Document:

AGREEMENT
      AND PLAN OF MERGER

    

    BY
      AND AMONG

    

    IEC
      Electronics Corp.,

    

    VUT
      Merger Corp.

    

    and

    

    Val-U-Tech
      Corp.

    

    Dated
      as of May 23, 2008

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    AGREEMENT
      AND PLAN OF MERGER

    

    This
      AGREEMENT
      AND PLAN OF MERGER,
      dated
      as of May 23, 2008 (this “Agreement”),
      is
      entered into by and among IEC Electronics Corp., a corporation organized under
      the laws of the State of Delaware (“Parent”),
      VUT
      Merger Corp., a corporation organized under the laws of the State of New York
      (“Merger
      Sub”),
      Val-U-Tech Corp., a corporation organized under the laws of the State of New
      York (“Company”)
      and
      Kathleen Brudek, Michael Brudek and Nicholas Vaseliv (each, a “Company
      Shareholder”
and,
      together, the “Company
      Shareholders”)
      (“Parent,” “Merger Sub”, “Company” and the “Company Shareholders” individually
      hereinafter referred to as “Party”
and
      collectively hereinafter referred to as the “Parties”);

     

    WHEREAS,
      Merger
      Sub, upon the terms and subject to the conditions of this Agreement and in
      accordance with the New York Business Corporation Law (“NYBCL”),
      will
      merge with and into Company (the “Merger”);

     

    WHEREAS,
      the
      board of directors of Company has (i) determined that the Merger is
      advisable and fair to the holders of Company Common Stock (as defined in
      Section 3.04) and is in the best interests of such shareholders,
      (ii) advised, authorized, approved and adopted this Agreement and the
      transactions contemplated hereby and (iii) recommended approval and
      adoption of this Agreement by the shareholders of Company (the “Company
      Shareholders”);

     

    WHEREAS,
      Company
      Shareholders have advised, authorized, approved and adopted this Agreement
      and
      the transactions contemplated hereby; and

     

    WHEREAS,
      the
      Board of Directors of Parent has determined that the Merger is advisable and
      in
      the best interests of Parent and its shareholders and the boards of directors
      of
      Parent and Merger Sub and the sole shareholder of Merger Sub have advised,
      authorized, approved and adopted this Agreement and the transactions
      contemplated hereby.

     

    NOW,
      THEREFORE,
      in
      consideration of the foregoing and the respective representations, warranties,
      covenants and agreements set forth in this Agreement, and intending to be
      legally bound hereby, the Parties agree as follows.

     

    ARTICLE
      I

     

    THE
      MERGER

     

    SECTION
      1.01 The Merger

     

    Upon
      the
      terms and subject to the conditions set forth in this Agreement, and in
      accordance with the NYBCL, at the Effective Time (as defined in
      Section 1.02) Merger Sub shall be merged with and into Company, with
      Company being the surviving corporation (hereinafter sometimes called
“Surviving
      Corporation”)
      in the
      Merger. Upon consummation of the Merger, the separate corporate existence of
      Merger Sub shall cease, and Surviving Corporation shall continue to exist as
      a
      New York corporation.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECTION
      1.02 Closing Date; Effective Time

     

    (a) Subject
      to the terms and conditions of this Agreement, including the satisfaction or,
      if
      permissible, waiver of the conditions set forth in Article VII of this
      Agreement, the closing of the Merger (the “Closing”
and
      the
      date of such Closing, the “Closing
      Date”)
      will
      take place on May 29, 2008, at 10:00 a.m. local time at the offices of Boylan,
      Brown, Code, Vigdor & Wilson, LLP, 2400 Chase Square, Rochester, New York,
      unless another date or place is agreed to in writing by the Parties

     

    (b) The
      Parties shall cause the Merger to be consummated on the Closing Date by filing
      the Certificate of Merger, in the form attached hereto as Exhibit
      A
      (the
“Certificate
      of Merger”)
      and
      any other appropriate documents with the New York Department of State, in such
      form as required by, and executed in accordance with the relevant provisions
      of,
      the NYBCL (the date and time of such filing being the “Effective
      Time”).

     

    SECTION
      1.03 Effect of the Merger

     

    At
      the
      Effective Time, the effect of the Merger shall be as provided in the applicable
      provisions of the NYBCL. Without limiting the generality of the foregoing,
      and
      subject thereto, at the Effective Time, all the property, rights, privileges,
      powers and franchises of Company and Merger Sub shall vest in Surviving
      Corporation, and all debts, liabilities and duties of Company and Merger Sub
      shall become the debts, liabilities and duties of Surviving
      Corporation.

     

    SECTION
      1.04 Certificate of Incorporation; Bylaws

     

    (a) Unless
      otherwise determined by Parent prior to the Effective Time, at the Effective
      Time, the certificate of incorporation of Company shall be the certificate
      of
      incorporation of Surviving Corporation until thereafter amended as provided
      by
      Law and such certificate of incorporation, except that Company’s certificate of
      incorporation shall be amended and restated at the Effective Time to have the
      same form and substance as the certificate of incorporation of Merger Sub except
      that the name of the Surviving Corporation shall be Val-U-Tech
      Corp.

     

    (b) Unless
      otherwise determined by Parent prior to the Effective Time, at the Effective
      Time, the bylaws of Merger Sub shall continue unchanged and shall be the bylaws
      of Surviving Corporation until thereafter amended as provided by Law, the
      certificate of incorporation of Surviving Corporation and such
      bylaws.

     

    SECTION
      1.05 Directors and Officers

     

    At
      the
      Effective Time, the initial officers and directors of Surviving Corporation
      shall be the persons listed on Exhibit
      B,
      each to
      hold office in accordance with the certificate of incorporation and bylaws
      of
      Surviving Corporation, in each case until their respective successors are duly
      elected or appointed and qualified. 

     

    
      
        
        

      

      
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    SECTION
      1.06 Classes and Series

     

    As
      to
      Company and Merger Sub, the designation and number of outstanding shares of
      each
      class and series, the specification of the classes and series entitled to vote
      on this Agreement, and the specification of each class and series entitled
      to
      vote as a class on this Agreement, is as follows: 

     

    (a) Company:

     

    
      
        	
                Designation of 

              	
                Number of 

              	
                Designation 

              	
                Classes and

              
	
                each outstand- 

              	
                outstanding

              	
                of class and

              	
                series enti-

              
	
                ing class and

              	
                shares of

              	
                series enti-

              	
                tled to vote

              
	
                series of shares

              	
                each class

              	
                tled to vote

              	
                as a class

              

      

      
        	
                Common Stock

              	
                100

              	
                Common
                  Stock

              	
                Common Stock

              

      

    

    

    (b) Merger Sub:

     

    
      
        	
                Designation of 

              	
                Number of 

              	
                Designation

              	
                Classes and

              
	
                each outstand- 

              	
                outstanding 

              	
                of class and

              	
                series enti-

              
	
                ing class and 

              	
                shares of

              	
                series enti-

              	
                tled to vote

              
	
                series of shares

              	
                each class

              	
                tled to vote

              	
                as a class

              

      

      
        	
                Common Stock

              	
                100

              	
                Common Stock

              	
                Common Stock

              

      

    

     

    ARTICLE II

     

    CONVERSION OF SECURITIES; EXCHANGE OF
      CERTIFICATES

     

    SECTION
      2.01 The Merger

     

    At
      the
      Effective Time, by virtue of the Merger and without any action on the part
      of
      Parent, Merger Sub, Company or the holders of any of the securities referred
      to
      in this Section 2.01:

     

    (a) Common
      Stock.
      

     

    (i) Subject
      to Section 2.01(a)(ii), each share of Company Common Stock (excluding any shares
      described in Section 2.01(b)) issued and outstanding immediately prior to
      the Effective Time shall cease to be outstanding and shall be converted into
      and
      exchanged for the right to receive the same proportion of (a) (1) Five Million
      Five Hundred Thousand Dollars (US$5,500,000) (the “Cash
      Purchase Price”),
      (2)
      Five Hundred Thousand (500,000) shares of common stock, par value $0.01, of
      Parent, (“Parent
      Common Stock”),
      and
      (3) "Purchase Notes" (as that term is hereinafter defined) that is (b) in the
      same as proportion as such share of Company Common Stock is of all shares of
      Company Common Stock outstanding on the Closing Date. The Purchase Notes shall
      be in the form of Exhibit 2.01(a)(i) (hereinafter collectively referred to
      as
      "Purchase Notes" and individually referred to as "Purchase Note") and shall
      be
      in an aggregate principal amount equal to (x) 4,500,000, less (y) $1,050,000,
      (c) subject to adjustment as provided herein. The shares of Parent Common Stock
      issuable to the holders of Company Common Stock pursuant hereto, the Cash
      Purchase Price and the Purchase Notes, together with the amount of cash in
      lieu
      of fractional shares of Parent Common Stock payable pursuant to
      Section 2.01(e), are sometimes referred to herein, collectively, as the
“Merger
      Consideration”.
      All
      such shares of Company Common Stock shall cease to be outstanding and shall
      automatically be canceled and retired and shall cease to exist, and each
      certificate previously evidencing any such shares shall thereafter represent
      only the right to receive the Merger Consideration. Except as otherwise provided
      herein or by applicable law, the holders of certificates previously evidencing
      such shares of Company Common Stock outstanding immediately prior to the
      Effective Time shall cease to have any rights with respect to such shares of
      Company Common Stock. Each such certificate previously evidencing such shares
      of
      Company Common Stock shall be exchanged for the Merger Consideration applicable
      thereto.

     

    
      
        
        

      

      
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    (ii) The
      Purchase Price and the Purchase Notes shall be increased or decreased, as the
      case may be, in accordance with the following

     

    (a) The
      Purchase Price and the Purchase Notes will be increased by one-half of the
      amount by which, as of the Closing Date, the following are greater than, or
      decreased by one-half of the amount by which the following are less than (as
      the
      case may be), the amounts shown on the Balance Sheet of the Company as of
      December 31, 2007 as audited by Rotenberg & Co. attached to this Agreement
      as Exhibit 2.01(a)(ii) (the “Company
      Balance Sheet”):

     

    i. cash
      and
      cash equivalents; 

     

    ii. net
      inventory, which shall not include any inventory that is (x) more than one
      (1)
      year old, (y) damaged or (z) not useable or saleable in the ordinary course
      of
      the Company’s business within one (1) year after the Closing Date;
      and

     

    iii. accounts
      receivable, which shall not include any account receivable as to which the
      Company has received any notice of dispute, whether verbal or written, or which
      is more than ninety (90) days old as of the Closing Date;

     

    (b) The
      Purchase Price and the Purchase Notes will be decreased by one-half of the
      amount by which, as of the Closing Date, the following are greater than, or
      increased by one-half of the amount by which the following are less than (as
      the
      case may be), the amounts shown on the Company Balance Sheet:

     

    i. accounts
      payable;

     

    ii. accrued
      payroll and vacation; and

     

    iii. other
      current liabilities.

     

    
      
        
        

      

      
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    (c) The
      Purchase Price and the Purchase Notes will be decreased by the amount of any
      liabilities as of the Closing Date that are not shown on the Company Balance
      Sheet.

     

    (iii) The
      Purchase Price and the Purchase Notes shall be increased by one-half of the
      amount by which the Company’s revenues from sales of its products and services
      in the ordinary course of its business for the calendar year 2008 (determined
      in
      accordance with Subsection 2.01(a)(vii)) exceed $18,000,000.

     

    (iv) The
      Purchase Price and the Purchase Notes shall be decreased (but not by more than
      the amount of the Purchase Notes, after adjustment as provided elsewhere in
      this
      Agreement) by the amount, if any, by which the Company’s revenues from sales of
      its products and services in the ordinary course of its business for the
      calendar year 2008 (determined in accordance with Subsection 2.01(a) (vii))
      are
      less than $14,000,000.

     

    (v) If
      sales
      by the Company to Harris Corporation of products and services for the calendar
      year 2009 are less than $5,500,000, then the Purchase Price and the Purchase
      Notes shall be reduced by one-half of (a) $5,500,000 less sales of products
      and
      services to Harris Corporation during the calendar year 2009, less (b) the
      amount, if any, by which all of the Company’s revenues from sales of its
      products and services in the ordinary course of its business for the calendar
      year 2009 (excluding the amount of its sales to Harris Corporation, ASML, ViaSat
      and Telephonics) exceed $7,100,000.

     

    As
      an
      example of the application of the foregoing formula, assume:

     

    
      	
               

            	
              (x)
                the Company’s sales to Harris Corporation for the calendar year 2009 are
                $4,000,000 and 

            

    

     

    (y)
      the
      Company’ total sales for the calendar year 2009 (other than sales to Harris
      Corporation, ASML, ViaSat and Telephonics) are $8,100,000

     

    Applying
      the foregoing, the Purchase Price and the Purchase Notes will be reduced by
      one-half of 

     

    (xx)
      $1,500,000 (the excess of $5,500,000 over $4,000,000) less 

     

    (yy)
      $1,000,000 (the excess of $8,100,000 over $7,100,000)

     

    
      
        
        

      

      
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    The
      reduction in the Purchase Price and the Purchase Notes will be 1⁄2 x ($1,500,000 -
      $1,000,000), or $250,000.

     

    (vi) Promptly,
      but in no event more than forty-five (45) days, after the Closing Date, the
      Parent shall cause its regularly engaged firm of independent certified public
      accountants to conduct an audit the Company’s books and records as of the
      Closing Date, and shall cause them to prepare a balance sheet of the Company
      as
      of the Closing Date in accordance with GAAP (subject to the specific definitions
      contained in Subsection 2.01(a)(ii)). Such balance sheet, shall be used in
      determining the adjustments, if any, that the Parent believes to be required
      by
      subsection 2.01(a)(ii). Parent shall deliver a copy of such balance sheet
      together with a statement of the adjustments, if any, that the Parent believes
      should be made to the Purchase Price and the Purchase Notes to the Shareholder
      Representative (the “Parent
      Notice”),
      promptly after Parent has received such balance sheet from its accountants.
      Following the delivery of the Parent Notice to the Shareholder Representative,
      the Parent shall give and shall cause the Company to give the Shareholder
      Representative and its representatives reasonable access to all of the books
      and
      records of the Company, on reasonable notice and during normal business hours,
      for so long and so often as reasonably required by them, so that the Shareholder
      Representative can determine whether or not the balance sheet and the proposed
      adjustments as set forth in the Parent Notice are accurate. If the Shareholder
      Representative determines that the Parent Notice (and the adjustments indicated
      thereon) was inaccurate, it shall give notice (the “Shareholder
      Notice”)
      of
      such finding to the Parent no later than thirty (30) days after delivery to
      the
      Shareholder Representative of the Parent Notice. Such Shareholder Notice shall
      specify any items or amounts as to which the Shareholder Representative
      disagrees and a detailed statement of the basis of each of the Shareholder
      Representative’s objections. If no such Shareholder Notice is given in
      accordance with this Subsection 2.01(a)(vi), the Parent Notice (and the
      adjustments indicated thereon) shall be conclusive and binding upon the
      parties.

     

    If
      a
      Shareholder Notice is given and the parties are unable to resolve any
      disagreements as to the adjustments required to the Purchase Price and the
      Purchase Notes within thirty (30) days after the Shareholder Notice has been
      given, the items or amounts in dispute shall be referred for resolution to
      the
      Independent Accountants. Promptly, but no later than 20 days after acceptance
      of
      the appointment as Independent Accountants, the Independent Accountants shall
      determine, based primarily on written submissions by Parent and the Shareholder
      Representative, which may be confirmed by independent review if the Independent
      Accountants deem such review to be necessary, only those issues in dispute
      and
      shall render a written report as to the resolution of the dispute and the
      resulting adjustments to the Purchase Price and the Purchase Notes, which shall
      be conclusive and binding on the parties. Parent shall permit the Independent
      Accountants to review the books and records of the Company that relate to the
      items in dispute, during normal business hours and upon reasonable notice.
      In
      resolving any disputed item, the Independent Accountants (x) shall be bound
      by the provisions of this Section 2.01 and (y) may not assign a value to
      any item greater than the greatest value for such items claimed by either party
      or less than the smallest value for such items claimed by either party. Parent
      and the Shareholders (in the aggregate) shall each be responsible for one-half
      (1⁄2) of the fees and expenses charged by the Independent Accountants for their
      services.

     

    
      
        
        

      

      
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    No
      later
      than the third (3rd) business day following the date of final determination
      of
      the adjustments, if any, required to the Purchase Notes in accordance with
      this
      Subsection 2.01(a)(vi), the Shareholder Representative shall deliver to the
      Parent the Purchase Notes delivered at the Closing and the Parent shall deliver
      to the Shareholder Representative replacement Purchase Notes, identical to
      the
      original Purchase Notes but adjusted as to principal amount as provided
      herein.

     

    (vii) In
      connection with the audit of the Parent’s financial statements for its fiscal
      year ended November 30, 2008, the Parent shall cause its auditors to determine
      and certify the Company’s revenues from sales of its products and services in
      the ordinary course of its business for the calendar year 2008, net of
      allowances, discounts, returns, shipping charges and similar costs, in
      accordance with GAAP, and shall deliver a copy of such determination to the
      Shareholder Representative. For purposes of making such determination, (A)
      except as provided in the immediately following subsection (B), all revenues
      from the performance of cable harness work from and after the Closing Date
      by
      either Parent or the Company shall be included in determining the sales of
      the
      Company, it being the intention of the Parties that all such work shall be
      performed by the Company and not by Parent from and after the Closing Date,
      and
      (B) notwithstanding the foregoing, no revenues from the performance of cable
      harness work by either Parent or the Company for ASML, ViaSat and Telephonics
      shall be included in determining the gross sales of the Company. 

     

    Parent
      shall deliver a copy of such auditor’s determination with a statement of the
      adjustments, if any, that the Parent believes should be made to the Purchase
      Price and the Purchase Notes pursuant to Subsection 2(a)(iv) to the Shareholder
      Representative (the “Second Parent
      Notice”),
      promptly after Parent has received such determination from its accountants.
      Following the delivery of the Second Parent Notice to the Shareholder
      Representative, the Parent shall give and shall cause the Company to give the
      Shareholder Representative and its representatives reasonable access to such
      of
      the books and records of the Company, on reasonable notice and during normal
      business hours, for so long and so often as reasonably required by them, to
      the
      extent necessary to verify such determination and the proposed adjustments
      as
      set forth in the Second Parent Notice are accurate. If the Shareholder
      Representative determines that Second Parent Notice (and the adjustments
      indicated thereon) was inaccurate, it shall give notice (the “Second
Shareholder
      Notice”)
      of
      such finding to the Parent no later than thirty (30) days after delivery to
      the
      Shareholder Representative of the Second Parent Notice. Such Second Shareholder
      Notice shall specify any items or amounts as to which the Shareholder
      Representative disagrees and a detailed statement of the basis of each of the
      Shareholder Representative’s objections. If no such Second Shareholder Notice is
      given in accordance with this Subsection 2.01(a)(viii), the Second Parent Notice
      (and the adjustments indicated thereon) shall be conclusive and binding upon
      the
      parties.

     

    If
      a
      Second Shareholder Notice is given and the parties are unable to resolve any
      disagreements as to the adjustments required to the Purchase Price and the
      Purchase Notes within thirty (30) days after the Second Shareholder Notice
      has
      been given, the items or amounts in dispute shall be referred for resolution
      to
      the Independent Accountants. Promptly, but no later than 20 days after
      acceptance of the appointment as Independent Accountants, the Independent
      Accountants shall determine, based primarily on written submissions by Parent
      and the Shareholder Representative, which may be confirmed by independent review
      if the Independent Accountants deem such review to be necessary, only those
      issues in dispute and shall render a written report as to the resolution of
      the
      dispute and the resulting adjustments to the Purchase Price and the Purchase
      Notes, which shall be conclusive and binding on the parties. Parent shall permit
      the Independent Accountants to review the books and records of the Company
      that
      relate to the items in dispute, during normal business hours and upon reasonable
      notice. In resolving any disputed item, the Independent Accountants
      (x) shall be bound by the provisions of this Section 2.01 and (y) may
      not assign a value to any item greater than the greatest value for such items
      claimed by either party or less than the smallest value for such items claimed
      by either party. Parent and the Shareholders (in the aggregate) shall each
      be
      responsible for one-half (1⁄2) of the fees and expenses charged by the Independent
      Accountants for their services.

     

    
      
        
        

      

      
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    No
      later
      than the third (3rd) business day following the date of final determination
      of
      the adjustments, if any, required to the Purchase Notes in accordance with
      this
      Subsection 2.01(a)(vii), the Shareholder Representative shall deliver to the
      Parent the Purchase Notes previously delivered to the Shareholders and the
      Parent shall deliver to the Shareholder Representative replacement Purchase
      Notes, identical to the original Purchase Notes but adjusted as to principal
      amount as provided herein.

     

    (vii) On
      or
      before January 31, 2010, the Parent shall deliver to the Shareholder
      Representative its calculation of any adjustments required to be made to the
      Purchase Price and the Purchase Notes pursuant to Subsection 2.01(a) (v) (the
      “Third Parent
      Notice”).
      Following the delivery of the Third Parent Notice to the Shareholder
      Representative, the Parent shall give and shall cause the Company to give the
      Shareholder Representative and its representatives reasonable access to such
      of
      the books and records of the Company, on reasonable notice and during normal
      business hours, for so long and so often as reasonably required by them, to
      the
      extent necessary to verify such calculation and the data upon which it is
      based.. If the Shareholder Representative determines that Third Parent Notice
      (and the adjustments indicated thereon) was inaccurate, it shall give notice
      (the “Third Shareholder
      Notice”)
      of
      such finding to the Parent no later than thirty (30) days after delivery to
      the
      Third Representative of the Third Parent Notice. Such Third Shareholder Notice
      shall specify any items or amounts as to which the Shareholder Representative
      disagrees and a detailed statement of the basis of each of the Shareholder
      Representative’s objections. If no such Third Shareholder Notice is given in
      accordance with this Subsection 2.01(a)(viii), the Third Parent Notice (and
      the
      adjustments indicated thereon) shall be conclusive and binding upon the
      parties.

     

    If
      a
      Third Shareholder Notice is given and the parties are unable to resolve any
      disagreements as to the adjustments required to the Purchase Price and the
      Purchase Notes within thirty (30) days after the Third Shareholder Notice has
      been given, the items or amounts in dispute shall be referred for resolution
      to
      the Independent Accountants. Promptly, but no later than 20 days after
      acceptance of the appointment as Independent Accountants, the Independent
      Accountants shall determine, based primarily on written submissions by Parent
      and the Shareholder Representative, which may be confirmed by independent review
      if the Independent Accountants deem such review to be necessary, only those
      issues in dispute and shall render a written report as to the resolution of
      the
      dispute and the resulting adjustments to the Purchase Price and the Purchase
      Notes, which shall be conclusive and binding on the parties. Parent shall permit
      the Independent Accountants to review the books and records of the Company
      that
      relate to the items in dispute, during normal business hours and upon reasonable
      notice. In resolving any disputed item, the Independent Accountants
      (x) shall be bound by the provisions of this Section 2.01 and (y) may
      not assign a value to any item greater than the greatest value for such items
      claimed by either party or less than the smallest value for such items claimed
      by either party. Parent and the Shareholders (in the aggregate) shall each
      be
      responsible for one-half (1⁄2) of the fees and expenses charged by the Independent
      Accountants for their services.

     

    
      
        
        

      

      
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    No
      later
      than the third (3rd) business day following the date of final determination
      of
      the adjustments, if any, required to the Purchase Notes in accordance with
      this
      Subsection 2.01(a)(viii), the Shareholder Representative shall deliver to the
      Parent the Purchase Notes previously delivered to the Shareholders and the
      Parent shall deliver to the Shareholder Representative replacement Purchase
      Notes, identical to the original Purchase Notes but adjusted as to principal
      amount as provided herein.

     

    (b) Treasury
      Stock.
      All
      shares of capital stock of Company held in the treasury of Company immediately
      prior to the Effective Time shall be canceled and extinguished without any
      conversion thereof and no amount shall be delivered or deliverable in exchange
      therefor.

     

    (c) Merger
      Sub Stock.
      Each
      share of common stock, par value $.01 per share, of Merger Sub issued and
      outstanding immediately prior to the Effective Time (“Merger
      Sub Stock”)
      shall
      be converted into and exchanged for one (1) duly and validly issued, fully
      paid
      and non-assessable share of common stock of the Surviving
      Corporation.

     

    (d) No
      Fractional Shares.
      No
      certificate or scrip representing any fractional shares of Parent Common Stock
      shall be issued pursuant to Section 2.01(a), and other than the right to
      receive the cash payment pursuant to this Section 2.01(d) any such
      fractional interests shall not entitle the owner thereof to any rights as a
      security holder of Parent. Notwithstanding any other provision hereof, all
      holders of Company Common Stock otherwise entitled to receive fractional shares
      of Parent Common Stock pursuant to Section 2.01(a) shall be entitled to
      receive, in lieu thereof, cash (without interest) in an amount equal to the
      product of (i) such fractional part of a share of Parent Common Stock to
      which the holder of Company Common Stock would otherwise be entitled under
      Sections 2.01(a) multiplied by the Average Parent Trading Price as of the
      Closing Date. As promptly as possible after the determination of the amount
      of
      cash to be paid to holders of fractional interests, Parent shall forward
      payments to holders of such fractional interests subject to and in accordance
      with the terms hereof.

     

    SECTION
      2.02 Exchange of Certificates
      and Merger Consideration

     

    (a) Payment
      Procedures.
      At the
      Closing, upon surrender to Parent by each Company Shareholder of the certificate
      or certificates (each a “Certificate”
and
      collectively, the “Certificates”)
      representing all of the shares of Company Common Stock owned by such Company
      Shareholder immediately prior to the Effective Time, together with any other
      documents required by Parent, Parent shall issue and deliver to each such
      Company Shareholder his, her or its pro rata share of the Merger Consideration,
      which shall consist of (i) a certificate for Parent Common Stock which shall
      be
      registered in the name of such Company Shareholder which shall bear legends
      as
      set forth on Exhibit 2.02(a), (ii) a Purchase Note payable to such Company
      Shareholder; and (iii) the Cash Purchase Price payable to such Company
      Shareholder, which together shall represent the entire Merger Consideration.
      Until surrendered in accordance with the provisions of this Section 2.02,
      each Certificate shall represent for all purposes only the right to receive
      the
      applicable consideration set forth in Section 2.01, without any interest
      thereon.

     

    
      
        
        

      

      
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    (b) No
      Further Rights in Stock.
      All
      shares of Parent Common Stock issued upon the surrender for exchange of
      Certificates in accordance with the terms of Sections 2.01 and 2.02
      (including any cash paid pursuant to this Article II) shall be deemed to
      have been issued (and paid) in full satisfaction of all rights pertaining to
      the
      shares of Company Common Stock theretofore represented by such Certificates,
      and
      there shall be no further registration of transfer on the stock transfer books
      of the Surviving Corporation of the shares of Company Common Stock represented
      by such Certificates which were outstanding immediately prior to the Effective
      Time. If, after the Effective Time, any such Certificates are presented to
      Parent or the Surviving Corporation for any reason, they shall be canceled
      and
      exchanged as provided in this Article II, except as otherwise provided by
      Law.

     

    (c) Withholding
      of Tax.
      Parent
      shall be entitled to deduct and withhold from the applicable amount of the
      Merger Consideration otherwise issuable to, and any cash payment in lieu of
      fractional shares otherwise payable pursuant to this Agreement to, any former
      holder of Company Common Stock such amounts as Parent (or any Affiliate thereof)
      is required to deduct and withhold with respect to the making of such payment
      under the Code, or any provision of state, local or foreign Tax Law. To the
      extent that amounts are so withheld by Parent (or any Affiliate thereof), such
      withheld amounts shall be treated for all purposes of this Agreement as having
      been paid to the former holder of Company Common Stock in respect of whom such
      deduction and withholding was made by Parent (or any Affiliate
      thereof).

     

    (d) Lost,
      Stolen or Destroyed Certificates.
      In the
      event any Certificate evidencing shares of Company Common Stock shall have
      been
      lost, stolen or destroyed, upon the making of an affidavit setting forth that
      fact by the Person claiming such lost, stolen or destroyed Certificate and,
      if
      required by Parent, the posting by such Person of a bond in such reasonable
      amount as Parent may direct as indemnity against any claim that may be made
      against Parent or the Surviving Corporation with respect to such Certificate,
      Parent shall pay to such Person the applicable Merger Consideration and any
      cash
      in lieu of fractional shares with respect to such lost, stolen or destroyed
      Certificate.

     

    (e) Distributions
      With Respect to Unexchanged Shares of Parent Common Stock.
      No
      dividends or other distributions declared or made after the Effective Time
      with
      respect to Parent Common Stock with a record date after the Effective Time
      shall
      be paid to the holder of any unsurrendered Certificate with respect to the
      shares of Parent Common Stock evidenced thereby until the holder of such
      Certificate shall properly surrender such Certificate in accordance with the
      requirements of Section 2.02(a). Subject to the effect of escheat, tax or other
      applicable Laws, following surrender of any such Certificate, there shall be
      paid to the holder of the Certificates evidencing whole shares of Parent Common
      Stock issued in exchange therefor, without interest, (i) promptly, the amount
      of
      dividends or other distributions with a record date after the Effective Time
      and
      theretofore paid with respect to such whole shares of Parent Common Stock,
      and
      (ii) at the appropriate payment date, the amount of dividends or other
      distributions, with a record date after the Effective Time but prior to
      surrender and a payment date occurring after surrender, payable with respect
      to
      such whole shares of Parent Common Stock. 

     

    
      
        
        

      

      
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    SECTION
      2.03 Certain Adjustments

     

    If
      between the date hereof and the Effective Time, the outstanding shares of
      Company Common Stock or of Parent Common Stock shall be changed into a different
      number of shares by reason of any reclassification, recapitalization, split-up,
      combination or exchange of shares, or any dividend payable in stock or other
      securities shall be declared thereon with a record date within such period,
      the
      Merger Consideration per share of Company Common Stock shall be adjusted
      accordingly to provide the same economic effect as contemplated by this
      Agreement prior to such reclassification, recapitalization, split-up,
      combination, exchange or dividend.

     

    SECTION
      2.04 Shareholders’ Representative

     

    The
      Shareholder Representative shall, by virtue of the Merger, be appointed
      attorney-in-fact and authorized and empowered to act, for and on behalf of
      any
      or all of Company Shareholders (with full power of substitution in the
      premises), in connection with the provisions of Article IX as they relate to
      Company and Company Shareholders generally, and such other matters as are
      reasonably necessary for the consummation of the transactions contemplated
      hereby including, without limitation, (i) to compromise on their behalf
      with Parent any claims asserted thereunder, (ii) to execute and deliver on
      behalf of Company Shareholders any documents or agreements contemplated by
      or
      necessary or desirable in connection with this Agreement, (iii) to administer
      and resolve any disputes with respect to the computation of any adjustments
      to
      the Purchase Price and the Purchase Notes and (iv) to take such further
      actions including coordinating and administering post-closing matters related
      to
      the rights and obligations of Company Shareholders (including exchanges of
      the
      Purchase Notes) as are authorized in this Agreement (the above named
      representative, as well as any subsequent representative of Company Shareholders
      appointed by Company Shareholders being referred to herein as the “Shareholders’
      Representative”).
      The
      Shareholders’ Representative shall not be liable to any Company Shareholder,
      Parent, the Surviving Corporation or their respective Affiliates or any other
      Person with respect to any action taken or omitted to be taken by the
      Shareholders’ Representative in his role as Shareholders’ Representative under
      or in connection with this Agreement unless such action or omission results
      from
      or arises out of fraud, gross negligence, willful misconduct or bad faith on
      the
      part of the Shareholders’ Representative. Parent, Merger Sub and the Surviving
      Corporation shall be entitled to rely on such appointment and treat such
      Shareholders’ Representative as the duly appointed attorney-in-fact of each
      Company Shareholder. Each Company Shareholder who votes in favor of the Merger
      pursuant to the terms hereof, by such vote and without any further action,
      and
      each Company Shareholder who receives Merger Consideration in connection with
      the Merger, by acceptance thereof and without any further action, confirms
      such
      appointment and authority.

     

    
      
        
        

      

      
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    ARTICLE
      III

    

    REPRESENTATIONS
      AND WARRANTIES OF COMPANY 

    AND
      COMPANY SHAREHOLDERS

     

    Except
      as
      specifically set forth in this Agreement, Company and each of the Company
      Shareholders hereby jointly and severally represents, warrants to and agrees
      with Parent and Merger Sub as follows, in each case as of the date of this
      Agreement and as of the Closing Date:

     

    SECTION
      3.01 Organization and Qualification

     

    Company
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the State of New York, and has the full and unrestricted corporate
      power
      and authority to own, operate and lease its Assets, to carry on its business
      as
      currently conducted, to execute and deliver this Agreement and to carry out
      the
      transactions contemplated hereby. Company is duly qualified to conduct business
      as a foreign corporation and is in good standing in the states, countries and
      territories listed in Schedule 3.01, which are the only jurisdictions where
      the
      nature of its business or the ownership, operation or leasing of its Assets
      makes such qualification necessary.

     

    SECTION
      3.02 No Subsidiaries;
      Other Interests

     

    Company
      has no Subsidiaries. Company has no equity investment or other interest in,
      nor
      has Company made advances or loans to, any Person.

     

    SECTION
      3.03 Certificate of Incorporation and Bylaws

     

    Company
      has furnished to Parent a true and complete copy of the certificate of
      incorporation of Company, as currently in effect on the date of this Agreement,
      and a true and correct copy of Company’s bylaws, as currently in effect on the
      date of this Agreement, in each case certified by the corporate secretary of
      Company. Company is not in violation of any of the provisions of its certificate
      of incorporation or bylaws.

     

    SECTION
      3.04 Capitalization

     

    The
      authorized capital stock of Company consists of two hundred (200) shares of
      common stock, no par value per share, of which one hundred (100) shares of
      common stock (the “Company
      Common Stock”)
      are
      issued and outstanding, all of which are duly authorized, validly issued, fully
      paid and non-assessable except as provided in Section 630 of the NYBCL. No
      shares of common stock are held in the treasury of Company. Schedule 3.04 sets
      forth the names and addresses of all holders of record of Company Common Stock
      and the number and class of shares held by each such shareholder. No other
      shares of Company Common Stock have been reserved for any purpose. There are
      no
      outstanding securities convertible into or exchangeable for Company Common
      Stock, any other securities of any Company and no outstanding options, rights
      (preemptive or otherwise), or warrants to purchase or to subscribe for any
      shares of such stock or other securities of Company. There are no outstanding
      Agreements affecting or relating to the voting, issuance, purchase, redemption,
      registration, repurchase or transfer of Company Common Stock or any other
      securities of Company. Each of the outstanding shares of Company Common Stock
      was issued in compliance with all applicable federal and state Laws concerning
      the issuance of securities. There are no obligations, contingent or otherwise,
      of Company to provide funds to, make any investment (in the form of a loan,
      capital contribution or otherwise) in, or provide any guarantee with respect
      to,
      any Person. There are no Agreements pursuant to which any Person (other than
      Company) is or may be entitled to receive any of the revenues or earnings,
      or
      any payment based thereon or calculated in accordance therewith, of
      Company.

     

    
      
        
        

      

      
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    SECTION
      3.05 Authority; Binding Obligation

     

    The
      execution and delivery by Company of this Agreement, the execution and delivery
      by Company of all other Agreements, documents, certificates or other instruments
      contemplated hereby, and the consummation by Company of the transactions
      contemplated hereby and thereby, have been duly authorized by all necessary
      corporate action, and no other corporate proceedings on the part of Company
      are
      necessary to authorize this Agreement and the other Agreements, documents,
      certificates or other instruments contemplated hereby, or to consummate the
      transactions contemplated hereby and thereby. This Agreement has been duly
      executed and delivered by Company and the Company Shareholder and constitutes
      the legal, valid and binding obligation of Company and the Company Shareholder,
      enforceable against each of them in accordance with its terms, except as such
      enforceability may be subject to the effects of any applicable bankruptcy,
      insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws
      affecting creditors’ rights generally and subject to the effects of general
      equitable principles (whether considered in a proceeding in equity or at
      law).

     

    SECTION
      3.06 No Conflict; Required Filings and Consents

     

    (a) The
      execution, delivery and performance by Company and the Company Shareholders
      of
      this Agreement and all other Agreements, documents, certificates or other
      instruments contemplated hereby, the fulfillment of and compliance with the
      respective terms and provisions hereof and thereof, and the consummation by
      Company and the Company Shareholders of the transactions contemplated hereby
      and
      thereby, do not and will not: (i) conflict with, or violate any provision
      of, the certificate of incorporation or bylaws of Company; (ii) conflict
      with or violate any Law applicable to Company, its Assets or the Company
      Shareholders; (iii) conflict with, result in any breach of, or constitute a
      default (or an event that with notice or lapse of time or both would become
      a
      default) or result in the termination or acceleration, or create in another
      Person, a put right, purchase obligation or similar right under any Agreement
      to
      which Company or the Company Shareholders is a party or by which any of them,
      or
      any of the Company’s Assets, may be bound; or (iv) result in or require the
      creation or imposition of, or result in the acceleration of, any indebtedness
      or
      any Encumbrance of any nature upon, or with respect to, Company or any of the
      Assets now owned or hereafter acquired by Company.

     

    
      
        
        

      

      
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    (b) Except
      as
      set forth on Schedule 3.06, the execution, delivery and performance by Company
      and the Company Shareholders of this Agreement and all other Agreements,
      documents, certificates or other instruments contemplated hereby, the
      fulfillment of and compliance with the respective terms and provisions hereof
      and thereof, and the consummation by Company of the transactions contemplated
      hereby and thereby, do not and will not: (i) require any consent, approval,
      authorization or permit of, or filing with or notification to, any Person not
      party to this Agreement, except (A) the filing and recordation of the
      Certificate of Merger as required by the NYBCL and (B) where the failure to
      obtain any consent, approval, authorization or permit or to make any filing
      or
      notification otherwise required to be disclosed hereunder would not have a
      Company Material Adverse Effect; or (ii) result in or give rise to any penalty,
      forfeiture, Agreement termination, right of termination, amendment or
      cancellation, or restriction on business operations of Company that would have
      a
      Company Material Adverse Effect.

     

    (c) All
      returns, reports, statements and other documents required to be filed by Company
      with any Governmental Entity have been filed in a timely manner and complied
      with and are true, correct and complete in all material respects (and any
      related fees required to be paid have been paid in full). All material records
      of every type and nature relating to the business, operations or Assets of
      Company have been maintained in all material respects in accordance with good
      business practices and the rules of any Governmental Entity and are maintained
      at Company.

     

    (d) No
      Governmental Entity or any other Person has notified Company that such
      Governmental Entity or other Person intends to object to the transactions
      contemplated hereunder which shall include for this purpose any objection to
      the
      operations of the business of Company as part of Parent. Company is not aware
      of
      any fact or circumstance related to it that would reasonably be expected to
      (i) cause the filing of any objection to any application for any
      Governmental consent required hereunder, (ii) lead to any delay in processing
      such application or (iii) require any waiver of any Governmental rule,
      policy or other applicable law.

     

    SECTION
      3.07 Intellectual Property

     

    (a) Schedule
      3.07 identifies each item of Intellectual Property (i) owned by Company, (ii)
      owned by any third party and used by Company pursuant to license, sublicense
      or
      other Agreement or (iii) otherwise used by Company and not otherwise
      generally used by Persons similarly situated (including, in each case,
      specification of whether each such item is owned, licensed or used by Company).
      In addition, Company has not licensed (as licensor), sublicensed (as
      sublicensor) or entered into any other agreement with respect to the use of
      any
      Intellectual Property. 

     

    (b) Company
      either owns or has adequate rights to use all of the Intellectual Property
      that
      is necessary to, and currently used for, its business as now conducted or
      currently proposed to be conducted, and such Intellectual Property is free
      and
      clear of Encumbrances. Company has previously furnished to Parent evidence
      of
      either ownership by Company of or license rights to use its Intellectual
      Property.

