securities Act, the Exchange Act, applicable state blue sky
      Laws and the rules and regulations thereunder.

     

    7.3 Nasdaq
      Quotation.
      The
      Company agrees to continue the quotation of the Shares on The Nasdaq Capital
      Market during the term of this Agreement.

     

    7.4 Access
      to Information.
      Subject
      to applicable Law, the Company shall (and shall cause each of its Subsidiaries
      to) afford to the Buyer’s officers, employees, accountants, counsel and other
      representatives, full access, during normal business hours during the period
      prior to the Effective Time, to all its properties, books, contracts,
      commitments, personnel and records and, during such period, the Company shall
      (and shall cause each of its Subsidiaries to) furnish promptly to the Buyer
      (a) a copy of each report, schedule, registration statement and other
      document filed or received by it during such period pursuant to the requirements
      of federal or state securities Laws, (b) the internal or external reports
      prepared by it or its Subsidiaries in the Ordinary Course of Business that
      are
      reasonably required by the Buyer promptly after such reports are made available
      to the Company’s personnel, and (c) all other information concerning its
      business, properties, assets and personnel as the Buyer may reasonably request.
      The Buyer will hold any such information which is nonpublic in confidence in
      accordance with the Confidentiality Agreement. No information or knowledge
      obtained in any investigation pursuant to this Section or otherwise shall affect
      or be deemed to modify any representation or warranty contained in this
      Agreement or the conditions to the obligations of the parties to consummate
      the
      Merger.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    7.5 Shareholders
      Meeting.
      As soon
      as reasonably practicable following the date of this Agreement, the Company,
      acting through the Company Board, and in accordance with applicable Law, shall
      (i) duly call, give notice of, convene and hold the Shareholders Meeting and
      (ii) (A) include in the Proxy Statement the recommendation of the Company Board
      that the terms of this Agreement are fair to and in the best interest of the
      shareholders of the Company, declaring this Agreement advisable and that the
      shareholders of the Company vote in favor of the adoption of this Agreement
      (the
“Company Board Recommendation”) and (B) use its reasonable best efforts to
      obtain the necessary approval of the transactions contemplated by this Agreement
      by the shareholders of the Company; provided, that the Company Board may fail
      to
      make or may withdraw, modify or change in a manner adverse to the Buyer all
      or
      any portion of the Company Board Recommendation and/or may fail to use such
      efforts if it shall have determined in good faith, after consultation with
      outside counsel to the Company, that such action is necessary in order for
      the
      Company Board to comply with its fiduciary duties under applicable
      Law. 

     

    7.6 Cooperation;
      Further Action.

     

    (a) Subject
      to the terms hereof, including Section 7.6(b),
      the
      Company and the Buyer shall each use its reasonable best efforts (subject to,
      and in accordance with applicable Laws) to (i) take, or cause to be taken,
      all
      actions, and do, or cause to be done, and to assist and cooperate with the
      other
      parties in doing, all things necessary, proper or advisable to consummate and
      make effective the transactions contemplated hereby as promptly as practicable,
      (ii) as promptly as practicable, obtain from any Governmental Entity or any
      other third party any consents, licenses, permits, waivers, approvals,
      authorizations, actions or non-actions, or orders required to be obtained or
      made by the Company or the Buyer or any of their Subsidiaries in connection
      with
      the authorization, execution and delivery of this Agreement and the consummation
      of the transactions contemplated hereby, (iii) as promptly as practicable,
      make
      all necessary filings, and thereafter make any other required submissions,
      with
      respect to this Agreement and the Merger required under (A) the Securities
      Act
      and the Exchange Act, and any other applicable federal or state securities
      Laws,
      (B) the HSR Act and any other Antitrust Laws and any related governmental
      request thereunder, and (C) any other applicable Law, (iv) defend any
      lawsuits or other legal proceedings, whether judicial or administrative,
      challenging this Agreement or the consummation of the transactions contemplated
      hereby, (v) publicly support this Agreement and the Merger and (vi) execute
      or
      deliver any additional instruments necessary to consummate the transactions
      contemplated by, and to fully carry out the purposes of, this Agreement. The
      Company and the Buyer shall consult and cooperate with each other in connection
      with obtaining such consents, licenses, permits, waivers, approvals,
      authorizations, or orders, including, without limitation, keeping the other
      apprised of the status of matters relating to the completion of the transactions
      contemplated hereby and providing copies of written notices or other
      communications received by such party or any of its respective Subsidiaries
      with
      respect to the transactions contemplated hereby and, subject to applicable
      Laws
      relating to the sharing of information, providing copies in advance of any
      proposed filing to the non-filing party and its advisors prior to filing and,
      if
      requested, accepting all reasonable additions, deletions or changes suggested
      in
      connection therewith. The Company and the Buyer shall use their respective
      reasonable best efforts to furnish to each other all information required for
      any application or other filing to be made pursuant to the rules and regulations
      of any applicable Law (including all information required to be included in
      the
      Proxy Statement) in connection with the transactions contemplated by this
      Agreement. For the avoidance of doubt, the Buyer and the Company agree that
      nothing contained in this Section 7.6(a)
      shall
      modify or affect their respective rights and responsibilities under Section
      7.6(b).
      The
      Company shall not permit any of its officers or any other representatives or
      agents to participate in any meeting or proceeding with any Governmental Entity
      in respect of any filings, investigation or other inquiry in connection with
      the
      transactions contemplated by this Agreement unless it consults with the Buyer
      in
      advance and, to the extent permitted by such Governmental Entity, gives the
      Buyer and its outside counsel the opportunity to attend and participate at
      such
      meeting or proceeding.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) Subject
      to the terms hereof, the Buyer and the Company agree, and shall cause each
      of
      their respective Subsidiaries, to cooperate and to use their respective
      reasonable efforts to obtain any government clearances or approvals required
      for
      Closing under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
      amended, the Federal Trade Commission Act, as amended, and any other federal,
      state or foreign Law or, regulation or decree designed to prohibit, restrict
      or
      regulate actions for the purpose or effect of monopolization or restraint of
      trade (collectively “Antitrust Laws”), to respond as promptly as practicable to
      any government requests for information under any Antitrust Law, and to contest
      and resist any action, including any legislative, administrative or judicial
      action, and to have vacated, lifted, reversed or overturned any decree,
      judgment, injunction or other order (whether temporary, preliminary or
      permanent) (an “Antitrust Order”) that restricts, prevents or prohibits the
      consummation of the Merger or any other transactions contemplated by this
      Agreement under any Antitrust Law. The Buyer shall be entitled to direct any
      proceedings or negotiations with any Governmental Entity relating to any of
      the
      foregoing, provided that it shall afford the Company a reasonable opportunity
      to
      participate therein. Notwithstanding anything in this Agreement to the contrary,
      neither the Buyer nor any of its Affiliates shall be under any obligation to
      (i)
      make proposals, execute or carry out agreements or submit to orders providing
      for the sale or other disposition or separate holding (through the establishment
      of a trust or otherwise) of any assets or categories of assets of the Buyer
      or
      any of its Affiliates or the Company or any of its Affiliates or the separate
      holding of any Shares (or shares of stock of the Surviving Corporation) or
      imposing or seeking to impose any material limitation on the ability of the
      Buyer or any of its Affiliates to conduct their business or own such assets
      or
      to acquire, hold or exercise full rights of ownership of the Shares (or shares
      of stock of the Surviving Corporation) or (ii) take any action under this
      Section if the United States Department of Justice or the United States
      Federal Trade Commission authorizes its staff to seek a preliminary injunction
      or restraining order to enjoin consummation of the Merger, and none of the
      Company or any of its Affiliates shall agree to any action set forth in the
      foregoing clause (i) without the prior written consent of the
      Buyer.

     

    (c) Each
      of
      the Company and the Buyer shall give (or shall cause their respective
      Subsidiaries to give) any notices to third parties, and use, and cause their
      respective Subsidiaries to use, their reasonable best efforts to obtain any
      third party consents related to or required in connection with the Merger that
      are (A) necessary to consummate the transactions contemplated hereby, (B)
      disclosed or required to be disclosed in the Company Disclosure Schedule or
      (C)
      required to prevent the occurrence of an event that has had or may have a
      Company Material Adverse Effect or a Buyer Material Adverse Effect prior to
      or
      after the Effective Time.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    7.7 Public
      Disclosure.
      Except
      as may be required by Law or stock market regulations, (i) the press release
      announcing the execution of this Agreement shall be issued only in such form
      as
      shall be mutually agreed upon by the Company and the Buyer and (ii) the Buyer
      and the Company shall consult with and obtain the consent of the other party
      before issuing any other press release or otherwise making any public statement
      with respect to the Merger or this Agreement. 

     

    7.8 Company
      Stock Plans.

     

    (a) Prior
      to
      the Effective Time, the Company Board (or, if appropriate, any committee
      administering the Company Stock Plans) shall adopt such resolutions or take
      such
      other actions as are required to effect the transactions contemplated by Section
      3.1(d)
      in
      respect of all outstanding Company Stock Options, and thereafter the Company
      Board (or any such committee) shall adopt any such additional resolutions and
      take such additional actions as are required in furtherance of the
      foregoing.

     

    (b) Payments
      in Respect of Company Stock Options.
      Each
      Company Stock Option cancelled pursuant to Section 3.1(d)
      shall,
      upon cancellation, be converted into the right to receive an amount in cash
      equal to the product of (i) the number of Shares subject to such Company Stock
      Option, whether or not then exercisable, and (ii) the excess, if any, of the
      Merger Consideration over the exercise price per share subject or related to
      such Company Stock Option (the “Option Consideration”).

     

    (c) Time
      of Payment.
      The
      cash amount described in paragraph (b)
      of this
      Section 7.8
      shall be
      paid as promptly as is practicable after the Effective Time.

     

    (d) Withholding.
      All
      amounts payable pursuant to Section 3.1(d)
      and
      Section 7.8(b)
      and
(c)
      shall be
      subject to any required withholding of taxes and shall be paid without interest.
      Payment shall, at the Buyer’s request, be withheld in respect of any Company
      Stock Option until the buyer has received documentation that evidences such
      payment is in full satisfaction of all rights under such Company Stock
      Option.

     

    7.9 Shareholder
      Litigation.
      Until
      the earlier of the termination of this Agreement in accordance with its terms
      or
      the Effective Time, the Company shall give the Buyer the opportunity to
      participate in the defense or settlement of any shareholder litigation against
      the Company or the Company Board relating to this Agreement or any of the
      transactions contemplated by this Agreement, and shall not settle any such
      litigation without the Buyer’s prior written consent, which will not be
      unreasonably withheld or delayed.

     

    7.10 Notification
      of Certain Matters.
      The
      Buyer shall give prompt notice to the Company, and the Company shall give prompt
      notice to the Buyer, of (a) the occurrence, or failure to occur, of any event,
      which occurrence or failure to occur could be reasonably likely to cause (i)
      (x)
      any representation or warranty of such party contained in this Agreement that
      is
      qualified as to materiality to be untrue or inaccurate in any respect or (y)
      any
      other representation or warranty of such party contained in this Agreement
      to be
      untrue or inaccurate in any material respect, in each case at any time from
      and
      after the date of this Agreement until the Effective Time, (ii) any failure
      of
      the Buyer and the Buyer Subsidiary or the Company, as the case may be, or of
      any
      officer, director, employee or agent thereof, to comply with or satisfy any
      covenant, condition or agreement to be complied with or satisfied by it under
      this Agreement or (iii) any actions, suits, claims, investigations or
      proceedings commenced or threatened in writing against, relating to or involving
      such party or any of its Subsidiaries that relate to the consummation of the
      Merger, or (b) any notice or other communication from any third party alleging
      that the consent of such third party is or may be required in connection with
      the transactions contemplated by this Agreement. Notwithstanding the above,
      the
      delivery of any notice pursuant to this Section will not limit or otherwise
      affect the remedies available hereunder to the party receiving such notice
      or
      the conditions to such party’s obligation to consummate the Merger.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    7.11 Directors’
      and Officers’ Indemnification and Insurance.

     

    (a) Without
      limiting any additional rights that any employee, officer or director may have
      under any employment agreement or Benefit Plan or under the Company’s
      certificate of incorporation or bylaws, after the Effective Time, the Buyer
      shall, and shall cause the Surviving Corporation to, indemnify and hold harmless
      each present (as of the Effective Time) and former officer or director of the
      Company and its Subsidiaries (the “Indemnified Directors and Officers”), against
      all Actions, losses, liabilities, damages, judgments, inquiries, fines and
      reasonable fees, costs and expenses, including, attorneys’ fees and
      disbursements (collectively, “Costs”), incurred in connection with any Action,
      whether civil, criminal, administrative or investigative, arising out of actions
      taken by them in their capacity as officers or directors at or prior to the
      Effective Time (including this Agreement and the transactions and actions
      contemplated hereby), or taken by them at the request of the Company or any
      of
      its Subsidiaries, whether asserted or claimed prior to, at or after the
      Effective Time, to the fullest extent permitted under applicable Law for a
      period of six years from the Effective Time. Each Indemnified Director and
      Officer will be entitled to advancement of expenses incurred in the defense
      of
      any Action from the Surviving Corporation within ten Business Days of receipt
      by
      the Surviving Corporation from the Indemnified Director or Officer of a request
      therefor; provided
      that
      any
      Person to whom expenses are advanced provides an undertaking, if and only to
      the
      extent required by the NJBCA, to repay such advances if it is ultimately
      determined that such person is not entitled to indemnification. The Surviving
      Corporation shall not settle, compromise or consent to the entry of any judgment
      in any proceeding or threatened Action (and in which indemnification could
      be
      sought by such Indemnified Director or Officer hereunder), unless such
      settlement, compromise or consent includes an unconditional release of such
      Indemnified Director or Officer from all liability arising out of such Action
      or
      such Indemnified Director or Officer otherwise consents.

     

    (b) The
      certificate of incorporation and by-laws of the Surviving Corporation shall
      contain provisions no less favorable with respect to indemnification,
      advancement of expenses and exculpation of former or present directors and
      officers than are presently set forth in the Company’s certificate of
      incorporation and by-laws, which provisions shall not be amended, repealed
      or
      otherwise modified for a period of six years from the Effective Time in any
      manner that would adversely affect the rights thereunder of any such
      individuals.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (c) Prior
      to
      the Effective Time, the Company shall endeavor to (and if it is unable to,
      the
      Buyer shall cause the Surviving Corporation to after the Effective Time) obtain
      and fully pay in one payment (up to a maximum cost of 260% of the current annual
      premium paid by the Company for its existing coverage in the aggregate) for
      “tail” insurance policies (providing only for the Side A coverage for
      Indemnified Directors and Officers where the existing policies also include
      coverage for the Company) with a claims period of at least six years from the
      Effective Time from an insurance carrier with the same or better credit rating
      as the Company’s current insurance carrier with respect to directors’ and
      officers’ liability insurance in an amount and scope at least as favorable as
      the Company’s existing policies with respect to matters existing or occurring at
      or prior to the Effective Time. The Buyer shall, and shall cause the Surviving
      Corporation to, honor and perform under all indemnification agreements entered
      into by the Company or any Company Subsidiary set forth in Section 7.11 of
      the
      Company Disclosure Schedule.

     

    (d) Notwithstanding
      anything herein t o the contrary, if any Action (whether arising before, at
      or
      after the Closing Date) is made against any Indemnified Director or Officer
      or
      any other party covered by directors’ and officers’ liability insurance, on or
      prior to the sixth anniversary of the Effective Time, the provisions of this
      Section 7.11
      shall
      continue in effect until the final disposition of such Action.

     

    (e) The
      covenants contained in this Section 7.11
      are
      intended to be for the benefit of, and shall be enforceable by, each of the
      Indemnified Directors and Officers and their respective heirs and legal
      representatives. The indemnification provided for herein shall not be deemed
      exclusive of any other rights to which an Indemnified Director or Officer is
      entitled, whether pursuant to Law, contract or otherwise.

