<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>2
<FILENAME>v015047_ex2-1.txt
<TEXT>
                                                                     EXHIBIT 2.1

                                TABLE OF CONTENTS

                                                                            PAGE

SECTION 1.    DESCRIPTION OF TRANSACTION.......................................1

     1.1   Merger of Merger Sub into the Company...............................1

     1.2   Effect of the Merger................................................1

     1.3   Closing; Effective Time.............................................1

     1.4   Articles of Incorporation and Bylaws; Directors and Officers........2

     1.5   Conversion of Shares................................................2

     1.6   Employee Stock Options..............................................3

     1.7   Closing of the Company's Transfer Books.............................3

     1.8   Exchange of Certificates............................................3

     1.9   Dissenting Shares...................................................4

     1.10  Escrow..............................................................5

     1.11  Tax Consequences....................................................5

     1.12  Further Action......................................................5

SECTION 2.    REPRESENTATIONS AND WARRANTIES OF THE SIGNING SHAREHOLDERS.......5

     2.1   Due Organization; No Subsidiaries; Etc..............................6

     2.2   Articles of Incorporation and Bylaws; Records.......................6

     2.3   Capitalization, Etc.................................................6

     2.4   Financial Statements................................................7

     2.5   Absence of Changes..................................................8

     2.6   Title to Assets.....................................................9

     2.7   Bank Accounts; Receivables..........................................9

     2.8   Equipment; Leasehold...............................................10

     2.9   Intellectual Property..............................................10

     2.10  Contracts..........................................................14

     2.11  Liabilities........................................................16

     2.12  Compliance with Legal Requirements.................................16

     2.13  Governmental Authorizations........................................17

     2.14  Tax Matters........................................................17

     2.15  Employee and Labor Matters; Benefit Plans..........................18


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<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)
                                                                            PAGE

     2.16  Environmental Matters..............................................21

     2.17  Insurance..........................................................21

     2.18  Related Party Transactions.........................................22

     2.19  Legal Proceedings; Orders..........................................22

     2.20  Authority; Binding Nature of Agreement.............................22

     2.21  Non-Contravention; Consents........................................23

     2.22  Vote Required......................................................23

     2.23  Brokers............................................................23

     2.24  No Other Representations...........................................23

     2.25  Full Disclosure....................................................24

SECTION 3.    REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........24

     3.1   Due Organization...................................................24

     3.2   Certificate/Articles of Incorporation and Bylaws...................24

     3.3   Capitalization, Etc................................................24

     3.4   SEC Filings; Financial Statements..................................25

     3.5   Authority; Binding Nature of Agreement.............................25

     3.6   Vote Required......................................................25

     3.7   Non-Contravention; Consents........................................25

     3.8   Legal Proceedings; Orders..........................................26

     3.9   Valid Issuance.....................................................26

     3.10  Offering Valid.....................................................26

     3.11  Brokers............................................................26

SECTION 4.    CERTAIN COVENANTS OF THE COMPANY AND THE SIGNING SHAREHOLDERS...26

     4.1   Access and Investigation...........................................26

     4.2   Operation of the Company's Business................................26

     4.3   Company Shareholders' Vote.........................................28

     4.4   No Negotiation.....................................................29

SECTION 5.    ADDITIONAL COVENANTS OF THE PARTIES.............................29

     5.1   Filings and Consents...............................................29


                                       ii
<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)
                                                                            PAGE

     5.2   SEC Filings........................................................29

     5.3   Securities Compliance; Blue Sky....................................30

     5.4   Public Announcements...............................................30

     5.5   Affiliate Agreements...............................................30

     5.6   Best Efforts.......................................................30

     5.7   Employment and Noncompetition Agreements...........................30

     5.8   Tax Matters........................................................30

     5.9   Release............................................................31

     5.10  Notification; Updates to Disclosure Schedule.......................31

     5.11  Employee Matters...................................................32

     5.12  Indemnification....................................................32

     5.13  SEC Filings........................................................33

     5.14  Extension of Funds.................................................33

     5.15  Dilution...........................................................33

SECTION 6.    CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB....33

     6.1   Accuracy of Representations........................................34

     6.2   Performance of Covenants...........................................34

     6.3   Dissenters' Rights.................................................34

     6.4   Shareholder Approval...............................................34

     6.5   Consents...........................................................34

     6.6   Agreements and Documents...........................................34

     6.7   Questionnaires.....................................................35

     6.8   FIRPTA Compliance..................................................35

     6.9   Financing..........................................................35

     6.10  No Restraints......................................................35

     6.11  No Legal Proceedings...............................................35

     6.12  No Material Adverse Effect.........................................35

     6.13  Amendment of Pelco Agreement.......................................35

     6.14  Audited Financial Statements.......................................35


                                      iii
<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)
                                                                            PAGE

SECTION 7.    CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY..............35

     7.1   Accuracy of Representations........................................36

     7.2   Performance of Covenants...........................................36

     7.3   Shareholder Approval...............................................36

     7.4   Agreements and Documents...........................................36

     7.5   Financing..........................................................36

     7.6   No Legal Proceedings...............................................36

     7.7   No Material Adverse Effect.........................................37

     7.8   No Restraints......................................................37

SECTION 8.    TERMINATION.....................................................37

     8.1   Termination Events.................................................37

     8.2   Termination Procedures.............................................37

     8.3   Effect of Termination..............................................37

SECTION 9.    INDEMNIFICATION, ETC............................................38

     9.1   Survival of Representations, Etc...................................38

     9.2   Indemnification by Designated Shareholders.........................38

     9.3   Satisfaction of Indemnification Claim..............................40

     9.4   No Contribution....................................................40

     9.5   Interest...........................................................40

     9.6   Defense of Third Party Claims......................................40

     9.7   Exercise of Remedies by Indemnitees................................42

     9.7   Escrow Fund........................................................42

SECTION 10.   MISCELLANEOUS PROVISIONS........................................42

     10.1  Further Assurances.................................................42

     10.2  Fees and Expenses..................................................42

     10.3  Attorneys' Fees....................................................42

     10.4  Notices............................................................42

     10.5  Time of the Essence................................................43

     10.6  Headings...........................................................43


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<PAGE>

                                TABLE OF CONTENTS
                                  (CONTINUED)
                                                                            PAGE