     

    
      
        
        

      

      
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    (c) There
      are
      no pending or, to Company’s knowledge, threatened claims against Company
      alleging that the conduct of its business infringes any Intellectual Property
      rights of others that would have a Company Material Adverse Effect. The business
      of Company as now conducted or proposed to be conducted does not infringe any
      third-party Intellectual Property rights.

     

    (d) To
      Company’s knowledge, no third party is infringing upon any of Company’s
      Intellectual Property, and Company has not notified any third party that it
      believes such third party is interfering with, infringing, or misappropriating
      any of Company’s Intellectual Property or engaging in any act of unfair
      competition. Company has the right to bring an action for the infringement
      of
      all of its Intellectual Property that is owned by Company.

     

    (e) Except
      as
      set forth in the next sentence, Company has taken all steps that are customary
      in its industry to protect Company’s rights in confidential information and
      trade secrets of Company or provided by any other Person to Company. Company
      does not require each employee, director, consultant or contractor to execute
      a
      confidentiality and non-disclosure agreement. The names of those of its present
      and former employees who have executed such agreements are listed on Schedule
      3.07, and copies of such agreements have been provided to Parent.

     

    (f) To
      Company's Knowledge, the operation of the business of Company as it currently
      is
      conducted or currently proposed to be conducted by Company does not and will
      not
      and will not when conducted by Parent or the Surviving Corporation in
      substantially the same manner following the Closing, infringe or misappropriate
      any Intellectual Property right of any person, violate any right of any person
      (including any right to privacy or publicity), or constitute unfair competition
      or trade practices under the laws of any jurisdiction.

     

    (g) Neither
      this Agreement nor the transactions contemplated by this Agreement, will result
      in (i) either Parent or the Surviving Corporation granting to any third
      party any right to or with respect to any Intellectual Property right owned
      by,
      or licensed to, either of them, (ii) either Parent’s or the Surviving
      Corporation’s being
      bound by, or subject to, any non-compete or other restriction on the operation
      or scope of their respective businesses, or (iii) either Parent’s or the
      Surviving Corporation’s being
      obligated to pay any royalties or other amounts to any third party in excess
      of
      those payable by Parent or the Surviving Corporation, respectively, prior to
      the
      Closing.

     

    SECTION 3.08
      Financial Statements
      and Condition

     

    (a) Company
      has prepared (i) the balance sheets of Company as of the end of the fiscal
      year
      ending on December 31, 2005 and the statements of income, equity and changes
      in
      financial position for fiscal year, compiled by Davie, Kaplan, Chapman &
Braverman, PC, (ii) the balance sheet of Company as of the end of the fiscal
      year ending on December 31, 2006 and the statements of income, equity and
      changes in financial position for such fiscal year, audited by Rotenberg &
Co., (iii) the balance sheet of Company as of October 31, 2007 and the
      statements of income, equity and changes in financial position for the period
      of
      the fiscal year then ended, reviewed by Davie, Kaplan, Chapman & Braverman,
      PC, (iv) the balance sheet of Company as of the end of the fiscal year ending
      on
      December 31, 2007 and the statements of income, equity and changes in financial
      position for such fiscal year, audited by Rotenberg & Co., accompanied by
      the related report of Rotenberg & Co. dated April 18, 2008 ("Rotenberg
      Management Letter"), (iii) the unaudited balance sheet of the Company as of
      March 31, 2008, and the unaudited statements of income, Company’s equity and
      changes in financial position for the three-month period ended March 31, 2008
      (collectively, the “Company
      Financial Statements”).
      A
      true and complete copy of Company Financial Statement has been delivered to
      Parent and is attached as Schedule 3.08.

     

    
      
        
        

      

      
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    (b) Company
      Financial Statements, including, without limitation, the notes thereto, (i)
      have
      been prepared in accordance with the books and records of Company and
      (ii) present fairly the financial position of Company and its results of
      operations and cash flows in accordance with GAAP applied on a basis consistent
      with prior accounting periods, subject in the case of unaudited statements,
      to
      normal year-end adjustments.

     

    (c) Company
      does not expect any year-end audit adjustments for the current fiscal year
      ending December 31, 2008. To the knowledge of Company, there are no anticipated
      material charges or write-offs of a non-recurring nature for the fiscal year
      ending December 31, 2008.

     

    (d) Except
      as
      set forth in the Rotenberg Management Letter, Company maintains a system of
      internal accounting controls sufficient to provide reasonable assurance that
      (i)
      transactions are executed in accordance with management’s general or specific
      authorizations; (ii) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with GAAP and to maintain
      asset accountability; (iii) access to assets is permitted only in accordance
      with management’s general or specific authorization; and (iv) the recorded
      accountability for assets is compared with the existing assets at reasonable
      intervals and appropriate action is taken with respect to any
      differences.

     

    (e) Schedule
      3.08 lists all of the changes in the methods of accounting or accounting
      practices or policies of Company since its inception.

     

    SECTION
      3.09 Absence
      of Certain Developments

     

    Since
      December 31, 2007:

     

    (a) the
      business of Company has been conducted in all material respects only in the
      Ordinary Course of Business; 

     

    (b) Company
      has not become liable in respect of any guarantee nor has it incurred or
      otherwise become liable in respect of any debt, except for borrowings, letters
      of credit and bankers’ acceptances in the Ordinary Course of Business under
      credit facilities in existence on December 31, 2007;

     

    (c) Company
      has not mortgaged, pledged or subjected to any lien any of its property,
      business or assets, except for purchase money or similar security interests
      granted in connection with the purchase of equipment or supplies in the Ordinary
      Course of Business in an amount not exceeding $10,000 in the
      aggregate;

     

    
      
        
        

      

      
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    (d) Company
      has not made any declaration, setting aside or payment of any dividend or other
      distribution with respect to, or repurchase of, any of its capital stock or
      other equity interests;

     

    (e) Company
      has not (i) acquired or leased from any other Person any material assets, or
      sold or leased to any other Person or otherwise disposed of any material assets
      (in each case except for assets acquired or sold in the Ordinary Course of
      Business in connection with goods and services provided to customers); (ii)
      entered into any contractual obligation relating to (A) the purchase or sale
      of
      any capital stock, partnership interest or other equity interest in any Person,
      (B) the purchase of assets constituting a business or (C) any merger,
      consolidation or other business combination; (iii) entered into or amended
      any
      lease of real property or material personal property (whether as lessor or
      lessee); (iv) canceled or compromised any debt or claim other than accounts
      receivable in the Ordinary Course of Business; (v) sold, transferred, licensed
      or otherwise disposed of any material intangible assets other than in the
      Ordinary Course of Business; (vi) waived or released any right of substantial
      value; (vii) instituted, settled or agreed to settle any material action; or
      (viii) entered into or consummated any transaction with any
      Affiliate;

     

    (f) there
      has
      been no loss, destruction or damage to any material item of property of Company,
      whether or not insured, which has had or could reasonably be expected to have
      a
      Company Material Adverse Effect;

     

    (g) other
      than in the Ordinary Course of Business and consistent with past practices,
      Company has not made any changes in the rate of compensation payable or paid,
      or
      agreed or orally promised to pay, conditionally or otherwise, any extra
      compensation, or severance or vacation pay, to any director, officer, employee,
      consultant or agent of Company;

     

    (h) there
      has
      been no material labor trouble (including any work slowdown, stoppage or strike)
      involving Company or any material change in any of its personnel or the terms
      and conditions of the employment of such personnel;

     

    (i) Company
      has not made any change in (x) its methods of accounting or accounting
      practices, except as required by GAAP, or (y) its pricing policies or payment
      or
      credit practices or failed to pay any creditor any amount owed to such creditor
      when due or granted any extensions or credit other than in the Ordinary Course
      of Business;

     

    (j) Company
      has not made any loan, advance or capital contributions to, or any other
      investment in, any Person;

     

    (k) Company
      has not adopted or increased any benefits under any Plan in any material
      manner;

     

    (l) Company
      has not written up or written down any of its material Assets;

     

    
      
        
        

      

      
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    (m) Company
      has not terminated or amended, or failed in any material respect to perform
      obligations or suffered the occurrence of any default under any material
      contractual obligation; and

     

    (n) Company
      has not entered into any contractual obligation to do any of the things referred
      to elsewhere in this Section 3.09.

     

    SECTION
      3.10 Absence of Undisclosed Liabilities

     

    There
      are
      no material liabilities or obligations (whether absolute or contingent, matured
      or unmatured, known or unknown) of Company, including but not limited to
      liabilities for Taxes and that are not reflected, or reserved against, in the
      audited balance sheet of Company as of December 31, 2007, except for those
      that
      may have been incurred after December 31, 2007 in the Ordinary Course of
      Business or that are not material in amount either individually or collectively.
      Since December 31, 2007, Company has not incurred any material liabilities
      or
      obligations (whether absolute or contingent, matured or unmatured, known or
      unknown) other than in the Ordinary Course of Business. All bonuses and
      incentive compensation (including, without limitation, all compensation-related
      expenses) have been accrued on Company Financial Statements based on GAAP and
      consistent with past practices.

     

    SECTION
      3.11 Litigation;
      Disputes

     

    (a) Company
      has not received notice of, and there is no pending, or, to the knowledge of
      Company or the Company Shareholders, threatened, action, suit, claim,
      arbitration, proceeding or investigation against, affecting or involving Company
      or its business or Assets, or the transactions contemplated by this Agreement,
      at law or in equity, or before or by any domestic or foreign court, arbitrator
      or Governmental Entity. Company is not (i) operating under or subject to
      any order, award, writ, injunction, decree or judgment of any court, arbitrator
      or Governmental Entity or (ii) in default with respect to any order, award,
      writ, injunction, decree or judgment of any court, arbitrator or Governmental
      Entity.

     

    (b) Company
      has complied and is in compliance in all material respects with all Laws,
      awards, orders, judgments, decrees and injunctions applicable to Company and
      its
      business or Assets, including all federal, state and local Laws and orders
      pertaining to employment or labor, safety, health, zoning and other matters.
      Company has obtained and holds all permits, licenses and approvals (none of
      which has been materially modified or rescinded and all of which are in full
      force and effect) from all government authorities necessary in order to own,
      use
      and maintain its Assets and to conduct its business as presently conducted.
      None
      of such permits, licenses or approvals will be terminated or modified as a
      result of the consummation of the merger.

     

    SECTION
      3.12 Real Property

     

    (a) Schedule
      3.12
      lists each real property lease under which Company is the lessee or lessor.
      Company is the owner and holder of the leasehold estates purported to be granted
      to it by the leases listed in Schedule
      3.12.
      Each such lease is in full force and effect and, to the knowledge of Company,
      constitutes a legal, valid and binding obligation of, and is legally enforceable
      in all material respects against, the respective parties thereto. Company has
      in
      all material respects performed all material obligations thereunder required
      to
      be performed by any of them to date. To the knowledge of Company and the Company
      Shareholders, no party is in default in any material respect under any of the
      foregoing, and there has not occurred any event which (whether with or without
      notice, lapse of time or the happening or occurrence of any other event) would
      constitute such a material default. 

     

    
      
        
        

      

      
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    (b) Company
      does not own or hold interests (other than leasehold interests) in any Real
      Property.

     

    SECTION
      3.13 Other Agreements; No Default

     

    Schedules
      3.12 and 3.13 list each Agreement to which Company is a party or by which
      Company, or any of its Assets, is bound, and which (i) involves expenditures
      or
      receipts by Company (other than contracts, commitments or Agreements which
      do
      not require payments or yield receipts of more than $10,000 in any twelve (12)
      month period or more than $25,000 in the aggregate); or (ii) contain covenants
      that limit the freedom of Company to engage in a line of business or to compete
      with any third party (Agreements listed pursuant to clauses (i) and (ii) above,
      collectively the “Company
      Contracts”).
      Each
      Company Contract is in full force and effect, constitutes a valid and binding
      obligation of and is legally enforceable in accordance with its terms against
      Company and, to the knowledge of Company and the Company Shareholders, all
      Company Contracts are valid, binding and enforceable obligations of the other
      parties thereto, except as such enforceability may be subject to the effects
      of
      any applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
      moratorium or similar Laws affecting creditors’ rights generally or subject to
      the effects of general equitable principles (whether considered in a proceeding
      in equity or at law). Company has complied with all of the provisions of such
      Company Contracts and is not in default thereunder, and there has not occurred
      any event which (whether with or without notice, lapse of time, or the happening
      or occurrence of any other event) would constitute such a default, and the
      execution of this Agreement by Company and its performance hereunder will not
      cause, or result in, a breach or default under any Company Contract. There
      has
      not been (A) any failure by Company or, to the knowledge of Company and the
      Company Shareholders, any other party to any such Company Contract to comply
      with all material provisions thereof, (B) any default by Company or, to the
      knowledge of Company and the Company Shareholders, any other party thereunder,
      or (C) to the knowledge of Company and the Company Shareholders (X) any
      threatened cancellation thereof or (Y) any outstanding dispute thereunder.
      Company is not a guarantor or otherwise liable for any liability or obligation
      (including indebtedness) of any other Person.

     

    SECTION
      3.14 Labor Relations

     

    There
      are
      no collective bargaining or other labor union Agreements to which Company is
      a
      party. There are, and for the past two (2) years have been, no strikes, work
      stoppages, union organization efforts or lawsuits (other than grievance
      proceedings) pending or, to the knowledge of Company and the Company
      Shareholders, threatened or reasonably anticipated between Company and
      (a) any current or former employees of Company or (b) any union or
      other collective bargaining unit representing such employees. There is no unfair
      labor practice charge or complaint, or other proceeding, against the Company
      pending, or to the knowledge of the Company and the Company Shareholders,
      threatened before the National Labor Relations Board or any similar state or
      foreign agency. Company has complied and is in compliance with all Laws relating
      to employment, labor, or the workplace, including, without limitation, Laws
      relating to wages, hours, collective bargaining, safety and health, work
      authorization, equal employment opportunity, immigration, withholding,
      unemployment compensation, worker’s compensation, employee privacy and right to
      know, except where the failure so to comply would not have a Company Material
      Adverse Effect. Company has not incurred any liability under, and has complied
      in all respects with, the Worker Adjustment Retraining Notification Act and
      the
      regulations promulgated thereunder and does not reasonably expect to incur
      any
      such liability as a result of actions taken or not taken prior to the
      consummation of the transactions contemplated hereunder.

     

    
      
        
        

      

      
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    SECTION
      3.15 Pension and Benefit Plans

     

    (a) Company
      has delivered to Parent prior to the execution of this Agreement true and
      complete copies of the plan documents, summary plan descriptions, summaries
      of
      material modification, all related trust agreements, insurance contracts, or
      other funding arrangements, all related service provider agreements, annual
      financial or actuarial valuation reports, the three most recent Forms 5500
      or
      5500C/R (with accompanying schedules), registration statements, and prospectuses
      for all pension, retirement, profit-sharing, deferred compensation, stock option
      (including accompanying form agreements), employee stock ownership, severance
      pay, vacation, bonus or other incentive plans, employment or change in control
      agreements, medical, vision, dental or other health plans, life insurance plans
      and other employee benefit plans or fringe benefit plans, programs, arrangements
      or Agreements, including, without limitation, all Company Benefit Plans. No
      Company Benefit Plan is or has been a multiemployer plan within the meaning
      of
      Section 3(37) of ERISA or has any withdrawal liability pursuant to ERISA
      Sections 4201 through 4225 with respect to any such multiemployer plan. Company
      has set forth in Schedule 3.15 (i) a list of all of Company Benefit Plans,
      (ii)
      a list of Company Benefit Plans that are Company Pension Plans, (iii) a list
      of
      Company Benefit Plans that are Company Stock Plans, and (iv) a list of the
      number of shares covered by, exercise prices for, and holders of, all stock
      options granted and available for grant under Company Stock Plans.

     

    (b) From
      their inception, all Company Benefit Plans have been and are in material
      compliance (in form and in operation) with the applicable terms of ERISA and
      the
      Code and any other applicable Laws, including the terms of such plans. All
      required reports, returns, and descriptions (including annual reports (Forms
      5500), summary annual reports, and summary plan descriptions have been timely
      filed and/or distributed in accordance with the applicable requirements of
      ERISA
      and the Code with respect to each Company Benefit Plan.

     

    (c) All
      liabilities (contingent or otherwise) under any Company Benefit Plan are fully
      accrued or reserved against in Company Financial Statement in accordance with
      GAAP. Each Company Pension Plan that is subject to Title IV of ERISA or Section
      412 of the Code satisfies the minimum funding standards (without regard to
      any
      waiver) provided for in Section 412 of the Code. 

     

    
      
        
        

      

      
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    (d) Company
      has no obligations for retiree health or other welfare benefits under any
      Company Benefit Plan or otherwise (other than continuation coverage to the
      extent required by Law), and there are no restrictions on the rights of Company
      to unilaterally amend or terminate any such Company Benefit Plan at any time
      without incurring any material liability thereunder.

     

    (e) Neither
      the execution and delivery of this Agreement nor the consummation of the
      transactions contemplated hereby will (i) result in any payment (including,
      without limitation, severance, golden parachute or otherwise) becoming due
      to
      any person under any Company Benefit Plan or otherwise, (ii) increase any
      benefits otherwise payable under any Company Benefit Plan or (iii) result in
      any
      acceleration of the time of payment or vesting of any such benefits. No Company
      Benefit Plan, individually or collectively, provides for any payment by Company
      any employee or independent contractor that is not deductible under Section
      162(a)(1) or 404 of the Code or that is an "excess parachute payment" pursuant
      to Section 280G of the Code.

     

    (f) Each
      Company Benefit Plan which is intended to be qualified under Section 401(a)
      of
      the Code and exempt from taxation under Section 501(a) of the Code has received
      a favorable determination letter from the IRS that it is so qualified and so
      exempt, the Company has delivered to Parent true and complete copies of all
      such
      determination letters, and no fact or event has occurred that could adversely
      affect such qualified or exempt status.

     

    (g) No
      Company Benefit Plan is a Voluntary Employees’ Beneficiary Association
      (“VEBA”)
      within
      the meaning of Section 501(c)(9) of the Code.

     

    (h) Company
      has made or reserved all contributions (including employer contributions and
      employee salary reduction contributions) and other payments and paid all
      premiums required to be made or paid for each Company Benefit Plan within the
      time periods prescribed by ERISA.

     

    (i) Company
      is not now or has ever been a “substantial employer” as defined in Section
      4001(a)(2) of ERISA and no Company Benefit Plan has subjected or does subject
      the Company to any liability under ERISA Sections 4063 or 4064.

     

    (j)
        There
      have been no “prohibited transactions” (as such term is defined in ERISA Section
      406 and Code Section 4975) with respect to any Company Benefit Plan. No
      fiduciary of any Company Benefit Plan has breached any of the responsibilities
      or obligations imposed upon fiduciaries under Title I of ERISA which shall
      subject Company, directly or indirectly, to any penalty or liability for breach
      of fiduciary duty. 

     

    (k) No
      Company Benefit Plan has experienced a "reportable event" (as such term is
      defined in Section 4043(b) of ERISA) that is not subject to an
      administrative or statutory waiver from the reporting requirement.

     

    
      
        
        

      

      
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    SECTION
      3.16 Taxes and Tax Matters

     

    (a) Company
      has paid all Taxes due and payable by it for or with respect to all periods
      up
      to and including the date hereof (without regard to whether or not such Taxes
      are or were disputed), whether or not shown on any Tax Return.

     

    (b) Company
      has filed on a timely basis all Company Tax Returns that it was required to
      file. All such Company Tax Returns were accurate and complete in all material
      respects. Company is not the beneficiary of any extension of time within which
      to file any Tax Return. No claim has ever been made by an authority in a
      jurisdiction where Company does not file Company Tax Returns that any one of
      them is or may be subject to taxation by that jurisdiction. Company has not
      given any currently effective waiver of any statute of limitations in respect
      of
      Taxes or agreed to any currently effective extension of time with respect to
      a
      Tax assessment or deficiency. There are no security interests on any of the
      assets of Company that arose in connection with any failure (or alleged failure)
      to pay any Tax.

     

    (c) Company
      has withheld and paid all Taxes required to have been withheld and paid in
      connection with amounts paid or owing to any employee, independent contractor,
      creditor, shareholder or other third party.

     

    (d) Company
      and the Company Shareholders have no knowledge of any facts or circumstances
      which could give rise to a reasonable expectation that any authority may assess
      any additional Taxes for any period for which Company Tax Returns have been
      filed. There is no dispute or claim concerning any liability for taxes of
      Company either (i) claimed or raised by any authority in writing or
      (ii) as to which Company or any Company Shareholders has knowledge based
      upon personal contact with any agent of such authority. Company has delivered
      to
      Parent copies of, and Schedule 3.16 sets forth a complete and accurate list
      of,
      Company Tax Returns filed with respect to the taxable periods of Company ended
      on or after December 31, 2005; indicates those Company Tax Returns that have
      been audited; and indicates those Company Tax Returns that currently are the
      subject of an audit.

     

    (e) Except
      as
      set forth on Schedule 3.16(e), the unpaid Taxes of Company (i) did not, as
      of the date of any financial statements of Company furnished to Parent pursuant
      to Section 3.08, exceed the reserve for any Tax Liability (rather than any
      reserve for deferred Taxes established to reflect timing differences between
      book and Tax income) set forth on the face of the such financial statements
      (rather than in any notes thereto) and (ii) do not exceed that reserve as
      adjusted for the passage of time through the Closing Date in accordance with
      the
      past custom and practice of Company in filing their Company Tax
      Returns.

     

    (f) Company
      has not filed a consent under Section 341(f) of the Code, concerning
      collapsible corporations. Company has not been a United States real property
      holding corporation within the meaning of Section 897(c)(2) of the Code
      during the applicable period specified in Section 897(c)(1)(A)(ii) of the
      Code. Except as set forth on Schedule 3.16(e), the Company has disclosed on
      its
      federal income Company Tax Returns all positions taken therein that could
      reasonably be expected to give rise to a substantial understatement of federal
      income Tax within the meaning of Section 6662 of the Code. Company is not a
      party to any Tax allocation or sharing agreement. Company (A)  has not been
      a member of an “affiliated group,” as defined in Section 1504(a) of the
      Code, filing a consolidated federal income Tax Return (other than a group the
      common parent of which was Company) and (B) does not have any Liability for
      the
      Taxes of any Person (other than any of Company) under Treas. Reg.
      Section 1.1502-6 (or any similar provision of state, local, or foreign
      law), as a transferee or successor, by contract or otherwise.

     

    
      
        
        

      

      
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    (g) Schedule
      3.16 sets forth the following information with respect to Company as of the
      date
      hereof: (i) the tax basis of Company in its assets; (ii) the amount of any
      net
      operating loss, net capital loss, unused investment, foreign tax or other
      credit, or excess charitable contribution allocable to Company; and (iii) the
      amount of any deferred gain or loss allocable to Company arising out of any
      “deferred intercompany transaction” as defined in Treas. Reg. Section
      1.1502-13(a)(2).

     

    (h) Company
      (and any predecessor of Company) has been a validly electing S corporation
      within the meaning of Code §§ 1361 and 1362 at all times during its
      existence and Company will be an S corporation up to and including the day
      before the Closing Date.

     

    (j) Company
      shall not be liable for any Tax under Code §1374 in connection with the deemed
      sale of Company’s assets caused by the §338(h)(10) Election. Company has not, in
      the past 10 years (A) acquired assets from another corporation in a transaction
      in which Company’s Tax basis for the acquired assets was determined, in whole or
      in part, by reference to the Tax basis of the acquired assets (or any other
      property) in the hands of the transferor or (B) acquired the stock of any
      corporation which is a qualified subchapter S subsidiary.

     

    SECTION
      3.17 Insurance

     

    Schedule
      3.17 lists all policies of title, asset, fire, hazard, casualty, liability,
      life, worker’s compensation and other forms of insurance of any kind owned or
      held by Company. All such policies: (a) are with insurance companies
      reasonably believed by Company to be financially sound and reputable;
      (b) are in full force and effect; (c) are sufficient for compliance by
      Company with all requirements of Law and of all Agreements to which Company
      is a
      party; (d) are valid and outstanding policies enforceable against the
      insurer; (e) insure against risks of the kind customarily insured against
      and in amounts customarily carried by companies similarly situated and by
      companies engaged in similar businesses and owning similar Assets; and
      (f) have the policy expiration dates set forth in
      Schedule 3.17.

     

    SECTION
      3.18 Arrangements With Related Parties

     

    No
      present or former officer, director, shareholder or Person known by Company
      or
      any Company Shareholder to be an Affiliate of Company, nor any Person known
      by
      them to be an Affiliate of such Person, is currently a party to any transaction
      or agreement with Company, including any agreement providing for any loans,
      advances, the employment of, furnishing of services by, rental of its Assets
      from or to, or otherwise requiring payments to, any such officer, director,
      shareholder or Affiliate; provided, however that Michael Brudek and Nicholas
      Vaseliv, who are Company Shareholders, are employees of the
      Company.

     

    
      
        
        

      

      
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    SECTION
      3.19 Books and Records

     

    Except
      as
      set forth in the Rotenberg Management Letter, the books of account, stock
      records, minute books and other corporate and financial records of Company
      are
      complete and correct and have been maintained in accordance with reasonable
      business practices for companies similar to Company, and Company will have
      prior
      to Closing prepared and made available to Parent the minutes for all meetings,
      and all written consents in lieu of such meetings, of the Board of Directors
      and/or shareholders of Company held as of the date thereof.

     

    SECTION
      3.20 Assets

     

    Company
      has good, valid and marketable title to all Assets owned by it, including,
      without limitation, all material Assets reflected in Company Financial Statement
      and all Assets acquired by Company since December 31, 2007 (except for Assets
      reflected in Company Financial Statement or acquired since such date which
      have
      been sold or otherwise disposed of in the Ordinary Course of Business), free
      and
      clear of all Encumbrances other than Permitted Encumbrances. All personal
      property of Company is in operating condition and repair and is suitable and
      adequate for the uses for which it is intended or is being used. All Inventory
      of Company (i) consists of items which are good and merchantable and of a
      quality and quantity presently usable and salable in the Ordinary Course of
      Business within one (1) year from the Closing Date; and (ii) has been reflected
      in Company Financial Statement in accordance with GAAP.

     

    SECTION
      3.21 Board Recommendation; Shareholder Approval

     

    The
      Board
      of Directors of Company has unanimously adopted, in compliance with the NYBCL,
      a
      resolution advising, authorizing, approving and adopting this Agreement and
      the
      transactions contemplated hereby, and recommending approval and adoption of
      this
      Agreement and the transactions contemplated hereby by Company Shareholders.
      Company Shareholders have unanimously adopted by written consent, in compliance
      with the NYBCL, a resolution authorizing, approving and adopting this Agreement
      and the transactions contemplated hereby.

     

    SECTION
      3.22 Directors and Officers

     

    Schedule
      3.22
      lists all current directors and officers of Company, showing each such person’s
      name, positions, and annual remuneration, bonuses and fringe benefits paid
      by
      Company for the current fiscal year and the most recently completed fiscal
      year.

     

    SECTION
      3.23 State Takeover Statutes

     

    No
      state
      takeover statute or similar statute or regulation of the State of New York
      (and,
      to the knowledge of Company and the Company Shareholders after due inquiry,
      of
      any other state or jurisdiction) applies or purports to apply to this Agreement
      or the transactions contemplated hereby and no provision of the certificate
      of
      incorporation, bylaws or other governing instruments of Company or the terms
      of
      any rights plan or agreement of Company would, directly or indirectly, restrict
      or impair the ability of Parent to vote, or otherwise to exercise the rights
      of
      a shareholder with respect to, securities of Company that may be acquired or
      controlled by Parent or permit any shareholder to acquire securities of Company
      or of Parent or any of its Subsidiaries on a basis not available to Parent
      in
      the event that Parent were to acquire securities of Company

     

    
      
        
        

      

      
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    SECTION
      3.24 Environmental Matters

     

    Company
      is in material compliance with all Environmental Laws. Company has no material
      liability under any Environmental Law and to its Knowledge the Company is not
      responsible for any liability of any other person under any Environmental Law.
      There are no pending or, to the knowledge of Company and the Company
      Shareholders, threatened actions, suits, claims, legal proceedings or other
      proceedings based on, and Company has not directly or indirectly received any
      notice of any complaint, order, directive, citation, notice of responsibility,
      notice of potential responsibility, or information request from any Governmental
      Entity or any other person arising out of or attributable to: (i) the
      current or past presence at any part of the real property owned or leased by
      Company (the “Real
      Property”)
      of
      Hazardous Materials or any substances that pose a hazard to human health or
      an
      impediment to working conditions; (ii) the current or past release or
      threatened release into the environment from the Real Property (including,
      without limitation, into any storm drain, sewer, septic system or publicly
      owned
      treatment works) of any Hazardous Materials or any substances that pose a hazard
      to human health or an impediment to working conditions; (iii) the off-site
      disposal of Hazardous Materials originating on or from the Real Property; or
      (iv) any violation of Environmental Laws at any part of the Real Property
      or otherwise arising from Company’s activities involving Hazardous
      Materials.

     

    SECTION
      3.25 Government Contracts and Other Commitments

     

    The
      Company has no contracts or subcontracts (at any tier) under prime contracts
      with Governmental Entities, None of the Company’s Business activities require
      that it or any of its employees obtain a security clearance from .any
      Governmental Entity.

     

    SECTION
      3.26 Relations with Governments

     

    Neither
      Company, nor to the knowledge of Company and the Company Shareholders, any
      of
      Company’s officers, directors, employees or agents (or shareholders,
      distributors, representatives or other persons acting on the express, implied
      or
      apparent authority of Company) have paid, given or received or have offered
      or
      promised to pay, give or receive, any bribe or other unlawful payment of money
      or other thing of value, any unlawful discount, or any other unlawful
      inducement, to or from any person or Governmental Entity in the United States
      or
      elsewhere in connection with or in furtherance of the business of Company
      (including, without limitation, any offer, payment or promise to pay money
      or
      other thing of value (a) to any foreign official, political party (or
      official thereof) or candidate for political office for the purposes of
      influencing any act, decision or omission in order to assist Company in
      obtaining business for or with, or directing business to, any person, or
      (b) to any person, while knowing that all or a portion of such money or
      other thing of value will be offered, given or promised to any such official
      or
      party for such purposes). The business of Company is not in any manner dependent
      upon the making or receipt of such payments, discounts or other inducements.
      Company has not otherwise taken any action that would cause Company to be in
      violation of the Foreign Corrupt Practices Act of 1977, as amended, or any
      applicable Laws of similar effect.

     

    
      
        
        

      

      
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    SECTION 3.27
      Broker’s Fees

     

    Company
      has no any liability or obligation to pay any fees or commissions to any broker,
      finder, or similar agent with respect to the transactions contemplated by this
      Agreement.

     

    SECTION
      3.28 Product Warranties

     

    All
      products and services provided by Company are sold, licensed or otherwise
      provided pursuant to the terms contained in the form of Quotation set forth
      on
      Schedule 3.28. The name of any person or firm to which any additional or
      different terms have been provided, together with a copy of such terms, are
      set
      forth on Schedule 3.28.

     

    SECTION
      3.29 Investment Representations

     

    (a)
       Each
      Company Shareholder is an “accredited investor” within the meaning of Rule 501
      promulgated under the Securities Act. By reason of such Company Shareholder’s
      business and financial experience, and the business and financial experience
      of
      those persons retained by such Company Shareholder to advise such Company
      Shareholder with respect to such Company Shareholder’s investment in the shares
      of Parent Common Stock to be received by such Company Shareholder in the Merger,
      such Company Shareholder, together with such advisors, has such knowledge,
      sophistication and experience in business and financial matters as to be capable
      of evaluating the merits and risks of the prospective investment, and is able
      to
      bear the economic risk of such investment and is able to afford a complete
      loss
      of such investment. Such Company Shareholder acknowledges that such Company
      Shareholder has been granted the opportunity to ask questions of, and receive
      answers from, representatives of Parent concerning Parent and the Parent Common
      Stock that such Company Shareholder is receiving in the Merger and to obtain
      any
      additional information that such Company Shareholder deems necessary to verify
      the accuracy of the answers such Company Shareholder received from such
      representatives.

     

    (b) Each
      Company Shareholder acknowledges that the shares of Parent Common Stock to
      be
      received in the Merger have not been registered under the Act. Such Company
      Shareholder is familiar with the provisions of Rule 144 and understands that
      in
      the event all of the applicable requirements of Rule 144 are not satisfied,
      registration under the Act or some other exemption from the registration
      requirements of the Act will be required in order to dispose of the Parent
      Common Stock to be received in the Merger, and that such Company Shareholder
      may
      be required to hold such shares of Parent Common Stock for a significant period
      of time prior to reselling them. 

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

    (c) Each
      Company Shareholder is acquiring the shares of Parent Common Stock to be
      received in the Merger for such Company Shareholder’s own account and not with a
      view to distribution in violation of any securities laws. Such Company
      Shareholder has no present intention to sell such Parent Common Stock in
      violation of federal or state securities laws and such Company Shareholder
      has
      no present arrangement (whether or not legally binding) to sell such shares
      of
      Parent Common Stock to or through any person or entity; provided,
      however, that by making the representations herein, such Company Shareholder
      does not agree to hold such shares of Parent Common Stock for any minimum or
      other specific term and reserves the right to dispose of such shares of Parent
      Common Stock at any time in accordance with federal and state securities laws
      applicable to such disposition.

     

    (d) Each
      Company Shareholder acknowledges and understands that the terms of issuance
      have
      not been reviewed by the SEC or by any state securities authorities and that
      the
      shares of Parent Common Stock to be issued in the Merger will be issued in
      reliance on the certain exemptions for non-public offerings under the Act,
      which
      exemptions depend upon, among other things, the representations made and
      information furnished by such Investor, including the bona fide nature of such
      Investor’s investment intent as expressed above.

     

    (e) Each
      Company Shareholder understands that the shares of Parent Common Stock to be
      issued in the Merger will be offered and sold in reliance on a transactional
      exemptions from the registration requirements of federal and state securities
      laws and Parent is relying upon the truth and accuracy of the representations,
      warranties, agreements, acknowledgments and understandings of such Company
      Shareholder set forth herein in order to determine the applicability of such
      exemptions and the suitability of such Investor to acquire the shares of Parent
      Common Stock to be issued in the Merger. 

     

    SECTION
      3.30 Disclosure

     

    Neither
      this Agreement nor any written statement, report or other document furnished
      or
      to be furnished by Company or Company Shareholders pursuant to this Agreement
      or
      in connection with the transactions contemplated hereby contains, or will
      contain, any statement which is false or misleading with respect to any material
      fact or omits to state a material fact necessary to make the statements herein
      or therein, in light of the circumstances in which they were made, not false
      or
      misleading. There is no fact known to Company or Company Shareholders which
      has
      not been disclosed to Parent in this Agreement or the Schedules hereto that
      could reasonably be expected to have a Company Material Adverse Effect.
 

     

    ARTICLE
      IV

     

    REPRESENTATIONS
      AND WARRANTIES

    OF
      PARENT AND MERGER SUB

     

    SECTION
      4.01 Organization and Qualification

     

    Parent
      is
      a corporation duly organized, validly existing and in good standing under the
      Laws of the State of Delaware, and has the full and unrestricted corporate
      power
      and authority to own, operate and lease its Assets, to carry on its business
      as
      currently conducted, to execute and deliver this Agreement and to carry out
      the
      transactions contemplated hereby. Merger Sub is a corporation duly organized,
      validly existing and in good standing under the laws of the State of New York,
      and has full and unrestricted corporate power and authority to own, operate
      and
      lease its Assets, to carry on its business as currently conducted, to execute
      and deliver this Agreement and to carry out the transactions contemplated
      hereby. Each of Parent and Merger Sub is duly qualified to conduct business
      as a
      foreign corporation and is in good standing in the states, countries and
      territories in which the nature of the business conducted by it or the character
      of the Assets owned, leased or otherwise held by it makes such qualification
      necessary, except where the failure to be so qualified would not have a Parent
      Material Adverse Effect.

     

    
      
        
        

      

      
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    SECTION
      4.02 Authority; Binding Obligation

     

    Each
      of
      Parent and Merger Sub has the full and unrestricted corporate power and
      authority to execute and deliver this Agreement and to carry out the
      transactions contemplated hereby. The execution and delivery by Parent and
      Merger Sub of this Agreement and all other Agreements, documents, certificates
      or other instruments contemplated hereby, and the consummation by Parent and
      Merger Sub of the transactions contemplated hereby and thereby, have been duly
      authorized by all necessary corporate action, and no other corporate proceedings
      on the part of Parent or Merger Sub are necessary to authorize this Agreement
      and the other Agreements, documents, certificates or other instruments
      contemplated hereby, or to consummate the transactions contemplated hereby
      and
      thereby. This Agreement has been duly executed and delivered by Parent and
      Merger Sub and constitutes a legal, valid and binding obligation of Parent
      and
      Merger Sub, enforceable in accordance with its terms, except as such
      enforceability may be subject to the effect of any applicable bankruptcy,
      insolvency, fraudulent conveyance, reorganization, moratorium or similar Laws
      affecting creditors’ rights generally and subject to the effect of general
      equitable principles (whether considered in a proceeding in equity or at
      law).

     

    SECTION
      4.03 No Conflict; Required Filings and Consents

     

    (a) The
      execution, delivery and performance by Parent and Merger Sub of this Agreement
      and all other Agreements, documents, certificates or other instruments
      contemplated hereby, the fulfillment of and compliance with the respective
      terms
      and provisions hereof and thereof, and the consummation by Parent and Merger
      Sub
      of the transactions contemplated hereby and thereby, do not and will not:
      (i) conflict with, or violate any provision of, the certificate of
      incorporation or the bylaws of Parent, or the certificate of incorporation
      or
      the bylaws of Merger Sub; (ii) subject to the filing and recordation of the
      Certificate of Merger as required by the NYBCL, conflict with or violate any
      Law
      applicable to Parent or Merger Sub or any of their respective Assets;
      (iii) conflict with, result in any breach of, constitute a default (or an
      event that with notice or lapse of time or both would become a default) under
      any Agreement to which Parent or Merger Sub is a party or by which Parent or
      Merger Sub or any of their respective Assets may be bound; or (iv) result
      in or require the creation or imposition of, or result in the acceleration
      of,
      any indebtedness or any Encumbrance of any nature upon, or with respect to,
      Parent or Merger Sub; except for any such conflict or violation described in
      clause (ii) above, any such conflict, breach or default described in clause
      (iii) above, or any such creation, imposition or acceleration described in
      clause (iv) above that would not have a Parent Material Adverse Effect and
      that would not prevent Parent or Merger Sub from consummating the Merger on
      a
      timely basis.

     

    
      
        
        

      

      
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    (b) The
      execution, delivery and performance by Parent and Merger Sub of this Agreement
      and all other Agreements, documents, certificates or other instruments
      contemplated hereby, the fulfillment of and compliance with the respective
      terms
      and provisions hereof and thereof, and the consummation by Parent and Merger
      Sub
      of the transactions contemplated hereby and thereby, do not and will not:
      (i) require any consent, approval, authorization or permit of, or filing
      with or notification to, any Person not party to this Agreement, except
      (A) the filing and recordation of the Certificate of Merger as required by
      the NYBCL; and (B) where the failure to obtain any consent, approval,
      authorization or permit or to make any filing or notification otherwise required
      to be disclosed hereunder would not have a Parent Material Adverse Effect;
      or
      (ii) result in or give rise to any penalty, forfeiture, Agreement
      termination, right of termination, amendment or cancellation, or restriction
      on
      business operations of Parent or Surviving Corporation that would have a Parent
      Material Adverse Effect.

     

    (c) Subject
      to the filing and recordation of the Certificate of Merger as required by the
      NYBCL, all returns, reports, statements and other documents required to be
      filed
      by Parent and Merger Sub with any Governmental Entity with respect to this
      agreement and the transaction contemplated hereby have been or will be filed
      in
      a timely manner and are or will be, as the case may be, true, correct and
      complete in all material respects (and any related fees required to be paid
      have
      been paid or will be in full). All material records of every type and nature
      relating to the business, operations or assets of Parent and Merger Sub have
      been maintained in all material respects in accordance with good business
      practices and are maintained at Parent.