     

    7.12 Loans
      to Company Employees, Officers and Directors.
      Prior
      to the Effective Time, all loans by the Company or any of its Subsidiaries
      to
      any of their employees, officers or directors shall have been repaid in full
      by
      the applicable borrowers.

     

    7.13 Takeover
      Statutes and Laws.
      If any
      anti-takeover Law (including, without limitation, a “fair price,” “moratorium,”
or “control share acquisition” statute) becomes applicable to the Merger, or any
      of the other transactions contemplated by hereby or thereby, the Company and
      the
      Company Board shall grant such approvals and take such actions as are necessary
      so that such transactions may be consummated as promptly as practicable on
      the
      terms contemplated by this Agreement or by the Merger and otherwise act to
      eliminate or minimize the effects of such Law on such transactions.

     

    7.14 Standstill
      Agreements; Confidentiality Agreements.
      During
      the period from the date of this Agreement through the Effective Time, the
      Company shall not terminate, amend, modify or waive any provision of any
      confidentiality or standstill agreement to which it or any of its respective
      Subsidiaries is a party and which relates to the confidentiality or information
      regarding the Company or its Subsidiaries or which relate to securities of
      the
      Company, other than client and customer agreements entered into by the Company
      or its Subsidiaries in the ordinary course of business consistent with past
      practice. During such period, the Company shall use reasonable best efforts
      to
      enforce, to the fullest extent permitted under applicable Law, the provisions
      of
      any such agreement, including by using reasonable best efforts to obtain
      injunctions to prevent any breaches of such agreements and to enforce
      specifically the terms and provisions thereof in any court having
      jurisdiction.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    ARTICLE
      VIII

     

    CONDITIONS
      TO MERGER

     

    8.1 Conditions
      to Each Party’s Obligation To Effect the Merger.
      The
      respective obligations of each party to this Agreement to effect the Merger
      shall be subject to the satisfaction on or prior to the Closing Date of the
      following conditions:

     

    (a) Shareholder
      Approval.
      The
      Company Voting Proposal shall have been duly approved and adopted at the Company
      Shareholders Meeting, at which a quorum is present, by the requisite vote of
      the
      shareholders of the Company under applicable Law and the Company’s certificate
      of incorporation and by-laws.

     

    (b) HSR
      Act and Similar Clearances.
      The
      waiting period applicable to the consummation of the Merger under the HSR Act
      and any other applicable Antitrust Laws shall have expired or been
      terminated.

     

    (c) Governmental
      Approvals.
      Other
      than the filing of the Certificate of Merger, all authorizations, consents,
      orders or approvals of, or declarations, notices or filings with, or expirations
      of waiting periods imposed by, any Governmental Entity in connection with the
      Merger and the consummation of the other transactions contemplated by this
      Agreement, the failure of which to file, obtain or occur would proscribe or
      prohibit the consummation of the transactions contemplated hereby (all such
      authorizations, consents, orders or approvals of, or declarations, notices
      or
      filings with, or expirations of waiting periods imposed by, collectively, the
      “Requisite Regulatory Approvals”) shall have been filed, obtained or
      occurred.

     

    (d) Proxy
      Statement.
      No stop
      order suspending, or similar proceeding relating to, the Proxy Statement shall
      have been initiated or threatened in writing by the SEC or its
      staff.

     

    (e) No
      Injunctions.
      No
      Governmental Entity of competent jurisdiction shall have enacted, issued,
      promulgated, enforced or entered any order, executive order, stay, decree,
      judgment or injunction (preliminary or permanent) or statute, rule or regulation
      which is in effect and which has the effect of making the Merger illegal or
      otherwise prohibiting consummation of the Merger or the other transactions
      contemplated by this Agreement.

     

    8.2 Additional
      Conditions to Obligations of the Buyer and the Buyer Subsidiary.
      The
      obligations of the Buyer and the Buyer Subsidiary to effect the Merger shall
      be
      subject to the satisfaction on or prior to the Closing Date of each of the
      following additional conditions, any of which may be waived, in writing,
      exclusively by the Buyer and the Buyer Subsidiary:

     

    (a) Representations
      and Warranties.
      (i)
      The
      representations and warranties of the Company set forth in Sections 4.2(c),
      (e)
      and
(f),
      4.3,
      4.23
      and
4.24
      shall be
      true and correct in all material respects as of the Closing Date as though
      made
      on and as of such date (unless any such representation or warranty is made
      only
      as of a specific date, in which event such representation and warranty shall
      be
      true and correct as of such specified date), (ii) the representations and
      warranties of the Company set forth in Section 4.2(a)
      shall be
      true and correct as of the Closing Date as though made on and as of such date
      (unless any such representation or warranty is made only as of a specific date,
      in which event such representation and warranty shall be true and correct as
      of
      such specified date), except in the case of this clause (ii) where the failure
      of any such representations and warranties to be so true and correct, in the
      aggregate, has not resulted in and would not reasonably be expected to result
      in, liability to the Company or to the Surviving Corporation with respect to
      not
      more than 24,000 additional Shares and (iii) the other representations and
      warranties of the Company contained in this Agreement (disregarding any Company
      Material Adverse Effect, materiality or similar qualifiers therein) shall be
      true and correct as of the Closing Date as though made on and as of such date
      (unless any such representation or warranty is made only as of a specific date,
      in which event such representation and warranty shall be true and correct as
      of
      such specified date), except in the case of this clause (iii) where the failure
      of any such representations and warranties to be so true and correct, in the
      aggregate, has not had and could not reasonably be expected to have a Company
      Material Adverse Effect; and the Buyer shall have received a certificate signed
      on behalf of the Company by the chief executive officer and the chief financial
      officer of the Company to such effect.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (b) Performance
      of Obligations of the Company.
      The
      Company shall have performed in all material respects all obligations required
      to be performed by it under this Agreement on or prior to the Closing Date;
      and
      the Buyer shall have received a certificate signed on behalf of the Company
      by
      the chief executive officer and the chief financial officer of the Company
      to
      such effect.

     

    (c) Governmental
      Approvals.
      Other
      than the filing of the Certificate of Merger, all authorizations, consents,
      orders or approvals of, or declarations, notices or filings with, or expirations
      of waiting periods imposed by, any Governmental Entity required on the part
      of
      the Buyer or any of its Subsidiaries in connection with the Merger and the
      consummation of the other transactions contemplated by this Agreement, the
      failure of which to file, obtain or occur, individually or in the aggregate,
      could reasonably be expected to have, directly or indirectly, a Buyer Material
      Adverse Effect or a Company Material Adverse Effect, shall have been filed,
      been
      obtained or occurred on terms and conditions which, individually or in the
      aggregate, could not reasonably be expected to have a Buyer Material Adverse
      Effect or a Company Material Adverse Effect.

     

    (d) Third
      Party Consents.
      The
      Company shall have obtained any required consent or approval of any third party
      (other than a Governmental Entity) (i) listed or described on Section
      8.2(d) of the Company Disclosure Schedule, or (ii) the failure of which to
      obtain, individually or in the aggregate, could reasonably be expected to have
      a
      Company Material Adverse Effect.

     

    (e) No
      Restraints.
      There
      shall not be instituted or pending any action or proceeding by any Governmental
      Entity (i) seeking to restrain, prohibit or otherwise interfere with the
      ownership or operation by the Buyer or any of its Subsidiaries of all or any
      portion of the business of the Company or any of its Subsidiaries or of the
      Buyer or any of its Subsidiaries or to compel the Buyer or any of its
      Subsidiaries to dispose of or hold separate all or any portion of the business
      or assets of the Company or any of its Subsidiaries or of the Buyer or any
      of
      its Subsidiaries, (ii) seeking to impose or confirm limitations on the ability
      of the Buyer or any of its Subsidiaries effectively to exercise full rights
      of
      ownership of the Shares (or shares of stock of the Surviving Corporation)
      including the right to vote any such shares on any matters properly presented
      to
      shareholders, (iii) seeking to require divestiture by the Buyer or any of its
      Subsidiaries of any such shares or (iv) seeking to obtain from the Company,
      the
      Buyer or the Buyer Subsidiary any material damages.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (f) Absence
      of Company Material Adverse Effect.
      No
      Company Material Adverse Effect shall have occurred, and there shall exist
      no
      change, event, circumstance, development or effect that could, individually
      or
      in the aggregate, reasonably be expected to have, a Company Material Adverse
      Effect.

     

    (g) Resignations.
      The
      Buyer shall have received copies of the resignations, effective as of the
      Effective Time, of each director of the Company and its
      Subsidiaries.

     

    8.3 Additional
      Conditions to Obligations of the Company.
      The
      obligation of the Company to effect the Merger shall be subject to the
      satisfaction on or prior to the Closing Date of each of the following additional
      conditions, any of which may be waived, in writing, exclusively by the
      Company:

     

    (a) Representations
      and Warranties.
      The
      representations and warranties of the Buyer and the Buyer Subsidiary set forth
      in this Agreement and in any certificate or other writing delivered by the
      Buyer
      or the Buyer Subsidiary pursuant hereto shall be true and correct (i) as of
      the
      date of this Agreement (except in the case of this clause (i), to the extent
      such representations and warranties are specifically made as of a particular
      date, in which case such representations and warranties shall be true and
      correct as of such date) and (ii) as of the Closing Date as though made on
      and
      as of the Closing Date (except in the case of this clause (ii), (x) to the
      extent such representations and warranties are specifically made as of a
      particular date, in which case such representations and warranties shall be
      true
      and correct as of such date, and (y) where the failure to be true and correct
      (without regard to any materiality, Buyer Material Adverse Effect or knowledge
      qualifications contained therein), individually or in the aggregate, has not
      had, and could not reasonably be expected to have, a Buyer Material Adverse
      Effect); and the Company shall have received a certificate signed on behalf
      of
      the Buyer by the chief executive officer or the chief financial officer of
      the
      Buyer to such effect.

     

    (b) Performance
      of Obligations of the Buyer and the Buyer Subsidiary.
      The
      Buyer and the Buyer Subsidiary shall have performed in all material respects
      all
      obligations required to be performed by them under this Agreement on or prior
      to
      the Closing Date; and the Company shall have received a certificate signed
      on
      behalf of the Buyer by the chief executive officer or the chief financial
      officer of the Buyer to such effect.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    ARTICLE
      IX

     

    TERMINATION
      AND AMENDMENT

     

    9.1 Termination.
      This
      Agreement may be terminated at any time prior to the Effective Time (with
      respect to Sections 9.1(b)
      through
9.1(f),
      by
      written notice by the terminating party to the other party, specifying the
      provision of this Agreement pursuant to which such termination is effected),
      whether before or, subject to the terms hereof, after adoption of this Agreement
      by the shareholders of the Company or the sole shareholder of the Buyer
      Subsidiary:

     

    (a) by
      mutual
      written consent of the Buyer, the Buyer Subsidiary and the Company;
      or

     

    (b) by
      either
      the Buyer or the Company if the Merger shall not have been consummated by April
      30, 2007 (the “Outside Date”), provided
      that
      the
      right to terminate this Agreement under this Section 9.1(b)
      shall
      not be available to any party whose failure to fulfill any obligation under
      this
      Agreement has been a principal cause of or resulted in the failure of the Merger
      to occur on or before the Outside Date) and, provided
      further
      that, in the event that the conditions set forth in Sections 8.1(b),
      (c)
      or
8.1(e)
      above
      shall not have been satisfied by the Outside Date, either the Buyer or the
      Company may unilaterally extend the Outside Date until June 15, 2007 upon
      written notice to the other by the Outside Date, in which case the Outside
      Date
      shall be deemed for all purposes to be June 15, 2007; or

     

    (c) by
      either
      the Buyer or the Company if (i) a Governmental Entity of competent jurisdiction
      shall have issued a nonappealable final order, decree or ruling or taken any
      other nonappealable final action, in each case having any of the effects set
      forth in Section 8.1(e)
      or (ii)
      a Governmental Entity that must grant a Requisite Regulatory Approval has denied
      the applicable Requisite Regulatory Approval and such denial has become final
      and nonappealable, provided
      that
      in the
      case of clause (i) or (ii) the party seeking to terminate this Agreement has
      complied with its obligations in Section 7.6;
      or

     

    (d) by
      either
      the Buyer or the Company if at the Company Shareholders Meeting (including
      any
      adjournment or postponement thereof permitted by this Agreement) at which a
      vote
      on the Company Voting Proposal is taken, the requisite vote of the shareholders
      of the Company in favor of the Company Voting Proposal shall not have been
      obtained; or

     

    (e) by
      the
      Buyer (i) if there shall have been a material breach of any representation,
      warranty, covenant or agreement on the part of the Company contained in this
      Agreement such that the conditions set forth in Section 8.2(a)
      or
8.2(b)
      would
      not be satisfied and which shall not have been cured prior to the earlier of
      (A)
      10 business days following notice of such breach and (B) the Termination Date;
      provided
      that
      Buyer shall not have the right to terminate this Agreement pursuant to this
      Section 9.1(e)
      if the
      Buyer or the Buyer Subsidiary is then in material breach of any of its covenants
      or agreements contained in this Agreement, or (ii) if a Triggering Event shall
      have occurred; or

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (f) by
      the
      Company (i) if there shall have been a material breach of any representation,
      warranty, covenant or agreement on the part of the Buyer or the Buyer Subsidiary
      contained in this Agreement such that the condition set forth in Section
8.3(a)
      or
8.3(b)
      would
      not be satisfied and which shall not have been cured prior to the earlier of
      (A)
      10 Business Days following notice of such breach and (B) the Outside Date;
      provided
      that
      the
      Company shall not have the right to terminate this Agreement pursuant to this
      Section 9.1(f)
      if the
      Company is then in material breach of any of its covenants or agreements
      contained in this Agreement, or (ii) prior to the approval of the transactions
      contemplated by this Agreement by the shareholders of the Company in accordance
      with this Agreement, pursuant to, and subject to the terms and conditions of,
      Section 7.1(b)(ii).

     

    9.2 Effect
      of Termination.
      In the
      event of termination of this Agreement as provided in Section 9.1,
      this
      Agreement shall immediately become void and there shall be no liability or
      obligation on the part of the Buyer, the Company, the Buyer Subsidiary or their
      respective officers, directors, shareholders or Affiliates; provided that (i)
      any such termination shall not relieve any party from liability for any willful
      breach of this Agreement (which includes, without limitation, the making of
      any
      representation or warranty by a party in this Agreement that the party knew
      was
      not true and accurate when made) and (ii) the provisions of Sections
4.23,
      6.2,
      9.3,
      this
      Section 9.2,
      Article
      X and the Confidentiality Agreement shall remain in full force and effect and
      survive any termination of this Agreement.

     

    9.3 Fees
      and Expenses.

     

    (a) Except
      as
      set forth in this Section 9.3,
      all
      fees and expenses incurred in connection with this Agreement and the
      transactions contemplated hereby shall be paid by the party incurring such
      fees
      and expenses, whether or not the Merger is consummated; provided, however,
      that
      the Company and the Buyer shall share equally all fees paid under the HSR Act
      and the applicable Antitrust Laws of other jurisdictions which impose pre-merger
      notification requirements upon parties to a merger or acquisition transaction
      that are similar to the HSR Act. 

     

    (b) If
      this
      Agreement is terminated pursuant to Section 9.1(d),
      then
      the Company shall pay the Buyer an amount equal to the sum of the Buyer’s
      Expenses (not to exceed $750,000 in the aggregate) for which the Buyer has
      not
      theretofore been reimbursed by the Company. Such payment shall be made not
      later
      than two Business Days after delivery to the Company of notice of demand for
      payment and a documented itemization setting forth in reasonable detail all
      Expenses of the Buyer (which itemization may be supplemented and updated from
      time to time by the Buyer until the ninetieth day after the Buyer delivers
      such
      notice of demand for payment). For purposes of this Agreement, “Expenses” shall
      mean all reasonable out-of-pocket expenses (including, without limitation,
      all
      fees and expenses of counsel, accountants, investment bankers, experts and
      consultants to a party hereto and its Affiliates) incurred by a party or on
      its
      behalf in connection with or related to the authorization, preparation,
      negotiation, execution and performance of this Agreement and the transactions
      contemplated hereby.