     10.7  Counterparts.......................................................43

     10.8  Governing Law......................................................43

     10.9  Successors and Assigns.............................................43

     10.10 Remedies Cumulative; Specific Performance..........................44

     10.11 Waiver.............................................................44

     10.12 Amendments.........................................................44

     10.13 Severability.......................................................44

     10.14 Parties in Interest................................................44

     10.15 Entire Agreement...................................................44

     10.16 Construction.......................................................45


                                       v

<PAGE>

                               AGREEMENT AND PLAN
                          OF MERGER AND REORGANIZATION

      THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of March 28, 2005, by and among: SBE, INC., a Delaware
corporation ("Parent"); PYX ACQUISITION SUB, LLC, a California limited liability
company, the sole member of which is Parent ("Merger Sub"); PYX TECHNOLOGIES,
INC., a California corporation (the "Company"); and the parties identified on
EXHIBIT A (the "Signing Shareholders"). Certain other capitalized terms used in
this Agreement are defined in EXHIBIT B.

                                    RECITALS

      A. Parent, Merger Sub and the Company intend to effect a merger of the
Company into Merger Sub (the "Merger") in accordance with this Agreement and the
California Corporations Code (the "CCC"). Upon consummation of the Merger, the
Company will cease to exist, and Parent will continue as the sole member of
Merger Sub.

      B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").

      C. This Agreement has been approved by the respective boards of directors
of Parent, Merger Sub and the Company.

      D. The Signing Shareholders own a total of 3,950,000 shares of the Common
Stock (par value $0.001 per share) of the Company ("Company Common Stock"),
constituting a majority of the outstanding Company Common Stock.

      E. Contemporaneously with the execution and delivery of this Agreement,
Andre Hedrick and Greg Yamamoto are executing a shareholder consent with respect
to the Merger.

                                    AGREEMENT

      The parties to this Agreement, intending to be legally bound, agree as
follows:

SECTION 1. DESCRIPTION OF TRANSACTION

      1.1 Merger of the Company into Merger Sub. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), the Company shall be merged with and into Merger Sub, and the
separate existence of the Company shall cease, and Parent will continue as the
sole member of Merger Sub (the "Surviving Entity").

      1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the CCC.

      1.3 Closing; Effective Time. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, One Maritime Plaza, 20th Floor, San Francisco, California
at 10:00 a.m. on a date to be designated by Parent (the "Scheduled Closing
Time"), which shall be no later than two business days after the last condition
set forth in Sections 6 and 7 has been satisfied or waived (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of such conditions). The date on which the Closing


                                       1
<PAGE>

actually takes place is referred to in this Agreement as the "Closing Date."
Contemporaneously with or as promptly as practicable after the Closing, a
properly executed agreement of merger conforming to the requirements of Chapter
11 of the CCC shall be filed with the Secretary of State of the State of
California. The Merger shall become effective at the time such agreement of
merger is filed with the Secretary of State of the State of California (the
"Effective Time").

      1.4 Articles of Incorporation and Bylaws; Directors and Officers. Unless
otherwise determined by Parent and the Company prior to the Effective Time,
immediately upon the Closing:

            (a) the articles of organization of the Surviving Entity shall be
the articles of organization of Merger Sub, except that the name of the
Surviving Entity shall be PyX Technologies, LLC;

            (b) the operating agreement of the Surviving Entity shall be the
operating agreement of Merger Sub; and

            (c) the directors of the Surviving Entity immediately after the
Effective Time shall be the directors of Parent as of such time, and the
officers of the Surviving Entity immediately after the Effective Time shall be
the Chief Executive Officer and the Chief Financial Officer of Parent as of such
time.

      1.5 Conversion of Shares.

            (a) Subject to Sections 1.8(c) and 1.9, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any shareholder of the Company:

                  (i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the right to receive the
Applicable Fraction (as defined in Section 1.5(b)) of a share of the common
stock (par value $0.001 per share) of Parent ("Parent Common Stock"); and

                  (ii) each share of the common stock (par value $0.001 per
share) of Merger Sub outstanding immediately prior to the Effective Time shall
be converted into one share of common stock of the Surviving Entity.

            (b) For purposes of this Agreement, the "Applicable Fraction" shall
be the fraction: (i) having a numerator equal to 4,600,000 shares of Parent
Common Stock (the "Share Consideration"), subject to adjustment as provided in
Section 10.2; and (ii) having a denominator equal to the sum of (A) 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), and (B) the aggregate number of shares of Company
Common Stock purchasable under or otherwise subject to all Company Options (as
defined in Section 1.6(a)) outstanding immediately prior to the Effective Time
(including all shares of Company Common Stock that may ultimately be purchased
under Company Options that are unvested or are otherwise not then exercisable).

            (c) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends.


                                       2
<PAGE>

      1.6 Employee Stock Options.

            (a) At the Effective Time, each stock option that is then
outstanding under the Company's 2005 Stock Plan, whether vested or unvested (a
"Company Option"), shall be assumed by Parent in accordance with the terms (as
in effect as of the date of this Agreement) of the Company's 2005 Stock Plan and
the stock option agreement by which such Company Option is evidenced. All rights
with respect to Company Common Stock under outstanding Company Options shall
thereupon be converted into rights with respect to Parent Common Stock.
Accordingly, from and after the Effective Time, (i) each Company Option assumed
by Parent may be exercised solely for shares of Parent Common Stock, (ii) the
number of shares of Parent Common Stock subject to each such assumed Company
Option shall be equal to the number of shares of Company Common Stock that were
subject to such Company Option immediately prior to the Effective Time
multiplied by the Applicable Fraction, rounded down to the nearest whole number
of shares of Parent Common Stock, (iii) the per share exercise price for the
Parent Common Stock issuable upon exercise of each such assumed Company Option
shall be determined by dividing the exercise price per share of Company Common
Stock subject to such Company Option, as in effect immediately prior to the
Effective Time, by the Applicable Fraction, and rounding the resulting exercise
price up to the nearest whole cent, and (iv) all restrictions on the exercise of
each such assumed Company Option shall continue in full force and effect, and
the term, exercisability, vesting schedule and other provisions of such Company
Option shall otherwise remain unchanged; provided, however, that each such
assumed Company Option shall, in accordance with its terms, be subject to
further adjustment as appropriate to reflect any stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction effected by
Parent after the Effective Time; provided further, that in no event shall any
assumed Company Option have a term in excess of ten years.