     

    (d) No
      Governmental Entity or any other Person has notified Parent or Merger Sub that
      such Governmental Entity or other Person intends to object to the transactions
      contemplated hereunder which shall include for this purpose any objection to
      the
      operations of the business of Company as part of Parent. Neither Parent nor
      Merger Sub are aware of any fact or circumstance related to them with respect
      to
      this Agreement and the transactions contemplated hereby that would reasonably
      be
      expected to (i) cause the filing of any objection to any application for
      any Governmental consent required hereunder, (ii) lead to any delay in
      processing such application or (iii) require any waiver of any Governmental
      rule, policy or other applicable law.

     

    SECTION
      4.04 No Prior Activities of Merger Sub

     

    Merger
      Sub was formed solely for the purpose of engaging in the transactions
      contemplated by this Agreement and has engaged in no other business activities
      and has conducted its operations only as contemplated hereby.

     

    
      
        
        

      

      
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    SECTION
      4.05 SEC Filings; Financial Statements

     

    (a) All
      statements, reports, schedules, forms and other documents required to have
      been
      filed by Parent with the SEC since December 31, 2006 (the “Parent
      SEC Documents”)
      have
      been so filed. As of their respective dates (or, if amended or superseded by
      a
      filing prior to the date of this Agreement, then on the date of such amendment
      or superseding filing): (i) each of the Parent SEC Documents complied in all
      material respects with the applicable requirements of the Securities Act or
      the
      Exchange Act (as the case may be); and (ii) none of the Parent SEC Documents
      contained any untrue statement of a material fact or omitted to state a material
      fact required to be stated therein or necessary in order to make the statements
      therein, in the light of the circumstances under which they were made, not
      misleading.

     

    (b) The
      financial statements (including any related notes) contained in the Parent
      SEC
      Documents (the “Parent
      Financial Statements”):
      (i)
      complied as to form in all material respects with the published rules and
      regulations of the SEC applicable thereto; (ii) were prepared in accordance
      with
      GAAP applied on a consistent basis throughout the periods covered (except as
      may
      be indicated in the notes to such financial statements or, in the case of
      unaudited statements, as permitted by Form 10-Q of the SEC, and except that
      the
      unaudited financial statements may not have contained footnotes and were subject
      to normal and recurring year-end adjustments which were not, or are not
      reasonably expected to be, individually or in the aggregate, material in
      amount), and (iii) fairly presented in all material respects the consolidated
      financial position of Parent and its consolidated subsidiaries as of the
      respective dates thereof and the consolidated results of operations and cash
      flows of Parent and its consolidated subsidiaries for the periods covered
      thereby.

     

    SECTION
      4.06 Brokers

     

    Except
      for any investment banking firm engaged by Parent to deliver a fairness opinion
      as contemplated by Section 7.02, no broker, finder or investment banker is
      entitled to any brokerage, finder’s or other fee or commission in connection
      with the transactions contemplated by this Agreement based upon arrangements
      made by or on behalf of Parent.

     

    ARTICLE
      V

     

    PRE-CLOSING
      COVENANTS

     

    SECTION
      5.01 Conduct of Business of Company Until Effective Time

     

    Company
      and the Company Shareholders hereby covenant and agree that, from the date
      of
      this Agreement until the Effective Time, Company, unless otherwise expressly
      contemplated by this Agreement or consented to in writing by Parent, will carry
      on its businesses only in the Ordinary Course of Business, use its best efforts
      to preserve intact its business organizations and Assets, maintain its rights
      and franchises, retain the services of its officers and employees and maintain
      its relationships with customers, suppliers, licensors, licensees and others
      having business dealings with it, and use its best efforts to keep in full
      force
      and effect liability insurance and bonds comparable in amount and scope of
      coverage to that currently maintained. Without limiting the generality of the
      foregoing, Company will not:

     

    
      
        
        

      

      
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    (a) (i) increase
      in any manner the compensation or fringe benefits of, or pay any bonus to,
      any
      director, officer or employee; (ii) grant any severance or termination pay
      (other than pursuant to the normal severance practices or existing agreements
      of
      Company in effect on the date of this Agreement) to, or enter into any severance
      agreement with, any director, officer or employee, or enter into any employment
      agreement with any director, officer or employee or otherwise without the prior
      written consent of Parent; (iii) establish, adopt, enter into or amend any
      Company Benefit Plan or other arrangement, except as may be required to comply
      with applicable Law; (iv) pay any benefit not provided for under any
      Company Benefit Plan or other arrangement; (v) grant any awards under any
      bonus, incentive, performance or other compensation plan or arrangement or
      Company Benefit Plan or other arrangement (including the grant of stock options,
      stock appreciation rights, stock-based or stock-related awards, performance
      units or restricted stock, or the removal of existing restrictions in any
      Company Benefit Plan or other arrangement or agreement or awards made
      thereunder), (vi) take any action to fund or in any other way secure the
      payment of compensation or benefits under any agreement or (vii) promote or
      fire
      any director, officer or employee;

     

    (b) declare,
      set aside or pay any dividend on, or make any other distribution in respect
      of,
      outstanding shares of capital stock;

     

    (c) (i) redeem,
      purchase or otherwise acquire any shares of capital stock of Company or any
      securities or obligations convertible into or exchangeable for any shares of
      capital stock of Company, or any options, warrants or conversion or other rights
      to acquire any shares of capital stock of Company or any such securities or
      obligations, or any other securities thereof; (ii) effect any
      reorganization, recapitalization, merger or share exchange; or (iii) split,
      combine or reclassify any of its capital stock or issue or authorize or propose
      the issuance of any other securities in respect of, in lieu of or in
      substitution for, shares of its capital stock;

     

    (d) issue,
      deliver, award, grant or sell, or authorize the issuance, delivery, award,
      grant
      or sale (including the grant of any limitations in voting rights or other
      Encumbrances) of, any shares of any class of its capital stock (including shares
      held in treasury but excluding shares issuable upon the exercise of options
      outstanding on the date hereof in accordance with their terms as of the date
      hereof), any securities convertible into or exercisable or exchangeable for
      any
      such shares, or any rights, warrants or options to acquire, any such shares,
      or
      amend or otherwise modify the terms of any such rights, warrants or options
      the
      effect of which shall be to make such terms more favorable to the holders
      thereof;

     

    (e) acquire
      or agree to acquire, by merging or consolidating with, by purchasing an equity
      interest in or a portion of the Assets of, or by any other manner, any business
      or any corporation, partnership, association or other business organization
      or
      division thereof, or otherwise acquire or agree to acquire any Assets of any
      other person (other than the purchase of assets from suppliers or vendors in
      the
      Ordinary Course of Business);

     

    
      
        
        

      

      
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    (f) sell,
      lease, exchange, mortgage, pledge, transfer or otherwise subject to any
      Encumbrance or dispose of, or agree to sell, lease, exchange, mortgage, pledge,
      transfer or otherwise subject to any Encumbrance or dispose of, any of its
      Assets, except for sales, dispositions or transfers in the Ordinary Course
      of
      Business;

     

    (g) propose
      or adopt any amendments to its certificate of incorporation, bylaws or other
      comparable charter or organizational documents;

     

    (h) make
      or
      rescind any express or deemed election relating to Taxes, settle or compromise
      any claim, action, suit, litigation, proceeding, arbitration, investigation,
      audit or controversy relating to Taxes which would reasonably be expected to
      result in a Company Material Adverse Effect, or change any of its methods of
      reporting income or deductions for federal income tax purposes from those
      employed in the preparation of the federal income tax returns;

     

    (i) make
      or
      agree to make any new capital expenditures;

     

    (j) (i) incur
      any indebtedness for borrowed money or guarantee any such indebtedness of
      another person, issue or sell any debt securities or warrants or other rights
      to
      acquire any debt securities of Company, guarantee any debt securities of another
      person, enter into any “keep well” or other agreement to maintain any financial
      statement condition of another person or enter into any agreement having the
      economic effect of any of the foregoing, except for borrowings incurred in
      the
      Ordinary Course of Business, or (ii) make any loans, advances or capital
      contributions to, or investments in, any other person other than travel and
      payroll advances made to employees in the Ordinary Course of
      Business;

     

    (k) pay,
      discharge, settle or satisfy any claims, liabilities or obligations (whether
      absolute or contingent, matured or unmatured, known or unknown), other than
      the
      payments, discharges or satisfactions, in the Ordinary Course of Business which
      are materially in accordance with their terms, of liabilities reflected or
      reserved against in, or contemplated by, Company Financial Statement or waive
      any material benefits of, or agree to modify in any material respect, any
      confidentiality, standstill or similar agreements to which Company is a
      party;

     

    (l) waive,
      release or assign any rights or claims, or modify, amend or terminate any
      agreement to which Company is a party;

     

    (m) make
      any
      change in any method of accounting or accounting practice or policy other than
      those required by GAAP or a Governmental Entity;

     

    (n) take
      any
      action or fail to take any action that would have a Company Material Adverse
      Effect prior to or after the Effective Time or a material adverse effect after
      the Effective Time, or that would adversely affect the ability of Company prior
      to the Effective Time, or Parent or any of its Subsidiaries after the Effective
      Time, to obtain consents of third parties or approvals of Government Entities
      required to consummate the transactions contemplated in this Agreement;
      or

     

    
      
        
        

      

      
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    (o) authorize,
      or commit or agree to do any of the foregoing.

     

    SECTION
      5.02 Efforts to Satisfy Conditions

     

    Parent
      and Company shall use their respective reasonable efforts to cause all
      conditions to the obligations of Parent and Company set forth in Article VII
      to
      be satisfied on or before the Closing Date.

     

    SECTION
      5.03 Other Actions

     

    Parent
      and Company shall not, and shall not permit any of their respective Affiliates
      to, take any action that would, or that could reasonably be expected to, result
      in (a) any of the representations and warranties of such Party set forth in
      this Agreement becoming untrue, or (b) any of the conditions to the Merger
      set forth in Article VII not being satisfied.

     

    SECTION
      5.04 Certain Tax Matters

     

    From
      the
      date hereof until the Effective Time, Company (a) will prepare and timely
      file with the relevant Taxing authority all Company Tax Returns required to
      be
      filed during such period (“Post-Signing
      Returns”),
      which
      Post-Signing Returns shall be accurate in all material respects, or permitted
      extensions with respect thereto, (b) will timely pay all Taxes due and
      payable with respect to such Post-Signing Returns, (c) will pay or
      otherwise make adequate provision for all Taxes payable by Company for which
      no
      Post-Signing Return is due prior to the Effective Time, and (d) will
      promptly notify Parent of any action, suit, proceeding, claim or audit pending
      against or with respect to Company in respect of any Taxes. 

     

    SECTION
      5.05 Access and Information

     

    For
      so
      long as this Agreement is in effect, and subject to applicable Laws, Company
      shall (a) afford to Parent and its officers, employees, accountants,
      consultants, legal counsel and other representatives reasonable access during
      normal business hours, subject to reasonable advance notice, to all of their
      respective properties, Agreements, books, records and personnel and
      (b) furnish promptly to Parent (i) a copy of each Agreement, document,
      certificate or other instrument filed with, or received from any Governmental
      Entity and (ii) all other information concerning its respective business,
      operations, prospects, conditions (financial or otherwise), Assets, liabilities
      and personnel as Parent may reasonably request.

     

    SECTION
      5.06 Access to Company Information

     

    From
      the
      date hereof and through the Closing Date, Company shall, and shall cause its
      accountants, counsel, investment bankers, financial advisors, consultants and
      other representatives, to provide Parent and Parent’s accountants, counsel,
      investment bankers, financial advisors, consultants and other representatives,
      upon reasonable notice, access to, and make available, all books, contracts,
      records, reports, properties and commitments of Company, including, without
      limitation, Company’s Tax Returns and financial statements, for Parent’s use in
      connection with Parent’s financing.

     

    
      
        
        

      

      
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    SECTION
      5.7 No Solicitation.

     

    From
      the
      date of this Agreement until the Effective Time or the termination of this
      Agreement pursuant to the terms of this Agreement, Company and the Company
      Shareholders shall not and shall not permit any of their Affiliates, directors,
      officers, employees, agents or representatives, including, without limitation,
      any investment banker, attorney or accountant of Company (collectively,
“Representatives”)
      directly or indirectly, to (i) initiate, solicit, encourage or otherwise
      facilitate (including by way of furnishing information), any inquiries or the
      making of any proposal or offer that constitutes, or may reasonably be expected
      to lead to, an Acquisition Proposal, (ii) enter into or maintain or
      continue discussions or negotiate with any Person in furtherance of such
      inquiries or to obtain an Acquisition Proposal, (iii) agree to, approve,
      recommend, or endorse any Acquisition Proposal, (iv) disclose any non-public
      information relating to Company or afford access to the properties, books or
      records of Company to any person that has made or may reasonably be expected
      to
      make a proposal regarding a Acquisition Proposal or that has advised Company
      that it is or may be interested in making a proposal regarding a Acquisition
      Proposal, or (v) authorize or permit any of its or their Subsidiaries or
      Representatives to take any such action and Company and Company Shareholders
      shall promptly notify Parent of any such inquiries and proposals received by
      any
      of them or their Representatives, relating to any of such matters

     

    SECTION
      5.8 Tax Matters

     

    (a) It
      is
      intended by the parties hereto that the Merger shall constitute a taxable
      transaction and shall not constitute a tax-free reorganization within the
      meaning of Section 368 of the Code. Each Party hereto and each Company
      Shareholder agrees not to take any position contrary to such intention with
      any
      Government Entity, including, without limitation, on any Tax returns or other
      filings.

     

    (b) At
      Parent’s option, Company and each Company Shareholder shall join with Parent in
      making an election under Code § 338(h)(10) (and any corresponding election
      under state, local, and foreign tax law) with respect to the purchase and sale
      of Company Common Stock pursuant to the Merger hereunder (collectively, a
“338(h)(10)
      Election”).
      Company Shareholders shall include any income, gain, loss, deduction, or other
      tax items resulting from the § 338(h)(10) Election on their Tax Returns to
      the extent required by applicable law. Company Shareholders shall also pay
      any
      Tax imposed on Company attributable to the making of the § 338(h)(10)
      Election, including (i) any Tax imposed under Code § 1374, (ii) any tax
      imposed under Code § 338 and the regulations thereunder, or (iii) any
      state, local or foreign Tax imposed on Company’s gain, and Company Shareholders
      shall indemnify Parent and the Surviving Corporation against any Loss arising
      out of any failure to pay any such Taxes.

     

    (c) Parent,
      Company and Company Shareholders agree that the Merger Consideration and the
      liabilities of Company (plus other relevant items) will be allocated to the
      assets of Company for all purposes (including Tax and financial accounting)
      in a
      manner consistent with Code §§ 338 and 1060 and the regulations thereunder.
      Parent, Company and Company Shareholders shall file all Tax Returns (including
      amended returns and claims for refund) and information reports in a manner
      consistent with such allocation.

     

    
      
        
        

      

      
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    ARTICLE
      VI

     

    ADDITIONAL
      AGREEMENTS

     

    SECTION
      6.01 Appropriate Action; Consents; Filings

     

    (a) Upon
      the
      terms and subject to the conditions set forth in this Agreement, the Parties
      shall use their reasonable best efforts to take, or cause to be taken, all
      appropriate action, and do, or cause to be done, all things necessary, proper
      or
      advisable under applicable Law or otherwise to consummate and make effective
      the
      transactions contemplated by this Agreement as promptly as practicable,
      including without limitation (i) executing and delivering any additional
      instruments necessary, proper or advisable to consummate the transactions
      contemplated by, and to carry out fully the purposes of, this Agreement,
      (ii) obtaining from any Governmental Entities any material Licenses
      required to be obtained or made by Parent, or Company, in connection with the
      authorization, execution and delivery of this Agreement and the consummation
      of
      the transactions contemplated herein, including, without limitation, the Merger,
      and (iii) making all necessary filings, and thereafter making any other
      required submissions, with respect to this Agreement and the Merger required
      any
      applicable Law; provided
      that
      Parent and Company shall cooperate with each other in connection with the making
      of all such filings, including providing copies of all such documents to the
      non-filing Party and its advisors prior to filing and discussing all reasonable
      additions, deletions or changes suggested in connection therewith. Company
      and
      Parent shall furnish to each other all information required for any application
      or other filing to be made pursuant to the rules and regulations of any
      applicable Law in connection with the transactions contemplated by this
      Agreement.

     

    (b) (i) Except
      as
      the Parties may otherwise agree, Company, any Company Shareholder and Parent
      shall each give any notices to third parties, and use their reasonable best
      efforts to obtain any third-party consents, approvals or waivers
      (A) necessary, proper or advisable to consummate the transactions
      contemplated in this Agreement; or (B) required to prevent a Company
      Material Adverse Effect or a Parent Material Adverse Effect.

     

    (ii) In
      the
      event that any of Company, any Company Shareholder or Parent shall fail to
      obtain any third-party consent, approval or waiver described in Section
      6.01(b)(i) of this Agreement, such Party shall use its reasonable best efforts,
      and shall take any such actions reasonably requested by the other Parties,
      to
      minimize any adverse effect upon Company and Parent and their respective
      businesses resulting, or which could reasonably be expected to result after
      the
      Effective Time, from the failure to obtain such consent, approval or
      waiver.

     

    (c) From
      the
      date of this Agreement until the Effective Time, Company and Parent shall
      promptly notify each other in writing of any pending or, to the knowledge of
      Company, Company Shareholders or Parent, threatened action, proceeding or
      investigation by any Governmental Entity or any other Person
      (i) challenging or seeking damages in connection with the Merger or the
      conversion of Company Common Stock into the Merger Consideration pursuant to
      the
      Merger or the transactions contemplated hereunder or (ii) seeking to
      restrain or prohibit the consummation of the Merger or the transactions
      contemplated hereunder or otherwise limit the right of Parent to own or operate
      all or any portion of the business or Assets of Company. Company and Parent
      shall cooperate with each other in defending any such action, proceeding or
      investigation, including seeking to have any stay or temporary restraining
      order
      entered by any court or other Governmental Entity vacated or
      reversed.

     

    
      
        
        

      

      
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    SECTION
      6.02 Disclosure

     

    Prior
      to
      the Effective Time, each Party shall notify the other Parties in writing of
      (i) any representation or warranty made by it in connection with this
      Agreement becoming untrue or inaccurate, (ii) the occurrence or
      non-occurrence of any event, the occurrence or non-occurrence of which would
      be
      likely to cause any condition to the obligations of any Party to effect the
      Merger and the other transactions contemplated by this Agreement not to be
      satisfied or (iii) the failure of Company, Parent or Merger Sub, as the
      case may be, to comply with or satisfy any covenant, condition or Agreement
      to
      be complied with or satisfied by it pursuant to this Agreement which would
      be
      likely to result in any condition to the obligations of any Party to effect
      the
      Merger and the other transactions contemplated by this Agreement not to be
      satisfied; provided,
      however,
      the
      delivery of any notice pursuant to this Section 6.02(a) shall not cure any
      breach of any representation or warranty requiring disclosure of such matter
      as
      of the date of this Agreement or otherwise limit or affect the rights and
      remedies available hereunder to the Party receiving such notice.

     

    SECTION
      6.03 Public Announcements

     

    Parent,
      Merger Sub and Company shall consult with each other before issuing or making,
      and shall give each other the opportunity to review and comment upon, any press
      release or other public statement with respect to the Merger and the other
      transactions contemplated in this Agreement, and shall not issue any such press
      release or make any such public statement prior to such consultation, except
      as
      may be required by Law.

     

    SECTION
      6.04 Obligations of Merger Sub

     

    Parent
      shall take all action necessary to cause Merger Sub to perform its obligations
      under this Agreement and to consummate the Merger on the terms and conditions
      set forth in this Agreement.

     

    SECTION
      6.05 Transaction Expenses

     

    Each
      Party to this Agreement shall bear their own expenses in connection herewith,
      including, without limitation, the fees of each Party’s respective legal
      counsel, financial advisors, accountants, brokers, finders or investment
      bankers, but in no event shall such fees and expenses (including, without
      limitation, the fees and expenses described in Section 3.27) incurred by or
      on
      behalf of Company. Company shall make a good faith effort to pay all of its
      expenses in connection with the Agreement and the transactions contemplated
      hereby prior to Closing. In the event any of the foregoing expenses are not
      paid
      prior to Closing or have not reduced the Transaction Value, Parent shall be
      entitled to offset such excess expenses against the Purchase Notes (as if such
      excess expenses were a Loss).

     

    
      
        
        

      

      
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    SECTION
      6.06 Director Resignations

     

    Company
      shall deliver to Parent prior to the Closing the resignation of each director
      and officer of Company, effective as of the Effective Time.

     

    SECTION
      6.07 Tax Advance

     

    Within
      fifteen (15) days after filing the tax return of the Company for the period
      January 1, 2008 through the Effective Time, Parent shall, or shall cause the
      Surviving Company to, pay to the Company Shareholders (pro rata to the number
      of
      shares of Company Stock owned by them as of the Closing Date) and amount equal
      to forty-two percent (42%) of (a) the taxable income to be allocated to each
      of
      them on Forms K-1 to be provided to them by the Surviving Corporation with
      respect to such period, less (b) Four Hundred Forty-Eight Thousand Two Hundred
      Thirty-six Dollars (448,236). The amount of such payments shall be applied
      against the payments next becoming due under the Purchase Notes after the date
      such payments are made to the Company Shareholders.

     

    ARTICLE
      VII

     

    CONDITIONS
      PRECEDENT

     

    SECTION
      7.01 Conditions to Obligations of Each Party Under This
      Agreement

     

    The
      respective obligations of each Party to effect the Merger and the other
      transactions contemplated herein shall be subject to the satisfaction at or
      prior to the Effective Time of the following conditions, any or all of which
      may
      be waived by agreement of Parent and Company, in whole or in part, to the extent
      permitted by applicable Law:

     

    (a) No
      Order.
      No
      Governmental Entity or federal or state court of competent jurisdiction shall
      have enacted, issued, promulgated, enforced or entered any statute, rule,
      regulation, executive order, decree, judgment, injunction or other order
      (whether temporary, preliminary or permanent), in any case which is in effect
      and which prevents or prohibits consummation of the Merger; provided,
      however,
      that
      the Parties shall use their reasonable best efforts to cause any such decree,
      judgment, injunction or other order to be vacated or lifted; provided,
      further,
      that
      the failure to obtain a required consent or approval of a Governmental Entity
      shall not form the basis for an assertion that this condition is not
      satisfied.

     

    
      
        
        

      

      
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    SECTION
      7.02 Additional Conditions to Obligations of Parent and Merger
      Sub

     

    The
      obligations of Parent and Merger Sub to effect the Merger and the other
      transactions contemplated in this Agreement are also subject to the satisfaction
      at or prior to the Effective Time of the following conditions, any or all of
      which may be waived by Parent, in whole or in part, to the extent permitted
      by
      applicable Law:

     

    (a) Representations
      and Warranties.
      Each of
      the representations and warranties of Company and the Company Shareholders
      contained in this Agreement shall be true and correct as of the date of this
      Agreement and shall be true and correct (except that where any statement in
      a
      representation or warranty expressly includes a standard of materiality, such
      statement shall be true and correct in all respects giving effect to such
      standard) as of the Effective Time as though made as of the Effective Time,
      except for (i) representations and warranties which address matters only as
      of a
      particular date, which representations and warranties shall be true and correct
      in all material respects (except that where any statement in a representation
      or
      warranty expressly includes a standard of materiality, such statement shall
      be
      true and correct in all respects giving effect to such standard) as of such
      date
      and (ii) changes permitted by or consistent with this
      Agreement.

     

    (b) Agreements
      and Covenants.
      Company
      shall have performed or complied in all respects with all Agreements and
      covenants required by this Agreement to be performed or complied with by Company
      on or prior to the Effective Time.

     

    (c) Opinion
      of Counsel.
      Parent
      shall have received from Olver Korts LLP, counsel to Company, an opinion dated
      the Closing Date, which is reasonable and customary for transactions of the
      type
      contemplated by this Agreement.

     

    (d) No
      Challenge.
      There
      shall not be pending any enforcement action or similar proceeding by any state
      or federal Governmental Entity that is likely to have a Company Material Adverse
      Effect or, if such action arises in connection with the transactions
      contemplated hereby, a Parent Material Adverse Effect.

     

    (e) Company
      Material Adverse Effect.
      There
      shall not have occurred a Company Material Adverse Effect (or any development
      that, insofar as reasonably can be foreseen, is reasonably likely to result
      in
      any Company Material Adverse Effect).

     

    (f) No
      Litigation.
      There
      shall be no pending or threatened suit, action, proceeding or investigation:
      (i)
      challenging or seeking to restrain or prohibit the consummation of the Merger
      or
      any of the other transactions contemplated by this Agreement, (ii) relating
      to
      the Merger and seeking to obtain from Parent or Merger Sub any damages that
      may
      be material to Parent, (iii) seeking to prohibit or limit in any respect
      Parent's ability to vote, receive dividends with respect to or otherwise
      exercise ownership rights with respect to the stock of the Surviving
      Corporation; (iv) which would materially and adversely affect the right of
      the
      Surviving Corporation to own the assets or operate the business of Company;
      or
      (v) which, if adversely determined, could have a Company Material Adverse Effect
      or Parent Adverse Effect.

     

    
      
        
        

      

      
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    (g) Consents.
      Company
      shall have procured all consents of third-parties and Governmental Entities
      specified in Schedule 3.06. Parent
      shall have received the approval of its primary lender to the consummation
      of
      the Merger and the transactions contemplated by this Agreement.

     

    (h) Bank
      Financing. Parent shall have entered into a loan agreement with a commercial
      lender reasonably acceptable to Parent including, among other things, the
      agreement of such lender to provide Parent with funds sufficient to pay or
      cause
      to be paid the Cash Purchase Price and the Company Shareholders shall have
      agreed to subordinate the Purchase Notes to the obligations of the Parent to
      such lender on terms and conditions satisfactory to such lender, in its sole
      discretion.

     

    (i) Benefit
      Plans Termination.
      Company
      shall have terminated each of the Benefit Plans on terms reasonably satisfactory
      to Parent, shall have provided evidence reasonably satisfactory to Parent to
      ensure that no employee or former employee of Company has any right under such
      plans and that all Liabilities of Company under the Benefits Plans (including
      any Liabilities relating to services performed prior to the Closing) are fully
      extinguished at no cost, and with no Liability, to Company except for funding
      of
      retirement plans for fiscal 2008 and for termination or rollover payments
      incident to termination of the Benefit Plans. 

     

    (j) Dissenting
      Shareholders.
      There
      shall be no Dissenting Shareholders.

     

    (k) Non-competition
      Agreements.
      Each of
      Company Shareholders shall have executed and delivered to Parent a
      non-competition agreement in the form attached hereto as Exhibit
      F.

     

    (l) Employment
      Agreements.
      Each of
      Michael Brudek and Nicholas Vaseliv shall have executed and delivered to Parent
      an employment agreement in the form attached hereto as Exhibit
      G.

     

    (m) Lease.
      Parent
      or the Surviving Corporation (at the option of Parent) having entered into
      a
      lease agreement for the premises in which the Company currently conducts its
      business, on terms (including term and rental payments) and conditions
      satisfactory to Parent.

     

    (n) Due
      Diligence Investigation.
      Parent
      shall not have identified anything during its continuing business and legal
      due
      diligence investigation of Company that has or in the reasonable judgment of
      Parent could be expected to have a Company Material Adverse Effect.

     

    (o) Fairness
      Opinion.
      If
      Parent elects, it shall have received an opinion from a reputable investment
      banking firm selected by Parent as to the fairness, from a financial point
      of
      view, to Parent of the aggregate Merger Consideration to be paid to Company
      Shareholders pursuant to this Agreement.

     

    (p) Officer’s
      Certificate.
      Parent
      shall have received a certificate, dated as of the Closing Date, signed on
      behalf of Company by the its chief executive officer and by each of the Company
      Shareholders (i) representing and warranting after reasonable investigation
      that
      the conditions set forth in Section 7.02(a) and Section 7.02(b) have
      been duly satisfied, (ii) certifying that Company Financial Statement have
      been
      prepared in accordance with GAAP and fairly present, in all material respects,
      the financial condition and results of operation of Company.

     

    
      
        
        

      

      
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    (q) Secretary’s
      Certificate.
      Parent
      shall have received a certificate, dated as of the Closing Date, signed by
      the
      Secretary of Company (i) attaching copies of Company’s certificate of
      incorporation and bylaws, and any amendments thereto, (ii) attaching a good
      standing certificate of Company, duly certified by the New York Department
      of
      State, (iii) certifying that attached thereto are true and correct copies
      of action by written consent or resolutions duly adopted by the board of
      directors and shareholders of Company which authorize and approve the execution,
      delivery and performance of this Agreement and the consummation of the
      transactions contemplated thereby, (iv) certifying that there are no
      proceedings for the dissolution or liquidation of Company and
      (v) certifying the incumbency, signature and authority of the officers of
      Company authorized to execute, deliver and perform this Agreement and all other
      documents, instruments or agreements related thereto executed or to be executed
      by Company.

     

    SECTION
      7.03 Additional Conditions to Obligations of Company

     

    The
      obligations of Company to effect the Merger and the other transactions
      contemplated by this Agreement are also subject to the satisfaction at or prior
      to the Effective Time of the following conditions, any or all of which may
      be
      waived by Company, in whole or in part, to the extent permitted by applicable
      Law:

     

    (a) Representations
      and Warranties.
      Each of
      the representations and warranties of Parent and Merger Sub contained in this
      Agreement shall be true and correct as of the date of this Agreement and shall
      be true and correct (except that where any statement in a representation or
      warranty expressly includes a standard of materiality, such statement shall
      be
      true and correct in all respects giving effect to such standard) as of the
      Effective Time as though made as of the Effective Time, except for
      (i) representations and warranties which address matters only as of a
      particular date, which representations and warranties shall be true and correct
      in all material respects (except that where any statement in a representation
      or
      warranty expressly includes a standard of materiality, such statement shall
      be
      true and correct in all respects giving effect to such standard) as of such
      date
      and (ii) changes permitted by or consistent with this Agreement. Company
      shall have received a certificate of the chief executive officer or chief
      financial officer of Parent to the foregoing effect.

     

    (b) Guarantees.
      Parent
      and Merger Sub shall have obtained the release of each of the Company
      Shareholders from all personal guarantees of obligations of the Company
      included, but not limited to, the lease by the Company of the premises occupied
      by the Company for the conduct of its business.

     

    (c) Agreements
      and Covenants.
      Parent
      and Merger Sub shall have performed or complied in all respects with all
      Agreements and covenants required by this Agreement to be performed or complied
      with by them on or prior to the Effective Time except for such noncompliance
      that does not have a Parent Material Adverse Effect. Company shall have received
      a certificate of the chief executive officer or chief financial officer of
      Parent and Merger Sub to that effect.

     

    
      
        
        

      

      
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    (d) Opinion
      of Counsel.
      Company
      and Shareholders shall have received from Boylan, Brown, Code, Vigdor &
Wilson, LLP, counsel to Parent and Merger Sub, an opinion dated the Closing
      Date, which is reasonable and customary for transactions of the type
      contemplated by this Agreement.

     

    (e) No
      Challenge.
      There
      shall not be pending any enforcement action or similar proceeding by any state
      or federal Governmental Entity that is likely to have a Parent Material Adverse
      Effect.

     

    (f) Parent
      Material Adverse Effect.
      There
      shall not have occurred a Parent Material Adverse Effect (or any development
      that, insofar as reasonably can be foreseen, is reasonably likely to result
      in
      any Parent Material Adverse Effect).

     

    (g) No
      Litigation.
      There
      shall be no pending or threatened suit, action, proceeding or investigation:
      (i)
      challenging or seeking to restrain or prohibit the consummation of the Merger
      or
      any of the other transactions contemplated by this Agreement or (ii) which,
      if
      adversely determined, could have a Parent Material Adverse Effect.

     

    (h) Consents.
      Parent
      shall have received the approval of its primary lender to the consummation
      of
      the Merger and the transactions contemplated by this Agreement.

     

    (i) Secretary’s
      Certificate.
      Company
      and Shareholders shall have received a certificate, dated as of the Closing
      Date, signed by the Secretary of Parent and Merger Sub (i) attaching copies
      of Parent’s and Merger Sub's certificate of incorporation and bylaws, and any
      amendments thereto, (ii) attaching a good standing certificate of Parent
      and Merger Sub, duly certified by the Delaware Secretary of State and New York
      Department of State, respectively (iii) certifying that attached thereto
      are true and correct copies of action by written consent or resolutions duly
      adopted by the board of directors of Parent and Merger Sub which authorize
      and
      approve the execution, delivery and performance of this Agreement and the
      consummation of the transactions contemplated thereby, and (iv) certifying
      the incumbency, signature and authority of the officers of Parent and Merger
      Sub
      authorized to execute, deliver and perform this Agreement and all other
      documents, instruments or agreements related thereto executed or to be executed
      by Parent and Merger Sub.

     

    
      
        
        

      

      
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    ARTICLE
      VIII

     

    TERMINATION,
      AMENDMENT AND WAIVER

     

    SECTION
      8.01 Termination

     

    This
      Agreement may be terminated at any time (except where otherwise indicated)
      prior
      to the Effective Time, whether before or after approval of this Agreement and
      the Merger by Company Shareholders:

     

    (a) by
      mutual
      written consent of Parent and Company;

     

    (b) (i) by
      Parent, if any of the conditions provided in Section 7.02 have not been met
      as
      of July 31, 2008 and such failure has not been cured within twenty (20) business
      days following receipt by Company of written notice of such failure describing
      the extent and nature thereof in reasonable detail, or to the extent permitted
      by applicable Law, such conditions have not been waived in writing by
      Parent;

     

    (ii) by
      Company, if any of the conditions provided in Section 7.03 have not been met
      as
      of the July 31, 2008 and such failure has not been cured within twenty (20)
      business days following receipt by Parent of written notice of such failure
      describing the extent and nature thereof in reasonable detail, or, to the extent
      permitted by applicable law, such conditions have not been waived in writing
      by
      Company.

     

    (c) by
      either
      Parent or Company if any decree, permanent injunction, judgment, order or other
      action by any court of competent jurisdiction or any other federal or state
      (but
      not county or municipal) Governmental Entity preventing or prohibiting
      consummation of the Merger shall have been filed or in effect; 

     

    (d) by
      either
      Parent or Company if the Merger shall not have been consummated by July 31,
      2008; provided however,
      that
      the right to terminate this Agreement under this Section 8.01(e) shall not
      be available to (i) Parent, where Parent’s failure to fulfill any
      obligation under this Agreement has been the cause of, or resulted in, the
      failure of the Effective Time to occur on or before such date, or
      (ii) Company, where Company’s failure to fulfill any obligation under this
      Agreement has been the cause of, or resulted in, the failure of the Effective
      Time to occur on or before such date; 

     

    (e) by
      either
      Parent or Company if any of the conditions provided in Section 7.01 have not
      been met as of July 31, 2008, or to the extent permitted by applicable law,
      have
      not been waived by both Parties; and

     

    (f) by
      Parent, if Company or the Company Shareholders breach their obligations under
      Section 5.7. 

     

    
      
        
        

      

      
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    SECTION
      8.02 Effect of Termination

     

    In
      the
      event of termination of this Agreement by either Parent or Company as provided
      in Section 8.01, this Agreement shall forthwith become void and there shall
      be no liability or obligation on the part of Parent, Merger Sub or Company
      or
      any of their respective directors or officers except (i) nothing herein
      shall relieve any Party from liability for any breach hereof, (ii) each
      Party shall be entitled to any remedies at law or in equity for such breach
      and
      (iii) Sections 8.02 and 8.03 and Article IX shall remain in full force and
      effect and survive any termination of this Agreement.

     

    SECTION
      8.03 Expenses; Termination Fees

     

    Except
      as
      otherwise set forth in this Agreement, all costs and expenses incurred by the
      parties hereto shall be borne solely and entirely by the party that has incurred
      such costs and expenses, whether or not the Merger is consummated. 

     

    SECTION
      8.04 Amendment

     

    Subject
      to applicable Law, this Agreement may be amended by the Parties at any time
      prior to the Effective Time. This Agreement may not be amended except by an
      instrument in writing signed by the Parties.

     

    SECTION
      8.05 Extension; Waiver

     

    At
      any
      time prior to the Effective Time, the Parties may (a) extend the time for
      the performance of any of the obligations or other acts of the other Parties,
      (b) waive any inaccuracies in the representations and warranties contained
      herein or in any Agreements, documents, certificates or other instruments
      delivered pursuant hereto and (c) waive compliance with any of the
      Agreements or conditions contained in this Agreement. Any such extension or
      waiver shall be valid if set forth in an instrument in writing signed by the
      Party or Parties to be bound thereby. The failure of any Party to assert any
      of
      its rights under this Agreement or otherwise shall not constitute a waiver
      of
      such rights.

     

    ARTICLE
      IX

     

    SURVIVAL
      OF REPRESENTATIONS; REMEDIES

     

    SECTION
      9.01 Survival of Representations

     

    All
      representations, warranties, covenants, indemnities and other agreements made
      by
      any party to this Agreement herein, shall be deemed made on and as of the
      Effective Time as though such representations, warranties, covenants,
      indemnities and other agreements were made on and as of such date, and all
      such
      representations, warranties, covenants, indemnities and other agreements shall
      survive the two-year anniversary of the Closing Date; provided,
      however,
      that
      (a) the representations set forth in Section 3.05 (Authority; Binding
      Obligation) shall survive in perpetuity, (b) the representations set forth
      in
      Section 3.01 (Organization and Qualification), Section 3.02 (No
      Subsidiaries), Section 3.04 (Capitalization), Section 3.15 (Pension
      and Benefit Matters), Section 3.16 (Tax and Tax Matters) and
      Section 3.24 (Environmental Matters) shall survive until the expiration of
      the applicable statute of limitations. Notwithstanding
      anything herein to the contrary, any representation, warranty, covenant,
      agreement or indemnity which is the subject of a claim which is asserted in
      writing prior to the expiration of the applicable period set forth above shall
      survive solely with respect to such claim until the final resolution
      thereof.

     

    
      
        
        

      

      
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    SECTION
      9.02 Indemnification by Company Shareholders

     

    (a) Company
      Shareholders hereby agree to severally indemnify, defend and hold Parent, the
      Surviving Corporation and their respective officers and directors, and each
      person, if any, who controls or may control Parent or the Surviving Corporation
      within the meaning of the Securities Act (all such persons hereinafter are
      referred to individually as a “Parent
      Indemnified Person”
and
      collectively as “Parent
      Indemnified Persons,”
but
      in
      no event shall any Company Shareholder prior to the Effective Time be such
      a
      Parent Indemnified Person) harmless against all Losses resulting from, imposed
      upon or incurred by any Parent Indemnified Person, directly or indirectly,
      as a
      result of any of the following, anything in this Agreement to the contrary
      notwithstanding:

     

    (i)  any
      inaccuracy or breach of a representation or warranty of Company or the Company
      Shareholder given or made by Company or the Company Shareholder in this
      Agreement, in the Certificate of Merger, in any of the schedules to this
      Agreement or in any certificate, document or agreement delivered by or on behalf
      of Company or the Company Shareholders pursuant hereto; and

     

    (ii) any
      failure by Company or the Company Shareholders to perform or comply with any
      covenant or agreement contained in this Agreement, in the Certificate of Merger
      or in any certificate, document or agreement delivered by or on behalf of
      Company or the Company Shareholder pursuant hereto.

     

    (b) Notwithstanding
      anything in this Agreement to the contrary, Company Shareholders shall not
      be
      responsible for any Loss pursuant to this Section 9.02 unless and until the
      aggregate amount of all of such Losses shall exceed $100,000 in
      which
      case Company Shareholders jointly and severally shall be liable for the amount
      by which the entire Loss exceeds $100,000.

     

    SECTION
      9.03 Procedure for Offset

     

    (a) In
      the
      event, from time to time, any Parent Indemnified Person determines that it
      has
      suffered a Loss for which indemnification is available pursuant to this
      Agreement, the following procedure shall be followed:

     

    (i) Parent
      Indemnified Person shall give written notice of any such claim (a “Loss
      Notice”)
      to the
      Shareholders’ Representative specifying in reasonable detail the amount of the
      claimed Loss (the “Loss
      Amount”)
      and
      the basis for such Loss and whether the Parent intends to offset against the
      Purchase Notes.