     

    (c) In
      the
      event that this Agreement is terminated by the Buyer pursuant to clause (ii)
      of
      Section 9.1(e)
      or by
      the Company pursuant to clause (ii) of Section 9.1(f),
      then
      the Company shall pay to the Buyer $1,941,400 less any Expenses actually paid
      to
      the Buyer pursuant to Section 9.3 (b) (the “Termination Fee”), at or prior to
      the time of, and as a pre-condition to the effectiveness of, termination in
      the
      case of a termination pursuant to Section 9.1(f)
      or as
      promptly as practicable (but in any event within two Business Days) in the
      case
      of a termination pursuant to Section 9.1(e),
      payable
      by wire transfer of same day funds.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    (d) If:
      (i)
      this Agreement is terminated by the Buyer or the Company pursuant to Section
      9.1(d); (ii) at or prior to the time of the termination of this Agreement an
      Acquisition Proposal shall have been disclosed, announced, commenced, submitted
      or made; and (iii) on or prior to the date 12 months after the date of
      termination of this Agreement, either: (A) an Acquisition Proposal is
      consummated; or (B) a definitive agreement with respect to an Acquisition
      Proposal is entered into by the Company (or any other Acquisition Proposal
      among
      or involving the parties to such definitive agreement or any of such parties’
controlled or controlling Affiliates) is consummated, then, prior to the
      consummation of such Acquisition Proposal, the Company shall pay to the Buyer
      the Termination Fee as promptly as practicable (but in any event within two
      Business Days of any such event), provided that any fees paid by the Buyer
      under
      Section 9.3(b) shall be credited against the fee to be paid under this
      Section 9.3(d).

     

    (e) The
      parties acknowledge that the agreements contained in this Section 9.3
      are an
      integral part of the transactions contemplated by this Agreement, and that,
      without these agreements, the parties would not enter into this Agreement.
      If
      the Company fails to promptly pay any expense reimbursement or fee due
      hereunder, the Company shall pay the costs and expenses (including legal fees
      and expenses) incurred by the Buyer in connection with the filing and
      prosecution of any Action, and enforcement of its rights to collect the amount
      finally determined under such Action to be due and owing, together with interest
      thereon at the publicly announced prime rate of Bank of America, N.A. plus
      two
      percent per annum from the date such expense reimbursement or fee was required
      to be paid.

     

    ARTICLE
      X

     

    MISCELLANEOUS

     

    10.1 Amendment.
      This
      Agreement may be amended by the parties hereto, by action taken or authorized
      by
      their respective Boards of Directors, at any time before or after approval
      of
      the matters presented in connection with the Merger by the shareholders of
      the
      Company or the Buyer Subsidiary, provided,
      however,
      that,
      after any such approval, no amendment shall be made which by Law requires
      further approval by such shareholders without such further approval. This
      Agreement may not be amended except by an instrument in writing signed on behalf
      of each of the parties hereto.

     

    10.2 Extension;
      Waiver.
      At any
      time prior to the Effective Time, the parties hereto, by action taken or
      authorized by their respective boards of directors, may, to the extent legally
      allowed, (i) extend the time for the performance of any of the obligations
      or other acts of the other parties hereto, (ii) waive any inaccuracies in
      the representations and warranties contained herein or in any document delivered
      pursuant hereto and (iii) subject to the proviso in Section 10.1, waive
      compliance with any of the agreements or conditions contained herein. Any
      agreement on the part of a party hereto to any such extension or waiver shall
      be
      valid only if set forth in a written instrument signed on behalf of such party.
      Such extension or waiver shall not be deemed to apply to any time for
      performance, inaccuracy in any representation or warranty, or noncompliance
      with
      any agreement or condition, as the case may be, other than that which is
      specified in the extension or waiver. The failure of any party to this Agreement
      to assert any of its rights under this Agreement or otherwise shall not
      constitute a waiver of such rights.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

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    10.3 Non−Survival
      of Representations, Warranties and Agreements.
      None of
      the representations, warranties, covenants and agreements in this Agreement
      or
      in any instrument delivered pursuant to this Agreement, and the other agreements
      and documents contemplated to be delivered in connection herewith, including
      any
      rights arising out of any breach of such representations, warranties, covenants
      and agreements, shall survive the Effective Time, except for (i) those covenants
      and agreements contained herein that by their terms apply or are to be performed
      in whole or in part at or after the Effective Time and (ii) this Article
      X.

     

    10.4 Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be in writing and shall be deemed given and effective
      on the earliest of (i) the date of transmission, if such notice or communication
      is delivered via facsimile at the facsimile telephone number specified in this
      Section 10.4
      prior to
      5:00 p.m. (New York time) on a Business Day, (ii) the Business Day after the
      date of transmission, if such notice or communication is delivered via facsimile
      at the facsimile telephone number specified in this Agreement later than 5:00
      p.m. (New York time) on any date and earlier than 11:59 p.m. (New York time)
      on
      such date, (iii) when received, if sent by nationally recognized overnight
      courier service, or (iv) if delivered in any other manner, upon actual receipt
      by the party to whom such notice is required to be given. The address for such
      notices and communications shall be as follows:

     

    
      	
            	(a)	
              if
                to the Buyer or the Buyer Subsidiary,
                to

            

    

     

    LumaSense
      Technologies, Inc.

    3033
      Scott Blvd.

    Santa
      Clara, California 95054

    Attn: Vivek
      Joshi

    Telephone:
      (408) 235-3890

    Facsimile:
      (408) 727-1664

     

    with
      a
      copy to:

     

    Jones
      Day

    1755
      Embarcadero Road

    Palo
      Alto, CA 94303

    Attention: Daniel
      R.
      Mitz

    Sean
      M.
      McAvoy

    Telephone
      No: (650)
      739-3939

    Facsimile
      No: (650)
      739-3900

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Table
          of Contents

      

    

    
      
        Agreement
          and Plan of Merger – Page
          53

      

    

     

     

    
      	
            	(b)	
              if
                to the Company, to

            

    

     

    Mikron
      Infrared, inc.

    16
      Thornton Road

    Oakland,
      New Jersey 07436

    Attn: Gerald
      D.
      Posner

    Telephone:
      (201) 405-0900

    Facsimile:
      (201) 405-0090

     

    with
      a
      copy to:

     

    Arent
      Fox
      LLP

    1675
      Broadway

    New
      York,
      NY 10019

    Attn: Steven
      D.
      Dreyer, Esq.

    Telephone:
      (212) 484-3917

    Facsimile:
      (212) 484-3990

     

    10.5 Entire
      Agreement.
      This
      Agreement (including the Schedules and Exhibits hereto and the documents and
      instruments referred to herein that are to be delivered at the Closing)
      constitutes the entire agreement among the parties to this Agreement and
      supersedes any prior understandings, agreements or representations by or among
      the parties hereto, or any of them, written or oral, with respect to the subject
      matter hereof; provided that the Confidentiality Agreement shall remain in
      effect in accordance with its terms.

     

    10.6 No
      Third Party Beneficiaries.
      Except
      for Section 7.11,
      this
      Agreement shall be binding upon and inure solely to the benefit of the parties
      hereto and their permitted assigns and nothing herein, express or implied,
      is
      intended to or shall confer upon any other Person any legal or equitable right,
      benefit or remedy of any nature whatsoever under or by reason of this
      Agreement.

     

    10.7 Assignment.
      No
      party may assign any of its rights or delegate any of its performance
      obligations under this Agreement, in whole or in part, by operation of Law
      or
      otherwise without the prior written consent of the other parties, and any such
      assignment without such prior written consent shall be null and void, except
      that from and after the Effective time, this Agreement may be assigned (in
      whole
      but not in part) to an Affiliate of a party hereto. Any purported assignment
      of
      rights or delegation of performance obligations in violation of this Section
      10.7
      is
      void.

     

    10.8 Severability.
      Any term
      or provision of this Agreement that is invalid or unenforceable in any situation
      in any jurisdiction shall not affect the validity or enforceability of the
      remaining terms and provisions hereof or the validity or enforceability of
      the
      offending term or provision in any other situation or in any other jurisdiction.
      If the final judgment of a court of competent jurisdiction declares that any
      term or provision hereof is invalid or unenforceable, the parties hereto agree
      that the court making such determination shall have the power to limit the
      term
      or provision, to delete specific words or phrases, or to replace any invalid
      or
      unenforceable term or provision with a term or provision that is valid and
      enforceable and that comes closest to expressing the intention of the invalid
      or
      unenforceable term or provision, and this Agreement shall be enforceable as
      so
      modified. In the event such court does not exercise the power granted to it
      in
      the prior sentence, the parties hereto agree to replace such invalid or
      unenforceable term or provision with a valid and enforceable term or provision
      that will achieve, to the extent possible, the economic, business and other
      purposes of such invalid or unenforceable term.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Table
          of Contents

      

    

    
      
        Agreement
          and Plan of Merger – Page
          54

         

         

      

    

    10.9 Counterparts
      and Signature.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original but all of which together shall be considered one and the
      same agreement and shall become effective when counterparts have been signed
      by
      each of the parties hereto and delivered to the other parties, it being
      understood that all parties need not sign the same counterpart. The
      exchange of a fully executed Agreement (in counterparts or otherwise) by
      facsimile or by electronic delivery in PDF format shall be sufficient to bind
      the parties to the terms and conditions of this Agreement.

     

    10.10 Interpretation.
      When
      reference is made in this Agreement to an Article or a Section, such reference
      shall be to an Article or Section of this Agreement, unless otherwise indicated.
      The table of contents and headings contained in this Agreement are for
      convenience of reference only and shall not affect in any way the meaning or
      interpretation of this Agreement. The language used in this Agreement shall
      be
      deemed to be the language chosen by the parties hereto to express their mutual
      intent, and no rule of strict construction shall be applied against any party.
      Whenever the context may require, any pronouns used in this Agreement shall
      include the corresponding masculine, feminine or neuter forms, and the singular
      form of nouns and pronouns shall include the plural, and vice versa. Any
      reference to any federal, state, local or foreign statute or Law shall be deemed
      also to refer to all rules and regulations promulgated thereunder, unless the
      context requires otherwise. Whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
      the words “without limitation”. No summary of this Agreement prepared by any
      party shall affect the meaning or interpretation of this Agreement.

     

    10.11 Governing
      Law.
      All
      matters arising out of or relating to this Agreement and the transactions
      contemplated hereby (including without limitation its interpretation,
      construction, performance and enforcement) shall be governed by and construed
      in
      accordance with the internal Laws of the State of Delaware without giving effect
      to any choice or conflict of Law provision or rule (whether of the State of
      Delaware or any other jurisdiction) that would cause the application of Laws
      of
      any jurisdictions other than those of the State of Delaware to be
      applied.

     

    10.12 Remedies.
      Except
      as otherwise provided herein, any and all remedies herein expressly conferred
      upon a party will be deemed cumulative with and not exclusive of any other
      remedy conferred hereby, or by Law or equity upon such party, and the exercise
      by a party of any one remedy will not preclude the exercise of any other remedy.
      The parties hereto agree that irreparable damage would occur in the event that
      any of the provisions of this Agreement were not performed in accordance with
      their specific terms or were otherwise breached. It is accordingly agreed that
      the parties shall be entitled to an injunction or injunctions to prevent
      breaches of this Agreement and to enforce specifically the terms and provisions
      of this Agreement, this being in addition to any other remedy to which they
      are
      entitled at Law or in equity.

     

    10.13 Submission
      to Jurisdiction.
      Each of
      the parties to this Agreement (a) consents to submit itself to the personal
      jurisdiction of any state or federal court sitting in the State of Delaware
      in
      any action or proceeding arising out of or relating to this Agreement or any
      of
      the transactions contemplated by this Agreement, (b) agrees that all claims
      in respect of such action or proceeding may be heard and determined in any
      such
      court, (c) agrees that it shall not attempt to deny or defeat such personal
      jurisdiction by motion or other request for leave from any such court, and
      (d) agrees not to bring any action or proceeding arising out of or relating
      to this Agreement or any of the transaction contemplated by this Agreement
      in
      any other court. Each of the parties hereto waives any defense of inconvenient
      forum to the maintenance of any action or proceeding so brought and waives
      any
      bond, surety or other security that might be required of any other party with
      respect thereto. Any party hereto may make service on another party by sending
      or delivering a copy of the process to the party to be served at the address
      and
      in the manner provided for the giving of notices in Section 10.4.
      Nothing
      in this Section 10.13,
      however, shall affect the right of any party to serve legal process in any
      other
      manner permitted by Law.

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Table
          of Contents

      

    

    
      
        Agreement
          and Plan of Merger – Page
          55

         

         

      

    

    10.14 Waiver
      Of Jury Trial.
      EACH OF
      THE BUYER, THE BUYER SUBSIDIARY AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL
      RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED
      ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT
      OR
      THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE BUYER
      SUBSIDIARY OR THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
      ENFORCEMENT OF THIS AGREEMENT.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK]

    
       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Table
          of Contents

      

    

    
      
        Agreement
          and Plan of Merger – Signature
          Page

        
           

        

         

      

    

    IN
      WITNESS WHEREOF, the Buyer, the Buyer Subsidiary and the Company have caused
      this Agreement to be signed by their respective officers thereunto duly
      authorized as of the date first written above.

     

    
      	 	 	 	 
	 	 	
              LUMASENSE
                TECHNOLOGIES, INC. 

            
	 	 	 	 
	 	 	By: 	 /s/ Vivek Joshi
	
            	 	 	
              

            
	 	 	Title: 	 
	 	 	 	
              
  

    

     

    
      
        	 	 	 	 
	 	 	
                
                  RED
                    ACQUISITION CORPORATION

                

              
	 	 	 	 
	 	 	By: 	 /s/ Vivek Joshi
	
              	 	 	
                

              
	 	 	Title: 	 
	 	 	 	
                
  

      

       

      
        
          	 	 	 	 
	 	 	
                  
                    
                      MIKRON
                        INFRARED, INC.

                    

                  

                
	 	 	 	 
	 	 	By: 	 /s/ Lawrence C. Karlson
	
                	 	 	
                  

                
	 	 	Title: 	 Chairman
	 	 	 	
                  
  

        

         

      

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        Table
          of Contents

      

    

    
       

      EXHIBIT
        A

       

      
        New
          Jersey Division of Revenue

         

        Restated
          Certificate of Incorporation of

         

        Mikron
          Infrared, Inc.

        

        To:
          The
          Treasurer, State of New Jersey

         

        Pursuant
          to the provisions of Section 14A:9-5 of the New Jersey Business Corporation
          Act
          (N.J.S.A. Sections 14A:1-1 et seq)
          (the
“Act”), the undersigned corporation hereby executes the following Restated
          Certificate of Incorporation:

         

        1. The
          name
          of the corporation is Mikron Infrared, Inc. (the “Corporation”).

         

        2. The
          purposes for which the Corporation is formed are to engage in any activity
          within the purposes for which corporations may be organized under the Act.
          

         

        3. The
          aggregate number of shares that the Corporation is authorized to issue
          is 1,000
          common shares of the par value of one-third cent each.

         

        4. The
          address of the corporation’s current registered office is 830 Bear Tavern Road,
          West Trenton, New Jersey 08628, and the name of its current registered
          agent at
          such address is Corporation Service Company.

         

        5. The
          number of directors constituting the current board of directors is three.
          The
          names and addresses of the directors are as follows:

         

        Vivek
          Joshi, 3033 Scott Blvd., Santa Clara, California 95054,

        William
          Tinsley, 3033 Scott Blvd., Santa Clara, California 95054 and

        Nadim
          Maluf, 3033 Scott Blvd., Santa Clara, California 95054.

