You are right, If the file does not exist in use nr. 2, then POSIX compliant shells should exit the script, so that the lines following exec will be executed.

I had only quickly tested it with bash:

Code:

bash ./test2
./test2: line 2: ./test123: No such file or directory
Hi

But in ksh:

Code:

ksh ./test2
./test2[2]: ./test123: cannot open [No such file or directory]

and in dash:

Code:

$ dash ./test2
./test2: 2: ./test1231c: cannot open ./test123: No such file

According to POSIX "exec" is a so-called "special built-in utility", and there is a redirection error, therefore the script should exit ( Shell Command Language: Consequences of Shell Errors )
Special Built-in utilities are:

Code:

break
: (colon)
continue
. (dot)
eval
exec
exit
export
readonly
return
set
shift
times
trap
unset

The reason that bash worked, is that is not fully POSIX compliant by default:

Code:

bash ./test2
./test2: line 2: ./test123: No such file or directory
Hi

Code:

$ bash --posix ./test2
./test2: line 2: ./test123: No such file or directory

See: Bash POSIX Mode, item #18. Bash Reference Manual