     

    
      
        
        

      

      
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    (ii) Within
      twenty (20) days after delivery of a Loss Notice, the Shareholders’
Representative shall provide to Parent and the Parent Indemnified Person (if
      not
      the same Person), a written response (a “Response
      Notice”)
      in
      which the Shareholders’ Representative will (i) agree that an offset in the
      full Loss Amount may be made against the Purchase Notes, (ii) agree that an
      offset in an amount equal to part, but not all, of the Loss Amount (the
“Agreed
      Amount”)
      may be
      made against the Purchase Notes or (iii) contest making any offset against
      the Purchase Notes. The Shareholders’ Representative may contest an offset
      against the Purchase Notes upon a good faith belief that all or such portion
      of
      such offset does not constitute a Loss for which the Parent Indemnified Person
      is entitled to indemnification under this Agreement. If no Response Notice
      is
      delivered by the Shareholders’ Representative within such twenty (20) day
      period, the Shareholders’ Representative shall be deemed to have agreed that an
      offset in the full Loss Amount may be made against the Purchase
      Notes.

     

    (iii) If
      the
      Shareholders’ Representative in the Response Notice agree (or are deemed to have
      agreed pursuant to clause (ii) above) that an offset may be made against the
      Purchase Notes in an amount equal to the Loss Amount, the Purchase Note of
      each
      Company Shareholder shall be reduced proportionately in the same percentage
      that
      each Company Shareholder’s Purchase Note bears to all Purchase
      Notes.

     

    (iv) If
      the
      Shareholders’ Representative in the Response Notice agrees that an offset in an
      Agreed Amount may be made against the Purchase Notes, the Purchase Note of
      each
      Company Shareholder shall be reduced proportionately in the same percentage
      that
      such Company Shareholder’s Purchase Note bears to all Purchase
      Notes.

     

    (v) If
      the
      Shareholders’ Representative in the Response Notice contests an offset against
      the Purchase
      Notes
      equal to
      all or any part of the Loss Amount (the “Contested
      Amount”),
      the
      Parent Indemnified Person and the Shareholders’ Representative shall negotiate
      in good faith to resolve any such dispute. During the period of such
      negotiation, and thereafter until the resolution of such dispute, Parent shall
      make any payments due on the Purchase Notes, up to the Contested Amount, to
      the
      Escrow Agent named in Subsection 9.03(a)(vi), to be held and disbursed in
      accordance with the provisions of that Subsection.. The Purchase
      Note of
      each
      Company Shareholder shall be reduced proportionately in the same percentage
      that
      such Company Shareholder’s Purchase
      Note
      bears to
      all Purchase
      Notes
      by an
      amount equal to the dollar amount of the award set forth in such
      determination.

     

    (vi) If
      the
      Parent claims that it is entitled to offset any Contested Sum against the
      Purchase Notes, it shall make each of the payments due with respect to the
      Purchase Notes coming due after the date of the Response Notice (up to, but
      not
      in excess of, the Contested Sum) (together, the “Escrow
      Sum”)
      to
      Olver Korts, LLP and Boylan, Brown, Code, Vigdor & Wilson, LLP, as Escrow
      Agent, to be held and disbursed in accordance with the following:

     

    (a) Retention
      of Escrow Sum.
      The
      Escrow Agent shall hold the Escrow Sum in an interest bearing account of its
      choosing in accordance with the provisions of this Subsection 9.03(a)(vi).
      Interest accumulated in such account shall be paid to Parent and the Company
      Shareholders in the same proportion as each of them shall become entitled to
      receive distribution of the Escrow Sum.

     

    
      
        
        

      

      
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    (b) Distribution
      of Escrow Sum.
      Escrow
      Agent shall retain the Escrow Sum until the resolution of dispute with respect
      to the Contested Sum in accordance with the provisions of Subsection 9.03(a)(v).
      The Escrow Agent shall distribute the Escrow Sum in accordance with the
      determination of a court of competent jurisdiction with respect to the disputes
      giving rise to the deposit in escrow of the Escrow Sum; provided, however,
      that
      if the Parent and the Shareholders Representative shall instruct the Escrow
      Agent in writing as to the manner in which it shall distribute the Escrow Sum,
      the Escrow Sum shall be distributed in accordance with such
      instructions.

     

    (c) Escrow
      Agent's Responsibility.
      The
      Escrow Agent may rely and shall be protected in acting upon any documents which
      may be submitted to them in connection with its duties hereunder and which
      it
      believes to be genuine and to have been signed or presented by the proper party
      or parties, and the Escrow Agent shall have no liability or responsibility
      with
      respect to the form, execution or validity thereof. The Escrow Agent shall
      not
      be responsible for any act or failure to act on their part except in the case
      of
      their own bad faith or gross negligence

     

    (d) Action
      By Escrow Agent.
      The
      Escrow Agent may act only jointly and not severally with respect to any matters
      relating to the Escrow Sum. The action by the Escrow Agent shall not preclude
      either of them from representing or continuing to represent its client is
      connection with this Agreement and the transactions contemplated hereby. The
      fees of Olver Korts, LLP for acting as Escrow Agent shall be paid by the Company
      Shareholders and the fees of Boylan, Brown, Code, Vigdor & Wilson, LLP for
      acting as Escrow Agent shall be paid by Parent.

     

    (b) The
      indemnity and other obligations of each Company Shareholder under this Agreement
      shall first be satisfied through the exercise by Parent of the right of offset
      against the aggregate outstanding amount of the Purchase Notes. Following its
      exhaustion of its offset rights as set forth above, Parent shall have the right
      to enforce the remaining indemnity obligations of Company Shareholders pursuant
      to Section 9.02 hereof against each Company Shareholder.

     

    (c) Provided
      that Parent makes payments of Contested Amounts to the Escrow Agent identified
      in Subsection 9.03(vi) in accordance with that Subsection, the exercise of
      any
      such right of offset or reimbursement by Parent in good faith, whether or not
      ultimately determined to be justified, will not constitute a breach of this
      Agreement or a default under any Purchase Note. Neither the exercise of nor
      the
      failure to exercise such right of offset or reimbursement will constitute an
      election of remedies or limit Parent in any manner in the enforcement of any
      other remedies available to Parent except as otherwise expressly set forth
      in
      this Agreement.

     

    
      
        
        

      

      
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    SECTION
      9.04 Third Party Claims.

     

    The
      obligations and liabilities of Company Shareholders with respect to their
      respective indemnities pursuant to this Article IX, resulting from any
      Third Party Claim shall be subject to the following terms and
      conditions:

     

    (a) The
      party
      seeking indemnification (the “Indemnified
      Party”)
      must
      give the party obligated to indemnify (the “Indemnifying
      Party”),
      notice of any Third Party Claim which is asserted against, resulting to, imposed
      upon or incurred by the Indemnified Party and which may give rise to liability
      of the Indemnifying Party pursuant to this Article IX, stating (to the
      extent known or reasonably anticipated) the nature and basis of such Third
      Party
      Claim and the amount thereof; provided
      that the
      failure to give such notice shall not affect the rights of the Indemnified
      Party
      hereunder except to the extent (i) that the Indemnifying Party shall have
      suffered actual damage by reason of such failure, or (ii) such failure or
      delay materially adversely affects the ability of the Indemnifying Party to
      defend, settle or compromise such Third Party Claim.

     

    (b) Subject
      to Section 9.04(c) below, if the Indemnifying Party assumes responsibility
      for Losses arising out of such Third Party Claim, then the Indemnifying Party
      shall have the right to undertake, by counsel or other representatives of its
      own choosing, the defense of such Third Party Claim at the Indemnifying Party’s
      risk and expense.

     

    (c) In
      the
      event that (i) the Indemnifying Party shall elect not to undertake such defense,
      (ii) within a reasonable time after notice from the Indemnified Party of any
      such Third Party Claim, the Indemnifying Party shall fail to undertake to defend
      such Third Party Claim, or (iii) there is a reasonable probability that such
      Third Party Claim may materially and adversely affect the Indemnified Party
      other than as a result of money damages or other money payments, then the
      Indemnified Party (upon further written notice to the Indemnifying Party) shall
      have the right to undertake the defense, compromise or settlement of such Third
      Party Claim, by counsel or other representatives of its own choosing, on behalf
      of and for the account and risk of the Indemnifying Party. In the event that
      the
      Indemnified Party undertakes the defense of a Third Party Claim under this
      Section 9.04, the Indemnifying Party shall pay to the Indemnified Party, in
      addition to the other sums required to be paid hereunder, the reasonable costs
      and expenses incurred by the Indemnified Party in connection with such defense,
      compromise or settlement as and when such costs and expenses are so
      incurred.

     

    (d) Anything
      in this Section 9.04 to the contrary notwithstanding, (i) neither the
      Indemnified Party nor the Indemnifying Party shall, without the other party’s
      written consent (which consent shall not be unreasonably withheld or delayed),
      settle or compromise such Third Party Claim or consent to entry of any judgment
      which does not include as an unconditional term thereof the giving by the
      claimant or the plaintiff to the Indemnified Party of a release from all
      liability in respect of such Third Party Claim in form and substance
      satisfactory to the Indemnified Party; (ii) in the event that a party
      hereto undertakes defense of such Third Party Claim in accordance with this
      Section 9.04, the other parties, by counsel or other representative of
      their own choosing and at their sole cost and expense, shall have the right
      to
      participate in the defense, compromise or settlement thereof and each party
      and
      its counsel and other representatives shall cooperate with the other party
      and
      its counsel and representatives in connection therewith; and (iii) the
      party that undertakes the defense of such Third Party Claim in accordance with
      this Section 9.04 shall have an obligation to keep the other parties
      informed of the status of the defense of such Third Party Claim and furnish
      the
      other parties with all documents, instruments and information that the other
      parties shall reasonably request in connection therewith.

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    SECTION
      9.05 No
      Recourse Against Company

     

    Company
      Shareholders hereby irrevocably waive any and all right to recourse against
      Company and the Surviving Corporation with respect to any misrepresentation
      or
      breach of any representation, warranty or indemnity, or noncompliance with
      any
      conditions or covenants, given or made by Company in this Agreement or any
      other
      agreements and documents executed or to be executed by the Parties hereto in
      order to consummate the transactions contemplated by this Agreement. No Company
      Shareholder shall be entitled to contribution from, subrogation to or recovery
      against Company or the Surviving Corporation with respect to any liability
      of
      any Company Shareholder that may arise under or pursuant to this Agreement
      or
      any of the other agreements and documents executed or to be executed by the
      Parties hereto in order to consummate the transactions contemplated by this
      Agreement or such other agreements and documents contemplated
      hereby.

     

    SECTION
      9.06 Specific Performance

     

    (a) In
      addition to any other remedies which Parent or Merger Sub may have at law or
      in
      equity, Company and the Company Shareholders hereby acknowledge that Company
      and
      the transactions contemplated under this Agreement are unique, and that the
      harm
      to Parent or Merger Sub resulting from breaches by Company or the Company
      Shareholders of their obligation cannot be adequately compensated by damages.
      Accordingly, Company and the Company Shareholders agree that Parent and Merger
      Sub shall have the right to have all obligations, undertakings, agreements,
      covenants and other provisions of this Agreement specifically performed by
      Company and the Company Shareholders and that Parent and Merger Sub shall have
      the right to obtain an order or decree of such specific performance in any
      of
      the courts of the United States of America or any state or other political
      subdivision thereof.

     

    (b) In
      addition to any other remedies which Company Shareholders may have at law or
      in
      equity, Parent and Merger Sub hereby acknowledge that the transactions
      contemplated under this Agreement are unique, and that the harm to Company
      Shareholders resulting from breaches by Parent or Merger Sub of their obligation
      cannot be adequately compensated by damages. Accordingly, Parent and Merger
      Sub
      agree that Company Shareholders shall have the right to have all obligations,
      undertakings, agreements, covenants and other provisions of this Agreement
      specifically performed by Parent and Merger Sub and that Company Shareholders
      shall have the right to obtain an order or decree of such specific performance
      in any of the courts of the United States of America or any state or other
      political subdivision thereof.

     

    SECTION
      9.07 Remedies Cumulative

     

    Subject
      to the limitations and qualifications set forth in this Article IX, the
      remedies provided herein shall be cumulative and shall not preclude the
      assertion by the parties hereto of any other rights or the seeking of any other
      remedies against the other parties, or their respective successors or
      assigns.

     

    
      
        
        

      

      
        48

        
          

        

      

      
        
        

      

    

     

    SECTION
      9.08 Indemnity by Parent

     

    Parent
      hereby agrees to indemnify, defend and hold Company Shareholders (“Company
      Shareholder
      Indemnified Person”
and
      collectively “Company Shareholder Indemnified
      Persons,”
but
      in
      no event shall any Company Shareholder prior to the Effective Time be such
      a
      Company Shareholder Indemnified Person) harmless against all Losses resulting
      from, imposed upon or incurred by any Company Shareholder Indemnified Person,
      directly or indirectly, as a result of any of the following, anything in this
      Agreement to the contrary notwithstanding:

     

    (a)  any
      inaccuracy or breach of a representation or warranty of Parent or Merger Sub
      given or made by Parent or Merger Sub in this Agreement, in the Certificate
      of
      Merger, or in any certificate or agreement delivered by or on behalf of Parent
      or Merger Sub pursuant hereto; and

     

    (b) any
      failure by Parent or Merger Sub to perform or comply with any covenant or
      agreement contained in this Agreement, in the Certificate of Merger or in any
      certificate or agreement delivered by or on behalf of Parent or Merger Sub
      pursuant hereto.

     

    ARTICLE
      X

     

    GENERAL
      PROVISIONS

     

    SECTION
      10.01 Notices

     

    All
      notices and other communications given or made pursuant hereto shall be in
      writing and shall be deemed to have been duly given or made as of the date
      delivered, mailed or transmitted if delivered personally, mailed by registered
      or certified mail (postage prepaid, return receipt requested) or sent by
      overnight courier (providing proof of delivery) to the Parties at the following
      addresses or sent by electronic transmission to the following facsimile numbers
      (or at such other address or facsimile number for a Party as shall be specified
      by like notice):

     

    
      	 	
              (a)

            	
              If
                to Parent or Merger Sub:

            

    

    

    IEC
      Electronics Corp.

    105
      Norton Street

    
      	 	 	
              Newark,
                New York 14513

            

    

    Facsimile: (315)332-4430

    Attention: Chief
      Executive Officer

     

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

     

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

            

    

    

    Boylan,
      Brown, Code, Vigdor & Wilson, L.L.P.

    2400
      Chase Square

    Rochester,
      New York 14604

    
      	 	
              Facsimile:

            	
              (585)
                232-3528

            

    

    
      	 	
              Attention:

            	
              Robert
                F. Mechur, Esq.

            

    

     

    
      	 	
              (b)

            	
              If
                to Company prior to the Closing
                Date:

            

    

    

    Val-
      U-Tech Corp.

    115
      A
      Victor Heights Parkway

    
      	 	 	
              Victor,
                New York 14564

            

    

    Facsimile: (585)
      924-8584

    
      	 	
              Attention:

            	
              Michael
                Brudek, President

            

    

     

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

    

    Olver
      Korts LLP

    Tobey
      Village Office Park

    100
      Office Park Way

    Pittsford,
      NY 14534

    Facsimile:
      (585) 387-5234

    Attention:
      Matthew M. Korona, Esq.

     

    If
      to
      Shareholders’ Representative:

    

    Michael
      Brudek

    127
      Amann
      Road

    Honeoye
      Falls, New York 14472

    

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

    

    Olver
      Korts LLP

    Tobey
      Village Office Park

    100
      Office Park Way

    Pittsford,
      NY 14534

    Facsimile:
      (585) 387-9234

    Attention:
      Matthew M. Korona, Esq.

     

    SECTION
      10.02 Jurisdiction, Venue and Attorneys’ Fees

     

    (a) In
      the
      event that any legal proceedings are commenced in any court with respect to
      any
      matter arising under this Agreement, the Parties hereto specifically consent
      and
      agree that:

     

    
      
        
        

      

      
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    (i) the
      courts of the State of New York and/or the United States Federal Courts located
      in the State of New York shall have exclusive jurisdiction over each of the
      Parties and such proceedings; and

     

    (ii) the
      venue
      of any such action shall be in Monroe County, New York and/or the United States
      District Court for the Western District of New York

     

    (b) In
      the
      event that any legal proceedings are commenced in any court with respect to
      any
      matter arising under or relating to this Agreement or any of the agreements
      executed in connection herewith, the prevailing party in such proceeding shall
      be entitled to recover from the other party or parties its reasonable attorneys’
fees, disbursement and expenses incurred in connection with the investigation
      and prosecution or defense (as the case may be) in connection with such
      proceeding.

     

    SECTION
      10.02 Headings

     

    The
      headings contained in this Agreement are for reference purposes only and shall
      not affect in any way the meaning or interpretation of this
      Agreement.

     

    SECTION
      10.03 Severability

     

    If
      any
      term or other provision of this Agreement is invalid, illegal or incapable
      of
      being enforced by any rule of Law or public policy, all other conditions and
      provisions of this Agreement shall nevertheless remain in full force and effect
      so long as the economic or legal substance of the transactions contemplated
      hereby is not affected in any manner materially adverse to any Party. Upon
      such
      determination that any term or other provision is invalid, illegal or incapable
      of being enforced, the Parties shall negotiate in good faith to modify this
      Agreement so as to effect the original intent of the Parties as closely as
      possible in an acceptable manner to the end that transactions contemplated
      hereby are fulfilled to the extent possible.

     

    SECTION
      10.04 Entire Agreement

     

    This
      Agreement (together with the Exhibits, Schedules and the other documents
      delivered pursuant hereto) constitute the entire agreement of the Parties and
      supersede all prior agreements and undertakings, both written and oral, among
      the Parties, or any of them, with respect to the subject matter
      hereof.

     

    SECTION
      10.05 Assignment

     

    Neither
      this Agreement nor any of the rights, interests or obligations hereunder shall
      be assigned by any of the Parties hereto (whether by operation of Law or
      otherwise) without the prior written consent of the other Parties; provided,
      however,
      that
      Parent and Merger Sub shall have the right to assign this Agreement without
      the
      prior written consent of Company to a direct or indirect Subsidiary of the
      Parent, but no such assignment shall relieve Parent or Merger Sub, as the case
      may be, of its obligations hereunder. Subject to the preceding sentence, this
      Agreement shall be binding upon, inure to the benefit of and be enforceable
      by
      the Parties and their respective successors and assigns.

     

    
      
        
        

      

      
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    SECTION
      10.06 Parties in Interest

     

    This
      Agreement shall be binding upon and inure solely to the benefit of each Party,
      and nothing in this Agreement, express or implied, other than the right to
      receive the Merger Consideration pursuant to Article II and the rights of
      the Parent Indemnified Person pursuant to Article IX, is intended to or shall
      confer upon any other Person any right, benefit or remedy of any nature
      whatsoever under or by reason of this Agreement.

     

    SECTION
      10.07 Mutual Drafting

     

    Each
      Party has participated in the drafting of this Agreement, which each Party
      acknowledges is the result of extensive negotiations between the Parties.
      Consequently, this Agreement shall be interpreted without reference to any
      rule
      or precept of law that states that any ambiguity in a document be construed
      against the drafter.

     

    SECTION
      10.08 Governing Law

     

    This
      Agreement shall be governed by, and construed in accordance with, the Laws
      of
      the State of New York, regardless of the Laws that might otherwise govern under
      applicable principles of conflicts of law.

     

    SECTION
      10.09 Counterparts

     

    This
      Agreement may be executed and delivered in one or more counterparts, and by
      the
      different Parties in separate counterparts, each of which when executed and
      delivered shall be deemed to be an original but all of which taken together
      shall constitute one and the same agreement.

     

    SECTION
      10.10 Singular and Plural

     

    Any
      reference in this Agreement to the singular includes a reference to the plural
      and vice
      versa.

     

    ARTICLE
      XI

     

    DEFINITIONS

     

    For
      purposes of this Agreement, the following terms, and the singular and plural
      thereof, shall have the meanings set forth below:

     

    “Acquisition
      Proposal” shall mean any offer, proposal, letter of intent, inquiry or
      expression or indication of interest (other than an offer, proposal, letter
      of
      intent, inquiry or expression or indication of interest by Parent) contemplating
      or otherwise relating to any Acquisition Transaction.

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

     

    “Acquisition
      Transaction” shall mean any transaction or series of related transactions
      involving:

     

    (a)
      any
      merger, consolidation, share exchange, business combination, issuance of
      securities, direct or indirect acquisition of securities, tender offer, exchange
      offer or other similar transaction in which (i) Company is a constituent
      corporation, (ii) a Person or “Group” (as defined in the Exchange Act and the
      rules promulgated thereunder) of Persons directly or indirectly acquires
      beneficial or record ownership of securities representing more than 10% of
      the
      outstanding securities of any class of voting securities of Company, or (iii)
      Company issues securities representing more than 10% of the outstanding
      securities of any class of voting securities of Company;

     

    (b)
      any
      direct or indirect sale, lease, exchange, transfer, license, acquisition or
      disposition of any business or businesses or of assets or rights that constitute
      or account for 10% or more of the net revenues, net income or assets of Company;
      or 

     

    (c)
      any
      liquidation or dissolution of Company.

     

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

     

    “Affiliate”
      means: (a) with respect to an individual, any member of such individual’s
      family; (b) with respect to an entity, any officer, director, shareholder,
      partner or investor of or in such entity or of or in any Affiliate of such
      entity; and (c) with respect to a Person, any Person which directly or
      indirectly, through one or more intermediaries, Controls, is Controlled by,
      or
      is under common Control with such Person or entity.

     

    “Agreement”
      means any agreement between or among two or more Persons with respect to their
      relative rights and/or obligations or with respect to a thing done or to be
      done, including, without limitation, agreements denominated as contracts,
      leases, promissory notes, covenants, easements, rights of way, commitments,
      arrangements and understandings.

     

    “Assets”
      means assets of every kind and everything that is or may be available for the
      payment of liabilities (whether inchoate, tangible or intangible), including,
      without limitation, real and personal property.

     

    “Average
      Parent Trading Price” for any date shall mean the average closing sales price on
      The Over the Counter Bulletin Board (as reported in The Wall Street Journal,
      or,
      if not reported therein, any other authoritative source) for the five (5)
      trading-day period ending on trading day that is immediately prior to such
      date.

     

    “business
      day” means a day other than a Saturday, a Sunday or any other day on which
      commercial banks in the City of New York are authorized or obligated to be
      closed.

     

    “Certificate”
      is defined in Section 2.02(a).

     

    “Certificate
      of Merger” is defined in Section 1.02.

     

    “Closing”
      is defined in Section 1.02.

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

    

     

    “Closing
      Date” is defined in Section 1.02.

     

    “Code”
      means the United States Internal Revenue Code of 1986, as amended.

     

    “Company”
      is defined in the Preamble to this Agreement.

     

    “Company
      Balance Sheet” is defined in Section 2.01(a)(ii)(a).

     

    “Company
      Benefit Plans” means all “employee benefit plans” as that term is defined in
      Section 3(3) of ERISA, whether or not terminated, and trust agreements and
      insurance contracts under or with respect to which Company has or could have
      any
      liability, contingent, secondary or otherwise, and any other benefit plan,
      program, practice, arrangement, or agreement (including without limitation
      employment agreements) providing benefits of any kind to employees, officers,
      directors, or independent contractors.

     

    “Company
      Common Stock” is defined in Section 3.04.

     

    “Company
      Contracts” is defined in Section 3.13.

     

    “Company
      Financial Statement” is defined in Section 3.08(a).

     

    “Company
      Material Adverse Effect” means any event, change or effect that, individually or
      when taken together with any related events, is or is reasonably likely to
      be
      materially adverse to the business, prospects, operations, condition (financial
      or otherwise), Assets or liabilities of Company.

     

    “Company
      Pension Plan” means any Company Benefit Plans that is an “employee pension
      benefit plan,” as that term is defined in Section 3(2) of ERISA.

     

    “Company
      Share Amount” means the aggregate number of shares of Company Common Stock
      outstanding immediately prior to the Effective Time (including any such shares
      that are subject to a repurchase option or risk of forfeiture under any
      restricted stock purchase agreement or other agreement).

     

    “Company
      Shareholders” has the meaning set forth in the Preamble to this
      Agreement.

     

    “Company
      Stock Plan” means any Company Benefit Plan pursuant to which Company is or may
      become obligated to, or obligated to cause any other Person to, issue, deliver
      or sell shares of capital stock of Company, or grant, extend or enter into
      any
      option, warrant, call, right, commitment or agreement to issue, deliver or
      sell
      shares, or any other interest in respect of capital stock of
      Company.

     

    “Company
      Tax Returns” means all Tax Returns required to be filed by Company (without
      regard to extensions of time permitted by law or otherwise).

     

    “Control”
      (including the terms “Controlled by” and “under common Control with”) means, as
      used with respect to any Person, possession of power (directly or indirectly
      or
      as a trustee or executor) to direct or cause the direction of management or
      policies of such Person (whether through ownership of voting securities, as
      trustee or executor, by Agreement or otherwise).

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

     

    “Debt”
      shall mean without duplication (a) all outstanding indebtedness for borrowed
      money of Company to any Person (including all interest accrued thereon), (b)
      all
      obligations of Company arising from or incurred in connection with the
      acquisition or purchase of capital assets (including the deferred purchase
      price
      for such capital assets and all Capital Lease Obligations), (c) any amounts
      that
      are required to be accrued on the balance sheet of Company for bonuses payable
      to any employee, and (d) all accounts payable by Company other than those
      incurred by Company in the Ordinary Course of Business of Company. Normal
      accounts payables and accrued expenses incurred in the Ordinary Course of
      Business of Company shall be excluded from the definition of Debt.

     

    “Dissenting
      Shareholder” shall mean a shareholder of the Company who shall have duly
      demanded appraisal of his shares of Company Common stock pursuant to Section
      623
      of the NYBCL, complied with the provisions of such Section and not withdrawn,
      failed to perfect or otherwise lost his right to such appraisal..

     

    “Effective
      Time” is defined in Section 1.02.

     

    “Encumbrance”
      means any mortgage, lien, pledge, encumbrance, security interest, deed of trust,
      option, encroachment, reservation, order, decree, judgment, condition,
      restriction, charge, Agreement, claim or equity of any kind.

     

    “Environmental
      Laws” means any federal, state or local Law relating to public health or safety,
      worker health or safety, or pollution, damage to or protection of the
      environment including, without limitation, Laws relating to emissions,
      discharges, releases or threatened release of Hazardous Materials into the
      environment (including, without limitation, ambient air, surface water,
      groundwater, land surface or subsurface), or otherwise relating to the
      manufacture, processing, distribution, use, treatment, storage, generation,
      disposal, transport or handling of any Hazardous Material.

     

    “ERISA”
      means the Employee Retirement Income Security Act of 1974, as amended, and
      all
      Laws promulgated pursuant thereto or in connection therewith.

     

    “GAAP”
      means United States generally accepted accounting principles, consistently
      applied.

     

    “Government
      Property” means property or equipment in the possession of or directly acquired
      by a Governmental Entity and subsequently made available to Company or any
      other
      property or equipment otherwise acquired by Company to which a Governmental
      Entity has title.

     

    “Governmental
      Entities” (including the term “Governmental”) means any governmental,
      quasi-governmental or regulatory authority, whether domestic or
      foreign.

     

    “Hazardous
      Material” means (i) any “hazardous substance” as now defined pursuant to the
      Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
      §9601(14); (ii) any “pollutant or contaminant” as defined in 42 U.S.C.
§9601(33); (iii) any material now defined as “hazardous waste” pursuant to 40
      C.F.R. Part 261; (iv) any petroleum, including crude oil and any fraction
      thereof; (v) natural or synthetic gas usable for fuel; (vi) any “hazardous
      chemical” as defined pursuant to 29 C.F.R. Part 1910; and (vii) any asbestos,
      polychlorinated biphenyl (“PCB”), radium, or isomer of dioxin, or any material
      or thing containing or composed of such substance or substances.

     

    
      
        
        

      

      
        55

        
          

        

      

      
        
        

      

    

     

    “Independent
      Accountants” means the firm of Mengel Metzger Barr & Co., LLP. In the event
      that such firm declines or is unable to serve, “Independent Accountants means
      the firm of Eldredge, Fox & Porretti, LLP.

     

    “Intellectual
      Property” means (a) all inventions (whether patentable or unpatentable and
      whether or not reduced to practice), all improvements thereto, all patent
      disclosures, industrial designs, utility models and all patents and patent
      applications, together with all reissuances, continuations,
      continuations-in-part, divisions, revisions, extensions, renewals and
      reexaminations thereof, (b) all trademarks, service marks, trade dress,
      domain names, web site addresses, logos, trade names, and corporate names,
      together with all translations, adaptations, derivations, and combinations
      thereof and including all goodwill associated therewith, and all applications,
      registrations, and renewals in connection therewith, (c) all registered and
      unregistered copyrights, all rights to database information, and all
      applications, registrations, and renewals in connection therewith, (d) all
      mask works and all applications, registrations, and renewals in connection
      therewith, (e) all trade secrets and confidential business information
      (including research and development, know-how, formulas, compositions,
      manufacturing and production processes and techniques, technical data, software,
      databases, designs, drawings, specifications, customer and supplier lists,
      pricing and cost information, and business and marketing plans and proposals),
      (f) all rights, including rights of privacy and publicity, to use the names,
      likenesses and other personal characteristics of any individual, and
      (g) other proprietary rights and (h) all copies and tangible
      embodiments thereof (in whatever form or medium) existing in any part of the
      world (including all computer software and related data and
      documentation).

     

    “Inventory”
      means all new materials, work in progress, finished goods and inventoriable
      supplies.

     

    “Knowledge”
      will be deemed to be present with respect to Company when the matter in question
      is known, or upon reasonable investigation, should have been known, to Company.
      If the Company or any Company Shareholder has received written or oral notice
      of
      any event circumstance or claim, the Company shall be deemed to have Knowledge
      of such event circumstance or claim.

     

    “Laws”
      means all foreign, federal, state and local statutes, laws, ordinances,
      regulations, rules, resolutions, orders, tariffs, determinations, writs,
      injunctions, awards (including, without limitation, awards of any arbitrator),
      judgments and decrees applicable to the specified Person and to the businesses
      and Assets thereof (including, without limitation, Laws relating to the
      protection of classified information; the sale, leasing, ownership or management
      of real property; employment practices, terms and conditions, and wages and
      hours; building standards, land use and zoning; safety, health and fire
      prevention; and environmental protection, including Environmental
      Laws).

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

    

     

    “License”
      means any franchise, grant, authorization, license, tariff, permit, easement,
      variance, exemption, consent, certificate, approval or order of any Governmental
      Entity.

     

    “Losses”
      means all demands, losses, claims, actions or causes of action, assessments,
      damages, liabilities, costs and expenses, including, without limitation,
      interest, penalties and reasonable attorneys’ fees and
      disbursements.

     

    “Merger”
      is defined in the Preamble to this Agreement. 

     

    “Merger
      Consideration” is defined in Section 2.01(a)(i).

     

    “Merger
      Sub” is defined in the Preamble to this Agreement.

     

    “Merger
      Sub Stock” is defined in Section 2.01(d).

     

    “Multiemployer
      Plan” means any “multiemployer plan” within the meaning of Section 4001(a)(3) of
      ERISA to which Company contributes, has an obligation to contribute, or has
      at
      any time since September 2, 1974, contributed or been obligated to
      contribute.

     

    “NYBCL”
      is defined in the Preamble to this Agreement.

     

    “Ordinary
      Course of Business” means ordinary course of business consistent with past
      practices and reasonable business operations.

     

    “Parent”
      is defined in the Preamble to this Agreement.

     

    “Parent
      Common Stock” is defined in Section 2.01(a).

     

    “Parent
      Material Adverse Effect” means any event, change or effect that, individually or
      when taken together with any related events, is or is reasonably likely to
      be
      materially adverse to the business, prospects, operations, condition (financial
      or otherwise), Assets or liabilities of Parent and its Subsidiaries, taken
      as a
      whole.

     

    “Parent
      Notice” is defined in Section 2.01(a)(v)).

     

    “Parent
      SEC Documents” is defined in Section 4.05.

     

    “Party”
      and “Parties” are defined in the Preamble to this Agreement.

     

    “Permitted
      Encumbrance” means (i) easements, rights of way, minor irregularities of title,
      and liens for taxes not yet due and payable, (ii) landlord, warehouse and
      materialmen’s liens and (ii) other Encumbrances similar to clauses (i) and (ii);
      provided, however, that any or all of the foregoing do not materially affect
      the
      utility or value of the Assets or other matters to which they
      relate.

     

    
      
        
        

      

      
        57

        
          

        

      

      
        
        

      

    

     

    “Person”
      means an individual, corporation, partnership, limited liability company, joint
      venture, trust, unincorporated organization or other entity, or a Governmental
      Entity.

     

    “Plan”
      means any plan, program or arrangement, whether or not written, that is or
      was
      an “employee benefit plan” as such term is defined in Section 3(3) of ERISA
      and (a) which was or is established or maintained by Company; (b) to
      which Company contributed or was obligated to contribute or to fund or provide
      benefits; or (c) which provides or promises benefits to any person who
      performs or who has performed services for Company and because of those services
      is or has been (i) a participant therein or (ii) entitled to benefits
      thereunder.

     

    “Post-Signing
      Returns” is defined in Section 5.04.

     

    “Representatives”
      is defined in Section 5.7.

     

    “Scheduled
      Closing Date” is defined in Section 2.04.

     

    “Shareholder
      Notice” is defined in Section 2.01(a)(v)).

     

    “Shareholders’
      Representative” means Michael Brudek. If Michael Brudek is unable or unwilling
      to serve as the Shareholders’ Representative, “Shareholders’ Representative”
means Kathleen Brudek. If both Michael Brudek and Kathleen Brudek are unable
      or
      unwilling to serve as the Shareholders’ Representative, “Shareholders’
Representative” means Nicholas Vaseliv.

     

    “Subsidiary”
      means a corporation, partnership, joint venture or other entity of which any
      Person owns, directly or indirectly, at least fifty percent (50%) of the
      outstanding securities or other interests the holders of which are generally
      entitled to vote for the election of the board of directors or other governing
      body or otherwise exercise Control of such entity.

     

    “Surviving
      Corporation” is defined in Section 1.01.

     

    “Taxes”
      (including the terms “Tax” and “Taxing”) means all federal, state, local and
      foreign taxes (including, without limitation, income, profit, franchise, sales,
      use, real property, personal property, ad
      valorem,
      excise,
      employment, social security and wage withholding taxes) and installments of
      estimated taxes, assessments, deficiencies, levies, imports, duties, license
      fees, registration fees, withholdings, or other similar charges of every kind,
      character or description imposed by any Governmental Entity, and any interest,
      penalties or additions to tax imposed thereon or in connection
      therewith.

     

    “Tax
      Liabilities” means any action, suit, proceeding, audit, investigation or claim
      pending or threatened in respect of any Taxes for which Company is or may become
      liable, or any deficiency or claim for any such Taxes that has been to Company’s
      knowledge proposed, asserted or threatened. 

     

    “Tax
      Returns” means all federal, state, local, foreign and other applicable returns,
      declarations, reports and information statements with respect to Taxes required
      to be filed with the United States Internal Revenue Service, and its successors,
      or any other Governmental Entity or Tax authority or agency, including, without
      limitation, consolidated, combined and unitary tax returns.

     

    
      
        
        

      

      
        58

        
          

        

      

      
        
        

      

    

     

    “Third
      Party Claim” means any claim or other assertion of liability by any third
      party.

     

    “Withdrawal
      Liability” means liability to a Multiemployer Plan as a result of a complete or
      partial withdrawal from such Multiemployer Plan, as those terms are defined
      in
      Part I of Subtitle E of Title IV of ERISA.

     

    [Remainder
      of Page Intentionally Left Blank; Signature Page Follows.]

     

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed and delivered, this Agreement
      or have caused this Agreement to be duly executed and delivered, as of the
      date
      first set forth hereinabove.

     

    
      	
              IEC
                ELECTRONICS CORP.

            
	 	 
	
              By:
                

            	 
	
              Name:
                W. Barry Gilbert

            
	
              Title:
                Chief Executive Officer

            
	 	 
	
              VUT
                MERGER CORP.

            
	 	 
	
              By:
                

            	 
	
              Name:
                W. Barry Gilbert

            
	
              Title:
                President

            
	 	 
	
              VAL-U-TECH
                CORP.

            
	 	 
	
              By:
                

            	 
	
              Name:
                Michael Brudek

            
	
              Title:
                President

            
	 
	
              COMPANY
                SHAREHOLDERS:

            
	 	 
	 	 
	
              Name:
                Kathleen Brudek

            
	 
	 
	
              Name:
                Michael Brudek

            
	 
	 
	
              Name:
                Nicholas Vaseliv

            

    

    

    
      
        
        

      

      
        60

        
          

        

      

      
        
        

      

    

    

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

     

    
      	 
	
              Michael
                Brudek

            

    

    

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

     

    
      	 
	
              Kathleen
                Brudek

            

    

    

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

     

    
      	 
	
              Nicholas
                Vaseliv

            

    

     

    
      
        
        

      

      
        61

        
          

        

      

      
        
        

      

    

    

    EXHIBIT
      A

    

    FORM
      OF

    

    CERTIFICATE
      OF MERGER

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

     

    INITIAL
      OFFICERS AND DIRECTORS

    OF

    SURVIVING
      CORPORATION

    

    Initial
      Officers

    

      
        	
                Office

              	 	
                Officer

              
	
                Chairman

              	 	
                W.
                  Barry Gilbert

              
	
                President

              	 	
                Michael
                  Brudek

              
	
                Secretary

              	 	
                Robert
                  F. Mechur

              

      

    

     

    Initial
      Directors 

    
      
        	 
	 
	 

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      F

    

    FORM
      OF

     

    NON-COMPETITION
      AGREEMENT 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      G

    

    FORM
      OF

     

    EMPLOYMENT
      AGREEMENTCREDIT
          FACILITY AGREEMENT

      

       

      This
        CREDIT FACILITY AGREEMENT (“Agreement”)
        is
        made as of the 30th day of May, 2008 by and among IEC ELECTRONICS CORP.,
        a
        corporation formed under the laws of the State of Delaware (“Borrower”)
        and
        MANUFACTURERS AND TRADERS TRUST COMPANY (“Lender”),
        a New
        York banking corporation, with offices at 255 East Avenue, Rochester, New
        York
        14604.

       

      ARTICLE
        I
        - DEFINITIONS

       

      1.1 The
        following terms shall have the following meanings unless otherwise expressly
        stated herein:

       

      “Affiliate”
means
        any Person which directly or indirectly, or through one or more intermediaries,
        Controls or is Controlled By or is Under Common Control with
        Borrower.

       

      “Agreement”
means
        this Credit Facility Agreement, as further amended, extended or restated
        from
        time to time.

       

      “Applicable Margin”
means,
        with respect to the Revolving Line Facility, the Term Loan, and the Equipment
        Line Facility, the per annum rates shown in the applicable column of the
        table
        below based on the applicable Debt to EBITDARS Ratio, calculated for Borrower
        on
        a consolidated basis and without duplication in accordance with
        GAAP:

       

      
        	
                Level

              	 	
                Debt to EBITDARS

              	 	
                Revolving Line Facility*

              	 	
                Term Loan/Equipment Line 

                Facility

              	 
	 	 	 	 	
                Base Rate 

                Margin

              	 	
                LIBOR 

                Margin

              	 	
                Base Rate 

                Margin

              	 	
                LIBOR 

                Margin

              	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                I

              	 	
                ≥ 3.50 to 1

              	 	
                0.50%

              	 	
                2.75%

              	 	
                0.75%

              	 	
                3.00%

              	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                II

              	 	
                ≥ 3.00 and < 3.50 to 1

              	 	
                0.25%

              	 	
                2.50%

              	 	
                0.50%

              	 	
                2.75%

              	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                III

              	 	
                ≥ 2.50 and < 3.00 to 1

              	 	
                0.00%

              	 	
                2.25%

              	 	
                0.25%

              	 	
                2.50%

              	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                IV

              	 	
                ≥ 2.00 and < 2.50 to 1

              	 	
                0.00%

              	 	
                2.00%

              	 	
                0.00%

              	 	
                2.25%

              	 
	 	 	 	 	 	 	 	 	 	 	 	 
	
                V

              	 	
                < 2.00

              	 	
                0.00%

              	 	
                1.50%

              	 	
                0.00%

              	 	
                1.75%

              	 

      

      
      

       

      
        	 	 	
                *
                  For amounts outstanding as an Overline Advance, the Applicable
                  Margin

              

      

      
        	 	 	
                   will
                  be the applicable level shown in the above table plus 0.50%.
                  