        

        6. The
          duration of the Corporation shall be perpetual.

         

        IN
          WITNESS WHEREOF,
          the
          undersigned Corporation has executed this Restated Certificate of Incorporation
          on
          [                   
] [    ], 2007.

         

        
          	 	 	 
	 	
                  Mikron
                    Infrared, Inc.

                
	 
 	 
 	 
 
	 	By:  	 
	 	
                  
                                                          
                  , PresidentExhibit
        4.1

    

     

    CERTIFICATE
      OF DESIGNATION OF THE RELATIVE RIGHTS AND PREFERENCES

    OF
      THE

    SERIES
      A CONVERTIBLE PREFERRED STOCK

    OF

    UNITED
      NATIONAL FILM CORPORATION

    

    The
      undersigned, the Chief Executive Officer of United National Film Corporation,
      a
      Nevada corporation (the "Company"), in accordance with the provisions of the
      Nevada Revised Statutes, does hereby certify that, pursuant to the authority
      conferred upon the Board of Directors by the Articles of Incorporation of the
      Company, the following resolution creating a series of preferred stock,
      designated as Series A Convertible Preferred Stock, was duly adopted on February
      7, 2007, as follows:

    

    RESOLVED,
      that pursuant to the authority expressly granted to and vested in the Board
      of
      Directors of the Company by provisions of the Articles of Incorporation of
      the
      Company (the "Articles of Incorporation"), there hereby is created out of the
      shares of the Company’s preferred stock, par value $0.0001 per share, of the
      Company authorized in Article IV of the Articles of Incorporation (the
      "Preferred Stock"), a series of Preferred Stock of the Company, to be named
      "Series A Convertible Preferred Stock," consisting of Nine Million Five Hundred
      Thousand (9,500,000) shares, which series shall have the following designations,
      powers, preferences and relative and other special rights and the following
      qualifications, limitations and restrictions:

    

    1.  Designation
      and Rank.
      The
      designation of such series of the Preferred Stock shall be the Series A
      Convertible Preferred Stock, par value $0.0001 per share (the "Series A
      Preferred Stock"). The maximum number of shares of Series A Preferred Stock
      shall be Nine Million Five Hundred Thousand (9,500,000) shares. The Series
      A
      Preferred Stock shall rank senior to the Company’s common stock, par value
      $0.0001 per share (the "Common Stock"), and to all other classes and series
      of
      equity securities of the Company which by their terms do not rank senior to
      the
      Series A Preferred Stock ("Junior Stock"). The Series A Preferred Stock shall
      be
      subordinate to and rank junior to all indebtedness of the Company now or
      hereafter outstanding.

    

    2.  Dividends.

    

    (a)  Payment
      of Dividends.
      Commencing on the date of the initial issuance (the “Issuance Date”) of the
      Series A Preferred Stock, the holders of record of shares of Series A Preferred
      Stock shall be entitled to receive, out of any assets at the time legally
      available therefor and as declared by the Board of Directors, dividends at
      the
      rate of five percent (5%)
      of
      the stated Liquidation Preference Amount (as defined in Section 4 hereof) per
      share per annum (the "Dividend Payment"), and no more, payable quarterly (unless
      converted by the holder pursuant to Section 5(a) hereof prior to the date the
      applicable Dividend Payment is due) commencing on March 31, 2007 and the first
      business day of each subsequent three-month period at the option of the Company
      in cash or registered shares of Common Stock. Upon the payment of any dividend
      on the Series A Preferred Stock in registered shares of Common Stock, the number
      of shares of Common Stock to be issued to the holder shall be an amount equal
      to
      the quotient of (i) the Dividend Payment divided by (ii) eighty percent (80%)
      of
      the average of the VWAP (as defined below) for the five (5) trading days
      immediately preceding the date the Dividend Payment is due; provided,
      however,
      if
      there is no trading volume in the Common Stock at any time during such five
      (5)
      trading day period, the number of shares of Common Stock to be issued to the
      holder shall be an amount equal to the quotient of (i) the Dividend Payment
      divided by (ii) eighty percent (80%) of the average of the Closing Bid Price
      (as
      defined in Section 5(b)(v)) for the five (5) trading days immediately preceding
      the date the Dividend Payment is due. In the case of shares of Series A
      Preferred Stock outstanding for less than a full year, dividends shall be pro
      rated based on the portion of each year during which such shares are
      outstanding. Dividends on the Series A Preferred Stock shall be cumulative,
      shall accrue and be payable quarterly. Dividends on the Series A Preferred
      Stock
      are prior and in preference to any declaration or payment of any distribution
      (as defined below) on any outstanding shares of Junior Stock. Such dividends
      shall accrue on each share of Series A Preferred Stock from day to day whether
      or not earned or declared so that if such dividends with respect to any previous
      dividend period at the rate provided for herein have not been paid on, or
      declared and set apart for, all shares of Series A Preferred Stock at the time
      outstanding, the deficiency shall be fully paid on, or declared and set apart
      for, such shares on a pro rata basis with all other equity securities of the
      Company ranking pari passu with the Series A Preferred Stock as to the payment
      of dividends before any distribution shall be paid on, or declared and set
      apart
      for Junior Stock. For purposes hereof, “VWAP”
shall
      mean, for any date, (i) the daily volume weighted average price of the Common
      Stock for such date on the OTC Bulletin Board as reported by Bloomberg Financial
      L.P. (based on a trading day from 9:30 a.m. Eastern Time to 4:02 p.m. Eastern
      Time); (ii) if the Common Stock is not then listed or quoted on the OTC
      Bulletin Board and if prices for the Common Stock are then reported in the
“Pink
      Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
      succeeding to its functions of reporting prices), the most recent bid price
      per
      share of the Common Stock so reported; or (iii) in all other cases, the
      fair market value of a share of Common Stock as determined by an independent
      appraiser selected in good faith by the Holder and reasonably acceptable to
      the
      Company.

     

    
      
        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    

    (b)  So
      long
      as any shares of Series A Preferred Stock are outstanding, the Company shall
      not
      declare, pay or set apart for payment any dividend or make any distribution
      on
      any Junior Stock (other than dividends or distributions payable in additional
      shares of Junior Stock), unless at the time of such dividend or distribution
      the
      Company shall have paid all accrued and unpaid dividends on the outstanding
      shares of Series A Preferred Stock.

    

    (c)  In
      the
      event of (i) a mandatory redemption pursuant to Section 9 hereof or (ii) a
      redemption upon the occurrence of a Major Transaction (as defined in Section
      8(c) hereof) or a Triggering Event (as defined in Section 8(d) hereof), all
      accrued and unpaid dividends on the Series A Preferred Stock shall be payable
      on
      the date of such redemption. In the event of a voluntary conversion pursuant
      to
      Section 5(a) hereof, all accrued and unpaid dividends on the Series A Preferred
      Stock being converted shall be payable on the Voluntary Conversion Date (as
      defined in Section 5(b)(i) hereof).

    

    (d)  For
      purposes hereof, unless the context otherwise requires, "distribution" shall
      mean the transfer of cash or property without consideration, whether by way
      of
      dividend or otherwise, payable other than in shares of Common Stock or other
      equity securities of the Company, or the purchase or redemption of shares of
      the
      Company (other than redemptions set forth in Section 8 below or repurchases
      of
      Common Stock held by employees or consultants of the Company upon termination
      of
      their employment or services pursuant to agreements providing for such
      repurchase or upon the cashless exercise of options held by employees or
      consultants) for cash or property.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    

    3.  Voting
      Rights.

    

    (a)  Class
      Voting Rights.
      The
      Series A Preferred Stock shall have the following class voting rights (in
      addition to the voting rights set forth in Section 3(b) hereof). So long as
      any
      shares of the Series A Preferred Stock remain outstanding, the Company shall
      not, without the affirmative vote or consent of the holders of at least
      seventy-five percent (75%) of the shares of the Series A Preferred Stock
      outstanding at the time, given in person or by proxy, either in writing or
      at a
      meeting, in which the holders of the Series A Preferred Stock vote separately
      as
      a class: (i) authorize, create, issue or increase the authorized or issued
      amount of any class or series of stock, including but not limited to the
      issuance of any more shares of Preferred Stock, ranking pari passu or senior
      to
      the Series A Preferred Stock, with respect to the distribution of assets on
      liquidation, dissolution or winding up; (ii) amend, alter or repeal the
      provisions of the Series A Preferred Stock, whether by merger, consolidation
      or
      otherwise, so as to adversely affect any right, preference, privilege or voting
      power of the Series A Preferred Stock; provided,
      however,
      that
      any creation and issuance of another series of Junior Stock shall not be deemed
      to adversely affect such rights, preferences, privileges or voting powers;
      (iii)
      repurchase, redeem or pay dividends on, shares of Common Stock or any other
      shares of the Company's Junior Stock (other than de minimus repurchases from
      employees of the Company in certain circumstances); (iv) amend the Articles
      of
      Incorporation or By-Laws of the Company so as to affect materially and adversely
      any right, preference, privilege or voting power of the Series A Preferred
      Stock; provided,
      however,
      that
      any creation and issuance of another series of Junior Stock shall not be deemed
      to adversely affect such rights, preferences, privileges or voting powers;
      (v)
      effect any distribution with respect to Junior Stock other than as permitted
      hereby; (vi) reclassify the Company's outstanding securities; (vii) voluntarily
      file for bankruptcy, liquidate the Company’s assets or make an assignment for
      the benefit of the Company’s creditors; or (viii) materially change the nature
      of the Company’s business. 

    

    (b)  General
      Voting
      Rights.
      Except
      with respect to transactions upon which the Series A Preferred Stock shall
      be
      entitled to vote separately as a class pursuant to Section 3(a) above and except
      as otherwise required by Nevada law, the Series A Preferred Stock shall have
      no
      voting rights. The Common Stock into which the Series A Preferred Stock is
      convertible shall, upon issuance, have all of the same voting rights as other
      issued and outstanding Common Stock of the Company, and none of the rights
      of
      the Preferred Stock.

     

    4.  Liquidation
      Preference.

    

    (a)  In
      the
      event of the liquidation, dissolution or winding up of the affairs of the
      Company, whether voluntary or involuntary, the holders of shares of Series
      A
      Preferred Stock then outstanding shall be entitled to receive, out of the assets
      of the Company available for distribution to its stockholders, an amount equal
      to $2.33 per share (the "Liquidation Preference Amount") of the Series A
      Preferred Stock plus any accrued and unpaid dividends before any payment shall
      be made or any assets distributed to the holders of the Common Stock or any
      other Junior Stock. If the assets of the Company are not sufficient to pay
      in
      full the Liquidation Preference Amount plus any accrued and unpaid dividends
      payable to the holders of outstanding shares of the Series A Preferred Stock
      and
      any series of Preferred Stock or any other class of stock ranking pari passu,
      as
      to rights on liquidation, dissolution or winding up, with the Series A Preferred
      Stock, then all of said assets will be distributed among the holders of the
      Series A Preferred Stock and the other classes of stock ranking pari passu
      with
      the Series A Preferred Stock, if any, ratably in accordance with the respective
      amounts that would be payable on such shares if all amounts payable thereon
      were
      paid in full. The liquidation payment with respect to each outstanding
      fractional share of Series A Preferred Stock shall be equal to a ratably
      proportionate amount of the liquidation payment with respect to each outstanding
      share of Series A Preferred Stock. All payments for which this Section 4(a)
      provides shall be in cash, property (valued at its fair market value as
      determined by an independent appraiser reasonably acceptable to the holders
      of a
      majority of the Series A Preferred Stock) or a combination thereof; provided,
      however,
      that no
      cash shall be paid to holders of Junior Stock unless each holder of the
      outstanding shares of Series A Preferred Stock has been paid in cash the full
      Liquidation Preference Amount plus any accrued and unpaid dividends to which
      such holder is entitled as provided herein. After payment of the full
      Liquidation Preference Amount plus any accrued and unpaid dividends to which
      each holder is entitled, such holders of shares of Series A Preferred Stock
      will
      not be entitled to any further participation as such in any distribution of
      the
      assets of the Company.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    

    (b)  A
      consolidation or merger of the Company with or into any other corporation or
      corporations, or a sale of all or substantially all of the assets of the
      Company, or the effectuation by the Company of a transaction or series of
      related transactions in which more than 50% of the voting shares of the Company
      is disposed of or conveyed, shall not be deemed to be a liquidation,
      dissolution, or winding up within the meaning of this Section 4. In the event
      of
      the merger or consolidation of the Company with or into another corporation,
      the
      Series A Preferred Stock shall maintain its relative powers, designations and
      preferences provided for herein and no merger shall result which is inconsistent
      therewith.

    

    (c)  Written
      notice of any voluntary or involuntary liquidation, dissolution or winding
      up of
      the affairs of the Company, stating a payment date and the place where the
      distributable amounts shall be payable, shall be given by mail, postage prepaid,
      no less than forty-five (45) days prior to the payment date stated therein,
      to
      the holders of record of the Series A Preferred Stock at their respective
      addresses as the same shall appear on the books of the Company.

    

    5.  Conversion.
      The
      holder of Series A Preferred Stock shall have the following conversion rights
      (the "Conversion Rights"):

    

    (a)  Right
      to Convert.
      At any
      time on or after the Issuance Date, the holder of any such shares of Series
      A
      Preferred Stock may, at such holder's option, subject to the limitations set
      forth in Section 7 herein, elect to convert (a "Voluntary Conversion") all
      or
      any portion of the shares of Series A Preferred Stock held by such person into
      a
      number of fully paid and nonassessable shares of Common Stock equal to the
      quotient of (i) the Liquidation Preference Amount of the shares of Series A
      Preferred Stock being converted divided by (ii) the Conversion Price (as defined
      in Section 5(d) below) then in effect as of the date of the delivery by such
      holder of its notice of election to convert. In the event of a notice of
      redemption of any shares of Series A Preferred Stock pursuant to Section 8
      hereof, the Conversion Rights of the shares designated for redemption shall
      terminate at the close of business on the last full day preceding the date
      fixed
      for redemption, unless the redemption price is not paid on such redemption
      date,
      in which case the Conversion Rights for such shares shall continue until such
      price is paid in full. In the event of a liquidation, dissolution or winding
      up
      of the Company, the Conversion Rights shall terminate at the close of business
      on the last full day preceding the date fixed for the payment of any such
      amounts distributable on such event to the holders of Series A Preferred Stock.
      In the event of such a redemption or liquidation, dissolution or winding up,
      the
      Company shall provide to each holder of shares of Series A Preferred Stock
      notice of such redemption or liquidation, dissolution or winding up, which
      notice shall (i) be sent at least fifteen (15) days prior to the termination
      of
      the Conversion Rights (or, if the Company obtains lesser notice thereof, then
      as
      promptly as possible after the date that it has obtained notice thereof) and
      (ii) state the amount per share of Series A Preferred Stock that will be paid
      or
      distributed on such redemption or liquidation, dissolution or winding up, as
      the
      case may be.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    

    (b)  Mechanics
      of Voluntary Conversion.
      The
      Voluntary Conversion of Series A Preferred Stock shall be conducted in the
      following manner:

    

    (i)  Holder's
      Delivery Requirements.
      To
      convert Series A Preferred Stock into full shares of Common Stock on any date
      (the "Voluntary Conversion Date"), the holder thereof shall (A) transmit by
      facsimile (or otherwise deliver), for receipt on or prior to 5:00 p.m., New
      York
      time on such date, a copy of a fully executed notice of conversion in the form
      attached hereto as Exhibit
      I
      (the
      "Conversion Notice"), to the Company at (86) 027 5970 0010, Attention: Chief
      Executive Officer, and (B) surrender to a common carrier for delivery to the
      Company as soon as practicable following such Voluntary Conversion Date the
      original certificates representing the shares of Series A Preferred Stock being
      converted (or an indemnification undertaking with respect to such shares in
      the
      case of their loss, theft or destruction) (the "Preferred Stock Certificates")
      and the originally executed Conversion Notice.