            (b) The Company and Parent shall take all action that may be
necessary (under the Company's 2005 Stock Plan and otherwise) to effectuate the
provisions of this Section 1.6.

            (c) At the Closing, Parent will deliver to each holder of an assumed
Company Option a written notice setting forth (i) the number of shares of Parent
Common Stock subject to such assumed Company Option, and (ii) the exercise price
per share of Parent Common Stock issuable upon exercise of such assumed Company
Option.

      1.7 Closing of the Company's Transfer Books. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Entity or
Parent, such Company Stock Certificate shall be canceled and shall be exchanged
as provided in Section 1.8.

      1.8 Exchange of Certificates.

            (a) As soon as practicable after the Effective Time, but in any
event no more than two business days after the Effective Time, Parent will send
to the holders of Company Stock Certificates other than the Signing Shareholders
(i) a letter of transmittal in customary form and containing such provisions as
Parent may reasonably specify, and (ii) instructions for use in effecting the
surrender of Company Stock Certificates in exchange for certificates
representing Parent Common Stock. Upon surrender of a Company Stock Certificate
to Parent for exchange, together with a duly executed letter of transmittal and
such other documents as may be reasonably required by Parent and referenced in
the letter of transmittal, the holder of such Company Stock Certificate shall be


                                       3
<PAGE>

entitled to receive from Parent, and Parent shall cause such holder to receive,
in exchange therefor a certificate representing the number of whole shares of
Parent Common Stock that such holder has the right to receive pursuant to the
provisions of this Section 1 (without giving effect to escrow arrangements),
less such holder's pro rata share of the Escrow Shares, and the Company Stock
Certificate so surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.8, each Company Stock Certificate shall be deemed, from and
after the Effective Time, to represent only the right to receive upon such
surrender, a certificate representing shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated by this
Section 1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
issuance of any certificate representing Parent Common Stock, require the owner
of such lost, stolen or destroyed Company Stock Certificate to provide an
appropriate affidavit.

            (b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).

            (c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, determined by multiplying such fraction by the
average of the closing sale prices of a share of Parent Common Stock as reported
on the Nasdaq SmallCap Market for each of the 10 consecutive trading days
immediately preceding the Closing Date (the "Designated Parent Stock Price").

            (d) Parent and the Surviving Entity shall be entitled to deduct and
withhold from any consideration payable or otherwise deliverable to any holder
or former holder of capital stock of the Company pursuant to this Agreement such
amounts as Parent or the Surviving Entity may be required to deduct or withhold
therefrom under the Code or under any provision of state, local or foreign tax
law. To the extent such amounts are so deducted or withheld, such amounts shall
be treated for all purposes under this Agreement as having been paid to the
Person to whom such amounts would otherwise have been paid.

            (e) Neither Parent nor the Surviving Entity shall be liable to any
holder or former holder of capital stock of the Company for any shares of Parent
Common Stock (or dividends or distributions with respect thereto), or for any
cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.

      1.9 Dissenting Shares.

            (a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become "dissenting shares" within the meaning of Section
1300(b) of the CCC shall not be converted into or represent the right to receive
Parent Common Stock in accordance with Section 1.5 (or cash in lieu of
fractional shares in accordance with Section 1.8(c)), and the holder or holders
of such shares shall be entitled only to such rights as may be granted to such
holder or holders in Chapter 13 of the CCC; provided, however, that if the


                                       4
<PAGE>

status of any such shares as "dissenting shares" shall not be perfected, or if
any such shares shall lose their status as "dissenting shares," then, as of the
later of the Effective Time or the time of the failure to perfect such status or
the loss of such status, such shares shall automatically be converted into and
shall represent only the right to receive (upon the surrender of the certificate
or certificates representing such shares) Parent Common Stock in accordance with
Section 1.5 (and cash in lieu of fractional shares in accordance with Section
1.8(c)).

            (b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Chapter
13 of the CCC and of any other demand, notice or instrument delivered to the
Company prior to the Effective Time pursuant to the CCC, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
any such demand, notice or instrument. The Company shall not make any payment or
settlement offer prior to the Effective Time with respect to any such demand
unless Parent shall have consented in writing to such payment or settlement
offer.

      1.10 Escrow. As soon as practicable after the Effective Time of the
Merger, and subject to and in accordance with the provisions of Section 9.8,
Parent, on behalf of the shareholders of the Company, shall take, or cause to be
taken, the following actions:

            (a) Parent shall withhold from, and not deliver to, the shareholders
of the Company, certificates representing 460,000 shares of Parent Common Stock
out of the shares that would otherwise be issued to the Company's shareholders
pursuant to Section 1.5(a)(i), representing a pro rata reduction from the number
of shares of Parent Common Stock that each shareholder of the Company would have
otherwise received (the "Escrow Shares");

            (b) Parent shall issue the Escrow Shares in the names of the
applicable shareholders of the Company that would otherwise have received the
Escrow Shares pursuant to Section 1.5(a)(i); and (c) Parent shall cause the
Escrow Shares to be delivered to the Escrow Agent (as defined in the Escrow
Agreement), which Escrow Shares shall be held in escrow and shall be available
to satisfy the indemnification obligations set forth in Section 9. To the extent
not used for such purpose, such Escrow Shares shall be released as provided in
the Escrow Agreement.

      1.11 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations. Each party to this Agreement acknowledges
that it is responsible for determining the tax consequences of the Merger for
itself and for its shareholders and that it has not relied on any other party to
this Agreement, or any Representative of any other such party, in making such
determination.

      1.12 Further Action. If, at any time after the Effective Time, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Entity or Parent with full
right, title and possession of and to all rights and property of Merger Sub and
the Company, the officers and directors of the Surviving Entity and Parent shall
be fully authorized (in the name of Merger Sub, in the name of the Company and
otherwise) to take such action.

SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE SIGNING SHAREHOLDERS

      Except as set forth in this Agreement or on the Disclosure Schedule, the
Company and the Signing Shareholders, jointly and severally, represent and
warrant, to and for the benefit of the Parent Indemnitees, as set forth below.
The Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered paragraphs contained in this Section 2, and the disclosure in any


                                       5
<PAGE>

paragraph shall qualify (a) the disclosure in the corresponding paragraph of
this Section 2, and (b) the other paragraphs of this Section 2 to the extent it
is clear from the reading of such disclosure that it also qualifies or applies
to such paragraphs.

      2.1 Due Organization; No Subsidiaries; Etc.

            (a) Except as set forth in Part 2.1 of the Disclosure Schedule, the
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all necessary corporate power
and authority: (i) to conduct its business in the manner in which its business
is currently being conducted; (ii) to own and use its assets in the manner in
which its assets are currently owned and used; and (iii) to perform its
obligations under all Company Contracts.

            (b) The Company has not conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or other name, other than the name "PyX Technologies, Inc."

            (c) The Company is qualified, authorized, registered or licensed to
do business as a foreign corporation and is in good standing in each
jurisdiction where the nature of its activities and of its properties (both
owned and leased) makes such qualification, authorization, registration or
licensing necessary, except in such jurisdictions where the failure to do so has
not had and will not have a Material Adverse Effect on the Company or its
business.

            (d) The Company does not own any controlling interest in any Entity
and has never owned, beneficially or otherwise, any shares or other securities
of, or any direct or indirect equity interest in, any Entity. The Company has
not agreed and is not obligated to make any future investment in or capital
contribution to any Entity. The Company has not guaranteed and is not
responsible or liable for any obligation of any of the Entities in which it owns
or has owned any equity interest.

      2.2 Articles of Incorporation and Bylaws; Records. The Company has
delivered to Parent accurate and complete copies of: (a) the Company's articles
of incorporation and bylaws, including all amendments thereto; (b) the stock
records of the Company; and (c) the minutes and other records of the meetings
and other proceedings (including any actions taken by written consent or
otherwise without a meeting) of the shareholders of the Company, the board of
directors of the Company and all committees of the board of directors of the
Company. There have been no formal meetings or other proceedings of the
shareholders of the Company, the board of directors of the Company or any
committee of the board of directors of the Company that are not fully reflected
in such minutes or other records. There has not been any violation of any of the
provisions of the Company's articles of incorporation or bylaws, and the Company
has not taken any action that is inconsistent in any material respect with any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors. The books of
account, stock records, minute books and other records of the Company are
accurate, up-to-date and complete in all material respects, and, except as set
forth in Part 2.2 of the Disclosure Schedule, have been maintained in accordance
with prudent business practices.

      2.3 Capitalization, Etc.

            (a) The authorized capital stock of the Company consists of: (i)
10,000,000 shares of Common Stock (par value $0.001 per share), of which
5,567,500 shares have been issued and are outstanding. All of the outstanding
shares of Company Common Stock have been duly authorized and validly issued, and
are fully paid and non-assessable. Part 2.3 of the Disclosure Schedule provides
an accurate and complete description of the terms of each repurchase option that
is held by the Company and to which any of such shares is subject.


                                       6
<PAGE>

            (b) The Company has reserved 4,647,500 shares of Company Common
Stock for issuance under its 2005 Stock Plan, of which 4,432,500 shares are
reserved for issuance upon exercise of outstanding options and 215,000 shares
are issued and outstanding. Part 2.3 of the Disclosure Schedule accurately sets
forth, with respect to each Company Option that is outstanding as of the date of
this Agreement: (i) the name of the holder of such Company Option; (ii) the
total number of shares of Company Common Stock that are subject to such Company
Option and the number of shares of Company Common Stock with respect to which
such Company Option is immediately exercisable; (iii) the date on which such
Company Option was granted and the term of such Company Option; (iv) the vesting
schedule for such Company Option; (v) the exercise price per share of Company
Common Stock purchasable under such Company Option; and (vi) whether such
Company Option has been designated an "incentive stock option" as defined in
Section 422 of the Code. Except as set forth in this Section 2.3(b), there is
no: (i) outstanding subscription, option, call, warrant or right (whether or not
currently exercisable) to acquire any shares of the capital stock or other
securities of the Company; (ii) outstanding security, instrument or obligation
that is or may become convertible into or exchangeable for any shares of the
capital stock or other securities of the Company; (iii) Contract under which the
Company is or may become obligated to sell or otherwise issue any shares of its
capital stock or any other securities; or (iv) except as set forth in Part
2.3(b) of the Disclosure Schedule, to the knowledge of the Company and the
Signing Shareholders, condition or circumstance that may give rise to or provide
a basis for the assertion of a claim by any Person to the effect that such
Person is entitled to acquire or receive any shares of capital stock or other
securities of the Company.

            (c) All outstanding shares of Company Common Stock, and all
outstanding Company Options and Company Warrants, have been issued and granted
in compliance with (i) all applicable securities laws and other applicable Legal
Requirements, and (ii) all requirements set forth in applicable Contracts.

            (d) The Company has never repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities of the Company.

            (e) As of the date hereof, the date of the Information Statement (as
defined in Section 4.3), the date the Information Statement is delivered to the
Company's shareholders and the Closing Date, each Person that held shares of
Company Common Stock immediately prior to the Closing is a resident of the state
set forth opposite such Person's name on Schedule 2.3(e), as such Schedule may
be updated from time to time prior to the Closing to reflect any relocations by
Company shareholders that may occur.

      2.4 Financial Statements.

            (a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):

                  (i) The audited balance sheets of the Company as of December
31, 2003 and 2004, and the related audited income statements, statements of
shareholders' equity and statements of cash flows of the Company for the years
then ended; and

                  (ii) the unaudited balance sheet of the Company (the
"Unaudited Interim Balance Sheet") as of February 28, 2005 (the "Interim
Statement Date"), and the related unaudited income statement of the Company for
the two months then ended.