              

      

       

      The
        Applicable Margin shall be fixed at Level III on the date of this Agreement.
        Effective on the first annual anniversary of the date of this Agreement,
        the
        Level applicable to Loans will be established based upon the Debt to EBITDARS
        Ratio as of the last day of the measurement period ending on March 31, 2009.
        Thereafter, changes, if any, in the Level applicable to Loans will be effective
        on the tenth (10th) day following each date on which the Borrower’s Quarterly
        Covenant Compliance Sheet (“QCC
        Sheet”)
        is
        required to be delivered to the Lender pursuant to Section 11.4,
        based
        upon the Debt to EBITDARS ratio shown therein. In the event that any QCC
        Sheet
        is not delivered by the date required, pricing will revert to Level I until
        the
        tenth (10th) day following the date of delivery of the delayed QCC Sheet,
        on
        which tenth day pricing will be adjusted to the applicable level shown by
        the
        QCC Sheet.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      “Applicable
        Unused Fee”
means
        the per annum rate (calculated based upon days elapsed over a 360 day year)
        shown in the table below based on the applicable Debt to EBITDARS Ratio,
        calculated for Borrower on a consolidated basis and without duplication in
        accordance with GAAP:

       

      
        	
                Level

              	 	
                Debt to EBITDARS

              	 	
                Unused 

                Commitment 

                Fee

              	 
	 	 	 	 	 	 
	
                I

              	 	
                ≥
                  3.50 to 1

              	 	
                0.500%

              	 
	 	 	 	 	 	 
	
                II

              	 	
                ≥
                  3.00 and < 3.50 to 1

              	 	
                0.375%

              	 
	 	 	 	 	 	 
	
                III

              	 	
                ≥
                  2.50 and < 3.00 to 1

              	 	
                0.250%

              	 
	 	 	 	 	 	 
	
                IV

              	 	
                ≥
                  2.00 and < 2.50 to 1

              	 	
                0.250%

              	 
	 	 	 	 	 	 
	
                V

              	 	
                <
                  2.00

              	 	
                0.125%

              	 

      

       

      The
        Applicable Unused Fee shall be fixed at Level III on the date of this Agreement.
        Effective on the first annual anniversary of the date of this Agreement,
        the
        Level applicable to Unused Fees will be established based upon the Debt to
        EBITDARS ratio as of the last day of the measurement period ending on March
        31,
        2009. Thereafter, changes, if any, in the Level applicable to Unused Fees
        will
        be effective on the tenth (10th) day following each date on which the Borrower’s
        Quarterly Covenant Compliance Sheet (“QCC
        Sheet”)
        is
        required to be delivered to the Lender pursuant to Section 11.4,
        based
        upon the Debt to EBITDARS Ratio shown therein. In the event that any QCC
        Sheet
        is not delivered by the date required, pricing will revert to Level I until
        the
        tenth (10th) day following the date of delivery of the delayed QCC Sheet,
        on
        which tenth day pricing will be adjusted to the applicable level shown by
        the
        QCC Sheet.

       

      “Asset
        Disposition”
shall
        mean any sale, assignment, transfer, lease, or other disposition by a Person
        to
        any other Person, whether in one transaction or in a series of related
        transactions, of any of its assets, business units or other properties
        (including (i) any interest in property, whether tangible or intangible,
        (ii)
        Capital Securities of Subsidiaries, and (iii) any sale-leaseback transaction),
        provided, however, that “Asset Disposition” shall not include (a) the sale of
        inventory in the ordinary course of business, and (b) the disposition of
        any
        obsolete or retired property not used or useful in the business of any of
        the
        Credit Parties in return for a fair market value.

       

      “Base
        Rate”
means
        the higher of (i) the Prime Rate, and (ii) the Federal Funds Rate plus one-half
        percentage point (.5%).

       

      “Base
        Rate Loan”
means
        any Loan when and to the extent that the interest rate for such Loan is
        determined by reference to the Base Rate.

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      “Borrower”
means
        IEC Electronics Corp. and its successors, legal representatives and
        assigns.

       

      “Borrowing
        Base”
means
        the sum of the following:

       

      (a) 85%
        of
        the Eligible Accounts of the Credit Parties; plus

       

      (b) plus
        35%
        of the Eligible Inventories of the Credit Parties up to a maximum of $2,000,000,
        or if the Inventory Overline Advance Rate has been elected pursuant to Section
        2.2,
        70% of
        the Borrower’s Eligible Inventories up to a maximum of $4,000,000.

       

      “Borrowing
        Base Report”
means
        a
        report described in Section 9.1
        of this
        Agreement.

       

      “Business
        Day”
means
        any day other than a Saturday, Sunday, or other day on which commercial banks
        in
        New York are authorized or required to close under the laws of such State
        and,
        if the applicable day relates to LIBOR Loan, LIBOR Interest Period, or notice
        with respect to a LIBOR Loan, a day on which dealings in Dollar deposits
        are
        also carried on in the London interbank market and banks are open for business
        in London.

       

      “Capital Security”
means,
        (a) with respect to any Person that is a corporation, any and all shares,
        interests or equivalents in capital stock (without limitation whether voting
        or
        nonvoting, and whether common or preferred) of such corporation, and (b)
        with
        respect to any Person that is not a corporation, any and all partnership,
        membership, limited liability company or other equity interests of such Person;
        and (c) in each case, any and all warrants, rights or options to purchase
        any of
        the foregoing with respect to any Person, any security convertible into any
        of
        the foregoing, participations, and any other equity interests or equity
        equivalents with respect to such Person.

       

      “Casualty
        Event”
shall
        mean, with respect to any property (including any interest in property) of
        any
        Credit Party, any loss of, theft of, damage to, or condemnation or other
        taking
        of, such property for which any of the Credit Parties receives insurance
        proceeds, proceeds of a condemnation award, or other compensation, which
        proceeds are not used to replace or restore such property.

       

      “Change
        in Control”
means
        the acquisition of ownership, directly or indirectly, beneficially or of
        record,
        by any person or group (within the meaning of Section 13(d)(3) of the Securities
        Exchange Act of 1934 and the rules of the Securities and Exchange Commission
        thereunder as in effect on the date hereof), of shares representing more
        than
        twenty-five percent (25%) of the aggregate ordinary voting power in the election
        of Borrower’s directors represented by the issued and outstanding capital stock
        of Borrower.

       

      “Closing
        Date”
means
        the date of this Agreement.

       

      “Commitment”
means
        the Revolving Line Commitment and the agreement to make the Term
        Loan.

       

      “Controls”
        (including the terms “Controlled
        By”
or
        “Under
        Common Control”)
        means, but not be limited to, the ownership of ten percent (10%) or more
        of the
        outstanding shares of capital stock of any corporation having voting power
        for
        the election of directors, whether or not at the same time stock of any other
        class or classes has or might have voting power by reason of the happening
        of
        any contingency, or ownership of ten percent (10%) or more of any interest
        in
        any Person or any other interest by reason of which a controlling influence
        over
        the affairs of the Person may be exercised.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      “Copyright
        Security Agreements”
means
        the Copyright Security Agreement listed on Schedule
        1.1(a),
        and any
        similar document delivered by any Credit Party, and, as amended, modified
        or
        restated from time to time.

       

      “Credit
        Party(ies)”
means
        the Borrower and each Guarantor.

       

      “Debt”
means,
        as of the measurement date, without duplication, on a consolidated basis,
        Borrower’s and its Subsidiaries’:

       

      (a) indebtedness
        or liability for borrowed money, including without limitation Obligations
        under
        the Loan Documents, Val-U-Tech Subordinated Debt, the M&T Sale-Leaseback,
        synthetic leases and any other off-balance sheet financing (but except for
        the
        M&T Sale-Leaseback not including true operating leases);

       

      (b) obligations
        evidenced by bonds, debentures, notes, or other similar instruments;

       

      (c) obligations
        for the deferred purchase price of property or services (excluding current
        accounts payable incurred in the ordinary course of business); 

       

      (d) obligations
        as lessee under capital leases; 

       

      (e) current
        liabilities in respect of unfunded vested benefits under Plans covered by
        ERISA;

       

      (f) obligations
        as an account party under letters of credit and letters of guaranty;

       

      (g) obligations
        under acceptance facilities; 

       

      (h) all
        guaranties, endorsements (other than for collection or deposit in the ordinary
        course of business), and other contingent obligations to purchase, to provide
        funds for payment, to supply funds to invest in any Person, or otherwise
        to
        assure a creditor against loss; 

       

      (i) obligations
        secured by (or for which the holder of the obligations has an existing right,
        contingent or otherwise to be secured by) any Liens on property owned or
        acquired, whether or not the obligations secured thereby have been assumed;
        and

       

      (j) all
        purchase money mortgages, and obligations under asset securitization vehicles,
        conditional sales contracts and similar title retention debt
        instruments.

       

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

       

      “Debt
        to EBITDARS Ratio”
means
        as of the applicable measurement date, the Debt as of such date divided by
        EBITDARS for the twelve (12) Fiscal Month period ended as of such
        date.

       

      “Default”
means
        any event, action, inaction, occurrence or condition that with notice or
        passage
        of time, or both, would constitute an Event of Default.

       

      “Distributions”
means
        (i) dividends, payments, or distributions of any kind (including without
        limitation cash or property or the setting aside for payment of either) in
        respect of Capital Securities of the applicable Person except distributions
        in
        the form of such Capital Securities, and (ii) repurchases, redemptions, or
        acquisitions of Capital Securities.

       

      “EBITDARS”
means,
        for the applicable period, Net Income plus interest expense, cash Taxes paid,
        depreciation and amortization of intangible assets, payments due under the
        M&T Sale-Leaseback, and non-cash stock option expense, all on a consolidated
        basis and determined in accordance with GAAP on a consistent basis.

       

      “Eligible
        Accounts”
means
        and includes only accounts receivable of a Credit Party (“Accounts”),
        the
        records and accounts of which are located in all places at which Borrower
        maintains, or will maintain, records relating to the Accounts, are acceptable
        to
        Lender in Lender’s reasonable discretion, arise out of sales in the ordinary
        course of the business of a Credit Party made by a Credit Party to a Person
        which is not an Affiliate nor an employee of a Credit Party nor controlled
        by an
        Affiliate, which are not in dispute and which do not then violate any warranty
        with respect to Accounts set forth in any security agreement made by any
        Credit
        Party in favor of Lender (“Lender
        Security Agreement”).
        No
        Account shall be an Eligible Receivable if more than 90 days have passed
        since
        the original invoice date and the inventory covered by such Account was shipped
        to the customer on or prior to the invoice date, or the services described
        in
        such invoice were provided on or prior to the invoice date. Accounts must
        not be
        owing by an Account debtor or a group of affiliated Account debtors whose
        then
        existing Accounts owing to the Credit Parties individually exceed in aggregate
        face amount twenty percent (20)%) of the Credit Parties’ total Eligible
        Receivables and are not owing by an Account debtor or a group of affiliated
        Account debtors whose then existing Accounts to any or all of the Credit
        Parties
        collectively exceed in aggregate face amount twenty percent (20%) of the
        total
        Eligible Receivables of all the Credit Parties; provided that the Lender
        may
        from time to time, in the exercise of its sole and absolute discretion, consent
        to a higher concentration limit and provided further that any such Account
        shall
        be a non-Eligible Receivable only to the extent of such excess. Lender may
        treat
        any Account as ineligible if: (a) any warranty contained in this Agreement
        or in
        any Lender Security Agreement with respect to Accounts has been breached;
        or (b)
        the Account debtor or any affiliate of the Account debtor has disputed the
        liability, or made any claim with respect to such Account or with respect
        to any
        other Account due from such customer or account debtor to any Credit Party;
        provided, however, only such portion of the Account which is disputed or
        subject
        to a claim shall be treated as ineligible unless Lender reasonably determines
        in
        its discretion that there is a material risk of nonpayment (or Lender is
        unable
        to assess the risk of nonpayment) of the entire Account or any other Account
        pending resolution of such dispute or claim, in which case Lender may treat
        the
        entire Account or such other Account as ineligible; or (c) the Account debtor
        or
        an affiliate of the Account debtor has filed a case for bankruptcy or
        reorganization under the Bankruptcy Code, or if any case under the Bankruptcy
        Code has been filed against the Account debtor or any affiliate of the Account
        debtor, or if the Account debtor or any Affiliate of the account debtor has
        assigned for the benefit of creditors, or if the Account debtor or any affiliate
        of the Account debtor has failed, suspended business operations, become
        insolvent, or had or suffered a receiver or a trustee to be appointed for
        all or
        a significant portion of its assets or affairs; or (d) if the Account debtor
        is
        also a supplier to or creditor of a Credit Party or if the Account debtor
        has or
        asserts any right of offset with respect to any Account or asserts any claim
        or
        counterclaim against any Credit Party with respect to any Account or otherwise
        (the Accounts due from the Account debtor will only be reduced to the extent
        of
        the claim or counter claim); or (e) the sale is to an Account debtor outside
        the
        United States or Canada, unless the sale is on letter of credit, acceptance
        or
        other terms acceptable to Lender; or (f) 50% or more of the Accounts of any
        Account debtor and its affiliates is ineligible, then all the Accounts of
        such
        Account debtor and its affiliates may be deemed ineligible by Lender; (g)
        it
        relates to a sale of goods or services to the United States, or any agency
        or
        department thereof, unless the applicable Credit Party assigns its right
        to
        payment of such Account to Lender in form and substance satisfactory to Lender,
        so as to comply with the Assignment of Claims Act of 1940, as amended; or
        (h) it
        relates to sale of goods or services to a state or local governmental authority
        or an agency or department thereof; or (i) it relates to intercompany sales,
        employee sales or is due from an Affiliate; or (j) it consists of a sale
        to an
        Account debtor on consignment, bill and hold, guaranteed sale, sale or return,
        sale on approval, payment plan, scheduled installment plan, extended payment
        terms or any other repurchase or return basis; or (k) the Account debtor
        is
        located in a state in which the applicable Credit Party is deemed to be doing
        business under the laws of such state and which denies creditors access to
        its
        courts in the absence of qualification to transact business in such state
        or of
        the filing of any reports with such state, unless the applicable Credit Party
        has qualified as a foreign corporation authorized to do business in such
        state
        or has filed all required reports; or (l) the Account is evidenced by chattel
        paper or an instrument of any kind, or has been reduced to judgment; or (m)
        the
        Account arises from a sale of goods or services to an individual who is
        purchasing such goods primarily for personal, family or household purposes;
        or
        (n) if Lender believes, in its reasonable discretion, that collection of
        such
        Account is insecure or that such Account may not be paid by reason of the
        Account debtor’s financial inability to pay (should availability under the
        Revolving Line Facility be an issue, the Lender will allow the Borrower thirty
        (30) days prior to the removal from the Borrowing Base, provided that the
        Accounts from such Account debtor do not collectively exceed ten percent
        (10%)
        of the total Eligible Receivables).

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      “Eligible
        Inventories”
means
        inventory owned by a Credit Party (“Inventory”)
        which
        has been identified and described to the Lender’s reasonable satisfaction, and
        is represented by the Borrower as meeting all of the following criteria on
        the
        date any Revolving Credit Loan based thereon is outstanding: (a) a Credit
        Party
        is the sole owner of the Inventory, none of the Inventory is being held or
        shipped by such Credit Party on a consignment or approval basis, such Credit
        Party has not sold, assigned or otherwise transferred all or any portion
        thereof, and none of the Inventory is subject to any claim, lien, or security
        interest other than in favor of Lender; (b) if any of the Inventory is
        represented or covered by any document of title, instrument or chattel paper,
        a
        Credit Party is the sole owner of all such documents, instruments, and chattel
        paper, all of which are in the possession of such Credit Party, none thereof
        has
        been sold, assigned, or otherwise transferred, and none thereof is subject
        to
        any claim, lien or security interest other than in favor of Lender; and (c)
        the
        Inventory consists of saleable non-obsolete, commodity type raw materials
        that
        are earmarked for specific orders and is not excess as shown on the Borrower’s
        Excess Stock Report or determined by the Lender’s collateral audits, and
        finished goods manufactured or acquired by a Credit Party in the ordinary
        course
        of such Credit Party’s business, as conducted on the date hereof, subject to its
        contract or sole possession and located in places where Credit Parties maintain,
        or will maintain, Inventory, and at locations for which landlord or bailee
        waivers in form and substance acceptable to Lender have been executed and
        delivered by such landlord or bailee to Lender; and any Inventory which the
        Lender in the good faith exercise of its sole discretion from time to time
        has
        deemed to be ineligible because the Lender otherwise considers the collateral
        value to the Lender to be impaired or its ability to realize such value to
        be
        insecure.

       

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

       

      “Energy
        Loan”
means
        the term loan made by the Lender to fund energy-related expenditures, referenced
        in Article IV hereof.

       

      “Energy
        Loan Maturity Date”
means
        April 2, 2013.

       

      “Energy
        Loan Note”
means
        the Energy Loan Note evidencing the Energy Loan, as such note may be amended,
        modified or restated from time to time.

       

      “Environment”
means
        any water, including, but not limited to, surface water and ground water
        or
        water vapor: any land, including land surface or subsurface; stream sediments;
        air; fish; wildlife; plants; and all other natural resources or environmental
        media.

       

      “Environmental
        Laws”
means
        all present and future federal, state and local environmental, land use,
        zoning,
        health, chemical use, safety and sanitation laws, statutes, ordinances,
        regulations, codes and rules relating to the protection of the Environment
        and/or governing the use, storage, treatment, generation, transportation,
        processing, handling, production or disposal of Hazardous Substances and
        the
        regulations, rules, ordinances, bylaws, policies, guidelines, procedures,
        interpretations, decisions, orders and directives of federal, state and local
        governmental agencies and authorities with respect thereto.

       

      “Environmental Permits”
means
        all licenses, permits, approvals, authorizations, consents or registrations
        required by any applicable Environmental Laws and all applicable judicial
        and
        administrative orders in connection with ownership, lease, purchase, transfer,
        closure, use and/or operation of the Improvements and/or as may be required
        for
        the storage, treatment, generation, transportation, processing, handling,
        production or disposal of Hazardous Substances.

       

      “Environmental Report”
means
        written reports, if any, prepared for the Lender by an environmental consulting
        or environmental engineering firm.

       

      “Equipment
        Line Facility”
means
        the equipment line facility established pursuant to Section 5.1
        of this
        Agreement.

       

      “Equipment
        Line Loan(s)”
means
        a
        loan or loans made by the Lender to Borrower under the Equipment Line
        Facility.

       

      “Equipment
        Line Maturity Date”
means
        the first annual anniversary date of the Closing Date.

       

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

       

      “Equipment
        Line Notes”
means
        the Equipment Line Notes made from time to time by Borrower in favor of Lender
        pursuant to Section 5.4
        of this
        Agreement, as such notes may be amended, modified or restated from time to
        time.

       

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

       

      “ERISA
        Affiliate”
means
        any trade or business (whether incorporated or unincorporated) which together
        with the Borrower is treated as a single employer under Section 414(b), (c),
        (m)
        or (o) of the Internal Revenue Code.

       

      “Eurocurrency
        Reserve Requirement”
means,
        for any Interest Period for a LIBOR Loan, the daily average of the stated
        maximum rate (expressed as a decimal) at which reserves (including any marginal,
        supplemental, or emergency reserves) are required to be maintained during
        such
        Interest Period under Regulation D by member banks of the Federal Reserve
        System
        in New York City with deposits exceeding one billion dollars against
“Eurocurrency Liabilities” (as such term is used in Regulation D) but without
        benefit or credit of proration, exemptions, or offsets that might otherwise
        be
        available from time to time under Regulation D. Without limiting the effect
        of
        the foregoing, the Eurocurrency Reserve Requirement shall reflect any other
        reserves required to be maintained against (i) any category of liabilities
        that
        includes deposits by reference to which the LIBOR Interest Rate for LIBOR
        Loans
        is to be determined; or (ii) any category of extension of credit or other
        assets
        that include LIBOR Loans.

       

      “Event
        of Default”
means
        the occurrence of any event described in Section 13.1.

       

      “Federal
        Funds Rate”
means,
        for any period, a fluctuating interest rate per annum equal for each day
        during
        such period determined by the Lender to equal the weighted average of the
        rates
        on overnight federal funds transactions with members of the Federal Reserve
        System arranged by Federal funds brokers, as published for such day (or if
        such
        day is not a Business Day, for the next preceding Business Day) by the Federal
        Reserve Bank of New York, or, if such rate is not so published for any day
        which
        is a Business Day, the average of the quotations at approximately 10:00 a.m.
        for
        such day on such transactions received by the Lender from three Federal funds
        brokers of recognized standing selected by it.

       

      “Financial
        Statements”
means
        Borrower’s audited consolidated financial statements for the Fiscal Year ending
        September 30, 2007 described in Section 7.7.

       

      “Fiscal Month”
means
        a
        period that constitutes Borrower’s monthly accounting period.

       

      “Fiscal
        Quarter”
means
        any of the quarterly accounting periods of Borrower ending on December 31,
        March
        31, June 30, and September 30 of any Fiscal Year.

       

      “Fiscal
        Year”
means
        the annual accounting period of Borrower ending on September 30 of each
        year.

       

      “Fixed
        Charge Coverage Ratio”
means,
        as of the applicable measurement date, the ratio of (i) EBITDARS minus
        Unfinanced Capital Expenditures minus cash Taxes paid for the four Fiscal
        Quarters just ended, to (ii) the sum of Interest Expense plus principal payments
        due or paid with respect to Debt (including payments under the M&T
        Sale-Leaseback) during the four Fiscal Quarters just ended.

       

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

       

      “Fixed
        Rate”
means,
        with respect to any particular Loan, the then Applicable LIBOR Margin for
        Term
        Loan/Equipment Line Facility, plus the Cost of Funds for two, three, four,
        or
        five years (the “Base
        Term”),
        as
        applicable. “Cost
        of Funds’
means
        the most recent yield on United States Treasury Obligations adjusted to a
        constant maturity to match the Base Term in effect two (2) Business Days
        prior
        to the date on which the Fixed Rate will first be applicable to the respective
        Loan, as published by the Board of Governors of the Federal Reserve System
        in
        the Federal Reserve Statistical Release H.15(519), or by such other quoting
        service, index, or commonly available source utilized by the Lender, plus
        the
“ask” side of the like term swap spread. 

       

      “Fixed
        Rate Loan”
means
        any Loan when and to the extent that the interest rate for such Loan is
        determined by reference to a Fixed Rate.

       

      “Fixed
        Rate Period”
means
        the period selected by the Borrower during which a particular Fixed Rate
        shall
        be applicable.

       

      “Forfeiture
        Action”
means
        any action, including investigations, hearings, and other legal proceedings,
        before any court, tribunal, commission, or governmental authority, agency,
        or
        instrumentality, whether domestic or foreign, that may result in seizure
        of any
        property or asset.

       

      “GAAP”
and
        “Generally
        Accepted Accounting Principles”
means
        generally accepted accounting principles set forth in the opinions and
        pronouncements of the Accounting Principles Board of the American Institute
        of
        Certified Public Accountants and statements and pronouncements of the Financial
        Accounting Standards Board or in such other statements by such other entity
        as
        may be approved by a significant segment of the accounting profession in
        the
        United States of America, which are applicable to the circumstances as of
        the
        date of determination.

       

      “Guarantor(s)”
means
        each Subsidiary which becomes a Guarantor pursuant to Section 9.12.

       

      “Guaranties”
means,
        collectively, the continuing guaranties executed and delivered to Lender
        by each
        Guarantor which guaranty payment of the Obligations, as amended, modified
        or
        restated from time to time, and “Guaranty”
means
        any of the Guaranties.

       

      “Hazardous
        Substances”
means,
        without limitation, any explosives, radon, radioactive materials, asbestos,
        urea
        formaldehyde foam insulation, polychlorinated biphenyls, petroleum and petroleum
        products, methane, hazardous materials, hazardous wastes, hazardous or toxic
        substances and any other material defined as a hazardous substance in the
        Comprehensive Environmental Response, Compensation and Liability Act of 1980,
        as
        amended, 42 U.S.C. Sections 9601, et. seq.; the Hazardous Materials
        Transportation Act, as amended, 49 U.S.C. Sections 1801, et. seq.; the Resource
        Conservation and Recovery Act, as amended, 42 U.S.C. Sections 6901, et. seq.;
        Articles 15 and 27 of the New York State Environmental Conservation Law or
        any
        other federal, state, or local law, regulation, rule, ordinance, by-law,
        policy,
        guideline, procedure, interpretation, decision, order, or directive, whether
        existing as of the date hereof, previously enforced or subsequently
        enacted.

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      “Improvements”
means
        any and all real property and improvements owned or used by any of the Credit
        Parties.

       

      “Interest
        Expense”
means,
        for the applicable period, all interest paid, capitalized, or accrued, and
        amortization of debt discount with respect to all Debt determined after giving
        effect to the net cost associated with Rate Management
        Transactions.

       

      “Interest
        Period”
means
        with respect to any LIBOR Loan, the period commencing on the date such Loan
        is
        made, converted or renewed, as applicable, and ending, as a Borrower may
        select,
        on the numerically corresponding day in the first, second, third, or sixth
        calendar month thereafter, subject however, to the following
        limitations:

       

      (a) Each
        Interest Period that commences on the last Business Day of the calendar month
        (or on any day for which there is no numerically corresponding day in the
        appropriate subsequent calendar month) shall end on the last Business Day
        of the
        appropriate subsequent calendar month;

       

      (b) No
        Interest Period may extend beyond the Termination Date; and

       

      (c) If
        an
        Interest Period would end on a day that is not a Business Day, such Interest
        Period shall be extended to the next Business Day unless, such Business Day
        would fall in the next calendar month, in which event such Interest Period
        shall
        end on the immediately preceding Business Day.

       

      “Inventory
        Overline Advance Rate”
means
        70% of Borrower’s Eligible Inventory.

       

      “Investment”
of
        any
        Person means (a) acquisition of any Capital Security, evidence of Debt or
        other
        security or instrument issued by any other Person, (b) any loan, advance
        or
        extension of credit to (including guaranties of liabilities of), or any
        contribution to the capital of, any other Person, (c) any acquisition of
        assets
        or business from or Capital Security of any other Person and (d) any other
        investment in any other Person. An Investment shall be deemed to be
“outstanding”, except to the extent that it has been paid or otherwise satisfied
        in cash or the Person making such Investment has received cash in consideration
        for the sale thereof, notwithstanding the fact that such Investment may
        otherwise have been forgiven, released, canceled or otherwise
        nullified.

       

      “Lender”
means
        Manufacturers and Traders Trust Company, and its successors, legal
        representatives, and assigns

       

      “LIBOR
        Interest Rate”
means,
        for each LIBOR Loan, the rate per annum (rounded upward, if necessary, to
        the
        nearest 1/100th of 1%) determined by the Lender to be equal to the quotient
        of
        (i) the London Interbank Offered Rate for such LIBOR Loan for such Interest
        Period divided by (ii) one minus the Eurocurrency Reserve Requirement for
        such
        Interest Period.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      “LIBOR
        Loan”
means
        any Loan when and to the extent that the interest rate for such Loan is
        determined by reference to the LIBOR Interest Rate.

       

      “Lien”
means
        any mortgage, pledge, security interest, encumbrance, lien, assignment or
        charge
        of any kind or description and shall include, without limitation, any agreement
        to give any of the foregoing, any conditional sale or other title retention
        agreement, any lease in the nature thereof including any lease or similar
        arrangement with a public authority executed in connection with the issuance
        of
        industrial development revenue bonds or pollution control revenue bonds,
        and the
        filing of or agreement to give any financing statement under the Uniform
        Commercial Code (or comparable law) of any jurisdiction naming the owner
        of the
        asset to which such lien applies as a debtor (other than a filing which does
        not
        evidence an outstanding secured obligation, or a commitment to make advances
        or
        to incur any other obligation of any kind).

       

      “Linked
        Deposit Program”
shall
        mean the Empire State Development Linked Deposit Program, in which the Lender
        is, as of the date hereof, a participant.

       

      “Loan(s)”
means,
        collectively, the Revolving Credit Loans, the Term Loan, and Equipment Line
        Loans as the context requires.

       

      “Loan
        Documents”
means
        the Agreement, the Notes, the Security Documents, and all other agreements,
        documents and certificates executed with or in favor of the Lender in connection
        with the Agreement or any amendment to the Agreement or to any other Loan
        Document.

       

      “London
        Interbank Offered Rate”
        applicable to any Interest Period for a LIBOR Loan means the rate per annum
        (rounded upward, if necessary, to the nearest 1/100th of 1%) at which dollar
        deposits are offered on page 3750 of the Dow Jones Markets Screen for a period
        and in an amount comparable to the Interest Period and the principal amount
        of
        such LIBOR Loan, at approximately 11:00 a.m. London time, or if such rate
        is not
        available, the rate as determined by the Lender from any broker, quoting
        service
        or commonly available source utilized by the Lender.

       

      “M&T
        Sale-Leaseback”
means
        the sale-leaseback arrangement between the Lender and the Borrower evidenced
        in
        part by the Master Equipment Lease dated on or about even date
        herewith.

       

      “Material
        Adverse Effect”
means
        a
        material adverse effect on the financial condition, performance, business,
        operations or prospects of the Credit Parties, taken as a whole.

       

      “Money
        Market Investments”
means
        (a) any security issued or directly and fully guaranteed or insured by the
        United States government or any agency or instrumentality thereof or having
        a
        remaining maturity of not more than 270 days, (b) any certificate of deposit,
        eurodollar time deposit and banker’s acceptance with remaining maturity of not
        more than 270 days, any overnight bank deposit, any demand deposit account,
        in
        each case with Lender or with any United State commercial bank having capital
        and surplus in excess of $500,000,000 and rated B or better by Thomson Bankwatch
        Inc., (c) any repurchase obligation with a term of not more than seven days
        for
        underlying securities of the types described in clauses (a) and (b) above
        entered into with any financial institution meeting the qualifications specified
        in clause (b) above, and (d) any commercial paper issued by Lender and any
        other
        commercial paper rated A-1 by Standard & Poor’s Rating Group of Prime-1 by
        Moody’s Investors Service, Inc. and in any case having a remaining maturity of
        not more than 270 days.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      “Multiemployer
        Plan”
means
        a
“multiemployer plan” as defined in Section 4001(a)(3) of ERISA as to which any
        of the Credit Parties or any ERISA Affiliate is obligated to make, has made,
        or
        will be obligated to make contributions on behalf of participants who are
        or
        were employed by any of them.

       

      “Net
        Cash Proceeds”
shall
        mean (a) in the case of any Casualty Event, the aggregate cash proceeds of
        insurance, condemnation awards and other compensation received by any Person
        in
        respect of such Casualty Event less (i) reasonable fees and expenses incurred
        by
        such Person in connection therewith, and (ii) contractually required payments
        of
        Debt to the extent secured by Liens on the property subject to such Casualty
        Event and any income or transfer Taxes paid or reasonably estimated by such
        Person to be payable by such Person as a result of such Casualty Event, and
        (b)
        in the case of any Asset Disposition, the aggregate amount of all cash payments
        and proceeds (including any cash payments made from time to time in respect
        to
        the principal amount of any note or similar instrument or agreement providing
        for or evidencing debt as the deferred purchase price owing from the purchaser
        of such asset to the applicable Person) received by any Person in connection
        therewith less (i) reasonable fees and expenses incurred by such Person in
        connection therewith, (ii) Debt to the extent the amount thereof is secured
        by a
        Lien on the property that is the subject of such Asset Disposition and the
        transferee (or holder of the Lien on) such property requires that such Debt
        be
        repaid as a condition of such Asset Disposition, and (iii) any income or
        transfer Taxes paid or reasonably estimated by the Person to be payable by
        such
        Person as a result of such Asset Disposition.

       

      “Net
        Income”
means
        for the applicable period, the net earnings of the Borrower on a consolidated
        basis, determined in accordance with GAAP on a consistent basis, but
        excluding:

       

      (a) any
        gain
        or loss arising from the sale of capital assets;

       

      (b) any
        gain
        arising from any write-up of assets;

       

      (c) net
        earnings or losses of any Subsidiary of Borrower accrued prior to the date
        it
        became a Subsidiary;

       

      (d) net
        earnings or losses of any Person, substantially all the assets of which have
        been acquired in any manner by Borrower, realized by such Person prior to
        the
        date of such acquisition;

       

      (e) net
        earnings or losses of any Person in which Borrower has an ownership interest,
        except any such net earnings which have actually been received by Borrower
        in
        the form of cash distributions and except the net earnings or losses of any
        Guarantor;

       

      (f) any
        portion of the net earnings of any Subsidiary of Borrower which for any reason
        is unavailable for payment of dividends to Borrower;

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      (g) the
        net
        earnings or losses of any Person to which any assets of Borrower shall have
        been
        sold, transferred or disposed of after the date of such
        transaction,

       

      (h) the
        net
        earnings or losses of any Person into which Borrower shall have merged, or
        been
        a party to any consolidation or other form of reorganization, prior to the
        date
        of such transaction;

       

      (h) any
        gain
        arising from the acquisition of any securities of Borrower; and

       

      (i) any
        gain
        or loss arising from extraordinary items.

       

      “Note(s)”
means
        the Revolving Credit Note, the Term Loan Note, the Energy Loan Note, and
        the
        Equipment Line Notes.

       

      “Obligations”
means
        and shall include all of the Credit Parties’ obligations to the Lender and/or to
        any of Lender’s affiliates of any kind or nature, arising now or in the future
        under or related to this Agreement and/or the Loan Documents including
        obligations related to the Revolving Credit Note, the Term Loan Note, the
        Energy
        Loan Note, the Equipment Line Notes, overdrafts, obligations related to Rate
        Management Transactions, automated transfer transactions, electronic funds
        transfers, other transactions related to the Credit Parties’ dealings with the
        Lender, interest accruing after the filing of any petition or assignment
        in
        bankruptcy or for reorganization by or against the Credit Parties (whether
        or
        not such a claim for such post-petition interest is allowed in the proceedings),
        fees, charges, expenses, and amount payable with respect to
        guaranties.

       

      “Overline
        Advance”
means
        any portion of a Loan under the Revolving Line Facility that is available
        under
        the Borrowing Base only if the Inventory Overline Advance Rate is in
        effect.

       

      “PBGC”
means
        the Pension Benefit Guarantee Corporation and any successor
        thereto.

       

      “Permitted
        Debt”
means
        Debt described in Section 10.1.

       

      “Permitted
        Liens”
means
        the Liens set forth on Schedule
        1.1(b)
        and the
        following Liens:

       

      (a) liens
        imposed by any governmental authority for Taxes or charges not yet due or
        which
        are being contested in good faith and by appropriate proceedings if adequate
        reserves with respect thereto are maintained on the books of the Borrower
        subject to such lien in accordance with GAAP on a consistent basis;

       

      (b) carriers’,
        warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like liens
        arising in the ordinary course of business which are not overdue for a period
        of
        more than thirty (30) days, or which are being contested in good faith and
        by
        appropriate proceedings;

       

      (c) pledges
        or deposits under workers’ compensation, unemployment insurance and other social
        security legislation; 

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      (d) deposits
        to secure the performance of bids, trade contracts (other than borrowed money),
        leases, statutory obligations, surety and appeal bonds, performance bonds
        and
        other obligations of a like nature incurred in the ordinary course of business;
        and

       

      (e) Liens
        in
        favor of Lender.

       

      “Person”
means
        any individual, sole proprietorship, or other entity of any kind or nature
        including any corporation, partnership, trust, unincorporated organization,
        limited liability company, unlimited liability company, mutual company, joint
        stock company, estate, union, employee organization, government or any agency
        or
        political subdivision thereof.

       

      “Plan”
means
        any employee benefit plan, program, arrangement, practice or contract,
        maintained by or on behalf of a Borrower or an ERISA Affiliate, which provides
        benefits or compensation to or on behalf of employees or former employees,
        whether formal or informal, whether or not written, including but not limited
        to
        the following types of plans:

       

      (a) Executive
        Arrangements - any bonus, incentive compensation, stock option, deferred
        compensation, commission, severance, “golden parachute”, “rabbi trust”, or other
        executive compensation plan, program, contract, arrangement or
        practice;

       

      (b) ERISA
        Plans - any “employee benefit plan” as defined in ERISA, including, but not
        limited to, any defined benefit pension plan, profit sharing plan, money
        purchase pension plan, savings or thrift plan, stock bonus plan, employee
        stock
        ownership plan, Multiemployer Plan, or any plan, fund, program, arrangement
        or
        practice providing for medical (including post-retirement medical),
        hospitalization, accident, sickness, disability, or life insurance benefits;
        and

       

      (c) Other
        Employee Fringe Benefits - any stock purchase, vacation, scholarship, day
        care,
        prepaid legal services, severance pay or other fringe benefit plan, program,
        arrangement, contract or practice.

       

      “Prepayment
        Premium”
means
        a
        payment by the Borrower with respect to any prepayment in whole or in part
        of
        the Term Loan or an Equipment Line Loan which is a Fixed Rate Loan equal
        to the
        greater of (a) one percent (1%) of the principal sum prepaid, or (b) an amount
        equal to the present value of the difference between (i) the amount of interest
        that would have accrued on the principal sum from the date of the prepayment
        to
        the end of the applicable Fixed Rate Period, at the interest rate set forth
        in
        the Term Loan Note or Equipment Line Note, as the case may be, in effect
        on the
        date of prepayment and (ii) the amount of interest that would have accrued
        on
        the principal sum from the date of the prepayment to the end of the applicable
        Fixed Rate Period of the applicable Note at the Current Market Rate.
“Current
        Market Rate”
shall
        mean the most recent yield on United States Treasury Obligations adjusted
        to a
        constant maturity having a term most nearly corresponding to Fixed Rate Period
        remaining from the date of prepayment to the last day of the applicable Fixed
        Rate Period, in effect two (2) Business Days prior to the prepayment date
        as
        published by the Board of Governors of the Federal Reserve System in the
        Federal
        reserve Statistical Release H.15 (519), or by such other quoting service,
        index,
        or commonly available source utilized by the Lender. The “present
        value”
        calculation shall use the Current Market Rate as the discount rate and shall
        be
        calculated as if each installment of the principal sum had been made when
        due
        during the remainder of the applicable Fixed Rate Period. 

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      “Prime
        Rate”
means
        the rate of interest announced by the Lender from time to time at its Principal
        Office as its prime commercial lending rate, which rate is not intended to
        be
        the lowest rate of interest charged by Lender to its borrowers.

       

      “Principal
        Office”
means
        the Lender’s office at 255 East Avenue, Rochester, New York 14604.

       

      “Quarterly
        Covenant Compliance Sheet”
means
        the covenant compliance sheet delivered on a quarterly basis by Borrower
        to
        Lender, in substantially the form of Exhibit
        A
        attached
        hereto, including a certificate of the Chief Financial Officer of Borrower
        certifying that no Event of Default or Default has occurred and certifying
        to
        the accuracy of an attached schedule showing computation of financial covenants
        contained in Article XI hereof.

       

      “Rate
        Management Transaction”
means
        any transaction (including an agreement with respect thereto) now existing
        or
        hereafter entered into by any Credit Party which is a rate swap, basis swap,
        forward rate transaction, commodity swap, commodity option, equity or equity
        index swap, equity or equity index option, bond option, interest rate option,
        foreign exchange transaction, cap transaction, floor transaction, collar
        transaction, forward transaction, currency swap transaction, cross-currency
        rate
        swap transaction, currency option or any other similar transaction (including
        any option with respect to any of these transactions) or any combination
        thereof, whether linked to one or more interest rates, foreign currencies,
        commodity prices, equity prices or other financial measures.