    

    (ii)  Company's
      Response.
      Upon
      receipt by the Company of a facsimile copy of a Conversion Notice, the Company
      shall immediately send, via facsimile, a confirmation of receipt of such
      Conversion Notice to such holder. Upon receipt by the Company of a copy of
      the
      fully executed Conversion Notice, the Company or its designated transfer agent
      (the "Transfer Agent"), as applicable, shall, within three (3) trading days
      following the date of receipt by the Company of the fully executed Conversion
      Notice, issue and deliver to the Depository Trust Company (“DTC”) account on the
      Holder’s behalf via the Deposit Withdrawal Agent Commission System (“DWAC”) as
      specified in the Conversion Notice, registered in the name of the holder or
      its
      designee, for the number of shares of Common Stock to which the holder shall
      be
      entitled.
      Notwithstanding the foregoing to the contrary, the Company or its Transfer
      Agent
      shall only be obligated to issue and deliver the shares to the DTC on a holder’s
      behalf via DWAC if a registration statement providing for the resale of the
      shares of Common Stock issuable upon conversion of the Series A Preferred Stock
      is effective. If the number of shares of Preferred Stock represented by the
      Preferred Stock Certificate(s) submitted for conversion is greater than the
      number of shares of Series A Preferred Stock being converted, then the Company
      shall, as soon as practicable and in no event later than three (3) business
      days
      after receipt of the Preferred Stock Certificate(s) and at the Company's
      expense, issue and deliver to the holder a new Preferred Stock Certificate
      representing the number of shares of Series A Preferred Stock not
      converted.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    

    (iii)  Dispute
      Resolution.
      In the
      case of a dispute as to the arithmetic calculation of the number of shares
      of
      Common Stock to be issued upon conversion, the Company shall cause its Transfer
      Agent to promptly issue to the holder the number of shares of Common Stock
      that
      is not disputed and shall submit the arithmetic calculations to the holder
      via
      facsimile as soon as possible, but in no event later than two (2) business
      days
      after receipt of such holder's Conversion Notice. If such holder and the Company
      are unable to agree upon the arithmetic calculation of the number of shares
      of
      Common Stock to be issued upon such conversion within one (1) business day
      of
      such disputed arithmetic calculation being submitted to the holder, then the
      Company shall within one (1) business day submit via facsimile the disputed
      arithmetic calculation of the number of shares of Common Stock to be issued
      upon
      such conversion to the Company’s independent, outside accountant. The Company
      shall cause the accountant to perform the calculations and notify the Company
      and the holder of the results no later than seventy-two (72) hours from the
      time
      it receives the disputed calculations. Such accountant's calculation shall
      be
      binding upon all parties absent manifest error. The reasonable expenses of
      such
      accountant in making such determination shall be paid by the Company, in the
      event the holder's calculation was correct, or by the holder, in the event
      the
      Company's calculation was correct, or equally by the Company and the holder
      in
      the event that neither the Company's or the holder's calculation was correct.
      The period of time in which the Company is required to effect conversions or
      redemptions under this Certificate of Designation shall be tolled with respect
      to the subject conversion or redemption pending resolution of any dispute by
      the
      Company made in good faith and in accordance with this Section
      5(b)(iii).

     

    (iv)  Record
      Holder.
      The
      person or persons entitled to receive the shares of Common Stock issuable upon
      a
      conversion of the Series A Preferred Stock shall be treated for all purposes
      as
      the record holder or holders of such shares of Common Stock on the Conversion
      Date.

    

    (v)  
      Company's Failure to Timely Convert.
      If
      within three (3) business days of the Company's receipt of an executed copy
      of
      the Conversion Notice (so long as the applicable Preferred Stock Certificates
      and original Conversion Notice are received by the Company on or before such
      third business day) (the "Delivery Date") the Transfer Agent shall fail to
      issue
      and deliver to a holder the number of shares of Common Stock to which such
      holder is entitled upon such holder's conversion of the Series A Preferred
      Stock
      or to issue a new Preferred Stock Certificate representing the number of shares
      of Series A Preferred Stock to which such holder is entitled pursuant to Section
      5(b)(ii) (a "Conversion Failure"), in addition to all other available remedies
      which such holder may pursue hereunder and under the Series A Convertible
      Preferred Stock Purchase Agreement (the "Purchase Agreement") among the Company
      and the initial holders of the Series A Preferred Stock (including
      indemnification pursuant to Section 6 thereof), the Company shall pay additional
      damages to such holder on each business day after such third (3rd)
      business day that such conversion is not timely effected in an amount equal
      to
      0.5% of the product of (A) the sum of the number of shares of Common Stock
      not
      issued to the holder on a timely basis pursuant to Section 5(b)(ii) and to
      which
      such holder is entitled and, in the event the Company has failed to deliver
      a
      Preferred Stock Certificate to the holder on a timely basis pursuant to Section
      5(b)(ii), the number of shares of Common Stock issuable upon conversion of
      the
      shares of Series A Preferred Stock represented by such Preferred Stock
      Certificate, as of the last possible date which the Company could have issued
      such Preferred Stock Certificate to such holder without violating Section
      5(b)(ii) and (B) the Closing Bid Price (as defined in Section 5(c)(iii) below)
      of the Common Stock on the last possible date which the Company could have
      issued such Common Stock and such Preferred Stock Certificate, as the case
      may
      be, to such holder without violating Section 5(b)(ii). If the Company fails
      to
      pay the additional damages set forth in this Section 5(b)(v) within five (5)
      business days of the date incurred, then such payment shall bear interest at
      the
      rate of 2.0% per month (pro rated for partial months) until such payments are
      made. 

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    

    (vi)  Buy-In
      Rights.
      In
      addition to any other rights available to the holders of Series A Preferred
      Stock, if the Company fails to cause its Transfer Agent to transmit to the
      holder a certificate or certificates representing the shares of Common Stock
      issuable upon conversion of the Series A Preferred Stock on or before the
      Delivery Date, and if after such date the holder is required by its broker
      to
      purchase (in an open market transaction or otherwise) shares of Common Stock
      to
      deliver in satisfaction of a sale by the holder of the shares of Common Stock
      issuable upon conversion of Series A Preferred Stock which the holder
      anticipated receiving upon such conversion (a “Buy-In”), then the Company shall
      (1) pay in cash to the holder the amount by which (x) the holder’s total
      purchase price (including brokerage commissions, if any) for the shares of
      Common Stock so purchased exceeds (y) the amount obtained by multiplying (A)
      the
      number of shares of Common Stock issuable upon conversion of Series A Preferred
      Stock that the Company was required to deliver to the holder in connection
      with
      the conversion at issue times (B) the price at which the sell order giving
      rise
      to such purchase obligation was executed, and (2) at the option of the holder,
      either reinstate the shares of Series A Preferred Stock and equivalent number
      of
      shares of Common Stock for which such conversion was not honored or deliver
      to
      the holder the number of shares of Common Stock that would have been issued
      had
      the Company timely complied with its conversion and delivery obligations
      hereunder. For example, if the holder purchases Common Stock having a total
      purchase price of $11,000 to cover a Buy-In with respect to an attempted
      conversion of shares of Common Stock with an aggregate sale price giving rise
      to
      such purchase obligation of $10,000, under clause (1) of the immediately
      preceding sentence the Company shall be required to pay to the holder $1,000.
      The holder shall provide the Company written notice indicating the amounts
      payable to the holder in respect of the Buy-In, together with applicable
      confirmations and other evidence reasonably requested by the Company. Nothing
      herein shall limit a holder’s right to pursue any other remedies available to it
      hereunder, at law or in equity including, without limitation, a decree of
      specific performance and/or injunctive relief with respect to the Company’s
      failure to timely deliver certificates representing shares of Common Stock
      upon
      conversion of the Series A Preferred Stock as required pursuant to the terms
      hereof. 

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

     

    (c)  Mandatory
      Conversion.

    

    (i)  Subject
      to Section 7 hereof, the number of outstanding shares of Series A Preferred
      Stock referred to below in Section 5(c)(ii) on each Mandatory Conversion Date
      shall, automatically and without any action on the part of the holder thereof,
      convert into a number of fully paid and nonassessable shares of Common Stock
      equal to the quotient of (i) the Liquidation Preference Amount of the number
      of
      shares of Series A Preferred Stock being converted on such Mandatory Conversion
      Date divided by (ii) the Conversion Price in effect on such Mandatory Conversion
      Date.

    

    (ii)  As
      used
      herein, "Mandatory Conversion Date" shall mean (A) with respect to all
      outstanding shares of Series A Preferred Stock at such time, that date that
      is
      two (2) years following the effective date of the registration statement (the
      “Registration Statement”) providing for the resale of shares of the Common Stock
      issuable upon conversion of the Series A Preferred Stock on which the Closing
      Bid Price (as defined below) of the Common Stock equals or exceeds $5.00 (as
      may
      be adjusted for stock splits or combinations of the Common Stock) for a period
      of thirty (30) consecutive trading days and the trading volume of the Common
      Stock for each of the thirty (30) trading days equals or exceeds 45,000 shares
      of Common Stock, and (B) with respect to ten percent (10%) of all outstanding
      shares of Series A Preferred Stock at such time, that date following the
      effective date of the Registration Statement on which the Closing Bid Price
      of
      the Common Stock equals or exceeds $3.50 (as may be adjusted for stock splits
      or
      combinations of the Common Stock) for a period of at least ten (10) consecutive
      trading days and there has been at least one trade effected in the Common Stock
      for a period of at least ten (10) trading days within any fifteen (15)
      consecutive trading day period so long as the Closing Bid Price also exceeds
      $3.50 (as may be adjusted for stock splits or combinations of the Common Stock)
      on such trading days (the “Trading Milestone”), and thereafter on the date
      during each of the next three (3) three-month periods the Trading Milestone
      is
      achieved; provided,
      that,
      on any
      Mandatory Conversion Date, (i) the Registration Statement is effective and
      has
      been effective, without lapse or suspension of any kind, for a period of sixty
      (60) consecutive calendar days with respect to a Mandatory Conversion pursuant
      to subclause (A) above and for a period of twenty (20) consecutive calendar
      days
      with respect to a Mandatory Conversion pursuant to subclause (B) above, or
      the
      shares of Common Stock into which the Series A Preferred Stock can be converted
      may be offered for sale to the public pursuant to Rule 144(k) ("Rule 144(k)")
      under the Securities Act of 1933, as amended, (ii) trading
      in the Common Stock shall not have been suspended by the Securities and Exchange
      Commission or the OTC Bulletin Board (or other exchange or market on which
      the
      Common Stock is trading), and (iii) the Company is in material compliance with
      the terms and conditions of this Certificate of Designation and the other
      Transaction Documents (as defined in the Purchase Agreement).
      Notwithstanding the foregoing, the Mandatory Conversion Date shall be extended
      for as long as (a) a Triggering Event (as defined in Section 8(d) hereof) shall
      have occurred and be continuing, or (b) any event shall have occurred and be
      continuing which with the passage of time and the failure to cure would result
      in a Triggering Event. The Mandatory Conversion Date and the Voluntary
      Conversion Date collectively are referred to in this Certificate of Designation
      as the "Conversion Date."

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    

    (iii)  The
      term
      "Closing Bid Price" shall mean, for any security as of any date, the last
      closing bid price of such security on the OTC Bulletin Board or other principal
      exchange on which such security is traded as reported by Bloomberg, or, if
      no
      closing bid price is reported for such security by Bloomberg, the last closing
      trade price of such security as reported by Bloomberg, or, if no last closing
      trade price is reported for such security by Bloomberg, the average of the
      bid
      prices of any market makers for such security as reported in the "pink sheets"
      by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
      calculated for such security on such date on any of the foregoing bases, the
      Closing Bid Price of such security on such date shall be the fair market value
      as mutually determined by the Company and the holders of a majority of the
      outstanding shares of Series A Preferred Stock. 

    

    (iv)  On
      each
      Mandatory Conversion Date, the applicable number of outstanding shares of Series
      A Preferred Stock referred to in Section 5(c)(ii) hereof shall be converted
      automatically without any further action by the holders of such shares and
      whether or not the certificates representing such shares are surrendered to
      the
      Company or its Transfer Agent; provided,
      however,
      that
      the Company shall not be obligated to issue the shares of Common Stock issuable
      upon conversion of any shares of Series A Preferred Stock unless certificates
      evidencing such shares of Series A Preferred Stock are either delivered to
      the
      Company or the holder notifies the Company that such certificates have been
      lost, stolen, or destroyed, and executes an agreement satisfactory to the
      Company to indemnify the Company from any loss incurred by it in connection
      therewith. Upon the occurrence of a Mandatory Conversion of the Series A
      Preferred Stock pursuant to this Section 5, the holders of the Series A
      Preferred Stock shall surrender the certificates representing the Series A
      Preferred Stock for which the Mandatory Conversion Date has occurred to the
      Company and the Company shall cause its Transfer Agent to deliver the shares
      of
      Common Stock issuable upon such conversion (in the same manner set forth in
      Section 5(b)(ii)) to the holder within three (3) business days of the holder's
      delivery of the applicable Preferred Stock Certificates.

    

    (d)  Conversion
      Price.
      

    

    (i)  The
      term
      "Conversion Price" shall mean $2.33, subject to adjustment under Section 5(e)
      hereof. Notwithstanding any adjustment hereunder, at no time shall the
      Conversion Price be greater than $2.33 per share except if it is adjusted
      pursuant to Section 5(e)(i). 

    

    (ii)  Notwithstanding
      the foregoing to the contrary, if during any period (a "Black-out
      Period"),
      a
      holder of Series A Preferred Stock is unable to trade any Common Stock issued
      or
      issuable upon conversion of the Series A Preferred Stock immediately due to
      the
      postponement of filing or delay or suspension of effectiveness of the
      Registration Statement or because the Company has otherwise informed such holder
      of Series A Preferred Stock that an existing prospectus cannot be used at that
      time in the sale or transfer of such Common Stock (provided that such
      postponement, delay, suspension or fact that the prospectus cannot be used
      is
      not due to factors solely within the control of the holder of Series A Preferred
      Stock or due to the Company exercising its rights under Section 3(n) of the
      Registration Rights Agreement (as defined in the Purchase Agreement)), such
      holder of Series A Preferred Stock shall have the option but not the obligation
      on any Conversion Date within ten (10) trading days following the expiration
      of
      the Black-out Period of using the Conversion Price applicable on such Conversion
      Date or any Conversion Price selected by such holder of Series A Preferred
      Stock
      that would have been applicable had such Conversion Date been at any earlier
      time during the Black-out Period or within the ten (10) trading days thereafter.
      

     

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    

    (e)  Adjustments
      of Conversion Price.

    

    (i)  Adjustments
      for Stock Splits and Combinations.
      If the
      Company shall at any time or from time to time after the Issuance Date, effect
      a
      stock split of the outstanding Common Stock, the Conversion Price shall be
      proportionately decreased. If the Company shall at any time or from time to
      time
      after the Issuance Date, combine the outstanding shares of Common Stock, the
      Conversion Price shall be proportionately increased. Any adjustments under
      this
      Section 5(e)(i) shall be effective at the close of business on the date the
      stock split or combination becomes effective.

    

    (ii)  Adjustments
      for Certain Dividends and Distributions.
      If the
      Company shall at any time or from time to time after the Issuance Date, make
      or
      issue or set a record date for the determination of holders of Common Stock
      entitled to receive a dividend or other distribution payable in shares of Common
      Stock, then, and in each event, the Conversion Price shall be decreased as
      of
      the time of such issuance or, in the event such record date shall have been
      fixed, as of the close of business on such record date, by multiplying the
      Conversion Price then in effect by a fraction:

    

    (1)  the
      numerator of which shall be the total number of shares of Common Stock issued
      and outstanding immediately prior to the time of such issuance or the close
      of
      business on such record date; and

    

    (2)  the
      denominator of which shall be the total number of shares of Common Stock issued
      and outstanding immediately prior to the time of such issuance or the close
      of
      business on such record date plus the number of shares of Common Stock issuable
      in payment of such dividend or distribution.