            (b) Except as set forth in Part 2.4 of the Disclosure Schedule, the
Company Financial Statements are accurate and complete in all material respects
and present fairly the financial position of the Company as of the respective
dates thereof and the results of operations and (in the case of the financial


                                       7
<PAGE>

statements referred to in Section 2.4(a)(i)) cash flows of the Company for the
periods covered thereby. The Company Financial Statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis throughout the periods covered (except as permitted by
United States generally accepted accounting principles and except that the
financial statements referred to in Section 2.4(a)(ii) do not contain footnotes
and are subject to normal and recurring year-end audit adjustments, which are
not expected, individually or in the aggregate, to be material in magnitude).

      2.5 Absence of Changes. Except as set forth in Part 2.5 of the Disclosure
Schedule, since the Interim Statement Date:

            (a) there has not been any Material Adverse Effect on the Company,
and, to the knowledge of the Company and the Signing Shareholders, no event has
occurred that will, or could reasonably be expected to, have a Material Adverse
Effect on the Company;

            (b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's assets (whether
or not covered by insurance);

            (c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;

            (d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other security (except for Company Common Stock issued
upon the exercise of outstanding Company Options and Company Warrants), (ii) any
option or right to acquire any capital stock or any other security (except for
Company Options and Company Warrants), or (iii) any instrument convertible into
or exchangeable for any capital stock or other security;

            (e) the Company has not amended or waived any of its rights under,
or permitted the acceleration of vesting under, (i) any provision of its 2005
Stock Plan, (ii) any provision of any agreement evidencing any outstanding
Company Option, or (iii) any restricted stock purchase agreement;

            (f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;

            (g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;

            (h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since the
Interim Statement, exceeds $10,000;

            (i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract;

            (j) the Company has not (i) acquired, leased or licensed any right
or other asset from any other Person, (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;


                                       8
<PAGE>

            (k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;

            (l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;

            (m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;

            (n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;

            (o) the Company has not changed any of its methods of accounting or
accounting practices in any respect;

            (p) the Company has not made any Tax election;

            (q) the Company has not commenced or settled any Legal Proceeding;

            (r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and

            (s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.

      2.6 Title to Assets.

            (a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it, including: (i) all assets reflected on
the Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.7(b)
and 2.9 of the Disclosure Schedule and all of the Company's rights under the
Contracts identified in Part 2.10 of the Disclosure Schedule; and (iii) all
other assets reflected in the Company's books and records as being owned by the
Company. Except as set forth in Part 2.6 of the Disclosure Schedule, all of said
assets are owned by the Company free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of the Company.

            (b) Part 2.6 of the Disclosure Schedule identifies all assets that
are material to the business of the Company and that are being leased or
licensed to the Company, in each case, having a value, individually, in excess
of $5,000.

      2.7 Bank Accounts; Receivables.

            (a) Part 2.7(a) of the Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.

            (b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of the Interim Statement Date. Except as set


                                       9
<PAGE>

forth in Part 2.7(b) of the Disclosure Schedule, all existing accounts
receivable of the Company (including those accounts receivable reflected on the
Unaudited Interim Balance Sheet that have not yet been collected and those
accounts receivable that have arisen since the Interim Statement Date and have
not yet been collected) (i) represent valid obligations of customers of the
Company arising from bona fide transactions entered into in the ordinary course
of business, (ii) are current and will be collected in full when due, without
any counterclaim or set off (net of an allowance for doubtful accounts not to
exceed $5,000 in the aggregate).

      2.8 Equipment; Leasehold.

            (a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.

            (b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.

      2.9 Intellectual Property..

                  (a) Part 2.9(a) of the Disclosure Schedule accurately
identifies and describes:

                  (i) in Part 2.9(a)(i) of the Disclosure Schedule, each
proprietary product or service developed, manufactured, marketed, or sold by the
Company at any time since its inception and any product or service currently
under development by the Company;

                  (ii) in Part 2.9(a)(ii) of the Disclosure Schedule: (A) each
item of Registered IP in which the Company has or purports to have an ownership
interest of any nature (whether exclusively, jointly with another Person or
otherwise); (B) the jurisdiction in which such item of Registered IP has been
registered or filed and the applicable registration or serial number; (C) any
other Person that has an ownership interest in such item of Registered IP and
the nature of such ownership interest; and (D) each product or service
identified in Part 2.9(a)(i) of the Disclosure Schedule that embodies, utilizes
or is based upon or derived from (or, with respect to products and services
under development, that is expected to embody, utilize or be based upon or
derived from) such item of Registered IP;

                  (iii) in Part 2.9(a)(iii) of the Disclosure Schedule: (A) all
Intellectual Property Rights or Intellectual Property licensed to the Company
(other than any non-customized software that: (1) is so licensed solely in
executable or object code form pursuant to a nonexclusive, internal use software
license, (2) is not incorporated into, or used directly in the development,
manufacturing or distribution of, the products or services of the Company and
(3) is generally available on standard terms for less than $5,000); (B) the
corresponding Contract or Contracts pursuant to which such Intellectual Property
Rights or Intellectual Property is licensed to the Company; and (C) whether the
license or licenses so granted to the Company are exclusive or nonexclusive; and

                  (iv) in Part 2.9(a)(iv) of the Disclosure Schedule, each
Contract pursuant to which any Person has been granted any license under, or
otherwise has received or acquired any right (whether or not currently
exercisable) or interest in, any Company IP.

            (b) The Company has provided to Parent a complete and accurate copy
of each standard form of Company IP Contract used by the Company at any time,
including each standard form of: (i) end user license agreement; (ii)
development agreement; (iii) distributor or reseller agreement; (iv) employee


                                       10
<PAGE>

agreement containing any assignment or license of Intellectual Property or
Intellectual Property Rights or any confidentiality provision; (v) consulting or
independent contractor agreement containing any assignment or license of
Intellectual Property or Intellectual Property Rights or any confidentiality
provision; or (vi) confidentiality or nondisclosure agreement. Except as
disclosed in Part 2.9 of the Disclosure Schedule, no Company IP Contract
deviates in any material respect from the corresponding standard form agreement
provided to Parent. Except as disclosed in Part 2.9 of the Disclosure Schedule,
the Company is not bound by, and no Company IP is subject to, any Contract
containing any covenant or other provision that in any way limits or restricts
the ability of the Company to use, exploit, assert, or enforce any Company IP
anywhere in the world.