       

      “Regulation
        D”
means
        Regulation D of the Board of Governors of the Federal Reserve System as amended
        or supplemented from time to time.

       

      “Release”
has
        the
        same meaning as given to that term in Section 101(22) of the Comprehensive
        Environmental Response, Compensation and Liability Act of 1980, as amended,
        42
        U.S.C. Section 9601(22), and the regulations promulgated
        thereunder.

       

      “Revolving
        Credit Commitment”
means
        the Commitment of the Lender related to the Revolving Credit
        Facility.

       

      “Revolving
        Credit Facility”
means
        the revolving credit facility established pursuant to Section 2.1
        of this
        Agreement.

       

      “Revolving
        Credit Loan(s)”
means
        a
        loan or loans made by the Lender to Borrower under the Revolving Credit
        Facility.

       

      “Revolving
        Credit Note”
means
        the Revolving Credit Note in the amount of the Revolving Credit Commitment,
        as
        such note may be amended, modified or restated from time to time.

       

      “Security
        Agreement”
means
        the General Security Agreement made by each Credit Party in favor of
        Lender.

       

      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

      “Security
        Documents”
means
        those documents set forth on Schedule
        1.1(e).

       

      “Subsidiary”
means
        any Person, the accounts of which would be consolidated with those of the
        parent
        in the parent’s consolidated financial statements in accordance with GAAP
        (including among others consolidated subsidiaries of consolidated
        subsidiaries).

       

      “Tax”
means
        any federal, state, provincial, or foreign tax (including withholding tax),
        assessment, or other governmental charge (including penalties and interest)
        upon
        a Person or upon its assets, revenues, income, or profits.

       

      “Termination
        Date”
means
        May 30, 2013.

       

      “Term
        Loan”
means
        the $1,700,000 aggregate original outstanding principal balance term loan
        made
        by the Lender pursuant to Article III hereof.

       

      “Term
        Loan Maturity Date”
means
        May 30, 2013.

       

      “Term
        Loan Note”
means
        the Term Loan Note evidencing the Term Loan, as such note may be amended,
        modified or restated from time to time.

       

      “Trademark
        Security Agreements”
means
        the Trademark Collateral Security and Pledge Agreement listed on Schedule
        1.1(e),
        and any
        similar document delivered by any Credit Party, and, as amended, modified
        or
        restated from time to time. 

       

      “Type
        of Loan”
means
        a
        Base Rate Loan, LIBOR Loan, or Fixed Rate Loan, as the case may be.

       

      “Unfinanced
        Capital Expenditures”
means
        all capital expenditures other than (i) capital expenditures financed by
        the
        Lender (but excluding for this definition any capital expenditures financed
        with
        the proceeds of a Revolving Credit Loan), and (ii) capital expenditures financed
        with Debt (other than the Loans) permitted under this Agreement or Debt to
        which
        the Lender consents in writing.

       

      “Val-U-Tech
        Subordinated Debt”
means
        Debt incurred to the Shareholder of Val-U-Tech, Inc. in connection with the
        closing of the Val-U-Tech Transaction, which Debt must be subordinated to
        the
        Obligations in form and substance satisfactory to the Lender.

       

      “Val-U-Tech
        Transaction”
means
        the acquisition by the Borrower of the stock of Val-U-Tech Corp. pursuant
        to the
        Agreement and Plan of Merger among Borrower, VUT Merger Corp., Val-U-Tech,
        Inc.
        and the Shareholders of Val-U-Tech, Inc. dated May 23, 2008.

       

      1.2 Interpretation.
        This
        Agreement has been prepared in cooperation of counsel for each of the parties,
        and shall not be construed as against any particular party as drafter. Unless
        otherwise expressly provided in this Agreement, the following interpretations
        shall apply: 

       

      (a) references
        in this Agreement to statutes shall include any amendments of the same and
        any
        rules and regulations promulgated thereunder, 

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (b) references
        to Persons include their permitted successors and assigns, and in the case
        of
        any governmental authority, any Person succeeding to its functions and
        capacities, 

       

      (c) references
        to agreements (including exhibits and schedules thereto) include amendments,
        assignments, and restatements provided that such amendments, assignments,
        and
        restatements are not prohibited by the Loan Documents, 

       

      (d) references
        to specific sections, articles, annexes, schedules, and exhibits are to this
        Agreement, 

       

      (e) words
        importing gender include the other gender,

       

      (f) the
        singular includes the plural and the plural includes the singular,

       

      (g) the
        words, “including”, “include”, and “includes” shall be deemed to be followed by
        the words “without limitation”,

       

      (h) each
        authorization herein shall be deemed irrevocable and coupled with an
        interest,

       

      (i) obligations
        or liabilities of the Credit Parties, or any of them, to which this Agreement
        makes reference shall be joint and several,

       

      (j) accounting
        terms shall be interpreted, and all determinations relating thereto shall
        be
        made, in accordance with GAAP, and 

       

      (k) captions
        and headings are for ease of reference only and shall not affect the
        construction hereof.

       

      ARTICLE
        II - REVOLVING CREDIT FACILITY

       

      2.1 Revolving
        Credit Commitment.
        The
        Lender agrees, subject to Section 2.2
        and the
        other terms and conditions hereinafter set forth, to make Revolving Credit
        Loans
        to the Borrower from time to time during the period from the Closing Date
        up to
        but not including the Termination Date in an aggregate principal amount not
        to
        exceed at any time outstanding the amount of $9,000,000. During the period
        from
        the Closing Date to the Termination Date, within the limits of the Revolving
        Credit Commitment and subject to Section 2.2,
        the
        Borrower may borrow, prepay pursuant to Section 2.6,
        and
        reborrow under this Section 2.1.
        On such
        terms and conditions, the Revolving Credit Loans may be outstanding as Base
        Rate
        Loans or LIBOR Loans.

       

      2.2 Borrowing
        Base;
        Overline Advances.
        Notwithstanding the provisions of Section 2.1,
        the
        aggregate principal amount of all outstanding Revolving Credit Loans shall
        not
        exceed the lesser of the Borrowing Base and the Revolving Credit Commitment.
        

       

      Upon
        Borrower’s request the Inventory Overline Advance Rate shall apply and the
        Lender will make Overline Advances from time to time; provided, however no
        new
        Overline Advance shall be available unless no Overline Advances have been
        outstanding in the immediately prior thirty (30) consecutive days and no
        Default
        then exists.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      At
        any
        time that the aggregate principal amount of all outstanding Revolving Credit
        Loans exceeds the lesser of the Borrowing Base and the Revolving Credit
        Commitment, the Borrower shall immediate prepay a portion of the Revolving
        Credit Loans that is at least the amount of such excess pursuant to Section
        2.6
        hereof.

       

      2.3 Notice
        and Manner of Borrowing.
        Borrower agrees to give the Lender notice of any Revolving Credit Loan on
        or
        before the Business Day of each Base Rate Loan, and at least three (3) Business
        Days before each LIBOR Loan, specifying: (a) the date of such Loan; (b) the
        amount of such Loan; (c) the Type of Loan; and (d) in the case of a LIBOR
        Loan,
        the duration of the Interest Period applicable thereto. Subject to the terms
        of
        this Agreement, and upon fulfillment of the applicable conditions set forth
        in
        VIII, the Lender shall credit the amount of such advance, in immediately
        available funds, to the account of the Borrower maintained with the Lender
        for
        that purpose. By mutual agreement, the Lender and Borrower may agree to sweep
        arrangements under mutually acceptable terms from time to time.

       

      2.4 Interest.
        Borrower shall pay interest to the Lender on the outstanding and unpaid
        principal amount of the Revolving Credit Loans made under this Agreement
        at
        either the Base Rate or the LIBOR Interest Rate as the case may be, in each
        case
        plus the Applicable Margin. Any change in the interest rate resulting from
        a
        change in the Base Rate shall be effective as of the opening of business
        on the
        day on which such change in the Base Rate becomes effective. Each LIBOR Rate
        shall be effective for the applicable Interest Period. Interest on each Loan
        shall be calculated on the basis of a year of 360 days for the actual number
        of
        days elapsed. 

       

      2.5 Revolving
        Credit Note.
        Borrower’s obligation to repay the Revolving Credit Loans shall be evidenced by
        a Revolving Credit Note in substantially the form of Exhibit
        B
        to this
        Agreement, in favor of Lender in the aggregate principal amount of Lender’s
        Revolving Credit Commitment. 

       

      2.6 Payments.
        

       

      (a) Interest
        shall be paid in immediately available funds to the Lender, in the case of
        LIBOR
        Loans on the last day of the applicable Interest Period but no less often
        than
        every three months, and in the case of Base Rate Loans, on the first day
        of each
        month. All accrued and unpaid interest shall be due and payable on the
        Termination Date.

       

      (b) Each
        Overline Advance shall be repaid in full no later than the sixtieth (60th)
        day
        after the making of such Overline Advance.

       

      (c) All
        Revolving Credit Loans shall be repaid in full on the Termination
        Date.

       

      (d) At
        any
        time that the Borrower becomes aware or receives notice (oral or written)
        that
        the outstanding principal amount of all Revolving Credit Loans exceeds the
        Borrowing Base, Borrower shall immediately prepay that portion of the Revolving
        Credit Loans that is necessary to comply with the provisions of Section
2.2.
        

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      2.7 Unused
        Commitment Fee.
        Borrower agrees to pay to the Lender the Applicable Unused Fee on the average
        amount of the Revolving Credit Commitment unused during each Fiscal Quarter.
        Such fee shall be payable quarterly and the Lender is hereby authorized to
        charge Borrower’s account with Lender for the amount of such fee. The Lender
        will send Borrower an invoice setting forth the amount of such fee and the
        basis
        upon which it was calculated, and will send such invoice within two (2) Business
        Days after such fee is so charged..

       

      2.8 Use
        of
        Proceeds.
        Proceeds of the Revolving Credit Loans shall be used on the date of this
        Agreement first for repayment in full of obligations to Keltic Financial.
        Thereafter the Revolving Credit Loans will be available for the Borrower’s
        general corporate purposes including purchase of the stock of Val-U-Tech
        Corp..

       

      ARTICLE
        III - TERM LOAN

       

      3.1 Term
        Loan.
        On the
        Closing Date the Lender will make a term loan (the “Term
        Loan”)
        to
        Borrower on the terms and conditions hereinafter set forth, in the aggregate
        principal amount of One Million Seven Hundred Thousand Dollars ($1,700,000).
        

       

      3.2 Term
        Loan Note.
        Borrower’s obligation to repay the Term Loan shall be evidenced by its
        promissory note in substantially the form of Exhibit
        C
        to this
        Agreement, with blanks appropriately completed.

       

      3.3 Principal
        Payments on Term Loan.
        Borrower agrees to pay the principal amount of the Term Loans in consecutive
        installments on the first day of each month in the amount of $28,334 each.
        The
        entire unpaid principal amount of the Term Loan shall be due and payable
        on the
        Term Loan Maturity Date.

       

      3.4 Interest.
        

       

      (a) Borrower
        shall pay interest on the outstanding principal amount of the Term Loan at
        the
        rate of six and seven-tenths percent (6.7%) per annum. Interest on the Term
        Loan
        shall be calculated on the basis of a year of 360 days for the actual number
        of
        days elapsed. 

       

      (b) Interest
        on the Term Loan shall be paid in immediately available funds to the Lender
        on
        the first day of each month. All remaining accrued interest shall be due
        and
        payable on the Term Loan Maturity Date.

       

      3.5 Use
        of
        Proceeds.
        Proceeds of the Term Loan shall be used on the date of this Agreement first
        for
        repayment in full of obligations to Keltic Financial. Thereafter the Term
        Loan
        proceeds will be available for the Borrower’s general corporate purposes
        including purchase of the stock of Val-U-Tech Corp.. 

       

      ARTICLE
        IV - ENERGY LOAN

       

      4.1 Energy
        Loan.
        The
        existing Energy Loan made by Lender to Borrower in the original aggregate
        outstanding principal amount of $203,306.15 shall remain outstanding.

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      4.2 Energy
        Loan Note.
        Borrower’s obligation to repay the Energy Loan is evidenced by its promissory
        note with attached rider in substantially the form of Exhibit
        D
        to this
        Agreement.

       

      4.3 Energy
        Loan Payments.
        Borrower shall make payments of principal and interest as provided in the
        Energy
        Loan Note. All remaining unpaid principal and accrued interest on the Energy
        Loan shall be due and payable in full on the Energy Loan Maturity
        Date.

       

      4.4 Interest.
        Borrower shall pay interest on the outstanding principal amount of the Energy
        Loan as provided in the Energy Loan Note. 

       

      4.5 Energy
        Loan Documents.
        The
        provisions of this Agreement supersede and replace the Agreement (Affirmative
        Agreements) containing financial covenants executed by and between the Borrower
        and Lender in connection with closing of the Energy Loan.

       

      ARTICLE
        V
        - EQUIPMENT LINE OF CREDIT
        FACILITY

       

      5.1 Equipment
        Line of Credit.
        Subject
        to Section 5.2
        and the
        other terms and conditions hereinafter set forth, the Lender has established
        the
        Equipment Line Facility, available in the discretion of the Lender to the
        Borrower from time to time during the period from the Closing Date up to
        but not
        including the Equipment Line Maturity Date, in an aggregate principal amount
        of
        $1,500,000. No reborrowing is available under the Equipment Line Facility.
        The
        Lender will consider Borrower’s requests for Equipment Line Loans, but shall
        have the sole and absolute discretion whether to make any Loan (or any portion
        of any Loan) requested by Borrower, regardless of any general availability
        under
        the Equipment Line Facility.

       

      5.2 Notice
        and Manner of Borrowing.
        Borrower may make requests for Equipment Line Loans, in minimum amounts of
        $100,000, to the Lender specifying: (a) the date of such Loan; (b) the amount
        of
        such Loan; (c) the Type of Loan; (d) in the case of a LIBOR Loan, the duration
        of the Interest Period applicable thereto, and (e) the purpose of the Loan
        including copies of invoices for equipment being purchased and other supporting
        documentation reasonably requested by Lender. Subject to the terms of this
        Agreement including Section 5.1,
        and
        upon fulfillment of the applicable conditions set forth in Article VIII,
        the
        Lender shall credit the amount of such Equipment Line Loan, in immediately
        available funds, to the account of the Borrower maintained with the Lender
        for
        that purpose. 

       

      5.3 Interest.
        

       

      (a) The
        Equipment Line Loans may be outstanding as Base Rate Loans, LIBOR Loans,
        or
        Fixed Rate Loans (in which case the rate shall be fixed for the duration
        of the
        term of the Equipment Line Loan), as elected with respect to each Equipment
        Line
        Loan at least three (3) Business Days before the date on which such Equipment
        Line Loan is made. Borrower shall pay interest to the Lender on the outstanding
        and unpaid principal amount of the each Equipment Line Loan at the Base Rate
        plus the Applicable Margin, the LIBOR Interest Rate plus the Applicable Margin,
        or the Fixed Rate, whichever may have been elected by the Borrower. Any change
        in the interest rate resulting from a change in the Base Rate shall be effective
        as of the opening of business on the day on which such change in the Base
        Rate
        becomes effective. Each LIBOR Rate shall be effective for the applicable
        Interest Period. Interest on each Loan shall be calculated on the basis of
        a
        year of 360 days for the actual number of days elapsed. 

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

      (b) Provided
        that the Lender remains a participant in the Linked Deposit Program and approval
        is received from New York Empire State Development for Borrower’s participation
        in such program, the Lender will provide the Borrower with the interest rate
        benefit under the Linked Deposit Program for up to an aggregate of $500,000
        in
        Equipment Line Loans. Borrower must elect a Fixed Rate for any Equipment
        Line
        Loan for the period in which Linked Deposit Program benefits are received,
        which
        period may not exceed forty-eight month, and the other terms and conditions
        of
        general application to the Linked Deposit Program must be
        satisfied.

       

      5.4 Equipment
        Line Notes.
        Borrower’s obligation to repay each Equipment Line Loan shall be evidenced by an
        Equipment Line Note in substantially the form of Exhibit
        E
        to this
        Agreement, with blanks appropriately completed, in favor of Lender in the
        principal amount of such Equipment Line Loan. In addition, for any Equipment
        Line Note to which the Linked Deposit Program will apply, the Borrower will
        execute and deliver to Lender a Linked Deposit Program Equipment Line Note
        Rider
        in substantially the form of Exhibit
        F
        to this
        Agreement, with blanks appropriately completed.

       

      5.5 Payments.
        

       

      (a) Interest
        on outstanding Equipment Line Loans shall be paid in immediately available
        funds
        to the Lender, in the case of LIBOR Loans on the last day of the applicable
        Interest Period but no less often than every three months, and in the case
        of
        Base Rate Loans or Fixed Rate Loans, on the first day of each month. All
        accrued
        and unpaid interest shall be due and payable on the Termination
        Date.

       

      (b) The
        principal of each Equipment Line Loan shall be repaid in consecutive monthly
        installments on the first day of each month, each equal to one-sixtieth of
        the
        original principal amount of the particular Equipment Line Loan. All Equipment
        Line Loans shall be repaid in full on the Termination Date.

       

      5.6 Use
        of
        Proceeds.
        Proceeds of the Equipment Line Loans shall be used to finance the purchase
        price
        of capital equipment.

       

      ARTICLE
        VI - CERTAIN GENERAL PROVISIONS

       

      6.1 Conversions
        and Renewals.
        Borrower may elect from time to time to convert all or a part of one type
        of
        Loan into another type of Loan or to renew all or part of a Loan by giving
        the
        Lender notice at least one (1) Business Day before conversion into a Base
        Rate
        Loan and at least three (3) Business Days before the conversion into or renewal
        of a LIBOR Loan, specifying: (a) the renewal or conversion date; (b) the
        amount
        of the Loan to be converted or renewed; (c) in the case of conversions, the
        type
        of Loan to be converted into; and (d) in the case of renewals of or a conversion
        into LIBOR Loans, the duration of the Interest Period applicable thereto;
        provided that LIBOR Loans can be converted only on the last day of the Interest
        Period for such Loan. All notices given under this Section 6.1
        shall be
        irrevocable and shall be given not later than 11:00A.M. (New York time) on
        the
        day which is not less than the number of Business Days specified above for
        such
        notice. If the Borrower shall fail to give the Lender the notice as specified
        above for the renewal or conversion of a LIBOR Loan prior to the end of the
        Interest Period with respect thereto or a Fixed Rate Loan prior to the
        expiration of the period for which such rate is fixed, such LIBOR Loan or
        Fixed
        Rate Loan shall automatically be converted into a Base Rate Loan on the last
        day
        of the Interest-Period for such Loan. Each LIBOR Loan shall be in an amount
        not
        less than $1,000,000 and in $500,000 increments except LIBOR Loans made under
        the Equipment Line Facility which shall be in amounts not less than $100,000
        and
        in $100,000 increments. No more than five (5) LIBOR Loans may be outstanding
        at
        any one time.

       

      
        
          
          

        

        
          21

          
            

          

        

        
          
          

        

      

       

      6.2 Notices.
        All
        notices given under Section 2.3
        and
        Section 6.1
        shall be
        irrevocable and shall be given not later than 10:00 a.m. (New York time)
        on the
        day which is not less than the number of Business Days specified above for
        such
        notice. Notices given pursuant to Section 2.3
        and
        Section 6.1
        shall be
        in writing or by confirmed facsimile transmission or by email actually received
        by the Lender, and shall be given to the Lender at the Lender Office. Notices
        shall be effective on the date received by the Lender if received on or before
        10:00 a.m. (New York time) on a Business Day, and shall be effective on the
        next
        Business Day if received after 10:00 a.m. (New York time) on a Business Day.
        

       

      6.3 Method
        of Payment.
        Borrower shall make each payment under this Agreement and the Notes not later
        than 12:00 noon (New York time) on the date when due in lawful money of the
        United States to the Lender at its Principal Office in immediately available
        funds. Borrower hereby authorizes the Lender, if and to the extent payment
        is
        not made when due under this Agreement and the Notes, to charge from time
        to
        time against any account of Borrower with the Lender any amount as
        due.

       

      6.4 Illegality.
        Notwithstanding any other provision in this Agreement, if any applicable
        law,
        rule, or regulation, or any change therein, or any change in the interpretation
        or administration thereof by any governmental authority, central bank, or
        comparable agency charged with the interpretation or administration thereof,
        or
        compliance by the Lender with any request or directive (whether or not having
        the force of law) of any such authority, central bank, or comparable agency
        shall make it unlawful or impossible, or impractical as a result of a
        contingency occurring after the date of this Agreement that materially affects
        the interbank market for the Lender to maintain or fund LIBOR Loans, then
        upon
        notice to the Borrower, the outstanding principal amount of all LIBOR Loans,
        together with interest accrued thereon, and any other amounts payable to
        the
        Lender under this Agreement shall (a) at the election of Borrower, be Converted
        into Base Rate Loans of the same principal amount or, if no such election
        is
        made, be repaid (b) immediately upon demand of the Lender if such change
        or
        compliance with such request, in the judgment of the Lender, requires immediate
        repayment, or (c) at the expiration of the last Interest Period to expire
        before
        the effective date of any such change or request.

       

      6.5 Disaster.
        Notwithstanding anything to the contrary herein, if the Lender determines
        (which
        determination shall be conclusive) that:

       

      (a) quotations
        of interest rates for the relevant deposits referred to in the definition
        of
        LIBOR Interest Rate are not being provided in the relevant amounts or for
        the
        relative maturities for purposes of determining the rate of interest on a
        LIBOR
        Loan as provided in this Agreement; or

       

      
        
          
          

        

        
          22

          
            

          

        

        
          
          

        

      

       

      (b) the
        relevant rates of interest referred to in the definition of LIBOR Interest
        Rate
        upon the basis of which the rate for any such type of Loan is to be determined
        do not accurately cover the cost to the Lender of making or maintaining LIBOR
        Loans; 

       

      then
        the
        Lender shall forthwith give notice thereof to the Borrower, whereupon (a)
        at the
        election of Borrower, the LIBOR Loans shall be Converted into Base Rate Loans
        of
        the same principal amount or, if no such election is made, and (b) (i) the
        obligation of the Lender to make LIBOR Loans shall be suspended until the
        Lender
        notifies the Borrower that the circumstances giving rise to such suspension
        no
        longer exist, and (ii) the Borrower shall repay in full the then outstanding
        principal amount of each LIBOR Loan together with accrued interest thereon,
        on
        the last day of the then current Interest Period applicable to such
        Loan.

       

      6.6 Increased
        Cost.
        From
        time to time upon notice to the Borrower from the Lender, the Borrower shall
        pay
        to the Lender such amounts as the Lender may determine to be necessary to
        compensate the Lender for any costs incurred by the Lender which the Lender
        determines are attributable to its making or maintaining any LIBOR Loans
        hereunder or its obligation to make any such Loans hereunder, or any reduction
        in any amount receivable by the Lender under this Agreement or the Notes
        in
        respect of any such Loans or such obligation (such increases in costs and
        reductions in amounts receivable being herein called “Additional
        Costs”),
        resulting from any change after the date of this Agreement in U.S. federal,
        state, municipal, or foreign laws or regulations (including Regulation D),
        or
        the adoption or making after such date of any interpretations, directives,
        or
        requirements applying to a class of banks including the Lender of or under
        U.S.
        federal, state, municipal, or foreign laws or regulations (whether or not
        having
        the force of law) by any court or governmental or monetary authority charged
        with the interpretation or administration thereof (“Regulatory
        Change”),
        which: (a) changes the basis of taxation of any amounts payable to the Lender
        under this Agreement or the Notes in respect of any such Loans (other than
        Taxes
        imposed on the overall net income of the Lender for any of such Loans by
        the
        jurisdiction where the Lender Principal Office is located); or (b) imposes
        or
        modifies any reserve, special deposit, compulsory loan, or similar requirements
        relating to any extensions or credit or other assets of, or any deposits
        with or
        other liabilities of, the Lender (including any of such Loans or any deposits
        referred to in the definition of LIBOR Interest Rate); or (c) imposes any
        other
        condition affecting this Agreement or the Notes (or any such extensions of
        credit or liabilities). The Lender will notify the Borrower of any event
        occurring after the date of this Agreement which will entitle the Lender
        to
        compensation pursuant to this Section 6.6
        as
        promptly as practicable after it obtains knowledge thereof and determines
        to
        request such compensation, but in no event will Borrower be liable for
        Additional Costs arising from any Regulatory Change which occurred more than
        six
        (6) months before the date of such notice.

       

      Determinations
        by the Lender for purposes of this Section 6.6
        of the
        effect of any Regulatory Change on its costs of making or maintaining Loans
        or
        on amounts receivable by it in respect of Loans, and of the additional amounts
        required compensate any the Lender in respect of any Additional Costs, shall
        be
        conclusive, provided that such determinations are made on a reasonable
        basis.

       

      
        
          
          

        

        
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      6.7 Risk-Based
        Capital.
        In the
        event that the Lender determines that with respect to any LIBOR Loans hereunder
        (a) compliance with any judicial, administrative, or other governmental
        interpretation of any law or regulation or (b) compliance by the Lender or
        any
        corporation that Controls Lender with any guideline or request from any central
        bank or other governmental authority (whether or not having the force of
        law)
        has the effect of requiring an increase in the amount of capital required
        or
        expected to be maintained by the Lender or any corporation that Controls
        the
        Lender, and the Lender determines that such increase is based upon its
        obligations hereunder, and other similar obligations, the Borrower shall
        pay to
        the Lender, such additional amount as shall be certified by the Lender to
        be the
        amount allocable to the Lender’s obligations to the Borrower hereunder. The
        Lender will notify the Borrower of any event occurring after the date of
        this
        Agreement that will entitle the Lender to compensation pursuant to this Section
        6.7
        as
        promptly as practicable after it obtains knowledge thereof and determines
        to
        request such compensation, but in no event will the Borrower be liable for
        any
        compensation hereunder based on any event which occurred more than six (6)
        months before the date of such notice.

       

      Determinations
        by the Lender for purposes of this Section 6.7
        of the
        effect of any increase in the amount of capital required to be maintained
        by the
        Lender and of the amount allocable to the Lender’s obligations to the Borrower
        hereunder shall be determined by the Lender acting reasonably and in good
        faith
        using averaging and attribution methods that are reasonable, provided, however,
        absent manifest error, the Lender’s computation shall be final, conclusive, and
        binding.

       

      6.8 Funding
        Loss Indemnification.
        Upon
        notice to Borrower from the Lender, Borrower shall pay to the Lender such
        amount
        or amounts as shall be sufficient (in the reasonable opinion of the Lender)
        to
        compensate it for any loss, cost, liability, funding loss, or expense (in
        each
        case whether by reason of any reduction in yield, the liquidation or
        reemployment of any deposit or other funds acquired by the Lender, the fixing
        of
        any interest rate payable on LIBOR Loans, or otherwise) incurred directly
        or
        indirectly as a result of:

       

      (a) any
        payment of a LIBOR Loan on a date other than the last day of the Interest
        Period
        for such Loan including, but not limited to acceleration of the Loans;
        or

       

      (b) any
        failure by Borrower to borrow or convert a LIBOR Loan on the date for borrowing
        or conversion specified in the relevant notice under Section 2.3,
        5.2,
        or
6.1,
        as the
        case may be, or

       

      (c) any
        failure by Borrower to pay a LIBOR Loan on any date for payment specified
        in
        Borrower’s written notice of intention to pay such LIBOR Loan, or 

       

      (d) other
        event pursuant to which a LIBOR Loan is converted to a Base Rate
        Loan.

       

      6.9 Administrative
        Expenses.
        Borrower shall pay any reasonable fees, expenses and disbursements, including
        reasonable legal fees, of the Lender related to this Agreement, the Obligations,
        the perfection and protection of any collateral security required hereunder,
        the
        transactions contemplated by this Agreement, and the administration of this
        Agreement and the Obligations. Such payments shall be due at Closing and
        thereafter as incurred by the Lender.

       

      
        
          
          

        

        
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      6.10 Collection
        Costs.
        At the
        request of the Lender, Borrower shall promptly pay any reasonable fees, expenses
        and disbursements, including reasonable legal fees, of the Lender in connection
        with collection of any of the Obligations or enforcement of any of the Lender’s
        rights hereunder or under the Loan Documents. This obligation shall survive
        the
        payment of any Notes executed hereunder. The Lender may apply any payments
        of
        any nature received by it first to the payment of Obligations under this
        Section
6.10,
        notwithstanding any conflicting provision contained in this Agreement or
        any
        other agreement with the Borrower.

       

      6.11 Default
        Interest Rate.
        Upon
        the occurrence of an Event of Default, notwithstanding anything else herein,
        the
        rate of interest on each of the Obligations shall be automatically increased
        to
        a rate at all times equal to three percentage points (3%) above the rate
        of
        interest which would be in effect absent such failure of compliance, such
        increased rate and fees to remain in effect through and including the
        satisfaction and payment in full of all of the Obligations and the termination
        of the Commitment, or written waiver of such Event of Default by the
        Lender.

       

      6.12 Late
        Payment Fees.
        Payments of principal and/or interest not made in full before the date five
        (5)
        Business Days after the date due shall be subject to a processing charge
        of five
        percent (5%) of the payment due.

       

      6.13 Payment
        of Fees.
        Borrower hereby authorizes the Lender to withdraw an amount equal to the
        fees
        which are due and payable hereunder from any of its accounts with the Lender
        if
        not paid on the due date for such fees. The Lender shall advise the Borrower
        of
        any such withdrawals, provided, however, that failure by the Lender to give
        the
        Borrower such advice shall not prevent the Lender from making any such
        withdrawals under this Section 6.13.

       

      6.14 Prepayments.

       

      (a) LIBOR
        Loans are prepayable only at the end of the respective applicable Interest
        Periods, and breakage costs pursuant to Section 6.8
        will
        apply to any payment of principal for any reason during an applicable Interest
        Period, including without limitation by reason of acceleration. Prepayments
        of
        Fixed Rate Loans are subject to payment of the Prepayment Premium. Prepayments
        of Base Rate Loans may be made without premium or penalty.

       

      (b) The
        Lender reserves the right to require advance notice for all prepayments of
        Loans.

       

      (c) Voluntary
        principal prepayments of the Term Loan must be in minimum amounts of $500,000
        each.

       

      (d) Mandatory
        principal prepayments of first the Term Loan and then any Equipment Line
        Loans
        shall be made within five Business Days after the date received by any Credit
        Party of and in an amount equal to (i) one hundred percent (100%) of Net
        Cash
        Proceeds of any Asset Disposition outside of the ordinary course of business
        if
        the aggregate Net Cash Proceeds exceed $100,000 (cumulatively and in the
        aggregate), and (ii) one hundred percent (100%) of the Net Cash Proceeds
        from
        any Casualty Event. In the event of a mandatory prepayment, the Lender will
        waive any Prepayment Premium related to such prepayment of any Fixed Rate
        Loan.

       

      
        
          
          

        

        
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      (e) Prepayments
        of the Term Loan and Equipment Line Notes shall be applied to the principal
        installments in the inverse order of their maturities.

       

      (f) If
        by
        reason of an Event of Default the Lender elects to declare the Obligations
        to be
        immediately due and payable and/or to reduce or terminate the Commitment,
        then
        any indemnities pursuant to Section 6.8
        and the
        Prepayment Premium shall become due and payable in the same manner as though
        the
        Borrower had voluntarily prepaid the Notes.

       

      6.16 Commitment
        Fee.
        On the
        Closing Date, in consideration of the Commitment the Borrower shall pay the
        Lender a commitment fee of $25,000.

       

      6.17 Obligations
        Related to Rate Management Transactions.
        In the
        event that the Borrower enters into any Rate Management Transaction with
        the
        Lender, any costs incurred by the Lender or its affiliates in connection
        therewith, including any interest, expenses, fees, premiums, penalties or
        other
        charges associated with any obligations undertaken by the Lender or its
        Affiliates to hedge or offset the Lender’s or its affiliates obligations
        pursuant to such agreement, or the termination of any such obligations, shall
        be
        deemed additional interest and/or a related expense (to be determined in
        the
        sole discretion of the Lender) and due as part of the Obligations and secured
        by
        all collateral for and covered by all guarantees of the Obligations to the
        full
        extent thereof, and included in any judgment in any proceeding instituted
        by the
        Lender.

       

      6.18 Payments
        Due on Non-Business Days.
        Whenever any payment to be made under this Agreement or under the Notes shall
        be
        stated to be due on a day other than a Business Day, such payments shall
        be made
        on the next succeeding Business Day, and such extension of time shall be
        included in the computation of the payment of interest and the commitment
        fee,
        as the case may be, except, in the case of a LIBOR Loan, if the result of
        such
        extension would be to extend such payment into another calendar month, such
        payment shall be made on the immediately preceding Business Day

       

      ARTICLE
        VII - REPRESENTATIONS OF BORROWER

       

      The
        Borrower represents and warrants to the Lender as follows:

       

      7.1 Organization
        and Power.
        

       

      (a) Each
        of
        the Credit Parties is duly organized, validly existing and in good standing
        under the laws of its state of incorporation and is duly qualified to transact
        business and in good standing in all other states and jurisdictions in which
        it
        is required to qualify or in which failure to qualify could have a material
        adverse impact on its business. The jurisdictions of formation and qualification
        for each of the Credit Parties are described in Schedule
        7.1.

       

      (b) Each
        of
        the Credit Parties has full power and authority to own its properties, to
        carry
        on its business as now being conducted, to execute, deliver and perform the
        Agreement and all related documents and instruments, and to consummate the
        transactions contemplated hereby.

       

      
        
          
          

        

        
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      7.2 Proceedings
        of Borrower.
        

       

      (a) All
        necessary action on the part of the Credit Parties relating to authorization
        of
        the execution and delivery of this Agreement and all related documents and
        instruments, and the performance of the Obligations of the Credit Parties,
        hereunder and thereunder has been taken. This Agreement and all related
        documents and instruments constitute legal, valid and binding obligations
        of the
        Credit Parties, as applicable, enforceable in accordance with their respective
        terms.

       

      (b) The
        execution and delivery by the Borrower of this Agreement and all related
        documents and agreements, and the performance by each of the Credit Parties
        of
        their respective obligations under this Agreement, the Security Documents
        and
        all related documents and agreements will not violate any provision of law
        or
        their respective Certificates of Incorporation or By-Laws. The execution,
        delivery and performance of this Agreement, the Security Documents and all
        related documents and agreements, and the consummation of the transactions
        contemplated hereby will not violate, be in conflict with, result in a breach
        of, or constitute a default under any agreement to which any of the Credit
        Parties is a party or by which any of its properties is bound, or any order,
        writ, injunction, or decree of any court or governmental instrumentality,
        and
        will not result in the creation or imposition of any lien, charge or encumbrance
        upon any of its properties, and do not require the consent or approval of
        any
        governmental authority.

       

      7.4 Proceedings
        of Borrower.
        

       

      (a) All
        necessary action on the part of the Credit Parties relating to authorization
        of
        the execution and delivery of this Agreement and all related documents and
        instruments, and the performance of the Obligations of the Credit Parties,
        hereunder and thereunder has been taken. This Agreement and all related
        documents and instruments constitute legal, valid and binding obligations
        of the
        Credit Parties, as applicable, enforceable in accordance with their respective
        terms.

       

      (b) The
        execution and delivery by the Borrower of this Agreement and all related
        documents and agreements, and the performance by each of the Credit Parties
        of
        their respective obligations under this Agreement, the Security Documents
        and
        all related documents and agreements will not violate any provision of law
        or
        their respective Certificates of Incorporation or By-Laws. The execution,
        delivery and performance of this Agreement, the Security Documents and all
        related documents and agreements, and the consummation of the transactions
        contemplated hereby will not violate, be in conflict with, result in a breach
        of, or constitute a default under any agreement to which any of the Credit
        Parties is a party or by which any of its properties is bound, or any order,
        writ, injunction, or decree of any court or governmental instrumentality,
        and
        will not (except as provided in the Security Documents) result in the creation
        or imposition of any lien, charge or encumbrance upon any of its properties,
        and
        do not require the consent or approval of any governmental
        authority.

       

      
        
          
          

        

        
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      7.5 Capitalization.
        All of
        the outstanding Capital Securities of Borrower are duly authorized, validly
        issued and fully paid. All of the Capital Securities of each of Borrower’s
        Subsidiaries are owned by Borrower or a Subsidiary of Borrower.

       

      7.6 Litigation.
        Except
        as set forth on Schedule
        7.6,
        as of
        the date hereof there is no action, suit or proceeding at law or in equity
        by or
        before any court or any federal, state, municipal or other governmental
        department, commission, board, bureau, instrumentality or other agency, domestic
        or foreign, pending or, to the knowledge of the Credit Parties, threatened
        against or affecting the Credit Parties that brings into question the legality,
        validity or enforceability of this Agreement or the transactions contemplated
        hereby or that, if adversely determined, is not adequately covered by insurance
        and would have a Material Adverse Effect.

       

      7.7 Financial
        Statements.
        The
        audited consolidated balance sheets of Borrower as of the Fiscal Year ended
        September 30, 2007, and the related statements of operation, stockholders
        equity
        and cash flows (including supporting footnote disclosures) for the fiscal
        years
        then ended,
        with
        the opinion of Rotenberg & Co., LLP (collectively, the “Financial
        Statements”),
        all
        heretofore furnished to the Lender, have been prepared in accordance with
        GAAP
        consistently applied throughout the periods indicated are all true and correct
        in all material respects and present fairly the financial condition at the
        date
        of said financial statements and the results of operations for the fiscal
        period
        then ending. The Credit Parties as of such date did not have any significant
        liabilities, contingent or otherwise, including liabilities for taxes or
        any
        unusual forward or long-term commitments which were not disclosed by or reserved
        against in the Financial Statements, and at the present time there are no
        material unrealized or anticipated losses from any unfavorable commitments
        of
        the Credit Parties. All such Financial Statements have been prepared in
        accordance with GAAP applied on a consistent basis throughout the periods
        involved.

       

      7.8 Material
        Adverse Changes.
        As of
        the date of this Agreement, since September 30, 2007 there has been no material
        adverse change in the operations, business, property, assets or condition,
        financial or otherwise of the Credit Parties, taken as a whole, except for
        changes disclosed prior to the date of this Agreement by the Borrower either
        (i)
        in writing to the Lender or (ii) in the Borrower’s filings with the Securities
        and Exchange Commission.

       

      7.9 Taxes.
        Each of
        the Credit Parties have filed or caused to be filed when due all federal
        tax
        returns or extensions and all state and local tax returns or extensions that
        are
        required to be filed, and have paid or caused to be paid all Taxes as shown
        on
        said returns or any assessment received. The filed returns accurately reflect
        in
        all material respects all liability for Taxes of the Credit Parties, as
        applicable, for the periods covered thereby. Each of the Credit Parties has
        paid
        all material Taxes payable by it which have become due, other than those
        that
        are being contested in good faith and adequately disclosed and fully provided
        for on the consolidated financial statements of the Credit Parties in accordance
        with GAAP. None of the Credit Parties’ tax returns are being audited on the date
        of this Agreement and none of the Credit Parties have been notified of any
        intention by any taxing authority to conduct such an audit.

       

      7.10 Properties;
        Liens.
        Except
        as would not have a Material Adverse Effect, (a) the Credit Parties have
        good
        and marketable title to all of their properties and assets, including without
        limitation, the properties and assets reflected in the Financial Statements
        free
        and clear of all Liens, except for Permitted Liens, and (b) the Credit Parties
        have a valid leasehold estate and undisturbed peaceable possession under
        all
        leases under which they are operating, all of which are in full force and
        effect
        and none of which contain unusual or burdensome provisions that may materially
        adversely affect the operations of the Credit Parties.

       

      
        
          
          

        

        
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      7.11 Debt.
        Except
        for Permitted Debt, the Credit Parties have no outstanding Debt.