    

    (iii)  Adjustment
      for Other Dividends and Distributions.
      If the
      Company shall at any time or from time to time after the Issuance Date, make
      or
      issue or set a record date for the determination of holders of Common Stock
      entitled to receive a dividend or other distribution payable in securities
      of
      the Company other than shares of Common Stock, then, and in each event, an
      appropriate revision to the applicable Conversion Price shall be made and
      provision shall be made (by adjustments of the Conversion Price or otherwise)
      so
      that the holders of Series A Preferred Stock shall receive upon conversions
      thereof, in addition to the number of shares of Common Stock receivable thereon,
      the number of securities of the Company which they would have received had
      their
      Series A Preferred Stock been converted into Common Stock on the date of such
      event and had thereafter, during the period from the date of such event to
      and
      including the Conversion Date, retained such securities (together with any
      distributions payable thereon during such period), giving application to all
      adjustments called for during such period under this Section 5(e)(iii) with
      respect to the rights of the holders of the Series A Preferred Stock;
provided,
      however,
      that if
      such record date shall have been fixed and such dividend is not fully paid
      or if
      such distribution is not fully made on the date fixed therefor, the Conversion
      Price shall be adjusted pursuant to this paragraph as of the time of actual
      payment of such dividends or distributions; and provided further,
      however, that no such adjustment shall be made if the holders of Series A
      Preferred Stock simultaneously receive (i) a dividend or other distribution
      of shares of Common Stock in a number equal to the number of shares of Common
      Stock as they would have received if all outstanding shares of Series A
      Preferred Stock had been converted into Common Stock on the date of such event
      or (ii) a dividend or other distribution of shares of Series A Preferred
      Stock which are convertible, as of the date of such event, into such number
      of
      shares of Common Stock as is equal to the number of additional shares of Common
      Stock being issued with respect to each share of Common Stock in such dividend
      or distribution.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    

    (iv)  Adjustments
      for Reclassification, Exchange or Substitution.
      If the
      Common Stock issuable upon conversion of the Series A Preferred Stock at any
      time or from time to time after the Issuance Date shall be changed to the same
      or different number of shares of any class or classes of stock, whether by
      reclassification, exchange, substitution or otherwise (other than by way of
      a
      stock split or combination of shares or stock dividends provided for in Sections
      5(e)(i), (ii) and (iii), or a reorganization, merger, consolidation, or sale
      of
      assets provided for in Section 5(e)(v)), then, and in each event, an appropriate
      revision to the Conversion Price shall be made and provisions shall be made
      (by
      adjustments of the Conversion Price or otherwise) so that the holder of each
      share of Series A Preferred Stock shall have the right thereafter to convert
      such share of Series A Preferred Stock into the kind and amount of shares of
      stock and other securities receivable upon reclassification, exchange,
      substitution or other change, by holders of the number of shares of Common
      Stock
      into which such share of Series A Preferred Stock might have been converted
      immediately prior to such reclassification, exchange, substitution or other
      change, all subject to further adjustment as provided herein.

    

    (v)  Adjustments
      for Reorganization, Merger, Consolidation or Sales of Assets.
      If at
      any time or from time to time after the Issuance Date there shall be a capital
      reorganization of the Company (other than by way of a stock split or combination
      of shares or stock dividends or distributions provided for in Section 5(e)(i),
      (ii) and (iii), or a reclassification, exchange or substitution of shares
      provided for in Section 5(e)(iv)), or a merger or consolidation of the Company
      with or into another corporation where the holders of outstanding voting
      securities prior to such merger or consolidation do not own over 50% of the
      outstanding voting securities of the merged or consolidated entity, immediately
      after such merger or consolidation, or the sale of all or substantially all
      of
      the Company's properties or assets to any other person (an "Organic Change"),
      then as a part of such Organic Change an appropriate revision to the Conversion
      Price shall be made if necessary and provision shall be made if necessary (by
      adjustments of the Conversion Price or otherwise) so that the holder of each
      share of Series A Preferred Stock shall have the right thereafter to convert
      such share of Series A Preferred Stock into the kind and amount of shares of
      stock and other securities or property of the Company or any successor
      corporation resulting from Organic Change. In any such case, appropriate
      adjustment shall be made in the application of the provisions of this Section
      5(e)(v) with respect to the rights of the holders of the Series A Preferred
      Stock after the Organic Change to the end that the provisions of this Section
      5(e)(v) (including any adjustment in the Conversion Price then in effect and
      the
      number of shares of stock or other securities deliverable upon conversion of
      the
      Series A Preferred Stock) shall be applied after that event in as nearly an
      equivalent manner as may be practicable.

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    

    (vi)  Adjustments
      for Issuance of Additional Shares of Common Stock.
      For a
      period of two (2) years following the Issuance Date, in the event the Company
      shall issue or sell any additional shares of Common Stock (otherwise than as
      provided in the foregoing subsections (i) through (v) of this Section 5(e)
      or
      pursuant to (X) Common Stock Equivalents (hereafter defined) granted or issued
      prior to the Issuance Date) or (Y) pursuant to subsection (viii) below
      (“Additional Shares of Common Stock”), at a price per share less than the
      Conversion Price then in effect or without consideration, then the Conversion
      Price upon each such issuance shall be reduced to a price equal to the
      consideration per share paid for such Additional Shares of Common
      Stock.

    

    (vii)  Issuance
      of Common Stock Equivalents.
      The
      provisions of this Section 5(e)(vii) shall apply if the Company at any time
      within two (2) years following the Issuance Date, shall (a) issue any securities
      convertible into or exchangeable for, directly or indirectly, Common Stock
      ("Convertible Securities"), other than the Series A Preferred Stock, or (b)
      issue or sell any rights or warrants or options to purchase any such Common
      Stock or Convertible Securities (collectively, the "Common Stock Equivalents").
      If the price per share for which Additional Shares of Common Stock may be
      issuable pursuant to any such Common Stock Equivalent shall be less than the
      applicable Conversion Price then in effect, or if, after any such issuance
      of
      Common Stock Equivalents, the price per share for which Additional Shares of
      Common Stock may be issuable thereafter is amended or adjusted, and such price
      as so amended shall be less than the applicable Conversion Price in effect
      at
      the time of such amendment or adjustment, then the applicable Conversion Price
      upon each such issuance or amendment shall be adjusted as provided in the first
      sentence of subsection (vi) of this Section 5(e). No adjustment shall be made
      to
      the Conversion Price upon the issuance of Common Stock pursuant to the exercise,
      conversion or exchange of any Convertible Security or Common Stock Equivalent
      where an adjustment to the Conversion Price was made as a result of the issuance
      or purchase of any Convertible Security or Common Stock Equivalent.

    

    (viii)  Consideration
      for Stock.
      In case
      any shares of Common Stock or Convertible Securities other than the Series
      A
      Preferred Stock, or any rights or warrants or options to purchase any such
      Common Stock or Convertible Securities, shall be issued or sold:

    

    (1)  in
      connection with any merger or consolidation in which the Company is the
      surviving corporation (other than any consolidation or merger in which the
      previously outstanding shares of Common Stock of the Company shall be changed
      to
      or exchanged for the stock or other securities of another corporation), the
      amount of consideration therefore shall be, deemed to be the fair value, as
      determined reasonably and in good faith by the Board of Directors of the
      Company, of such portion of the assets and business of the nonsurviving
      corporation as such Board may determine to be attributable to such shares of
      Common Stock, Convertible Securities, rights or warrants or options, as the
      case
      may be; or

     

    
      
        
        

      

      
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    (2)  in
      the
      event of any consolidation or merger of the Company in which the Company is
      not
      the surviving corporation or in which the previously outstanding shares of
      Common Stock of the Company shall be changed into or exchanged for the stock
      or
      other securities of another corporation, or in the event of any sale of all
      or
      substantially all of the assets of the Company for stock or other securities
      of
      any corporation, the Company shall be deemed to have issued a number of shares
      of its Common Stock for stock or securities or other property of the other
      corporation computed on the basis of the actual exchange ratio on which the
      transaction was predicated, and for a consideration equal to the fair market
      value on the date of such transaction of all such stock or securities or other
      property of the other corporation. If any such calculation results in adjustment
      of the applicable Conversion Price, or the number of shares of Common Stock
      issuable upon conversion of the Series A Preferred Stock, the determination
      of
      the applicable Conversion Price or the number of shares of Common Stock issuable
      upon conversion of the Series A Preferred Stock immediately prior to such
      merger, consolidation or sale, shall be made after giving effect to such
      adjustment of the number of shares of Common Stock issuable upon conversion
      of
      the Series A Preferred Stock. In the event any consideration received by the
      Company for any securities consists of property other than cash, the fair market
      value thereof at the time of issuance or as otherwise applicable shall be as
      determined in good faith by the Board of Directors of the Company. In the event
      Common Stock is issued with other shares or securities or other assets of the
      Company for consideration which covers both, the consideration computed as
      provided in this Section (5)(e)(viii) shall be allocated among such securities
      and assets as determined in good faith by the Board of Directors of the
      Company.

    

    (ix)  Record
      Date.
      In case
      the Company shall take record of the holders of its Common Stock or any other
      Preferred Stock for the purpose of entitling them to subscribe for or purchase
      Common Stock or Convertible Securities, then the date of the issue or sale
      of
      the shares of Common Stock shall be deemed to be such record date.

    

    (x)  Certain
      Issues Excepted.
      Anything herein to the contrary notwithstanding, the Company shall not be
      required to make any adjustment to the Conversion Price upon (i) securities
      issued (other than for cash) in connection with a merger, acquisition, or
      consolidation, (ii) securities issued pursuant to the conversion or exercise
      of
      convertible or exercisable securities issued or outstanding on or prior to
      the
      date of the Purchase Agreement or issued pursuant to the Purchase Agreement
      (so
      long as the conversion or exercise price in such securities are not amended
      to
      lower such price and/or adversely affect the holders), (iii) securities issued
      in connection with bona fide strategic license agreements or other partnering
      arrangements so long as such issuances are not for the purpose of raising
      capital, (iv) Common Stock issued or the issuance or grants of options to
      purchase Common Stock pursuant to the Issuer’s stock option plans and employee
      stock purchase plans outstanding as they exist on the date of the Purchase
      Agreement, and (v) any warrants issued to the placement agent and its designees
      for the transactions contemplated by the Purchase Agreement. 

     

    
      
        
        

      

      
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    (f)  No
      Impairment.
      The
      Company shall not, by amendment of its Articles of Incorporation or through
      any
      reorganization, transfer of assets, consolidation, merger, dissolution, issue
      or
      sale of securities or any other voluntary action, avoid or seek to avoid the
      observance or performance of any of the terms to be observed or performed
      hereunder by the Company, but will at all times in good faith assist in the
      carrying out of all the provisions of this Section 5 and in the taking of all
      such action as may be necessary or appropriate in order to protect the
      Conversion Rights of the holders of the Series A Preferred Stock against
      impairment. In the event a holder shall elect to convert any shares of Series
      A
      Preferred Stock as provided herein, the Company cannot refuse conversion based
      on any claim that such holder or any one associated or affiliated with such
      holder has been engaged in any violation of law, unless (i) an order from the
      Securities and Exchange Commission prohibiting such conversion or (ii) an
      injunction from a court, on notice, restraining and/or adjoining conversion
      of
      all or of said shares of Series A Preferred Stock shall have been issued and
      the
      Company posts a surety bond for the benefit of such holder in an amount equal
      to
      120% of the Liquidation Preference Amount of the Series A Preferred Stock such
      holder has elected to convert, which bond shall remain in effect until the
      completion of arbitration/litigation of the dispute and the proceeds of which
      shall be payable to such holder in the event it obtains judgment.

    

    (g)  Certificates
      as to Adjustments.
      Upon
      occurrence of each adjustment or readjustment of the Conversion Price or number
      of shares of Common Stock issuable upon conversion of the Series A Preferred
      Stock pursuant to this Section 5, the Company at its expense shall promptly
      compute such adjustment or readjustment in accordance with the terms hereof
      and
      furnish to each holder of such Series A Preferred Stock a certificate setting
      forth such adjustment and readjustment, showing in detail the facts upon which
      such adjustment or readjustment is based. The Company shall, upon written
      request of the holder of such affected Series A Preferred Stock, at any time,
      furnish or cause to be furnished to such holder a like certificate setting
      forth
      such adjustments and readjustments, the Conversion Price in effect at the time,
      and the number of shares of Common Stock and the amount, if any, of other
      securities or property which at the time would be received upon the conversion
      of a share of such Series A Preferred Stock. Notwithstanding the foregoing,
      the
      Company shall not be obligated to deliver a certificate unless such certificate
      would reflect an increase or decrease of at least one percent of such adjusted
      amount.

    

    (h)  Issue
      Taxes.
      The
      Company shall pay any and all issue and other taxes, excluding federal, state
      or
      local income taxes, that may be payable in respect of any issue or delivery
      of
      shares of Common Stock on conversion of shares of Series A Preferred Stock
      pursuant hereto; provided,
      however,
      that
      the Company shall not be obligated to pay any transfer taxes resulting from
      any
      transfer requested by any holder in connection with any such
      conversion.

    

    (i)  Notices.
      All
      notices and other communications hereunder shall be in writing and shall be
      deemed given if delivered personally or by facsimile or three (3) business
      days
      following being mailed by certified or registered mail, postage prepaid,
      return-receipt requested, addressed to the holder of record at its address
      appearing on the books of the Company. The Company will give written notice
      to
      each holder of Series A Preferred Stock at least twenty (20) days prior to
      the
      date on which the Company closes its books or takes a record (I) with respect
      to
      any dividend or distribution upon the Common Stock, (II) with respect to any
      pro
      rata subscription offer to holders of Common Stock or (III) for determining
      rights to vote with respect to any Organic Change, dissolution, liquidation
      or
      winding-up and in no event shall such notice be provided to such holder prior
      to
      such information being made known to the public. The Company will also give
      written notice to each holder of Series A Preferred Stock at least twenty (20)
      days prior to the date on which any Organic Change, dissolution, liquidation
      or
      winding-up will take place and in no event shall such notice be provided to
      such
      holder prior to such information being made known to the public.

     

    
      
        
        

      

      
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    (j)  Fractional
      Shares.
      No
      fractional shares of Common Stock shall be issued upon conversion of the Series
      A Preferred Stock. In lieu of any fractional shares to which the holder would
      otherwise be entitled, the Company shall round the number of shares to be issued
      upon conversion up to the nearest whole number of shares.

    

    (k)  Reservation
      of Common Stock.
      The
      Company shall, so long as any shares of Series A Preferred Stock are
      outstanding, reserve and keep available out of its authorized and unissued
      Common Stock, solely for the purpose of effecting the conversion of the Series
      A
      Preferred Stock, such number of shares of Common Stock
      equal to
      at least one hundred fifty
      percent (150%) of the aggregate number of shares of Common Stock as shall from
      time to time be sufficient to effect the conversion of all of the shares of
      Series A Preferred Stock then outstanding. The initial number of shares of
      Common Stock reserved for conversions of the Series A Preferred Stock and any
      increase in the number of shares so reserved shall be allocated pro rata among
      the holders of the Series A Preferred Stock based on the number of shares of
      Series A Preferred Stock held by each holder of record at the time of issuance
      of the Series A Preferred Stock or increase in the number of reserved shares,
      as
      the case may be. In the event a holder shall sell or otherwise transfer any
      of
      such holder's shares of Series A Preferred Stock, each transferee shall be
      allocated a pro rata portion of the number of reserved shares of Common Stock
      reserved for such transferor. Any shares of Common Stock reserved and which
      remain allocated to any person or entity which does not hold any shares of
      Series A Preferred Stock shall be allocated to the remaining holders of Series
      A
      Preferred Stock, pro rata based on the number of shares of Series A Preferred
      Stock then held by such holder. 