            (c) The Company exclusively owns all right, title and interest to
and in the Company IP (other than Intellectual Property Rights or Intellectual
Property exclusively licensed to the Company, as identified in Part 2.9(a)(iii)
of the Disclosure Schedule) free and clear of any Encumbrances (other than
nonexclusive licenses granted pursuant to the Contracts listed in Part
2.9(a)(iv) of the Disclosure Schedule). Without limiting the generality of the
foregoing, except as set forth in Part 2.9 of the Disclosure Schedule:

                  (i) all documents and instruments necessary to perfect the
rights of the Company in the Company IP have been validly executed, delivered
and filed in a timely manner with the appropriate Governmental Body;

                  (ii) each Person who is or was an employee or independent
contractor of the Company and who is or was involved in the creation or
development of any Company IP has signed a valid and enforceable agreement
containing an irrevocable assignment of Intellectual Property Rights to the
Company and confidentiality provisions protecting the Company IP;

                  (iii) no Company Employee has any claim, right (whether or not
currently exercisable) or interest to or in any Company IP;

                  (iv) to the knowledge of the Company and the Signing
Shareholders, no employee or independent contractor of the Company is: (A) bound
by or otherwise subject to any Contract restricting him or her from performing
his or her duties for the Company; or (B) in breach of any Contract with any
former employer or other Person concerning Intellectual Property Rights or
confidentiality;

                  (v) no funding, facilities or personnel of any Governmental
Body were used, directly or indirectly, to develop or create, in whole or in
part, any Company IP;

                  (vi) the Company has taken all reasonable steps to maintain
the confidentiality of and otherwise protect and enforce its rights in all
proprietary information held by the Company, or purported to be held by the
Company, as a trade secret;

                  (vii) the Company has never assigned or otherwise transferred
ownership of, or agreed to assign or otherwise transfer ownership of, any
Intellectual Property Right to any other Person;

                  (viii) the Company is not now nor has ever been a member or
promoter of, or a contributor to, any industry standards body or similar
organization that could require or obligate the Company to grant or offer to any
other Person any license or right to any Company IP; and

                  (ix) to the knowledge of the Company and the Signing
Shareholders, the Company owns or otherwise has, and after the Closing the


                                       11
<PAGE>

Surviving Entity will continue to have, all Intellectual Property Rights needed
to conduct the business of the Company as currently conducted and currently
planned by the Company to be conducted.

            (d) To the knowledge of the Company and the Signing Shareholders,
all Company IP is valid, subsisting and enforceable. Without limiting the
generality of the foregoing, to the knowledge of the Company:

                  (i) no trademark (whether registered or unregistered) or trade
name owned, used, or applied for by the Company conflicts or interferes with any
trademark (whether registered or unregistered) or trade name owned, used or
applied for by any other Person;

                  (ii) none of the goodwill associated with or inherent in any
trademark (whether registered or unregistered) in which the Company has or
purports to have an ownership interest has been impaired;

                  (iii) each item of Company IP that is Registered IP is and at
all times has been in compliance with all Legal Requirements, and all filings,
payments and other actions required to be made or taken to maintain such item of
Company IP in full force and effect have been made by the applicable deadline;

                  (iv) no application for a patent or for a copyright, mask work
or trademark registration or any other type of Registered IP filed by or on
behalf of the Company has been abandoned, allowed to lapse or rejected;

                  (v) Part 2.9(d)(v) of the Disclosure Schedule accurately
identifies and describes each filing, payment, and action that must be made or
taken on or before the date that is 120 days after the date of this Agreement in
order to maintain each such item of Company IP in full force and effect;

                  (vi) the Company has provided to Parent complete and accurate
copies of all applications, correspondence and other material documents related
to each such item of Registered IP;

                  (vii) no interference, opposition, reissue, reexamination or
other Proceeding of any nature is or has been pending or, to the knowledge of
the Company and the Signing Shareholders, threatened, in which the scope,
validity or enforceability of any Company IP is being, has been or could
reasonably be expected to be contested or challenged; and

                  (viii) to the knowledge of the Company and the Signing
Shareholders, there is no basis for a claim that any Company IP is invalid or
unenforceable.

            (e) Neither the execution, delivery or performance of any of the
Transactional Agreements nor the consummation of any of the Transactions will,
with or without notice or the lapse of time, result in or give any other Person
the right or option to cause or declare: (i) a loss of, or material Encumbrance
on, any Company IP; (ii) a breach of any Contract listed or required to be
listed in Part 2.9(a)(iii) of the Disclosure Schedule; (iii) the release,
disclosure or delivery of any Company IP by or to any escrow agent or other
Person; or (iv) the grant, assignment or transfer to any other Person of any
license or other right or interest under, to or in any of the Company IP.

            (f) To the knowledge of the Company and the Signing Shareholders,
except as set forth in Part 2.9 of the Disclosure Schedule, no Person has
infringed, misappropriated, or otherwise violated, and no Person is currently
infringing, misappropriating or otherwise violating, any Company IP. Part 2.9(f)


                                       12
<PAGE>

of the Disclosure Schedule accurately identifies (and the Company has provided
to Parent a complete and accurate copy of) each letter or other written or
electronic communication or correspondence that has been sent or otherwise
delivered by or to the Company or any Representative of the Company regarding
any actual, alleged or suspected infringement or misappropriation of any Company
IP and provides a brief description of the current status of the matter referred
to in such letter, communication or correspondence.