       

      7.12 Franchises;
        Permits.
        Each of
        the Credit Parties has obtained and is in compliance with all licenses, permits,
        franchises, and governmental authorizations necessary for the ownership of
        its
        properties and the conduct of its business, for which failure to comply could
        reasonably be expected to have a Material Adverse Effect.

       

      7.13 Compliance
        With Law.
        

       

      (a) None
        of
        the Credit Parties is in violation of any laws, ordinances, governmental
        rules,
        requirements, or regulations, or any order, writ, injunction or decree of
        any
        court or federal, state, municipal or other governmental department, commission,
        board, bureau, agency or instrumentality, domestic or foreign, to which it
        is
        subject which violation could reasonably be expected to have a Material Adverse
        Effect. 

       

      (b) To
        the
        extent applicable, each of the Credit Parties is in compliance with the (i)
        Trading with the Enemy Act, as amended, and each of the foreign assets control
        regulations of the United States Treasury Department (31 CFR, Subtitle B,
        Chapter V, as amended) and any other enabling legislation or executive order
        relating thereto, and (ii) the Patriot Act, except in each case such
        noncompliances as could not, either individually or in the aggregate, reasonably
        be expected to have a Material Adverse Effect.

       

      (c) Neither
        the Borrower nor any of the Credit Parties, nor, to the knowledge of the
        Borrower, any director, officer, agent, employee (whether full time or
        contract), representative or other person acting on behalf of the Credit
        Parties
        has, in the course of its actions for, or on behalf of, the Credit Parties,
        (i)
        used any corporate funds for any unlawful contribution, gift, entertainment
        or
        other unlawful expenses relating to political activity, (ii) made any direct
        or
        indirect unlawful payment to any foreign or domestic government Person or
        employee (whether full time or contract) from corporate funds, (iii) violated
        or
        is in violation of any provision of the U.S. Foreign Corrupt Practices Act
        of
        1977, as amended, or (iv) made any unlawful bribe, rebate, payoff, influence
        payment, kickback or other unlawful payment to any foreign or domestic
        government Person or employee (whether full time or contract).

       

      7.14 Patents;
        Trademarks; and Authorizations.
        The
        Credit Parties own, possess or have licenses for all of the patents, trademarks,
        service marks, trade names, copyrights, licenses, authorizations, trade secrets,
        proprietary information and know-how, and all rights with respect to the
        foregoing (collectively, the “Intellectual
        Property”),
        necessary to the conduct of their business as now conducted. A complete list
        of
        all such Intellectual Property with respect to which registrations have been
        issued by the U.S. Patent and Trademark Office, the U.S. Copyright Office,
        or
        any comparable foregoing governmental authority is set forth on the Schedule
        7.14.
        Except
        as disclosed in Schedule
        7.6,
        to the
        knowledge of the Credit Parties, no product, process, method, substance,
        part or
        other material presently contemplated to be sold by or employed by any of
        the
        Credit Parties in connection with its business infringes or may infringe
        any
        patent, trademark, service mark, trade name, copyright, license or other
        right
        owned by any other person. Except as disclosed in Schedule
        7.6,
        there
        is no pending or threatened claim or litigation against or affecting any
        of the
        Credit Parties contesting its right to sell or use any such product, process,
        method, substance, part or other material. There is no pending or proposed
        any
        patent, invention, device application or principle or any statute, law, rule,
        regulation, standard or code which would prevent, inhibit or render obsolete
        the
        production or sale of any products of, or substantially reduce the projected
        revenues of or otherwise have a Material Adverse Effect.

       

      
        
          
          

        

        
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      7.15 Contracts
        and Agreements.
        None of
        the Credit Parties is a party to any contract or agreement that materially
        adversely affects its business, property, assets, or condition financial
        or
        otherwise, and each the Credit Parties is in compliance in all material respects
        with all material contracts and agreements to which it is a party.

       

      7.16 Subsidiaries
        and Affiliates.
        Except
        Affiliates and Subsidiaries listed on Schedule
        7.16
        and
        Subsidiaries permitted by Section 10.10
        below,
        Borrower has no Subsidiaries or Affiliates. The jurisdiction of formation
        and
        ownership of each of the Subsidiaries listed on Schedule
        7.16
        is set
        forth on such Schedule.

       

      7.17 Governmental
        Contracts.
        

       

      (a) None
        of
        the Credit Parties has knowledge of (i) an existing Organizational Conflict
        of
        Interest, as defined by the Federal Acquisition Regulation (“FAR”)
        2.101,
        that has not been resolved through an appropriate mitigation plan or (ii)
        circumstances that could be reasonably likely to negatively affect in any
        material respects the Credit Parties’ ability to be awarded government contracts
        similar to those which the any of the Credit Parties is currently
        performing.

       

      (b) None
        of
        the Credit Parties has knowledge of any payment by any Credit Parties to
        any
        Person in connection with any material government contract made in violation
        of
        applicable procurement statutes, regulations or the provisions of any of
        the
        Credit Parties’ material government contracts.

       

      (c) With
        respect to each government contract to which any of the Credit Parties is
        a
        party or bound, (i) neither the United States Government nor any prime
        contractor, subcontractor or other Person has notified any of the Credit
        Parties, in writing or otherwise, that any of the Credit Parties has breached
        or
        violated any requirement of law, or material certificate or representation,
        or
        any clause which has resulted in a cure notice which in each case, either
        individually or in the aggregate, could reasonably be expected to result
        in a
        Material Adverse Effect and (ii) solely with respect to material government
        contracts, no termination for default is currently in effect pertaining to
        any
        such material government contract.

       

      (d) (i)
        Neither any of the Credit Parties or any of their respective directors or
        officers is (or during the last five (5) years has been) under civil
        investigation by the United States Department of Justice or a state attorney
        general or under criminal investigation by any Governmental Authority, or
        is
        under indictment by any Governmental Authority with respect to any irregularity,
        misstatement or omission arising under or relating to any activities of the
        Credit Parties under a government contract and (ii) during the last five
        (5)
        years, none of the Credit Parties has made a voluntary disclosure to the
        United
        States Government with respect to any irregularity, misstatement or omission
        arising under or relating to a government contract, except, in each case,
        for
        any such investigation, indictment, voluntary disclosure, irregularity,
        misstatement or omission which, either individually or in the aggregate,
        could
        not reasonably be expected to have a Material Adverse Effect.

       

      
        
          
          

        

        
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      (e) There
        exist (i) no outstanding material claims against the Credit Parties, either
        by
        the United States Government or by any prime contractors, subcontractor,
        vendor
        or other third party, arising under or relating to any government contract
        and
        (ii) no disputes between the any of the Credit Parties and the United States
        Government under the Contract Disputes Act or any other Federal statute or
        between any of the Credit Parties and any prime contractor, subcontractor
        or
        vendor arising under or relating to any government contract, which, either
        individually or in the aggregate, could reasonably be expected to result
        in a
        Material Adverse Effect. 

       

      (f) None
        of
        the Credit Parties or any of their respective directors, officers, owners,
        partners, or to the knowledge of the foregoing, employees, is (or during
        the
        last five (5) years has been) suspended or debarred from doing business with
        the
        United States Government or is (or during such period was) the subject of
        a
        finding of non-responsibility or ineligibility for United States Government
        contracting. 

       

      (g) No
        notice
        of suspension, debarment, cure notice, show cause notice or notice of
        termination for default is in effect which, either individually or in the
        aggregate, could reasonably be expected to result in a Material Adverse Effect
        has been issued by the United States Government to any of the Credit Parties
        and
        none of the Credit Parties is a party to any pending, or to the Borrower’s
        knowledge threatened, suspension, debarment, termination for default issued
        by
        the United States Government or other adverse United States Government action
        or
        proceeding in connection with any contract with the United States Government
        which, either individually or in the aggregate, could reasonably be expected
        to
        result in a Material Adverse Effect. 

       

      (h) No
        cost
        incurred pertaining to any government contract of any of the Credit Parties
        has
        been disallowed by the United States Government or any of its agencies or,
        to
        the knowledge of any of the Credit Parties, is the subject of any investigation
        or which, either individually or in the aggregate, could reasonably be expected
        to result in a Material Adverse Effect. 

       

      (i) On
        the
        date hereof the cost accounting systems and government property management
        systems with respect to the material government contracts of the Credit Parties
        comply in all material respects with the applicable cost accounting standards
        set forth in FAR Sections 30 and 45 respectively.

       

      
        
          
          

        

        
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      7.18 ERISA.
        Except
        as set forth on the Schedule
        7.18:

       

      (a) Identification
        of Plans.
        (i)
        Neither any Credit Party, nor any ERISA Affiliate, maintains or contributes
        to,
        or has maintained or contributed to, any Plan that is an ERISA Plan, and
        (ii)
        none of the Credit Parties and their ERISA Affiliates maintains or contributes
        to, or have maintained or contributed to, any Plan that is an Executive
        Arrangement.

       

      (b) Compliance.
        Each
        Plan has at all times been maintained, by its terms and in operation, in
        accordance with all applicable laws, except such noncompliance (when taken
        as a
        whole) that will not have a Material Adverse Effect.

       

      (c) Liabilities.
        Neither
        any of the Credit Parties, nor any ERISA Affiliate, is currently, and has
        not
        been obligated in the last six (6) years to make contributions (directly
        or
        indirectly) to a Multiemployer Plan, and nor is currently subject to any
        liability (including withdrawal liability), tax or penalty whatsoever to
        any
        person whomsoever with respect to any Plan including, but not limited to,
        any
        tax, penalty or liability arising under Title I or Title IV or ERISA or Chapter
        43 of the Internal Revenue Code, except such liabilities (when taken as a
        whole)
        as will not have a Material Adverse Effect.

       

      (d) Funding.
        Each
        Credit Party and each ERISA Affiliate have made full and timely payment of
        all
        amounts (i) required to be contributed under the terms of each Plan and
        applicable law and (ii) required to be paid as expenses of each Plan. No
        Plan
        has an “amount of unfunded benefit liabilities” (as defined in Section
        4001(a)(18) of ERISA).

       

      7.19 Employment
        and Labor Relations.
        None of
        the Credit Parties is engaged in any unfair labor practice that could reasonably
        be expected, either individually or in the aggregate, to have a Material
        Adverse
        Effect. There is (i) no unfair labor practice complaint pending against and
        of
        the Credit Parties or, to the knowledge of the Borrower, threatened against
        any
        of them, before the National Labor Relations Board, and no grievance or
        arbitration proceeding arising out of or under any collective bargaining
        agreement is so pending against any of the Credit Parties or, to the knowledge
        of the Borrower, threatened against any of them, (ii) no strike, labor dispute,
        slowdown or stoppage pending against any of the Credit Parties or, to the
        knowledge of the Borrower, threatened against any of the Credit Parties,
        (iii)
        no union representation question exists with respect to the employees of
        any of
        the Credit Parties, (iv) no equal employment opportunity charges or other
        claims
        of employment discrimination are pending or, to the Borrower’s knowledge,
        threatened against any of the Credit Parties, (v) no wage and hour department
        investigation has been made of any of the Credit Parties, except (with respect
        to any matter specified in clauses (i) through (v) above, either individually
        or
        in the aggregate) such as could not reasonably be expected to have a Material
        Adverse Effect, and (vi) the Credit Parties have in place all current
        affirmative action plans applicable to their respective business operations
        and
        are in material compliance with all laws and regulations governing such
        affirmative action plans, including, without limitation, compliance with
        the
        terms set forth in such plans.

       

      7.20 Disclosure.
        Neither
        this Agreement, any Loan Document nor any other document, certificate or
        statement furnished to the Lender by or on behalf of any Credit Party in
        connection herewith contains any untrue statement of a material fact or omits
        to
        state a material fact necessary in order to make the statements contained
        herein
        and therein not misleading, if, in either case, such fact is material to
        an
        understanding of the financial condition, performance or prospects of the
        Credit
        Parties, taken as a whole or their business or operations, taken as a whole,
        or
        the ability of the Credit Parties to fulfill their obligations under this
        Agreement or by any Loan Documents to which they are parties.

       

      
        
          
          

        

        
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      ARTICLE
        VIII - CONDITIONS OF LENDING

       

      8.1 Loans.
        The
        following conditions must be satisfied before the Lender shall have any
        obligation to make Loans on the Closing Date under this Agreement:

       

      (a) Performance.
        Borrower shall have performed and complied with all agreements and conditions
        required to be performed or complied with by it prior to or at the time each
        Loan is made.

       

      (b) Opinion
        of Counsel.
        As of
        the Closing Date, the Credit Parties shall have delivered a favorable opinion
        of
        their counsel, in form and substance satisfactory to the Lender.

       

      (c) Documents
        to be Delivered.
        Borrower shall have executed and delivered or have caused to be executed
        and
        delivered to the Lender all Loan Documents in form and substance satisfactory
        to
        Lender, and all Loan Documents shall be in full force and effect.

       

      (d) Certified
        Resolutions.
        As of
        the Closing Date the Borrower and Guarantors shall have delivered a certificate
        of their respective corporate secretaries certifying (i) resolutions duly
        adopted by their respective Boards of Directors authorizing the execution,
        delivery and performance of the Loan Documents to which each is a party and
        the
        consummation of the transactions contemplated hereby and thereby, as applicable,
        which resolutions shall remain in full force and effect so long as any of
        the
        Obligations are outstanding or the Commitment has not been terminated, (ii)
        true
        and complete copies of their respective Certificates of Incorporation and
        By-Laws and (iii) the incumbency of their respective officers authorized
        to
        execute, deliver and perform this Agreement or the Loan Documents, as
        applicable.

       

      (e) Fees
        and Taxes.
        Borrower shall have paid all filing fees, taxes, and assessments related
        to the
        borrowings and the perfection of any interests in collateral security required
        hereunder.

       

      (f) Insurance.
        Borrower shall have delivered evidence satisfactory to the Lender of the
        existence of insurance required hereby.

       

      (g) Other
        Documents and Agreements.
        On or
        before the date of this Agreement, the Borrower shall have executed and/or
        delivered such other documents, instruments, and agreements as the Lender
        and
        its legal counsel may reasonably require in connection with the transactions
        contemplated hereby.

       

      (h) Certificates
        of Good Standing; Searches.
        As of
        the Closing Date, Borrower shall have delivered to the Lender (a) certificates
        of good standing from appropriate state officials to the effect that Borrower
        and each Guarantor is in good standing in the respective states of their
        incorporation as well as in all other states in which qualification is necessary
        to carry on their businesses as presently conducted and (b) UCC, judgment,
        bankruptcy and tax searches covering Borrower and each Guarantor in all
        jurisdictions deemed necessary by the Lender, the results of all of which
        shall
        be satisfactory to the Lender in all respects.

       

      
        
          
          

        

        
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      (i) Representations.
        The
        representations and warranties of the Credit Parties contained herein shall
        be
        true and correct in all material respects.

       

      (j) Consents
        and Approvals.
        The
        Lender shall have received evidence of receipt of all governmental, shareholder
        and other, if any, consents and approvals necessary in connection with the
        related financings and other transactions contemplated under this Agreement,
        except where the failure to obtain such consents or approvals would not,
        individually or in the aggregate, have a Material Adverse Effect.

       

      (k) Litigation.
        The
        Lender shall have been informed of any suit, investigation or proceeding
        pending
        in any court or before any arbitrator or governmental authority that would
        reasonably be expected either to have a Material Adverse Effect or to materially
        adversely affect the ability of any of the Credit Parties to perform its
        respective obligations under this Agreement, and no such suits, investigations,
        or proceedings shall be pending.

       

      (l) Patriot
        Act.
        To the
        extent applicable, each Credit Party is in compliance, in all material respects,
        with the (i) Trading with the Enemy Act, as amended, and each of the foreign
        assets control regulations of the United States Treasury Department (31 CFR,
        Subtitle B, Chapter V, as amended) and any other enabling legislation or
        executive order relating thereto, and (ii) Uniting and Strengthening America
        by
        Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
        (USA
        Patriot Act of 2001). To the knowledge of the Borrower, no part of the proceeds
        of the Loans will be used, directly or indirectly, for any payments to any
        governmental official or employee, political party, official of a political
        party, candidate for political office, or anyone else acting in an official
        capacity, in order to obtain, retain or direct business or obtain any improper
        advantage, in violation of the United States Foreign Corrupt Practices Act
        of
        1977, as amended.

       

      (m) Minimum
        Borrowing Capacity.
        The
        Lender shall have received evidence satisfactory to it that Borrower has
        at
        least $2,000,000 of remaining availability under the Borrowing Base after
        the
        Revolving Credit Loans to be made on the Closing Date.

       

      (n) Landlord
        Waivers.
        The
        Lender shall have received a waiver in form and substance satisfactory to
        Lender
        from each landlord of premises on which the Lender’s collateral is located and
        that is not owned by a Credit Party.

       

      (o) Val-U-Tech,
        Inc..
        On or
        before the Closing Date, the Lender shall have received final audited financial
        statements for Val-U-Tech Corp. for the fiscal year ended December 31, 2007,
        showing no material changes from Val-U-Tech Corp. internally prepared financial
        statements previously delivered to Lender. The Lender shall have reviewed
        and
        approved the final form, substance, terms, and conditions of the Val-U-Tech
        Transaction, including the Lender’s review and satisfaction with the proposed
        organizational and legal structure, tax assumptions, final projections, purchase
        allocation, accounting, due diligence, legal opinions, and other related
        matters. The Lender shall have received evidence satisfactory to it that
        (i) a
        minimum of $1,000,000 in value of Borrower stock shall have been delivered
        to
        fund purchase price in the Val-U-Tech Transaction, and (ii) the Val-U-Tech
        Subordinated Debt as of the Closing Date does not exceed a maximum principal
        amount of $3,500,000, and has been subordinated to the Obligations in form
        satisfactory to the Lender.

       

      
        
          
          

        

        
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      (p) Field
        Audit.
        On or
        before the Closing Date, the Lender shall have received the results of a
        field
        audit of the Credit Parties’ assets and operations performed at Borrower’s
        expense, the results of which must be satisfactory to Lender.

       

      8.2 Subsequent
        Loans and Letters of Credit.
        The
        obligation of the Lender to make any Revolving Credit Loans or Equipment
        Line
        Loans shall at all times be subject to the following continuing
        conditions:

       

      (a) Representations
        and Warranties.
        The
        representations and warranties of the Credit Parties contained herein shall
        be
        true and correct in all material respects as of the date of making of each
        such
        advance (except those which are specific as to a date certain), with the
        same
        effect as if made on and as of such date.

       

      (b) No
        Material Adverse Effect.
        Since
        the date of this Agreement, there has been no Material Adverse
        Effect.

       

      (c) No
        Defaults.
        There
        shall exist no Default or Event of Default at the time each Loan is to be
        made.

       

      8.3 Notice
        of Borrowing Representation.
        Each
        Notice of Borrowing given by a Borrower in accordance with Section 2.3
        and
5.2
        hereof
        and the acceptance by Borrower of the proceeds of a Revolving Credit Loan
        and/or
        Equipment Line Loan shall constitute a representation and warranty by the
        Borrower, made as of the time of the making of such Loan, that the conditions
        specified in Sections 8.1
        and
8.2
        have
        been fulfilled as of such time.

       

      ARTICLE
        IX - AFFIRMATIVE COVENANTS OF BORROWER

       

      So
        long
        as any Obligations shall be outstanding or this Agreement remains in effect,
        unless the Lender otherwise consents in writing, the Credit Parties
        shall:

       

      9.1 Financial
        Statements; Other Information.

       

      (a) Furnish
        to the Lender as soon as available, but in no event later than ninety (90)
        days
        after the close of each Fiscal Year in which this Agreement remains in effect,
        copies of annual consolidated financial statements of the Borrower in reasonable
        detail satisfactory to the Lender prepared in accordance with GAAP on a
        consistent basis audited by and with an unqualified opinion from an independent
        certified public accountant satisfactory to the Lender. Said financial
        statements shall include at least a consolidated and consolidating balance
        sheet
        and consolidated and consolidating statements of operations, stockholder’s
        equity and cash flow, and shall be accompanied by a copy of any management
        letter prepared by such accountants. Such financial statements shall be
        accompanied by a certificate of the Chief Financial Officer of Borrower to
        the
        effect that no Event of Default or Default has occurred.

       

      
        
          
          

        

        
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      (b) Furnish
        to the Lender unaudited financial statements not more than forty-five (45)
        days
        after the close of each Fiscal Quarter. Said statements shall be in reasonable
        detail satisfactory to the Lender, shall be prepared in accordance with GAAP,
        shall include at least a consolidated and consolidating balance sheet and
        a
        consolidated and consolidating statements of operations, stockholder’s equity
        and cash flow. Said financial statements shall be certified to be true and
        correct to the best knowledge of the Chief Financial Officer of Borrower.
        Such
        financial statements shall be accompanied by a certificate of the Chief
        Financial Officer of Borrower to the effect that no Event of Default or Default
        has occurred.

       

    

    (c) Furnish
      to the Lender unaudited financial statements not more than forty-five (45)
      days
      after the close of each Fiscal Month. Said statements shall be in reasonable
      detail satisfactory to the Lender, shall be prepared in accordance with GAAP,
      shall include at least a consolidated and consolidating balance sheet and a
      consolidated and consolidating statements of operations, stockholder’s equity
      and cash flow. Said financial statements shall be certified to be true and
      correct to the best knowledge of the Chief Financial Officer of Borrower. Such
      financial statements shall be accompanied by a certificate of the Chief
      Financial Officer of Borrower to the effect that no Event of Default or Default
      has occurred.

     

    (d) Provide
      to the Lender weekly borrowing base reports (“Borrowing
      Base Reports”),
      in
      substantially the form of Exhibit
      G
      attached
      hereto, each accompanied by an accounts receivable aging, accounts payable
      aging, and inventory report.
      After
      giving thirty (30) days prior notice to Lender, Borrower may provide Borrowing
      Base Reports on a monthly rather than weekly basis; provided, however, at any
      time the unused availability under the Borrowing Base is less than $1,000,000,
      weekly Borrowing Base Reports must be provided.

     

    (e) Provide
      to the Lender an annual operating budget with assumptions, in detail reasonably
      satisfactory to Lender, within thirty (30) days after the end of each Fiscal
      Year of Borrower.

     

    (f) Permit
      the Lender to perform full field audits of the Credit Parties’ accounts
      receivable and inventories at Borrower’s expense; provided, however, prior to an
      Event of Default (i) any additional audit after one such audit during each
      of
      Borrower’s Fiscal Years shall be at the Lender’s expense, and (ii) Borrower’s
      expense shall not to exceed $7,000 per audit, plus disbursements and
      out-of-pocket expenses. 

     

    (g) Furnish
      to the Lender such additional information, reports, or financial statements
      as
      the Lender may, from time to time, reasonably request, including, without
      limitation, lists of vendors and suppliers and information necessary to monitor
      Revolving Loans.

     

    (h) Permit
      any Person designated by the Lender to inspect the property, assets and books
      of
      the Credit Parties at reasonable times and, prior to an Event of Default, upon
      reasonable notice, and shall discuss their affairs, finances and accounts at
      reasonable times with the Lender from time to time as often as may be reasonably
      requested.

     

    (i) Notify
      the Lender promptly upon addition of any new location at which it conducts
      business or maintains assets, and of any new warehousing or distributorship
      agreement.

     

    
      
        
        

      

      
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    (j) Report
      immediately to the Lender in writing upon becoming aware of any noncompliance
      with any covenant in this Agreement or any Default, including without limitation
      becoming aware of any noncompliance with Article XI in advance of the date
      on
      which the corresponding quarterly financial statements are due to be delivered
      to the Lender.

     

    9.2 SEC
      Reports.
      Furnish
      to the Lender, as applicable, copies of all proxy statements, financial
      statements and reports which Borrower sends to its stockholders, and copies
      of
      all regular, periodic and current reports, and all comment letters and responses
      thereto, which Borrower files with the Securities and Exchange Commission
      (“SEC”) or any governmental authority which may be substituted therefore, or
      with any national securities exchange; provided, however, in lieu of such copies
      Borrower may advise Lender in writing (including by fax of email) that any
      such
      proxy statement, financial statement and report, as the case may be, is
      available on the SEC’s Edgar database.

     

    9.3 Taxes.
      Pay and
      discharge all taxes, assessments, levies and governmental charges upon the
      Credit Parties, their income and property, prior to the date on which penalties
      are attached thereto; provided, however, that the Credit Parties may in good
      faith contest any such taxes, assessments, levies or charges so long as such
      contest is diligently pursued and no lien or execution exists or is levied
      against any of the Credit Parties’ assets related to the contested
      items.

     

    9.4 Insurance.
      Maintain or cause to be maintained insurance, of kinds and in amounts reasonably
      satisfactory to the Lender, with responsible insurance companies on all of
      the
      Credit Parties’ real and personal properties in such amounts and against such
      risks as are prudent, including, but not limited to, full-risk extended coverage
      hazard insurance to the full insurable value of real property (co-insurance
      not
      being permitted without the prior written consent of the Lender), all-risk
      coverage for personal property, business interruption or loss of rents coverage,
      worker’s compensation insurance, and comprehensive general liability and
      products liability insurance. The Credit Parties also shall maintain flood
      insurance covering any real properties located in flood zones. The Credit
      Parties shall provide to the Lender, no less often than annually and upon its
      request, a detailed list and evidence satisfactory to the Lender of their
      insurance carriers and coverage and shall obtain such additional insurance
      as
      the Lender may reasonably request. Insurance policies shall name the Lender
      as
      additional insured, as its interests may appear, and all policies shall provide
      for at least thirty (30) days prior notice of cancellation to the
      Lender.

     

    9.5 Maintenance
      of Business Assets.
      At all
      times maintain, preserve, protect, and keep the Credit Parties’ assets in good
      repair, working order, and condition and, from time to time, make all needful
      and proper repairs, renewals, replacements, betterments and improvements
      thereto, so that the business of the Credit Parties may be properly and
      advantageously conducted at all times and the value of the Lender’s collateral
      shall be preserved.

     

    9.6 Material
      Changes, Judgments.
      Notify
      the Lender promptly of any material adverse change in the financial condition
      of
      any of the Credit Parties, and of any event, circumstance, or condition that
      has
      had or could reasonably be expected to have a Material Adverse Effect, including
      the filing of any suits, judgments or liens which, if adversely determined,
      could reasonably be expected to have a Material Adverse Effect.

     

    
      
        
        

      

      
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    9.7 ERISA
      Compliance.
      Comply
      in all material respects with the provisions of ERISA and regulations and
      interpretations related thereto with respect to all of the Credit Parties’
Plans.

     

    9.8 Franchises;
      Permits; Laws.
      Preserve and keep in full force and effect the existence of the Credit Parties
      and all franchises, permits, licenses and other authority as are necessary
      to
      enable them to conduct their businesses as being conducted on the date of this
      Agreement, and comply in all material respects with all laws, regulations and
      requirements now in effect or hereafter promulgated by any properly constituted
      governmental authority having jurisdiction over them.

     

    9.9 Performance
      of Obligations.
      The
      Borrower will, and will cause each of the Credit Parties to, perform all of
      its
      obligations under the terms of each mortgage, indenture, security agreement,
      loan agreement or credit agreement and each other agreement, contract or
      instrument by which it is bound (taking into account any grace, notice, or
      cure
      periods applicable thereto), except in each case such non-performances as could
      not, either individually or in the aggregate, reasonably be expected to have
      a
      Material Adverse Effect.

     

    9.10 Deposits;
      Bank Services.
      Maintain at the Lender all of the Credit Parties’ primary depository accounts,
      with exceptions permitted for accounts maintained for convenience in other
      geographical locations for the temporary deposit of receipts.

     

    9.11 Amendments.
      Give
      the Lender prompt written notice of an amendment or modification to any of
      the
      Credit Parties’ Certificates of Incorporation or By-Laws other governing
      documents or agreements.

     

    9.12 Additional
      Guarantors.
      Notify
      the Lender of the acquisition or creation of any new Subsidiary and cause each
      domestic Subsidiary created or acquired after the Closing Date to execute and
      deliver to the Lender a continuing guaranty, general security agreement, and
      other agreements in form and substance satisfactory to Lender subjecting all
      of
      the assets of the Subsidiary to the Lien held by the Lender, together with
      approvals and legal opinions in form and substance satisfactory to the Lender
      opining to the authorization, validity and enforceability of such Guaranty,
      and
      to such other matters at the Lender may reasonably request.

     

    9.13 Further
      Assurances.
      Cooperate with the Lender and execute such further instruments and documents
      as
      the Lender shall reasonably request to carry out the transactions contemplated
      by this Agreement and the other Loan Documents.

     

    ARTICLE
      X
      - NEGATIVE COVENANTS OF BORROWER

     

    So
      long
      as any Obligations shall be outstanding, or this Agreement shall remain in
      effect, unless the Lender otherwise consents in writing, none of the Credit
      Parties shall, directly or indirectly, jointly or severally:

     

    10.1 Debt,
      Mortgages and Liens.
      Create,
      incur, assume or allow to exist, voluntarily or involuntarily, any Debt or
      Liens, excluding only (a) Debt to and interests held by the Lender under this
      Agreement, (b) Debt described in Schedule
      10.1
      attached
      hereto and made a part hereof, which Debt may not be renewed, extended, amended
      or modified, (c) Permitted Liens, (d) Debt and interests to which the Lender
      consents in writing, (e) Debt of Borrower to any Guarantor or of any Guarantor
      to Borrower, and (f) amounts payable under or related to the Val-U-Tech
      Transaction.

     

    
      
        
        

      

      
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    10.2 Loans
      and Investments.
      Make
      any Investment in any Person, or purchase or own a futures contract or otherwise
      become liable for the purchase or sale of currency or other commodities at
      a
      future date in the nature of a futures contract, except for (i) Investments
      in
      any Person that is already a Credit Party, (ii) Money Market Investments, and
      (iii) Investments received in connection with the bankruptcy or reorganization
      of suppliers and customers and in good faith settlement of delinquent
      obligations of, and other disputes with, customers and suppliers arising in
      the
      ordinary course of business.

     

    10.3 Mergers,
      Dissolutions; Sales and Acquisitions; Change in Ownership
      Interests.
      Except
      for the Val-U-Tech Transaction, enter into any partnership, joint venture,
      merger or consolidation, or wind up, liquidate, or dissolve its affairs, or
      enter into a sale-leaseback except with Lender or its affiliates, or acquire
      all
      or substantially all the Capital Securities or assets of any Person, or sell,
      lease, transfer, or otherwise dispose of any its assets, except, for (a) (i)
      dispositions of inventory in the ordinary course of business or (ii) the
      disposition of any asset not material to the respective Credit Party or its
      business and not exceeding $100,000 in value, and (b) the merger of Borrower
      into any Guarantor or of any Guarantor into Borrower after giving written notice
      to the Lender of the intended merger, so long as any security interests granted
      to the Lender in the assets so transferred shall remain in full force and effect
      and perfected (to at least the same extent as in effect immediately prior to
      such transfer) and all actions required to maintain said perfected status have
      been taken.

     

    10.4 Amendments.
      Allow
      the amendment or modification of its Certificate of Incorporation, By-Laws
      or
      other governing documents and agreements in any material respect without the
      prior written consent of the Lender.

     

    10.5 Distributions.
      Make
      any Distributions without the prior consent of Lender.

     

    10.6 Material
      Changes.
      Permit
      any material change to be made in the character of the business of any of the
      Credit Parties, or in the nature of their operations as carried on at the date
      hereof.

     

    10.7 Compensation.
      Compensate any Person, including, without limitation, salaries, bonuses,
      consulting fees, or otherwise, in excess of amounts reasonably related to
      services rendered to the Credit Parties.

     

    10.8 Judgments.
      Allow
      to exist any judgment against any of the Credit Parties in excess of $250,000
      which are not fully covered by insurance or for which an appeal or other
      proceeding for the review thereof shall not have been taken and for which a
      stay
      of execution pending such appeal shall not have been obtained.

     

    10.9 Margin
      Securities.
      Not,
      directly or indirectly, use any part of the proceeds of the Obligations for
      the
      purpose of purchasing or carrying any margin stock within the meaning of
      Regulation U of the Board of Governors of the Federal Reserve System or to
      extend credit to any person for the purpose of purchasing or carrying any such
      margin stock, or for any purpose which violates, or is inconsistent with,
      Regulation X of such Board of Governors.

     

    
      
        
        

      

      
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    10.10 Subsidiaries.
      

     

    (a) Form,
      or
      permit to be formed, any Subsidiary unless such Subsidiary guarantees all
      Obligations to the Lender, which guarantee must be secured by all of its assets
      pursuant to a guaranty and a security agreement in form and substance acceptable
      to the Lender in its sole discretion.

     

    (b) Directly
      or indirectly, and will not permit any of its Subsidiaries to directly or
      indirectly, create or otherwise cause or suffer to exist or become effective
      any
      encumbrance or restriction on the ability of any such Subsidiary to (i) make
      Distributions on its Capital Securities owned by the Borrower or any of its
      Subsidiaries, or pay any Indebtedness owed to the Borrower or any of its
      Subsidiaries, (ii) make loans or advances to the Borrower or any of its
      Subsidiaries or (iii) transfer any of its properties or assets to the Borrower
      or any of its Subsidiaries, except for such encumbrances or restrictions
      existing under or by reason of (A) applicable law, (B) this Agreement and the
      other Loan Documents, (C) customary provisions restricting subletting or
      assignment of any lease governing any leasehold interest of the Borrower or
      any
      of its Subsidiaries, (D) customary provisions restricting assignment of any
      licensing agreement (in which the Borrower or any of its Subsidiaries is the
      licensee) or other contract entered into by the Borrower or any of its
      Subsidiaries in the ordinary course of business, and (E) restrictions on the
      transfer of any asset pending the close of the sale of such asset.

     

    10.11 Transactions
      with Credit Parties.
      Not,
      and will not permit any of the Credit Parties to, enter into any transaction
      or
      series of related transactions with any Affiliate of any of the Credit Parties,
      other than in the ordinary course of business and on terms and conditions
      substantially as favorable to the Credit Party as would reasonably be obtained
      by the Credit Party at that time in a comparable arm’s-length transaction with a
      Person other than an Affiliate.

     

    ARTICLE
      XI - FINANCIAL COVENANTS

     

    So
      long
      as any Obligations shall be outstanding or this Agreement remains in effect,
      unless the Lender otherwise consents in writing, the Borrower
      shall:

     

    11.1 Debt
      to EBITDARS.
      Maintain at all times a Debt to EBITDARS Ratio, on a consolidated basis, no
      greater than 3.75 to 1.00, reported at the end of each Fiscal Quarter commencing
      with the Fiscal Quarter ending June 30, 2008.

     

    11.2 Minimum
      EBITDARS.
      Maintain minimum quarterly EBITDARS, on a consolidated basis, equal to or
      greater than $350,000, measured at the end of each Fiscal Quarter commencing
      with the Fiscal Quarter ending on June 30, 2009. 

     

    11.3 Fixed
      Charge Coverage Ratio.
      Maintain at all times a Fixed Charge Coverage Ratio, on a consolidated basis,
      equal to or greater than 1.10 to 1.00, reported at the end of each Fiscal
      Quarter commencing with the Fiscal Quarter ending June 30, 2008.

     

    
      
        
        

      

      
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    11.4 Quarterly
      Covenant Compliance Sheet.
      Provide
      the Quarterly Covenant Compliance Sheet to the Lender within thirty (30) days
      after the close of each of its Fiscal Quarters.

     

    ARTICLE
      XII - ENVIRONMENTAL MATTERS; INDEMNIFICATION

     

    12.1 Environmental
      Representations.
      Borrower represents and warrants that:

     

    (a) Neither
      the Improvements nor any property adjacent to the Improvements is being or
      has
      been used for the storage, treatment, generation, transportation, processing,
      handling, production or disposal of any Hazardous Substance or as a landfill
      or
      other waste disposal site or for the storage of petroleum or petroleum based
      products except in compliance with all Environmental Laws.

     

    (b) Underground
      storage tanks are not and have not been located on the Improvements except
      in
      compliance with all Environmental Laws

     

    (c) The
      soil,
      subsoil, bedrock, surface water and groundwater of the Improvements are free
      of
      any Hazardous Substances, except as permitted by Environmental
      Laws.

     

    (d) There
      has
      been no Release, nor is there the threat of a Release of any Hazardous Substance
      on, at or from the Improvements or any property adjacent to or within the
      immediate vicinity of the Improvements which through soil, subsoil, bedrock,
      surface water or groundwater migration could come to be located on the
      Improvements, and the Credit Parties have not received any form of notice or
      inquiry from any federal, state or local governmental agency or authority,
      any
      operator, tenant, subtenant, licensee or occupant of the Improvements or any
      property adjacent to or within the immediate vicinity of the Improvements or
      any
      other person with regard to a Release or the threat of a Release of any
      Hazardous Substance on, at or from the Improvements or any property adjacent
      to
      the Improvements.

     

    (e) All
      Environmental Permits relating to the Credit Parties and the Improvements have
      been obtained and are in full force and effect.

     

    (f) No
      event
      has occurred with respect to the Improvements which, with the passage of time
      or
      the giving of notice, or both, would constitute a violation of any applicable
      Environmental Law or non-compliance with any Environmental Permit.

     

    (g) There
      are
      no agreements, consent orders, decrees, judgments, license or permit conditions
      or other orders or directives of any federal, state or local court, governmental
      agency or authority relating to the past, present or future ownership, use,
      operation, sale, transfer or conveyance of the Improvements which require any
      change in the present condition of the Improvements or any work, repairs,
      construction, containment, clean up, investigations, studies, removal or other
      remedial action or capital expenditures with respect to the
      Improvements.

     

    (h) There
      are
      no actions, suits, claims or proceedings, pending or threatened, which could
      cause the incurrence of expenses or costs of any name or description or which
      seek money damages, injunctive relief, remedial action or any other remedy
      that
      arise out of, relate to or result from (i) a violation or alleged violation
      of
      any applicable Environmental Law or noncompliance or alleged non-compliance
      with
      any Environmental Permit, (ii) the presence of any Hazardous Substance or a
      Release or the threat of a Release of any Hazardous Substance on, at or from
      the
      Improvements or any property adjacent to or within the immediate vicinity of
      the
      Improvements or (iii) human exposure to any Hazardous Substance, noises,
      vibrations or nuisances of whatever kind to the extent the same arise from
      the
      condition of the Improvements or the ownership, use, operation, sale, transfer
      or conveyance thereof.

     

    
      
        
        

      

      
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    12.2 Environmental
      Covenants.
      Borrower covenants and agrees with the Lender that, until the Obligations have
      been fully satisfied and paid and the Commitment has been terminated, the
      Borrower shall:

     

    (a) Comply
      with, and shall cause all operators, tenants, subtenants, licensees and
      occupants of the Improvements to comply with all applicable Environmental Laws
      and shall obtain and comply with, and shall cause all operators, tenants,
      subtenants, licensees and occupants of the Improvements to obtain and comply
      with, all Environmental Permits.

     

    (b) Not
      cause
      or permit any change to be made in the present or intended use of the
      Improvements which would (i) violate any applicable Environmental Law, (ii)
      constitute non-compliance with any Environmental Permit or (iii) materially
      increase the risk of a Release of any Hazardous Substance.

     

    (c) Promptly
      provide the Lender with a copy of all notifications which it gives or receives
      with respect to any past or present Release or the threat of a Release of any
      Hazardous Substance on, at or from the improvements or any property adjacent
      to
      the Improvements.

     

    (d) Undertake
      and complete all investigations, studies, sampling and testing and all removal
      and other remedial actions required by law to contain, remove and clean up
      all
      Hazardous Substances that are determined to be present at the Improvements
      in
      accordance with all applicable Environmental Laws and all Environmental
      Permits.

     

    (e) At
      all
      times upon prior notice, allow the Lender and its officers, employees, agents,
      representatives, contractors and subcontractors access to the Improvements
      for
      the purposes of ascertaining site conditions, including, but not limited to,
      subsurface conditions.

     

    (f) Deliver
      promptly to the Lender: (i) copies of any documents received from the United
      States Environmental Protection Agency, or any state, county or municipal
      environmental or health agency concerning a Credit Parties’ operations or the
      Improvements; and (ii) copies of any documents submitted by any of the Credit
      Parties to the United States Environmental Protection Agency or any state,
      county or municipal environmental or health agency concerning its operations
      or
      the Improvements.