    

    (l)  Retirement
      of Series A Preferred Stock.
      Conversion of Series A Preferred Stock shall be deemed to have been effected
      on
      the Conversion Date. Upon conversion of only a portion of the number of shares
      of Series A Preferred Stock represented by a certificate surrendered for
      conversion, the Company shall issue and deliver to such holder at the expense
      of
      the Company, a new certificate covering the number of shares of Series A
      Preferred Stock representing the unconverted portion of the certificate so
      surrendered as required by Section 5(b)(ii).

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    

    (m)  Regulatory
      Compliance.
      If any
      shares of Common Stock to be reserved for the purpose of conversion of Series
      A
      Preferred Stock require registration or listing with or approval of any
      governmental authority, stock exchange or other regulatory body under any
      federal or state law or regulation or otherwise before such shares may be
      validly issued or delivered upon conversion, the Company shall, at its sole
      cost
      and expense, in good faith and as expeditiously as possible, endeavor to secure
      such registration, listing or approval, as the case may be.

    

    6.  No
      Preemptive Rights.
      Except
      as provided in Section 5 hereof and in the Purchase Agreement, no holder of
      the
      Series A Preferred Stock shall be entitled to rights to subscribe for, purchase
      or receive any part of any new or additional shares of any class, whether now
      or
      hereinafter authorized, or of bonds or debentures, or other evidences of
      indebtedness convertible into or exchangeable for shares of any class, but
      all
      such new or additional shares of any class, or any bond, debentures or other
      evidences of indebtedness convertible into or exchangeable for shares, may
      be
      issued and disposed of by the Board of Directors on such terms and for such
      consideration (to the extent permitted by law), and to such person or persons
      as
      the Board of Directors in their absolute discretion may deem
      advisable.

    

    7.  Conversion
      Restriction.
      Notwithstanding anything to the contrary set forth in Section 5 of this
      Certificate of Designation, at no time may a holder of shares of Series A
      Preferred Stock convert shares of the Series A Preferred Stock if the number
      of
      shares of Common Stock to be issued pursuant to such conversion would cause
      the
      number of shares of Common Stock owned by such holder at such time to exceed,
      when aggregated with all other shares of Common Stock owned by such holder
      at
      such time, the number of shares of Common Stock which would result in such
      holder beneficially owning (as determined in accordance with Section 13(d)
      of
      the Securities Exchange Act of 1934, as amended, and the rules thereunder)
      in
      excess of 9.9% of the then issued and outstanding shares of Common Stock
      outstanding at such time; provided,
      however,
      that
      upon a holder of Series A Preferred Stock providing the Company with sixty-one
      (61) days notice (pursuant to Section 5(i) hereof) (the "Waiver Notice") that
      such holder would like to waive Section 7 of this Certificate of Designation
      with regard to any or all shares of Common Stock issuable upon conversion of
      Series A Preferred Stock, this Section 7(a) shall be of no force or effect
      with
      regard to those shares of Series A Preferred Stock referenced in the Waiver
      Notice.

     

    8.  Redemption.

    

    (a)  Redemption
      Option Upon Major Transaction.
      In
      addition to all other rights of the holders of Series A Preferred Stock
      contained herein, simultaneous with the occurrence of a Major Transaction (as
      defined below), each holder of Series A Preferred Stock shall have the right,
      at
      such holder's option, to require the Company to redeem all or a portion of
      such
      holder's shares of Series A Preferred Stock at a price per share of Series
      A
      Preferred Stock equal to one hundred percent (100%) of the Liquidation
      Preference Amount, plus any accrued but unpaid dividends and liquidated damages
      (the "Major Transaction Redemption Price"); provided that the Company shall
      have
      the sole option to pay the Major Transaction Redemption Price in cash or shares
      of Common Stock. If the Company elects to pay the Major Transaction Redemption
      Price in shares of Common Stock, the price per share shall be based upon the
      Conversion Price then
      in
      effect on the day preceding the date of delivery of the Notice of Redemption
      at
      Option of Buyer Upon Major Transaction (as hereafter defined) and the holder
      of
      such shares of Common Stock shall have demand registration rights with respect
      to such shares. 

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    

    (b)   Redemption
      Option Upon Triggering Event.
      In
      addition to all other rights of the holders of Series A Preferred Stock
      contained herein, after a Triggering Event (as defined below), each holder
      of
      Series A Preferred Stock shall have the right, at such holder's option, to
      require the Company to redeem all or a portion of such holder's shares of Series
      A Preferred Stock at a price per share of Series A Preferred Stock equal to
      one
      hundred twenty percent (120%) of the Liquidation Preference Amount, plus any
      accrued but unpaid dividends and liquidated damages the "Triggering Event
      Redemption Price" and, collectively with the "Major Transaction Redemption
      Price," the "Redemption Price"); provided that with respect to the Triggering
      Events described in clauses (i), (ii), (iii) and (vii) of Section 8(d), the
      Company shall have the sole option to pay the Triggering Event Redemption Price
      in cash or shares of Common Stock; and provided, further, that with respect
      to
      the Triggering Event described in clauses (iv), (v) and (vi) of Section 8(d),
      the Company shall pay the Triggering Event Redemption Price in cash. If the
      Company elects to pay the Triggering Event Redemption Price in shares of Common
      Stock in accordance with this Section 8(b), the price per share shall be based
      upon the lesser of (i) the Conversion Price then in effect on the day preceding
      the date of delivery of the Notice of Redemption at Option of Buyer Upon
      Triggering Event or (ii) the Closing Bid Price on the day preceding the date
      of
      delivery of the Notice of Redemption at Option of Buyer Upon Triggering Event
      and the holder of such shares of Common Stock shall have demand registration
      rights with respect to such shares.

    

    (c)  "Major
      Transaction".
      A
      "Major Transaction" shall be deemed to have occurred at such time as any of
      the
      following events:

    

    (i)  the
      consolidation, merger or other business combination of the Company with or
      into
      another Person (other than (A) pursuant to a migratory merger effected solely
      for the purpose of changing the jurisdiction of incorporation of the Company
      or
      (B) a consolidation, merger or other business combination in which holders
      of
      the Company's voting power immediately prior to the transaction continue after
      the transaction to hold, directly or indirectly, the voting power of the
      surviving entity or entities necessary to elect a majority of the members of
      the
      board of directors (or their equivalent if other than a corporation) of such
      entity or entities).

    

    (ii)  the
      sale
      or transfer of more than 50% of the Company's assets other than inventory in
      the
      ordinary course of business in one or a related series of transactions;
      or

    

    (iii)  closing
      of a purchase, tender or exchange offer made to the holders of more than fifty
      percent (50%) of the outstanding shares of Common Stock in which more than
      fifty
      percent (50%) of the outstanding shares of Common Stock were tendered and
      accepted.

     

    
      
        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    

    (d)  "Triggering
      Event".
      A
      "Triggering Event" shall be deemed to have occurred at such time as any of
      the
      following events:

    

    (i)  so
      long
      as any shares of Series A Preferred Stock are outstanding, the effectiveness
      of
      the Registration Statement, after it becomes effective, (i) lapses for any
      reason (including, without limitation, the issuance of a stop order) and such
      lapse continues for a period of twenty (20) consecutive trading days, or (ii)
      is
      unavailable to the holder of the Series A Preferred Stock for sale of the shares
      of Common Stock, and such lapse or unavailability continues for a period of
      twenty (20) consecutive trading days, and the shares of Common Stock into which
      such holder's Series A Preferred Stock can be converted cannot be sold in the
      public securities market pursuant to Rule 144(k) (“Rule 144(k)”) under the
      Securities Act of 1933, as amended, provided
      that the
      cause of such lapse or unavailability is not due to factors solely within the
      control of such holder of Series A Preferred Stock; or

    

    (ii)  the
      suspension from listing or trading, without subsequent listing on any one of,
      or
      the failure of the Common Stock to be listed or traded on at least one of,
      the
      OTC Bulletin Board, the Nasdaq National Market, the Nasdaq Capital Market,
      the
      New York Stock Exchange, Inc. or the American Stock Exchange, Inc., for a period
      of five (5) consecutive trading days; or

    

    (iii)  the
      Company's notice to any holder of Series A Preferred Stock, including by way
      of
      public announcement, at any time, of its inability to comply (including for
      any
      of the reasons described in Section 9) or its intention not to comply with
      proper requests for conversion of any Series A Preferred Stock into shares
      of
      Common Stock; or

    

    (iv)  the
      Company's failure to comply with a Conversion Notice tendered in accordance
      with
      the provisions of this Certificate of Designation within ten (10) business
      days
      after the receipt by the Company of the Conversion Notice and the Preferred
      Stock Certificates; or

     

    (v)  the
      Company deregisters its shares of Common Stock and as a result such shares
      of
      Common Stock are no longer publicly traded; or

    

    (vi)  the
      Company consummates a “going private” transaction and as a result the Common
      Stock is no longer registered under Sections 12(b) or 12(g) of the Securities
      Exchange Act of 1934, as amended; or

    

    (vii)  the
      Company breaches any representation, warranty, covenant or other term or
      condition of the Purchase Agreement, this Certificate of Designation or any
      other agreement, document, certificate or other instrument delivered in
      connection with the transactions contemplated thereby or hereby, except to
      the
      extent that such breach would not have a Material Adverse Effect (as defined
      in
      the Purchase Agreement) and except, in the case of a breach of a covenant which
      is curable, only if such breach continues for a period of a least ten (10)
      business days.

     

    
      
        
        

      

      
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    (e)  Mechanics
      of Redemption at Option of Buyer Upon Major Transaction.
      No
      sooner than fifteen (15) days nor later than ten (10) days prior to the
      consummation of a Major Transaction, but not prior to the public announcement
      of
      such Major Transaction, the Company shall deliver written notice thereof via
      facsimile and overnight courier ("Notice of Major Transaction") to each holder
      of Series A Preferred Stock. At any time after receipt of a Notice of Major
      Transaction (or, in the event a Notice of Major Transaction is not delivered
      at
      least ten (10) days prior to a Major Transaction, at any time within ten (10)
      days prior to a Major Transaction), any holder of Series A Preferred Stock
      then
      outstanding may require the Company to redeem, effective immediately prior
      to
      the consummation of such Major Transaction, all of the holder's Series A
      Preferred Stock then outstanding by delivering written notice thereof via
      facsimile and overnight courier ("Notice of Redemption at Option of Buyer Upon
      Major Transaction") to the Company, which Notice of Redemption at Option of
      Buyer Upon Major Transaction shall indicate (i) the number of shares of Series
      A
      Preferred Stock that such holder is electing to redeem and (ii) the applicable
      Major Transaction Redemption Price, as calculated pursuant to Section 8(a)
      above.

    

    (f)  Mechanics
      of Redemption at Option of Buyer Upon Triggering Event.
      Within
      one (1) business day after the Company obtains knowledge of the occurrence
      of a
      Triggering Event, the Company shall deliver written notice thereof via facsimile
      and overnight courier ("Notice of Triggering Event") to each holder of Series
      A
      Preferred Stock. At any time after the earlier of a holder's receipt of a Notice
      of Triggering Event and such holder becoming aware of a Triggering Event, any
      holder of Series A Preferred Stock then outstanding may require the Company
      to
      redeem all of the Series A Preferred Stock by delivering written notice thereof
      via facsimile and overnight courier ("Notice of Redemption at Option of Buyer
      Upon Triggering Event") to the Company, which Notice of Redemption at Option
      of
      Buyer Upon Triggering Event shall indicate (i) the number of shares of Series
      A
      Preferred Stock that such holder is electing to redeem and (ii) the applicable
      Triggering Event Redemption Price, as calculated pursuant to Section 8(b) above.
      

    

    (g)  Payment
      of Redemption Price.
      Upon
      the Company's receipt of a Notice(s) of Redemption at Option of Buyer Upon
      Triggering Event or a Notice(s) of Redemption at Option of Buyer Upon Major
      Transaction from any holder of Series A Preferred Stock, the Company shall
      immediately notify such holder of Series A Preferred Stock by facsimile of
      the
      Company's receipt of such Notice(s) of Redemption at Option of Buyer Upon
      Triggering Event or Notice(s) of Redemption at Option of Buyer Upon Major
      Transaction and each holder which has sent such a notice shall promptly submit
      to the Company such holder's Preferred Stock Certificates which such holder
      has
      elected to have redeemed. Other than with respect to the Triggering Event
      described in clause (iv) of Section 8(d), the Company shall have the sole option
      to pay the Redemption Price in cash or shares of Common Stock in accordance
      with
      Sections 8(a) and (b) and Section 9 of this Certificate of Designation. The
      Company shall deliver the applicable Major Transaction Redemption Price
      immediately prior to the consummation of the Major Transaction; provided
      that a
      holder's Preferred Stock Certificates shall have been so delivered to the
      Company; provided further
      that if
      the Company is unable to redeem all of the Series A Preferred Stock to be
      redeemed, the Company shall redeem an amount from each holder of Series A
      Preferred Stock being redeemed equal to such holder's pro-rata amount (based
      on
      the number of shares of Series A Preferred Stock held by such holder relative
      to
      the number of shares of Series A Preferred Stock outstanding) of all Series
      A
      Preferred Stock being redeemed. If the Company shall fail to redeem all of
      the
      Series A Preferred Stock submitted for redemption (other than pursuant to a
      dispute as to the arithmetic calculation of the Redemption Price), in addition
      to any remedy such holder of Series A Preferred Stock may have under this
      Certificate of Designation and the Purchase Agreement, the applicable Redemption
      Price payable in respect of such unredeemed Series A Preferred Stock shall
      bear
      interest at the rate of 1.0% per month (prorated for partial months) until
      paid
      in full. Until the Company pays such unpaid applicable Redemption Price in
      full
      to a holder of shares of Series A Preferred Stock submitted for redemption,
      such
      holder shall have the option (the "Void Optional Redemption Option") to, in
      lieu
      of redemption, require the Company to promptly return to such holder(s) all
      of
      the shares of Series A Preferred Stock that were submitted for redemption by
      such holder(s) under this Section 8 and for which the applicable Redemption
      Price has not been paid, by sending written notice thereof to the Company via
      facsimile (the "Void Optional Redemption Notice"). Upon the Company's receipt
      of
      such Void Optional Redemption Notice(s) and prior to payment of the full
      applicable Redemption Price to such holder, (i) the Notice(s) of Redemption
      at
      Option of Buyer Upon Major Transaction or Notice(s) of Redemption at Option
      of
      Buyer Upon Triggering Event (as applicable) shall be null and void with respect
      to those shares of Series A Preferred Stock submitted for redemption and for
      which the applicable Redemption Price has not been paid and (ii) the Company
      shall immediately return any Series A Preferred Stock submitted to the Company
      by each holder for redemption under this Section 8(d) and for which the
      applicable Redemption Price has not been paid and (iii) the Conversion Price
      of
      such returned shares of Series A Preferred Stock shall be adjusted to the lesser
      of (A) the Conversion Price and (B) the lowest Closing Bid Price during the
      period beginning on the date on which the Notice(s) of Redemption of Option
      of
      Buyer Upon Major Transaction or Notice(s) of Redemption of Option of Buyer
      Upon
      Triggering Event is delivered to the Company and ending on the date on which
      the
      Void Optional Redemption Notice(s) is delivered to the Company; provided
      that no
      adjustment shall be made if such adjustment would result in an increase of
      the
      Conversion Price then in effect; provided
      that no
      adjustment shall be made if such adjustment would result in an increase of
      the
      Conversion Price then in effect. A holder's delivery of a Void Optional
      Redemption Notice and exercise of its rights following such notice shall not
      effect the Company's obligations to make any payments which have accrued prior
      to the date of such notice other than interest payments. Payments provided
      for
      in this Section 8 shall have priority to payments to other stockholders in
      connection with a Major Transaction. 