            (g) To the knowledge of the Company and the Signing Shareholders,
the Company has never infringed (directly, contributorily, by inducement or
otherwise), misappropriated or otherwise materially violated any Intellectual
Property Right of any other Person. Without limiting the generality of the
foregoing, to the knowledge of the Company and the Signing Shareholders, except
as set forth in Part 2.9 of the Disclosure Schedule:

                  (i) no product, information or service ever manufactured,
produced, distributed, published, used, provided or sold by or on behalf of the
Company, and no Intellectual Property ever owned, used or developed by the
Company, has ever infringed, misappropriated or otherwise violated any
Intellectual Property Right of any other Person;

                  (ii) no Proceeding alleging infringement, misappropriation or
similar claim is pending or has been threatened in writing, or, to the knowledge
of the Company and the Signing Shareholders, otherwise against the Company or
against any other Person who may be entitled to be indemnified, defended, held
harmless or reimbursed by the Company with respect to such Proceeding or claim;

                  (iii) the Company has never received any notice or other
communication (in writing or, to the knowledge of the Company and the Signing
Shareholders, otherwise) relating to any actual, alleged or suspected
infringement, misappropriation or violation by the Company of any Intellectual
Property Right of another Person;

                  (iv) the Company is not bound by any Contract to indemnify,
defend, hold harmless or reimburse any other Person with respect to any
intellectual property infringement, misappropriation or similar claim (other
than pursuant to the Company IP Contracts described in Section 2.9(a)(iii) and
2.9(b));

                  (v) the Company has never assumed, or agreed to discharge or
otherwise take responsibility for, any existing or potential liability of
another Person for infringement, misappropriation or violation of any
Intellectual Property Right; and

                  (vi) no claim or Proceeding involving any Intellectual
Property or Intellectual Property Right licensed to the Company is pending or,
to the knowledge of the Company and the Signing Shareholders, has been
threatened in writing or, to the knowledge of the Company and the Signing
Shareholders, otherwise, except for any such claim or Proceeding that, if
adversely determined, would not adversely affect: (A) the use or exploitation of
such Intellectual Property or Intellectual Property Right by the Company; or (B)
the manufacturing, distribution or sale of any product or service being
developed, offered, manufactured, distributed or sold by the Company.

            (h) To the knowledge of the Company and the Signing Shareholders,
none of the Company Software: (i) contains any bug, defect or error (including
any bug, defect or error relating to or resulting from the display,
manipulation, processing, storage, transmission or use of date data) that
materially and adversely affects the use, functionality or performance of such
Company Software or any product or system containing or used in conjunction with


                                       13
<PAGE>

such Company Software; or (ii) fails to comply with any applicable warranty or
other contractual commitment relating to the use, functionality or performance
of such software or any product or system containing or used in conjunction with
such Company Software.

            (i) None of the Company Software contains any "back door," "drop
dead device," "time bomb," "Trojan horse," "virus," or "worm" (as such terms are
commonly understood in the software industry) or any other code designed or
intended to have, or capable of performing, any of the following functions: (i)
disrupting, disabling, harming or otherwise impeding in any manner the operation
of, or providing unauthorized access to, a computer system or network or other
device on which such code is stored or installed; or (ii) damaging or destroying
any data or file without the user's consent.

            (j) To the knowledge of the Company and the Signing Shareholders,
none of the Company Software is subject to any "copyleft" or other obligation or
condition (including any obligation or condition under any "open source" license
such as the GNU Public License, Lesser GNU Public License or Mozilla Public
License) that: (i) could or does require, or could or does condition the use or
distribution of such Company Software on, the disclosure, licensing or
distribution of any source code for any portion of such Company Software; or
(ii) could or does otherwise impose any limitation, restriction or condition on
the right or ability of the Company to use or distribute any Company Software.

            (k) Except as set forth in Part 2.9(k) of the Disclosure Schedule,
no source code for any Company Software has been delivered, licensed or made
available to any escrow agent or other Person who is not, as of the date of this
Agreement, an employee of the Company. The Company does not have any duty or
obligation (whether present, contingent or otherwise) to deliver, license or
make available the source code for any Company Software to any escrow agent or
other Person who is not, as of the date of this Agreement, an employee of the
Company. No event has occurred, and no circumstance or condition exists, that
(with or without notice or lapse of time) will, or could reasonably be expected
to, result in the delivery, license or disclosure of any source code for any
Company Software to any other Person who is not, as of the date of this
Agreement, an employee of the Company.

      2.10 Contracts.

            (a) Part 2.10 of the Disclosure Schedule identifies:

                  (i) each Company Contract relating to the employment of, or
the performance of services by, any employee, consultant or independent
contractor;

                  (ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any technology or any
Intellectual Property or Intellectual Property Right;

                  (iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;

                  (iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;

                  (v) each Company Contract relating to the acquisition,
issuance or transfer of any securities;


                                       14
<PAGE>

                  (vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;

                  (vii) each Company Contract involving or incorporating any
guaranty of indebtedness, any pledge, any performance or completion bond, any
indemnity or any surety arrangement;

                  (viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;

                  (ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Related Party (as defined in Section 2.18);

                  (x) each Company Contract constituting or relating to a
Government Contract or Government Bid;

                  (xi) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices;

                  (xii) any other Company Contract that has a term of more than
60 days and that may not be terminated by the Company (without penalty) within
60 days after the delivery of a termination notice by the Company; and

                  (xiii) any other Company Contract that contemplates or
involves (A) the payment or delivery of cash or other consideration in an amount
or having a value in excess of $10,000 in the aggregate, or (B) the performance
of services having a value in excess of $10,000 in the aggregate.

(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts.")

            (b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10 of the Disclosure Schedule,
including all amendments thereto. Part 2.10 of the Disclosure Schedule provides
an accurate description of the terms of each Company Contract that is not in
written form. Each Company Contract is valid and in full force and effect, and,
to the knowledge of the Company and the Signing Shareholders, is enforceable by
the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.

            (c) Except as set forth in Part 2.10(c) of the Disclosure Schedule:

                  (i) the Company has not materially violated or breached, or
committed any material default under, any Company Contract, and, to the
knowledge of the Company and the Signing Shareholders, no other Person has
materially violated or breached, or committed any material default under, any
Company Contract;

                  (ii) to the knowledge of the Company and the Signing
Shareholders, no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time) will, or could reasonably be
expected to, (A) result in a violation or breach of any of the material
provisions of any Company Contract, (B) give any Person the right to declare a


                                       15
<PAGE>

default or exercise any remedy under any Company Contract, (C) give any Person
the right to accelerate the maturity or performance of any Company Contract, or
(D) give any Person the right to cancel, terminate or modify any Company
Contract;

                  (iii) the Company has never received any written notice or, to
the knowledge of the Company and the Signing Shareholders, other communication
regarding any actual or possible violation or breach of, or default under, any
Company Contract; and

                  (iv) the Company has not knowingly waived any of its material
rights under any Company Contract.