     

    (g) If
      at any
      time the Lender obtains any reasonable evidence or information which suggests
      that a material potential environmental problem may exist at the improvements,
      the Lender may require that a kill or supplemental environmental inspection
      and
      audit report with respect to the Improvements of a scope and level of detail
      satisfactory to the Lender be prepared by an environmental engineer or other
      qualified person acceptable to the Lender at the Borrower’s expense. Such audit
      may include a physical inspection of the Improvements, a visual inspection
      of
      any property adjacent to or within the immediate vicinity of the Improvements,
      personnel interviews and a review of all Environmental Permits. If the Lender
      requires, such inspection shall also include a records search and/or subsurface
      testing for the presence of Hazardous Substances in the soil, subsoil, bedrock,
      surface water and/or groundwater. If such audit report indicates the presence
      of
      any Hazardous Substance or a Release or the threat of a Release of any Hazardous
      Substance on, at or from the Improvements, the Credit Parties shall promptly
      undertake and diligently pursue to completion all necessary, appropriate and
      legally authorized investigative, containment, removal, clean up and other
      remedial actions, using methods recommended by the engineer or other person
      who
      prepared said audit report and acceptable to the appropriate federal, state
      and
      local agencies or authorities.

     

    
      
        
        

      

      
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    12.3 Indemnity.
      Borrower agrees to indemnify, defend and hold harmless the Lender from and
      against any and all liabilities, claims, damages, penalties, expenditures,
      losses or charges, including, but not limited to, all costs of investigation,
      monitoring, legal representation, remedial response, removal, restoration or
      permit acquisition of any kind whatsoever, which may now or in the future be
      undertaken, suffered, paid, awarded, assessed, or otherwise incurred by the
      Lender (or any other Person affiliated with the Lender or representing or acting
      for the Lender or at the Lender’s behest, or with a claim on the Lender or to
      whom the Lender has liability or responsibility of any sort related to this
      Section 12.3)
      relating to, resulting from or arising out of (a) the use of the Improvements
      for the storage, treatment, generation, transportation, processing, handling,
      production or disposal of any Hazardous Substance or as a landfill or other
      waste disposal site, (b) the presence of any Hazardous Substance or a Release
      or
      the threat of a Release of any Hazardous Substance on, at or from the
      Improvements, (c) the failure to promptly undertake and diligently pursue to
      completion all necessary, appropriate and legally authorized investigative,
      containment, removal, clean up and other remedial actions with respect to a
      Release or the threat of a Release of any Hazardous Substance on, at or from
      the
      Improvements, (d) human exposure to any Hazardous Substance, noises, vibrations
      or nuisances of whatever kind to the extent the same arise from the condition
      of
      the Improvements or the ownership, use, operation, sale, transfer or conveyance
      thereof, (e) a violation of any applicable Environmental Law, (f) non-compliance
      with any Environmental Permit or (g) a material misrepresentation or inaccuracy
      in any representation or warranty or a material breach of or failure to perform
      any covenant made by Borrower in this Agreement. Such costs or other liabilities
      incurred by the Lender, or other Person described in this Section 12.3
      shall be
      deemed to include, without limitation, any sums which the Lender deems it
      necessary or desirable to expend to protect the Lender’s security interests and
      liens.

     

    12.4 No
      Limitation.
      The
      liability of the Borrower under this Article XII shall in no way be limited,
      abridged, impaired or otherwise affected by (a) any amendment or modification
      of
      this Agreement or any other document relating to the Obligations by or for
      the
      benefit of the Credit Parties or any subsequent owner of the Improvements except
      for an amendment or modification which expressly refers to this Article XII,
      (b)
      any extensions of time for payment or performance required by this Agreement
      or
      any other document relating to the Obligations, (c) the release of any of the
      Credit Parties or any other person from the performance or observance of any
      of
      the agreements, covenants, terms or conditions contained in this Agreement
      or
      any other document relating to the Obligations by operation of law, or the
      Lender’s voluntary act or otherwise, (d) the invalidity or unenforceability of
      any of the terms or provisions of this Agreement or any other document relating
      to the Obligations, (e) any exculpatory provision contained in this Agreement
      or
      any other document relating to the Obligations limiting the Lender’s recourse,
      to property encumbered by any mortgage or to any other security or limiting
      the
      Lender’s rights to a deficiency judgment against the Borrower, (f) any
      applicable statute of limitations, (g) any investigation or inquiry conducted
      by
      or on behalf of the Lender or any information which the Lender may have or
      obtain with respect to the environmental or ecological condition of the
      Improvements, (h) the sale, assignment or foreclosure of any interest in
      collateral for the Obligations, (i) the sale, transfer or conveyance of all
      or
      part of the Improvements, (j) the dissolution and liquidation of Borrower,
      (k)
      the death or legal incapacity of any individual, (l) the release or discharge,
      in whole or in part, of Borrower in any bankruptcy, insolvency, reorganization,
      arrangement, readjustment, composition, liquidation or similar proceeding,
      or
      (m) any other circumstances which might otherwise constitute a legal or
      equitable release or discharge of Borrower, in whole or in part.

     

    
      
        
        

      

      
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    12.5 Survival.
      Notwithstanding anything to the contrary contained herein, the liability and
      obligations of the Borrower under Section 12.3
      shall
      survive the discharge, satisfaction or assignment of this Agreement and the
      payment in full of all of the Obligations, unless such liability and obligations
      are terminated with express reference to this Section 12.5.

     

    12.6 Investigations.
      If
      Borrower defaults on any of its Obligations pursuant to this Agreement or any
      other Loan Document, the Lender or its designee shall have the right, upon
      reasonable notice to the Borrower, to enter upon the Improvements and conduct
      such tests, investigation and sampling, including, but not limited to,
      installation of monitoring wells, as shall be reasonably necessary for the
      Lender to determine whether any disposal of Hazardous Substances has occurred
      on, at or near the Improvements. The costs of all such tests, investigations
      and
      samplings shall be considered as additional Debt secured by all collateral
      for
      the Obligations and shall become immediately due and payable without notice
      and
      with interest thereon at the highest rate then borne by any of the
      Obligations.

     

    12.7 No
      Warranty Regarding Information.
      Borrower agrees that the Lender shall not be liable in any way for the
      completeness or accuracy of any Environmental Report or the information
      contained therein. The Borrower further agrees that the Lender has no duty
      to
      warn any of the Credit Parties or any other Person about any actual or potential
      environmental contamination or other problem that may have become apparent
      or
      will become apparent to the Lender.

     

    ARTICLE
      XIII - DEFAULTS

     

    13.1 Defaults.
      The
      following events (hereinafter called “Events
      of Default”)
      shall
      constitute defaults under this Agreement:

     

    (a) Nonpayment.
      Failure
      of Borrower to make any payment of any type under the terms of this Agreement,
      any of the Notes, or of any of the Loan Documents, within ten (10) days after
      the same becomes due and payable, except that there shall be no ten (10) day
      grace period for the Borrower’s obligation to reduce the principal balance of
      the Revolving Credit Facility if the outstanding principal balance of the
      Revolving Credit Facility exceeds the Revolving Credit Commitment or the
      Borrowing Base under Sections 2.1
      and
2.2
      of this
      Agreement.

     

    
      
        
        

      

      
        44

        
          

        

      

      
        
        

      

    

     

    (b) Performance.
      Failure
      of any of the Credit Parties to observe or perform, as applicable, 

     

    (i) any
      of
      the financial covenants in Article XI of this Agreement, 

     

    (ii) Sections
      9.1(a),
      9.1(b),
      9.1(c),
      9.1(d),
      and
9.4,
      

     

    (iii) Sections
      9.1(f),
      9.1(j) 9.6,
      and
9.12
      within
      ten days after the date on which performance was required, or

     

    (iv) any
      condition, covenant or term of this Agreement or any Loan Document not covered
      by Section 13.1(a),
      Section
13.1(b)(i),
      Section
13.1(b)(ii),
      or
      Section (iii)
      which is
      not cured within thirty (30) days after notice of such failure is sent by the
      Lender, and provided that during such thirty (30) day period the Credit Parties
      are diligently and in good faith curing such failure.

     

    (c) Other
      Obligations to Lender.
      Failure
      of any Credit Party to observe or perform any condition or covenant of any
      other
      agreement or instrument with the Lender, or any of its affiliates not covered
      by
      Section 13.1(a)
      or
      Section 13.1(b)
      after
      any applicable cure or grace period related thereto.

     

    (d) Obligations
      to Third Parties.
      Default
      by any Credit Party under:

     

    (i) any
      agreement or instrument involving Debt in excess of $100,000 (except as covered
      by Section 13.1(a),
      Section
13.1(b),
      or
      Section 13.1(c))
      unless
      and so long as such default is being contested reasonably diligently and in
      good
      faith and no judgment has been taken against the respective Credit Party or
      restraint, levy, or similar action with respect to any assets of the Credit
      Party has occurred, or 

     

    (ii) any
      other
      agreement with any third Person, which is not terminable on thirty (30) days
      or
      less notice, or provides for payment of consideration of more than $100,000
      by
      any party thereafter unless and so long as such default is being contested
      reasonably diligently and in good faith.

     

    (e) Representations.
      Failure
      of any representation or warranty made by any Credit Party in connection with
      the execution and performance of any Loan Document or any certificate of
      officers pursuant thereto, to be truthful, accurate or correct in all material
      respects; provided such failure in the case of representations and warranties
      specific as to a date certain must be as of such date certain.

     

    (f) Financial
      Difficulties.
      Financial difficulties of any Credit Party as evidenced by:

     

    (i) any
      admission in writing of inability to pay debts as they become due;
      or

     

    
      
        
        

      

      
        45

        
          

        

      

      
        
        

      

    

     

    (ii) immediately
      upon the filing of a voluntary, or sixty (60) days after a filing of an
      involuntary, petition in bankruptcy, or under any chapters of the Bankruptcy
      Code, or under any federal or state statute providing for the relief of debtors
      unless, in the case of the filing of an involuntary petition, it is dismissed
      within such sixty (60) day period; or

     

    (iii) making
      an
      assignment for the benefit of creditors; or

     

    (iv) consenting
      to the appointment of a trustee or receiver for all or a major part of any
      of
      its property; or

     

    (v) the
      entry
      of a court order appointing a receiver or a trustee for all or a major part
      of
      its property which is not bonded, discharged or stayed within sixty (60)
      days;

     

    (vi) the
      occurrence of any event, action, or transaction that could give rise to a lien
      or encumbrance on the assets of any Credit Party as a result of application
      of
      relevant provisions of ERISA;
      or

     

    (vii) the
      occurrence of any Forfeiture Action.

     

    (g) The
      occurrence of a Change in Control.

     

    (h) Security
      Documents.
      Any
      Credit Party, as signatory under any of the Security Documents, shall cause
      at
      any time or if for any reason the Security Documents to: (i) cease to create
      a
      valid and perfected Lien in and to the property purported to be subject to
      the
      same for any reason other than the failure of the secured parties thereunder
      to
      continue any UCC financing statement, or (ii) cease to be in full force and
      effect or shall be declared null and void, or (iii) the validity or
      enforceability of any Security Document shall be contested by any party thereto
      or any party thereto shall deny it has any further liability or obligations
      to
      the secured parties thereunder.

     

    (i) ERISA.
      Any
      event occurs or condition exists which, with notice or lapse of time or both,
      would make any Plan of any Credit Party subject to termination under subsections
      (1), (2) and (3) of Section 4042(a) of ERISA, or any Credit Party or any of
      their respective plan administrators shall have received notice from the PBGC
      indicating that it has made a determination that any Plan of any Credit Party
      is
      subject to termination under Section 4042(a)(4) of ERISA, or any Credit Party
      is
      subject to employer’s liability under Section 4062, 4063, or 4064 of ERISA, in
      each case under ERISA as now or hereafter amended.

     

    (j) Government
      Contracts.
      Any
      notice of debarment, notice of suspension or termination for default shall
      have
      been issued under any government contract, or (ii) any of the Credit Parties
      is
      debarred or suspended from contracting with any part of the United States
      Government or any state, local or foreign government, or (iii) a United States
      Government or any state, local or foreign government investigation shall have
      resulted in criminal or civil liability, suspension, debarment or any other
      adverse administrative action arising by reason of alleged fraud, willful
      misconduct, neglect, default or other wrongdoing, or (iv) the actual termination
      of any government contract due to alleged fraud, willful misconduct, neglect,
      default or any other wrongdoing and the effect of any of the foregoing events,
      either individually or in the aggregate, has had, or could reasonably be
      expected to have, a Material Adverse Effect.

     

    
      
        
        

      

      
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    13.2 Remedies.
      

     

    (a) If
      any
      one or more Events of Default listed in Section 13.1(f)(i)-(vi)
      occur,
      (a) the Commitment and any further commitments or obligations of the Lender
      shall be deemed to be automatically and without need for further action
      terminated, and (b) all Obligations of the Borrower to the Lender, automatically
      and without need for further action, shall become forthwith due and payable
      without presentment, demand, protest, or other notice of any kind, all of which
      are hereby expressly waived. If any one or more Events of Default other than
      those listed in Section 13.1(f)(i)-(vi)
      occur,
      the Lender may, at its option, take either or both of the following actions
      at
      the same or different times: (i) terminate the Commitment and any further
      commitments or obligations of the Lender, and (ii) declare all Obligations
      of
      the Borrower to the Lender, automatically and without need for further action,
      to be forthwith due and payable without presentment, demand, protest, or other
      notice of any kind, all of which are hereby expressly waived.

     

    (b) In
      case
      any such Events of Default shall occur, the Lender shall be entitled to recover
      judgment against the Borrower for all Obligations of the Borrower to the Lender
      either before, or after, or during the pendency of any proceedings for the
      enforcement, of any Security Document and, in the event of realization of any
      funds from any security or guarantee and application thereof to the payment
      of
      the Obligations due, the Lender shall be entitled to enforce payment of and
      recover judgment for all amounts remaining due and unpaid on such
      Obligations.

     

    (c) The
      Lender shall be entitled to exercise any other legal or equitable right which
      it
      may have, and may proceed to protect and enforce its rights by any other
      appropriate proceedings, including action for the specific performance of any
      covenant or agreement contained in this Agreement and the Loan
      Documents.

     

    ARTICLE
      XIV - MISCELLANEOUS

     

    14.1 Waiver.
      No
      delay or failure of the Lender to exercise any right, remedy, power or privilege
      hereunder shall impair the same or be construed to be a waiver of the same
      or of
      any Event of Default or an acquiescence therein. No single or partial exercise
      of any right, remedy, power or privilege shall preclude other or further
      exercise thereof by the Lender. All rights, remedies, powers, and privileges
      herein conferred upon the Lender shall be deemed cumulative and not exclusive
      of
      any others available.

     

    14.2 Survival
      of Representations.
      All
      representations and warranties contained herein shall survive the execution
      and
      delivery of this Agreement and the execution and delivery of other agreements
      hereunder.

     

    14.3 Additional
      Security; Setoff.
      The
      Lender shall have a security interest in and right of setoff with respect to
      all
      deposits or other sums credited by or due from the Lender to Borrower and a
      security interest in all securities or other property of Borrower in any of
      the
      Lender’s possession for safekeeping or otherwise. The Lender’s security interest
      shall secure payment of the Obligations. In the event of any Event of Default
      under this Agreement, regardless of the adequacy of collateral, without any
      demand or notice, except as required by applicable law, any Lender may apply
      or
      setoff such deposits or other sums and may sell or dispose of any or all of
      such
      securities or other property and may exercise any and all rights it may have
      under the New York Uniform Commercial Code, as in effect from time to time.
      The
      rights of the Lender under this Agreement are in addition to, and not exclusive
      of, any other rights it may have with respect to such deposits, sums,
      securities, or other property under other agreements or applicable principles
      of
      law. The Lender shall have no duty to take steps to preserve rights against
      prior parties as to such securities or other property.

     

    
      
        
        

      

      
        47

        
          

        

      

      
        
        

      

    

     

    14.4 Notices.
      Any
      notice or demand upon any party hereto shall be deemed to have been sufficiently
      given or served for all purposes hereof when delivered in person, the Business
      Day after delivery to a nationally recognized overnight courier marked for
      next
      Business Day delivery, or three (3) Business Days after it is mailed certified
      mail postage prepaid, return receipt requested, addressed as
      follows:

     

    If
      to
      Lender:

     

    Manufacturers
      and Traders Trust Company

    255
      East
      Avenue

    Rochester,
      New York 14604

    Attention:
      J. Theodore Smith/Brett Rawlings

    Facsimile:
      (585) 325-5105

     

    with
      a
      copy to:

     

    Harris
      Beach PLLC

    99
      Garnsey Road

    Pittsford,
      New York 14534

    Attention:
      Beth Ela Wilkens, Esq.

    Facsimile:
      (585) 419-8818

    

    If
      to
      Borrower:

     

    IEC
      Electronics Corp.

    105
      Norton Street

    Newark,
      New York 14513

    Attention: W.
      Barry
      Gilbert, CEO

                      Michael
      Schlehr, CFO

    

    with
      a
      copy to:

     

    Boylan
      Brown Code Vigdor & Wilson

    2400
      Chase Square

    Rochester,
      New York 14604

    Attention:
      Robert F. Mechur, Esq.

    Facsimile:
      (585) 232-3528

    
      
        
        

      

      
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    Any
      party
      may change, by notice in writing to the other parties, the address to which
      notices to it shall be sent.

     

    14.5 Entire
      Agreement.
      This
      Agreement and the Loan Documents embody the entire agreement and understanding
      among the parties and supersede all prior agreements and understandings relating
      to the subject mailer hereof. This Agreement shall not be changed or amended
      without the written agreement of all parties hereto. This Agreement embodies
      all
      commitments to lend between the Lender and the Borrower and supersedes any
      prior
      commitments. 

     

    14.6 Parties
      in Interest.
      

     

    (a) All
      the
      terms and provisions of this Agreement shall inure to the benefit of and be
      binding upon and be enforceable by the parties and their respective successors
      and assigns and shall inure to the benefit of and be enforceable by any holder
      of any of the Notes. Upon any transfer of any Obligation or any interest therein
      any Lender may deliver or otherwise transfer or assign to the holder any
      collateral or guarantees for the Obligation, which holder shall thereupon have
      all the rights of the Lender.

     

    (b) The
      rights, remedies, and benefits of and in favor of the Lender under this
      Agreement shall inure to the benefit of, and be enforceable by, any or all
      of
      the Lender and each of its affiliates.

     

    14.7 Indemnity.
      Nothing
      in this Section 14.7
      shall be
      deemed or shall be construed to relieve or release
      the
      Lender from any liability for breach of contract arising from any failure by
      the
      Lender to perform its contractual obligations hereunder. The Borrower shall
      indemnify and hold harmless the Lender and its affiliates, directors, officers,
      employees, agents, and representatives from and against any and all claims,
      damages, liabilities, and expenses that may be incurred by or asserted against
      such indemnified party in connection with the Loan Documents and the
      transactions contemplated thereby including in connection with the investigation
      of, preparation for, or defense of any pending or threatened claim, action,
      or
      proceeding; provided, however, that the Borrower shall not be liable to any
      indemnified party for such claims, damages, liabilities, and expenses resulting
      from such indemnified party’s own gross negligence or willful
      misconduct.

     

    14.8 Usury.
      The
      Loan Documents are hereby expressly limited so that in no contingency or event
      whatsoever, whether by reason of acceleration or maturity of the indebtedness
      evidenced hereby or otherwise, shall the amount paid or agreed to be paid to
      Lender for the use or the forbearance of the indebtedness evidenced hereby
      exceed the maximum permissible under applicable law. As used in this Section
      14.8,
      the
      term “applicable law” shall mean the law in effect as of the date hereof,
      provided, however that in the event there is a change in the law which results
      in a higher permissible rate of interest, then the Loan Documents shall be
      governed by such new law as of its effective date. If, under or from any
      circumstances whatsoever, fulfillment of any provision hereof or of any of
      the
      Loan Documents at the time performance of such provision shall be due, shall
      involve transcending the limit of such validity prescribed by applicable law,
      then the obligation to be fulfilled shall automatically be reduced to the limits
      of such validity, and if under or from any circumstances whatsoever the Lender
      should ever receive as interest an amount which would exceed the highest lawful
      rate, such amount which would be excessive interest shall be applied to the
      reduction of the principal balance evidenced hereby and not to the payment
      of
      interest. This provision shall control every other provision of all Loan
      Documents.

     

    
      
        
        

      

      
        49

        
          

        

      

      
        
        

      

    

     

    14.9 Severability.
      In the
      event that anyone or more of the provisions contained in this Agreement or
      any
      other Loan Document shall, for any reason, be held invalid, illegal or
      unenforceable in any respect, such invalidity, illegality or unenforceability
      shall not affect any other provision of this Agreement or such other Loan
      Document. 

     

    14.10 Governing
      Law.
      This
      Agreement and the Loan Documents, together with all of the rights and
      obligations of the parties hereto, shall be construed, governed and enforced
      in
      accordance with the laws of the State of New York, without giving effect to
      the
      principles of conflict of laws thereof.

     

    14.11 Electronic
      Communications.
      Borrowing base and compliance certificates submitted to the Lender
      electronically by a representative of the Borrower shall be deemed to have
      been
      submitted and signed by the representative sending the electronic
      communication.

     

    14.12 Patriot
      Act.
      The
      Lender hereby notifies the Credit Parties that pursuant to the requirements
      of
      the USA Patriot Act (Title III of Pub. L. 107-56 signed into law October 26,
      2001 and for purposes of this Section 14.12
      called
      the “Act”),
      it is
      required to obtain, verify, and record information that identifies the Credit
      Parties, which information includes the name and address of the Credit Parties
      and other information that will allow the Lender to identify the Credit Parties
      in accordance with the Act.

     

    14.13 Counterparts.
      This
      Agreement may be executed in any number of counterparts, all of which taken
      together shall constitute one and the same agreement, and any party hereto
      may
      execute this Agreement by signing any such counterpart.

     

    14.14 Survival.
      All
      indemnities set forth herein shall survive the execution, delivery, and
      termination of this Agreement and the Loan Documents and the making and
      repayment of the Obligations.

     

    14.15 Jurisdiction.
      Borrower hereby irrevocably and unconditionally consents to jurisdiction and
      service of process, which may be effected by certified mail in accordance with
      the certified mail provisions contained in Section 14.4,
      in the
      Supreme Court of the State of New York sifting in Monroe County, or of the
      United States District Court for the Western District of New York. Borrower
      hereby irrevocably and unconditionally waives any objection it may have to
      the
      laying of venue of any such action, suit or proceeding in any such court
      referred to in this Section 14.15.
      Borrower hereby irrevocably waives the defense of an inconvenient forum to
      the
      maintenance of any such action, suit or proceeding in any such
      court.

     

    14.16 Waiver
      of Trial by Jury.
      BORROWER WAIVES TRIAL BY JURY OF ANY CLAIMS OR PROCEEDINGS WITH RESPECT TO
      THIS
      AGREEMENT, THE LOAN DOCUMENTS, THE OBLIGATIONS AND ALL MATTERS RELATED HERETO
      TO
      THE FULLEST EXTENT ALLOWED BY LAW.

     

    
      
        
        

      

      
        50

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties have caused this Agreement to be executed by their
      duly authorized representatives by their signatures below.

     

    [Signature
      Pages Follow]

     

    
      
        
        

      

      
        51

        
          

        

      

      
        
        

      

    

     

    MANUFACTURERS
      AND TRADERS TRUST COMPANY,

     

    
      	
              By:

            	  

	 	
              Brett
                W. Rawlings

            
	 	
              Assistant
                Vice President

            

    

     

    
      
        
        

      

      
        52

        
          

        

      

      
        
        

      

    

     

    
      	
              IEC
                ELECTRONICS CORP.

            
	 	 
	
              By:

            	
               
                

            
	 	
              W.
                Barry Gilbert

            
	 	
              Chief
                Executive Officer

            

    

     

    
      
        
        

      

      
        53

        
          

        

      

      
        
        

      

    

    
       

      EXHIBIT
        A

      FORM
        OF MONTHLY COVENANT COMPLIANCE CERTIFICATE

       

    

    IEC
      ELECTRONICS CORP.

    FINANCIAL
      COVENANT CALCULATION

     

    As
      of
      ______________:

     

    
      
        	
                Credit
                  Agreement 

                Section

              	
                 

              	
                Covenant

              	
                 

              	
                Calculation
                  as of 

                Above
                  Date

              	
                 

              	
                Compliance
                  

                (Yes/No)

              	
                 

              	
                Requirement

              
	
                 

              	 	 	 	 	 	 	 	 
	
                Section
                  11.1

              	 	
                Debt
                  to EBITDARS

              	 	
                _____
                  to 1.0

              	 	 	 	
                No
                  greater than 3.75:1.00

              
	 	 	 	 	 	 	 	 	 
	
                Section
                  11.2

              	 	
                Minimum
                  Quarterly EBITDARS

              	 	
                $___________

              	 	 	 	
                At
                  least $350,000

              
	 	 	 	 	 	 	 	 	 
	
                Section
                  11.3

              	 	
                Fixed
                  Charge Coverage Ratio

              	 	
                _____
                  to 1.0

              	 	 	 	
                At
                  least 1.10:1.00

              

      

    

     

    I
      hereby
      certify that (i) the above calculations are correct and accurately reflect
      the
      consolidated financial condition of the Borrower as of the date shown above,
      and
      (ii) No Default or Event of Default has occurred under the Credit Facility
      Agreement dated as of May 30, 2008 (if and as the same has been
      amended).

     

    
      	
                    
                

            
	
              As
                Chief Financial Officer

            
	
              of
                IEC ELECTRONICS CORP.

            

    

     

    
      
        
        

      

      
        54

        
          

        

      

      
        
        

      

    

    EXHIBIT
      B

    FORM
      OF REVOLVING CREDIT NOTE

     

    REVOLVING
      CREDIT NOTE

     

    
      	
              $9,000,000

            	
              May
                30, 2008

            

    

    

     

    IEC
      ELECTRONICS CORP. (“Borrower”),
      a
      corporation organized under the laws of Delaware, for value received, hereby
      promises to pay to the order of MANUFACTURERS AND TRADERS TRUST COMPANY
      (“Lender”)
      the
      principal sum of Nine Million Dollars ($9,000,000) or, if less, the amount
      of
      the Revolving Credit Loans loaned by the Lender to Borrower pursuant to the
      Agreement referred to below, in lawful money of the United States of America
      and
      in immediately available funds on the date(s) and in the manner provided in
      said
      Agreement and with a final payment on the Termination Date. Borrower also
      promises to pay interest on the unpaid principal balance hereof, for the period
      such balance is outstanding, in like money, at the rates of interest as provided
      in the Agreement described below, on the date(s) and in the manner provided
      in
      said Agreement.

     

    The
      date
      and amount of each Revolving Credit Loan made by the Lender to the Borrower
      under the Agreement referred to below, maturity date and each payment of
      principal thereof, shall be recorded by the Lender on its books. The Lender’s
      records shall be presumed to be accurate absent manifest error.

     

    This
      is
      the Revolving Credit Note referred to in that certain Credit Facility Agreement
      (as amended from time to time, the “Agreement”)
      dated
      as of May 30, 2008, made among Borrower and Lender, and evidences the Revolving
      Credit Loans made thereunder. All capitalized terms not defined herein shall
      have the meanings given to them in the Agreement.

     

    Borrower
      waives presentment, notice of dishonor, protest and any other notice or
      formality with respect to this Revolving Credit Note.

     

    This
      Revolving Credit Note shall be governed by the laws of the State of New
      York.

     

    
      	
              IEC
                ELECTRONICS CORP.

            
	 	 
	
              By:

            	
                 
                

            
	
              Title:

            	
               
                

            

    

     

    
      
        
        

      

      
        55

        
          

        

      

      
        
        

      

    

    EXHIBIT
      C

    FORM
      OF TERM LOAN
      NOTE

     

    TERM
      LOAN
      NOTE

     

    
      	
              $1,700,000

            	
              May
                30, 2008

            

    

     

    IEC
      ELECTRONICS CORP. (“Borrower”),
      a
      corporation organized under the laws of Delaware, for value received, hereby
      promises to pay to the order of MANUFACTURERS AND TRADERS TRUST COMPANY
      (“Lender”)
      the
      principal sum of One Million Seven Hundred Thousand Dollars ($1,700,000), in
      lawful money of the United States of America and in immediately available funds
      in consecutive installments of principal on the first day of each month in
      the
      amount of $28,334 each. The entire unpaid principal amount of this Term Loan
      Note shall be due and payable on the Term Loan Maturity Date. Borrower also
      promises to pay interest on the unpaid principal balance hereof, for the period
      such balance is outstanding, in like money, at the rates of interest as provided
      in the Agreement described below, on the date(s) and in the manner provided
      in
      said Agreement.

     

    This
      is
      the Term Loan Note referred to in that certain Credit Facility Agreement (as
      amended from time to time, the “Agreement”)
      dated
      as of May 30, 2008, made among Borrower and Lender, and evidences the Term
      Loan
      made thereunder. All capitalized terms not defined herein shall have the
      meanings given to them in the Agreement.

     

    Borrower
      waives presentment, notice of dishonor, protest and any other notice or
      formality with respect to this Term Loan Note.

     

    This
      Term
      Loan Note shall be governed by the laws of the State of New York. 

     

    
      	
              IEC
                ELECTRONICS CORP.

            
	 	 
	
              By:

            	
                 
                

            
	
              Title:

            	
               
                

            

    

     

    
      
        
        

      

      
        56

        
          

        

      

      
        
        

      

    

    EXHIBIT
      D

    
      FORM
        OF ENERGY LOAN NOTE WITH RIDER

       

    

    See
      attached

     

    
      
        
        

      

      
        57

        
          

        

      

      
        
        

      

    

    EXHIBIT
      E

    FORM
      OF EQUIPMENT LINE NOTE

     

    EQUIPMENT
      LINE NOTE

     

    
      	
              $________________

            	 	
              _________________,
                20__

            

    

     

    IEC
      ELECTRONICS CORP. (“Borrower”),
      a
      corporation organized under the laws of Delaware, for value received, hereby
      promises to pay to the order of MANUFACTURERS AND TRADERS TRUST COMPANY
      (“Lender”)
      the
      principal sum of __________________ Dollars ($_____________), in lawful money
      of
      the United States of America and in immediately available funds in consecutive
      installments of principal on the first day of each month in the amount of
      $__________ each. The entire unpaid principal amount of the Equipment Line
      Loan
      evidenced hereby shall be due and payable on the Termination Date. Borrower
      also
      promises to pay interest on the unpaid principal balance hereof, for the period
      such balance is outstanding, in like money, at the rates of interest as provided
      in the Agreement described below, on the date(s) and in the manner provided
      in
      said Agreement. The initial interest rate hereunder shall be [the Base Rate
      plus
      Applicable Margin/the LIBOR Rate for a LIBOR Interest Period of _______ months
      plus Applicable Margin/the Fixed Rate of ________% per annum for a period of
      _________.

     

    This
      is
      an Equipment Line Note referred to in that certain Credit Facility Agreement
      (as
      amended from time to time, the “Agreement”)
      dated
      as of May 30, 2008, made among Borrower and Lender, and evidences an Equipment
      Line Loan made thereunder. All capitalized terms not defined herein shall have
      the meanings given to them in the Agreement.

     

    Borrower
      waives presentment, notice of dishonor, protest and any other notice or
      formality with respect to this Term Loan Note.

     

    This
      Term
      Loan Note shall be governed by the laws of the State of New York.

     

    [The
      Linked Deposit Program Rider attached to this Equipment Line Note is
      incorporated herein by reference.]

     

    
      	
              IEC
                ELECTRONICS CORP.

            
	 	 
	
              By:

            	
                 
                

            
	
              Title:

            	
               
                

            

    

     

    
      
        
        

      

      
        58

        
          

        

      

      
        
        

      

    

    EXHIBIT
      F

    FORM
      OF LINKED DEPOSIT PROGRAM RIDER

     

    LINKED
      DEPOSIT PROGRAM RIDER

     

    THIS
      RIDER is made as _______________, 20___ by IEC ELECTRONICS CORP. (“Borrower”)
      in
      favor of Manufacturers and Traders Trust Company (“Lender”)
      in
      connection with and as an addendum to the Equipment Line Note dated on even
      date
      herewith in the original principal amount of $_____________ (‘Note”).
      Unless otherwise defined herein, all capitalized terms used herein shall have
      the meanings as set forth in the Note and the Agreement referenced therein.
      To
      the extent that the terms of this Rider are inconsistent with other terms in
      the
      Note, the terms of this Rider shall control.

     

    Definitions.

     

    “Adjusted
      Rate”
shall
      mean on any given day the rate selected by the Borrower pursuant to Section
      5.1
      of the Agreement as in effect on the Closing Date, or any successor section
      thereto.

     

    “Program
      Rate”
shall
      mean the rate equal to _____ percentage points below the initial Fixed Rate
      applicable to the Note.

     

    “Reset
      Date”
shall
      mean:

     

    o
Not
      Applicable (the
      Note is to mature without a Reset Date.)

     

    
      o
the
        date _____ months from the date of
        the Note (which under no circumstances shall be more than forty-eight (48)
        months from the date of this Note).

    

     

    Interest.
      

     

    The
      unpaid principal of this Note shall earn interest from and including the date
      the proceeds of this Note are disbursed, to, but not including, the earlier
      of
      the Reset Date (if applicable) or the final maturity date of the Note, at a
      rate
      per year (“Interest
      Rate”)
      which
      shall on each day be the Program Rate; provided, however, the applicable
      Interest Rate prior to the earlier of the Reset Date (if applicable) or the
      final maturity date of the Note shall automatically and immediately (without
      further notice to Borrower) be adjusted to the Base Rate plus Applicable Margin
      if (i) the Lender terminates its participation in the Linked Deposit Program,
      (ii) the Linked Deposit Program is canceled or otherwise terminated, (iii)
      Borrower’s right to participate in the Linked Deposit Program is canceled,
      revoked or is otherwise not authorized, or (iv) all requirements of the Linked
      Deposit Program have not been satisfied (as determined by the Lender in its
      discretion) with respect to the Loan evidenced by the Note. Under any of the
      above scenarios, the Lender reserves the right to charge Borrower for the amount
      of any interest that would have accrued, or other amounts that would otherwise
      have been due to the Lender, if the Base Rate had been in effect from the date
      the proceeds of the Note were disbursed, and the Lender will waive any
      applicable Prepayment Premium. 

     

    
      
        
        

      

      
        59

        
          

        

      

      
        
        

      

    

    [From
      and
      including the Reset Date (if applicable), to, but not including the date all
      amounts hereunder are paid in full, the applicable Interest Rate shall be the
      Adjusted Rate.]

     

    Recalculation
      of Principal and Interest Installments. 

     

    To
      the
      extent (if at all) that the Note contemplates repayment by Borrower in
      consecutive level installments of principal and interest over the term of the
      Note until the Maturity Date, the amount of each installment of principal and
      interest due and payable under the Note may be adjusted by the Lender at any
      time to account for any change in the applicable Interest Rate as described
      herein. Absent manifest error, the Lender’s calculation of the adjustment and
      determination of the ongoing installment amounts shall be conclusive of the
      amounts due and payable by Borrower. Any such adjustment may affect the amount
      of the final installment of principal due at the final maturity date of the
      Note.

     

    
      	
              IEC
                ELECTRONICS CORP.

            
	 	 
	
              By:

            	
                 
                

            
	
              Title:

            	
               
                

            

    

     

    
      
        
        

      

      
        60

        
          

        

      

      
        
        

      

    

    EXHIBIT
      G

    FORM
      OF
      BORROWING BASE REPORT

     

    See
      attached

     

    
      
        
        

      

      
        61

        
          

        

      

      
        
        

      

    

    SCHEDULE
      1.1(a)

    PERMITTED
      LIENS

     

    None

     

    
      
        
        

      

      
        62

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      1.1(b)

    SECURITY
      DOCUMENTS

     

    General
      Security Agreement

     

    Negative
      Pledge Agreement

     

    Pledge
      Agreement

     

    Trademark
      Security Agreement

     

    Copyright
      Security Agreement

     

    
      
        
        

      

      
        63

        
          

        

      

      
        
        

      

    

    SCHEDULE
      7.1

    CREDIT
      PARTIES; JURISDICTIONS

     

    
      	
              Credit
                Party Name

            	 	
              Jurisdiction
                of Formation

            	 	
              Jurisdictions
                of Qualification

            
	 	 	 	 	 
	
              IEC
                Electronics Corp.

            	 	
              Delaware

            	 	
              New
                York

            
	 	 	 	 	 
	
              Val-U-Tech
                Corp.

            	 	
              New
                York

            	 	
              None

            

    

     

    
      
        
        

      

      
        64

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      7.6

    LITIGATION

     

    On
      August
      13, 2003 General Electric Company (“GE”) commenced an action in the State of
      Connecticut against IEC and Vishay Intertechnology, Inc. (“Vishay”). The action
      alleges cause of action for breach of a manufacturing services contract, which
      had an initial value of $4.4 million, breach of express warranty, breach of
      implied warranty, and a violation of the Connecticut unfair trade practices
      act.
      Vishay supplied a component that IEC used to assemble printed circuit boards
      for
      GE that GE contends failed to function properly requiring a product recall.
      GE
      claims damages “in excess of $15,000” plus interest and attorney’s fees. IEC and
      Vishay are proceeding to defend GE’s Connecticut action on the merits and IEC is
      proceeding with a cross claim against Vishay. IEC filed a motion for summary
      judgment directed to all counts. On January 11, 2007, the Court granted the
      motion in part, dismissing the claim for violation of the Connecticut unfair
      trade practices act, but determined that factual issues were disputed on the
      contract and warranty claims. On September 17, 2007, at a status conference,
      the
      parties agreed to a schedule for the case and it was set forth as an order
      of
      the Court. The scheduling order contemplates a trial to begin on January 5,
      2010. IEC intends to vigorously defend the claims and prosecute the cross claim,
      and is proceeding with the discovery process in accordance with the scheduling
      order.

     

    
      
        
        

      

      
        65

        
          

        

      

      
        
        

      

    

    SCHEDULE
      7.14

    INTELLECTUAL
      PROPERTY

     

    Registered
      Trademarks:
      

     

    
      	1.	
              “IEC”

            

    

     

    Registration
      Number: 1646272

     

    
      	2.	
              IEC
                Logo

            

    

     

    Registration
      Number: 1650337

     

    Registered
      Copyrights:

     

    
      	1.	
              Type
                of Work: Text 

            

    

     

    Registration
      Number: TXu000800909

     

    Application
      Title: The IEC UCW Menu System.

     

    
      
        
        

      

      
        66

        
          

        

      

      
        
        

      

    

    SCHEDULE
      7.16

    SUBSIDIARIES
      AND AFFILIATES

     

    
      	
              Subsidiary
                Name

            	 	
              Jurisdiction
                of Formation

            	 	
              Jurisdictions
                of Qualification

            
	 	 	 	 	 
	
              VUT
                Merger Corp.

            	 	
              New
                York

            	 	
              None

            
	 	 	 	 	 
	
              Val-U-Tech
                Corp.

            	 	
              New
                York

            	 	
              None

            

    

     

    
      
        
        

      

      
        67

        
          

        

      

      
        
        

      

    

    SCHEDULE
      7.18

    ERISA
      MATTERS

     

    IEC
      Electronics Corp.:

     

    IEC
      Electronics Corp. 401k Plan

     

    Employee
      Profit Sharing Plan

     

    2001
      Stock Option and Incentive Plan

     

    Management
      Incentive Plan

     

    Cafeteria
      Plan (Medical/Dental/Flex Spending)

     

    Long
      Term
      Disability Plan

     

    Life
      Insurance Plan 

     

    Val-U-Tech
      Corp.:

     

    Val-U-Tech
      Corp. 401k Profit Sharing Plan and Trust

     

    Val-U-Tech
      Corp. Section 125 Plan (Health/Dental)

     

    
      
        
        

      

      
        68

        
          

        

      

      
        
        

      

    

    SCHEDULE
      10.1

    DEBT

     

    None

     

    
      
        
        

      

      
        69

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