     

    
      
        
        

      

      
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    (h)  Demand
      Registration Rights.
      If the
      Redemption Price upon the occurrence of a Major Transaction or a Triggering
      Event is paid in shares of Common Stock and such shares have not been previously
      registered on a registration statement under the Securities Act, a holder of
      Series A Preferred Stock may make a written request for registration under
      the
      Securities Act pursuant to this Section 8(h) of all of its shares of Common
      Stock issued upon such Major Transaction or Triggering Event. The Company shall
      use its reasonable best efforts to cause to be filed and declared effective
      as
      soon as reasonably practicable (but in no event later than the ninetieth
      (90th)
      day
      after such holder’s request is made) a registration statement under the
      Securities Act, providing for the sale of all of the shares of Common Stock
      issued upon such Major Transaction or Triggering Event by such holder. The
      Company agrees to use its reasonable best efforts to keep any such registration
      statement continuously effective for resale of the Common Stock for so long
      as
      such holder shall request, but in no event shall the Company be required to
      maintain the effectiveness of such registration statement later than the date
      that the shares of Common Stock issued upon such Major Transaction or Triggering
      Event may be offered for resale to the public pursuant to Rule
      144(k).

     

    
      
        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    

    9.  Inability
      to Fully Convert.

    

    (a)  Holder's
      Option if Company Cannot Fully Convert.
      If,
      upon the Company's receipt of a Conversion Notice or on the Mandatory Conversion
      Date, the Company cannot issue shares of Common Stock registered for resale
      under the Registration Statement for any reason, including, without limitation,
      because the Company (w) does not have a sufficient number of shares of Common
      Stock authorized and available, (x) is otherwise prohibited by applicable law
      or
      by the rules or regulations of any stock exchange, interdealer quotation system
      or other self-regulatory organization with jurisdiction over the Company or
      its
      securities from issuing all of the Common Stock which is to be issued to a
      holder of Series A Preferred Stock pursuant to a Conversion Notice or (y)
      subsequent to the effective date of the Registration Statement, fails to have
      a
      sufficient number of shares of Common Stock registered for resale under the
      Registration Statement, then the Company shall issue as many shares of Common
      Stock as it is able to issue in accordance with such holder's Conversion Notice
      and pursuant to Section 5(b)(ii) above and, with respect to the unconverted
      Series A Preferred Stock, the holder, solely at such holder's option, can elect,
      within five (5) business days after receipt of notice from the Company thereof
      to:

    

    (i)  require
      the Company to redeem from such holder those Series A Preferred Stock for which
      the Company is unable to issue Common Stock in accordance with such holder's
      Conversion Notice ("Mandatory Redemption") at a price per share equal to the
      Major Transaction Redemption Price as of such Conversion Date (the "Mandatory
      Redemption Price"); provided that the Company shall have the sole option to
      pay
      the Mandatory Redemption Price in cash or, subject to Section 7 hereof, shares
      of Common Stock;

    

    (ii)  if
      the
      Company's inability to fully convert Series A Preferred Stock is pursuant to
      Section 9(a)(y) above, require the Company to issue restricted shares of Common
      Stock in accordance with such holder's Conversion Notice and pursuant to Section
      5(b)(ii) above;

    

    (iii)  void
      its
      Conversion Notice and retain or have returned, as the case may be, the shares
      of
      Series A Preferred Stock that were to be converted pursuant to such holder's
      Conversion Notice (provided that a holder's voiding its Conversion Notice shall
      not effect the Company's obligations to make any payments which have accrued
      prior to the date of such notice); or

    

    (iv)  exercise
      its Buy-In rights pursuant to and in accordance with the terms and provisions
      of
      Section 5(b)(vi) hereof.

     

    
      
        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    

    (b)  Mechanics
      of Fulfilling Holder's Election.
      The
      Company shall immediately send via facsimile or overnight courier to a holder
      of
      Series A Preferred Stock, upon receipt of an original or facsimile copy of
      a
      Conversion Notice from such holder which cannot be fully satisfied as described
      in Section 9(a) above, a notice of the Company's inability to fully satisfy
      such
      holder's Conversion Notice (the "Inability to Fully Convert Notice"). Such
      Inability to Fully Convert Notice shall indicate (i) the reason why the Company
      is unable to fully satisfy such holder's Conversion Notice, (ii) the number
      of
      Series A Preferred Stock which cannot be converted and (iii) the applicable
      Mandatory Redemption Price. Such holder shall notify the Company of its election
      pursuant to Section 9(a) above by delivering written notice via facsimile to
      the
      Company ("Notice in Response to Inability to Convert").

    

    (c)  Payment
      of Redemption Price.
      If such
      holder shall elect to have its shares redeemed pursuant to Section 9(a)(i)
      above, the Company shall pay the Mandatory Redemption Price to such holder
      within thirty (30) days of the Company's receipt of the holder's Notice in
      Response to Inability to Convert, provided
      that
      prior to the Company's receipt of the holder's Notice in Response to Inability
      to Convert the Company has not delivered a notice to such holder stating, to
      the
      satisfaction of the holder, that the event or condition resulting in the
      Mandatory Redemption has been cured and all Conversion Shares issuable to such
      holder can and will be delivered to the holder in accordance with the terms
      of
      Section 2(g). If the Company shall fail to pay the applicable Mandatory
      Redemption Price to such holder on a timely basis as described in this Section
      9(c) (other than pursuant to a dispute as to the determination of the arithmetic
      calculation of the Redemption Price), in addition to any remedy such holder
      of
      Series A Preferred Stock may have under this Certificate of Designation and
      the
      Purchase Agreement, such unpaid amount shall bear interest at the rate of 2.0%
      per month (prorated for partial months) until paid in full. Until the full
      Mandatory Redemption Price is paid in full to such holder, such holder may
      (i)
      void the Mandatory Redemption with respect to those Series A Preferred Stock
      for
      which the full Mandatory Redemption Price has not been paid, (ii) receive back
      such Series A Preferred Stock, and (iii) require that the Conversion Price
      of
      such returned Series A Preferred Stock be adjusted to the lesser of (A) the
      Conversion Price and (B) the lowest Closing Bid Price during the period
      beginning on the Conversion Date and ending on the date the holder voided the
      Mandatory Redemption. 

    

    (d)  Pro-rata
      Conversion and Redemption.
      In the
      event the Company receives a Conversion Notice from more than one holder of
      Series A Preferred Stock on the same day and the Company can convert and redeem
      some, but not all, of the Series A Preferred Stock pursuant to this Section
      9,
      the Company shall convert and redeem from each holder of Series A Preferred
      Stock electing to have Series A Preferred Stock converted and redeemed at such
      time an amount equal to such holder's pro-rata amount (based on the number
      shares of Series A Preferred Stock held by such holder relative to the number
      shares of Series A Preferred Stock outstanding) of all shares of Series A
      Preferred Stock being converted and redeemed at such time.

    

    10.  Vote
      to Change the Terms of or Issue Preferred Stock.
      The
      affirmative vote at a meeting duly called for such purpose or the written
      consent without a meeting, of the holders of not less than seventy-five percent
      (75%) of the then outstanding shares of Series A Preferred Stock (in addition
      to
      any other corporate approvals then required to effect such action), shall be
      required (a) for any change to this Certificate of Designation or the Company's
      Articles of Incorporation which would amend, alter, change or repeal any of
      the
      powers, designations, preferences and rights of the Series A Preferred Stock
      or
      (b) for the issuance of shares of Series A Preferred Stock other than pursuant
      to the Purchase Agreement.

     

    
      
        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    

    11.  Lost
      or Stolen Certificates.
      Upon
      receipt by the Company of evidence satisfactory to the Company of the loss,
      theft, destruction or mutilation of any Preferred Stock Certificates
      representing the shares of Series A Preferred Stock, and, in the case of loss,
      theft or destruction, of any indemnification undertaking by the holder to the
      Company and, in the case of mutilation, upon surrender and cancellation of
      the
      Preferred Stock Certificate(s), the Company shall execute and deliver new
      preferred stock certificate(s) of like tenor and date; provided,
      however,
      that
      the Company shall not be obligated to re-issue Preferred Stock Certificates
      if
      the holder contemporaneously requests the Company to convert such shares of
      Series A Preferred Stock into Common Stock.

    

    12.  Remedies,
      Characterizations, Other Obligations, Breaches and Injunctive Relief.
      The
      remedies provided in this Certificate of Designation shall be cumulative and
      in
      addition to all other remedies available under this Certificate of Designation,
      at law or in equity (including a decree of specific performance and/or other
      injunctive relief), no remedy contained herein shall be deemed a waiver of
      compliance with the provisions giving rise to such remedy and nothing herein
      shall limit a holder's right to pursue actual damages for any failure by the
      Company to comply with the terms of this Certificate of Designation. Amounts
      set
      forth or provided for herein with respect to payments, conversion and the like
      (and the computation thereof) shall be the amounts to be received by the holder
      thereof and shall not, except as expressly provided herein, be subject to any
      other obligation of the Company (or the performance thereof). The Company
      acknowledges that a breach by it of its obligations hereunder will cause
      irreparable harm to the holders of the Series A Preferred Stock and that the
      remedy at law for any such breach may be inadequate. The Company therefore
      agrees that, in the event of any such breach or threatened breach, the holders
      of the Series A Preferred Stock shall be entitled, in addition to all other
      available remedies, to an injunction restraining any breach, without the
      necessity of showing economic loss and without any bond or other security being
      required.

    

    13.  Specific
      Shall Not Limit General; Construction.
      No
      specific provision contained in this Certificate of Designation shall limit
      or
      modify any more general provision contained herein. This Certificate of
      Designation shall be deemed to be jointly drafted by the Company and all initial
      purchasers of the Series A Preferred Stock and shall not be construed against
      any person as the drafter hereof.

    

    14.  Failure
      or Indulgence Not Waiver.
      No
      failure or delay on the part of a holder of Series A Preferred Stock in the
      exercise of any power, right or privilege hereunder shall operate as a waiver
      thereof, nor shall any single or partial exercise of any such power, right
      or
      privilege preclude other or further exercise thereof or of any other right,
      power or privilege.

     

    
      
        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the undersigned has executed and subscribed this Certificate
      and does affirm the foregoing as true this 7 day of February, 2007.

    

    
      	 	 	 
	 	
              UNITED
                NATIONAL FILM CORPORATION

            
	 
 	 
 	 
 
	
            	By:  	/s/ Xu
              Jie
	 	
              

              Name:
                Xu Jie

            
	 	
              Title:
                President and Chief Executive
                Officer

            

    
      
        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

     

    
      EXHIBIT
        I

      

      UNITED
        NATIONAL FILM CORPORATION

      CONVERSION
        NOTICE

      

      Reference
        is made to the Certificate of Designation of the Relative Rights and Preferences
        of the Series A Preferred Stock of United National Film Corporation (the
        "Certificate of Designation"). In accordance with and pursuant to the
        Certificate of Designation, the undersigned hereby elects to convert the
        number
        of shares of Series A Preferred Stock, par value $0.0001 per share (the
        "Preferred Shares"), of United National Film Corporation, a Nevada corporation
        (the "Company"), indicated below into shares of Common Stock, par value $0.0001
        per share (the "Common Stock"), of the Company, by tendering the stock
        certificate(s) representing the share(s) of Preferred Shares specified below
        as
        of the date specified below.

      

      Date
        of
        Conversion:                  ____________________________________

      

      Number
        of
        Preferred Shares to be converted: __________

      

      Stock
        certificate no(s). of Preferred Shares to be converted: _______

      

      The
        Common Stock have been sold pursuant to the Registration Statement: YES
        ____     NO_____

      

      Please
        confirm the following information:

      

      Conversion
        Price:                  
____________________________________

      

      Number
        of
        shares of Common Stock

      to
        be
        issued:                      ____________________________________

      

      Number
        of
        shares of Common Stock beneficially owned or deemed beneficially owned by
        the
        Holder on the Date of Conversion: __________________

      

      Please
        issue the Common Stock into which the Preferred Shares are being converted
        and,
        if applicable, any check drawn on an account of the Company in the following
        name and to the following address:

       

      
        	
                Issue
                  to: 

              	 	
                 

                
                  

                

                

              
	
                Facsimile
                  Number: 

                 

                
                  Authorization: 

                

              	 
 	
                 

                
                  

                

                 

              
	
              	
              	
                
By:

	 	
                
                  

                

                Title:
                  

              
	 	
                
                  
 

              
	
                Dated:

              	 

      

       

      
        
          
          

        

      
          -25-

          
            

          

        

        
          
          

        

      

       

       

    

    ROSS
      MILLER

    Secretary
      of State

    204
      North
      Carson Street, Ste 1

    Carson
      City, Nevada 89701-4299

    (775)
      884-5708

    Website:
      secretaryofstate.biz

     

    Certificate
      of Correction

    (PURSUANT
      TO NRS 78, 78A, 80, 81 

    82,
      84,
      86, 87, 88, 88A, 89 AND 92A)

     

    
      	USE BLACK INK ONLY -DO NOT
              HIGHLIGHT 	 	
              ABOVE
                SPACE IS FOR OFFICE USE ONLY

            

    

     

    Certificate
      of Correction

     

    (PURSUANT
      TO NRS 78,78A, 80, 81, 82, 86, 87, 88, 88A and 92A)

     

    1.
      The
      name of the entity for which correction is being made: 

     

    United
      National Film Corporation

     

    2.
      Description of the original document for which correction is being
      made:

     

    Certificate
      of Designation (Document No. 20070089530-34)

     

    3.
      Filing
      date of the original document for which correction is being made:

     

    February
      7, 2007

     

    4.
      Description of the inaccuracy or defect.

     

    The
      Certificate of designation for Series A Convertible Preferred Stock, as filed
      on
      February 7, 2007 (the "Certificate
      of Designation"), inaccurately stated the number of shares of preferred stock,
      $.0001 par value, to be designated as Series A Convertible Preferred Stock,
      $.0001 par value. Whereas the Certificate of Designation, as filed,
      designated 9,500,000 shares of preferred stock, $.0001 par value, as Series
      A
      Convertible Preferred Stock, $.0001
      par value, the Certificate of Designation should have designed 10,500,000 shares
      of preferred stock, $.0001 par
      value, as Series A Convertible Preferred Stock, $.0001 par value.

     

    5.
      Correction of the inaccuracy or defect.

     

    The
      Certificate of Designation shall be corrected to reflect the designation by
      resolution of the Board of Directors of United National Film Corporation, of
      10,500,00 shares of the 50,000,000 authorized shares of preferred stock, $.0001
      par value, as Series A Convertible Preferred Stock, $.0001 par value, where
      such
      Series A Convertible Preferred Stock, $.0001 par value, shall have the powers,
      designations, preferences, limitation, restrictions and relative rights as
      set
      forth in the Certificate of Designation.

     

    6.
      Signature:

     

    
      	X
              /s/ Xu Jie 	 	President
              and Chief Executive Officer	 	2/7/07
	Authorized
              Signature	 	Title* 	 	Date

    

     

    *If
      entity is a Corporation, it must be signed by an Officer if stock has been
      issued, OR an incorporator or Director if stock has not been issued; a
      Limited-Liability Company, by a manager or managing members; a Limited
      Partnership or Limited-Liability Limited Partnership, by a General Partner;
      a
      Limited-Liability Partnership, by a Managing Partner; a Business Trust, by
      a
      Trustee.

     

    IMPORTANT:
      Failure
      to include any of the above information and submit the proper fees may cause
      this filing to be rejected.

     

    
      	This form must be
              accompanied
              by appropriate fees. 	 	
              Nevada
                Secretary of State AM Correction 2007

              Revised
                on 01/01/07

            

    

     

    
      
        
        

      

      
        -26-

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