            (d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.

            (e) The Contracts identified in Part 2.10(e) of the Disclosure
Schedule collectively constitute all of the Contracts necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted,

            (f) Part 2.10(f) of the Disclosure Schedule provides an accurate
description and breakdown of the Company's backlog under Company Contracts.

            (g) Except as set forth in Part 2.10(g) of the Disclosure Schedule,
the Company does not, and has never, entered into, bid for, had any interest in
or been determined to be noncompliant with any Government Contract. The Company
has not made, or participated in any way in, any Government Bid. Neither the
Company nor any of its employees has been debarred or suspended from doing
business with any Governmental Body, and, to the knowledge of the Company and
the Signing Shareholders, no circumstances exist that would warrant the
institution of debarment or suspension proceedings against the Company or any
employee of the Company. The Company has not made any disclosure to any
Governmental Body pursuant to any voluntary disclosure agreement.

            (h) The Company has complied with all applicable regulations and
other Legal Requirements and with all applicable contractual requirements
relating to the placement of legends or restrictive markings on technical data,
computer software and other Intellectual Property.

      2.11 Liabilities. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with United States
generally accepted accounting principles, and whether due or to become due),
except for: (a) liabilities identified as such in the "liabilities" column of
the Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries
that have been incurred by the Company since the Interim Statement Date in the
ordinary course of business and consistent with the Company's past practices;
(c) liabilities under the Company Contracts identified in Part 2.10 of the
Disclosure Schedule, to the extent the nature and magnitude of such liabilities
can be specifically ascertained by reference to the text of such Company
Contracts; (d) immaterial liabilities that are not required by United States
generally accepted accounting principles to be disclosed on the Unaudited
Interim Balance Sheet and (e) the liabilities identified in Part 2.11 of the
Disclosure Schedule.

      2.12 Compliance with Legal Requirements. Except as set forth in Part 2.12
of the Disclosure Schedule, the Company is, and has at all times been, in
compliance with all applicable Legal Requirements, except where the failure to
comply with such Legal Requirements has not had and will not have a Material
Adverse Effect on the Company. The Company has not received any written notice


                                       16
<PAGE>

or, to the knowledge of the Company and the Signing Shareholders, other
communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.

      2.13 Governmental Authorizations. Part 2.13 of the Disclosure Schedule
identifies each material Governmental Authorization held by the Company, and the
Company has delivered to Parent accurate and complete copies of all Governmental
Authorizations identified in Part 2.13 of the Disclosure Schedule. The
Governmental Authorizations identified in Part 2.13 of the Disclosure Schedule
are valid and in full force and effect, and collectively constitute all
Governmental Authorizations necessary to enable the Company to conduct its
business in the manner in which its business is currently being conducted. The
Company is, and at all times has been, in substantial compliance with the terms
and requirements of the respective Governmental Authorizations identified in
Part 2.13 of the Disclosure Schedule. The Company has not received any written
notice or, to the knowledge of the Company and the Signing Shareholders, other
communication from any Governmental Body regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any
Governmental Authorization, or (b) any actual or possible revocation,
withdrawal, suspension, cancellation, termination or modification of any
Governmental Authorization.

      2.14 Tax Matters. Except as set forth on Part 2.14 of the Disclosure
Schedule:

            (a) All Tax Returns required to be filed on or before the Closing
Date (including any extensions of such date) by or on behalf of the Company with
any Governmental Body (the "Company Returns") (i) have been or will be filed on
or before such applicable due date, and (ii) have been, or will be when filed,
accurately and completely prepared in all material respects in compliance with
all applicable Legal Requirements. All amounts shown on the Company Returns to
be due on or before the Closing Date have been or will be paid on or before the
Closing Date. The Company has delivered to Parent accurate and complete copies
of all Company Returns filed since inception that have been requested by Parent.

            (b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with United States generally accepted accounting
principles. The Company has not incurred a Tax liability from the date of the
Unaudited Interim Balance Sheet, other than in the ordinary course of business,
and the Company will establish in its books and records reserves adequate for
the payment of all such Tax liabilities.

            (c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. There have been no examinations or
audits of any Company Return. The Company has delivered to Parent accurate and
complete copies of all audit reports and similar documents (to which the Company
has access) relating to the Company Returns. No extension or waiver of the
limitation period applicable to any of the Company Returns has been granted (by
the Company or any other Person), and no such extension or waiver has been
requested from the Company.

            (d) No claim or Proceeding is pending or has been threatened in
writing or, to the knowledge of the Company and the Signing Shareholders,
otherwise against or with respect to the Company in respect of any Tax. There
are no unsatisfied liabilities for Taxes (including liabilities for interest,
additions to tax and penalties thereon and related expenses) with respect to any
notice of deficiency or similar document received by the Company with respect to
any Tax (other than liabilities for Taxes asserted under any such notice of
deficiency or similar document which are being contested in good faith by the
Company and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of the Company
except liens for current Taxes not yet due and payable. The Company has not
entered into or become bound by any agreement or consent pursuant to former


                                       17
<PAGE>

Section 341(f) of the Code. The Company has not been, and the Company will not
be, required to include any adjustment in taxable income for any tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions or events
occurring, or accounting methods employed, prior to the Closing.

            (e) There is no agreement, plan, arrangement or other Contract
covering any Company Employee that, considered individually or considered
collectively with any other such Contracts, will, or could reasonably be
expected to, give rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 280G or Section 162 of the Code. The
Company is not, and has never been, a party to or bound by any tax indemnity
agreement, tax-sharing agreement, tax allocation agreement or similar Contract.

      2.15 Employee and Labor Matters; Benefit Plans.

            (a) Part 2.15(a) of the Disclosure Schedule accurately identifies
each former employee of the Company who is receiving or is scheduled to receive
(or whose spouse or other dependent is receiving or is scheduled to receive) any
benefits (whether from the Company or otherwise) relating to such former
employee's employment with the Company and accurately describes such benefits.

            (b) The employment of each of the Company's employees is terminable
by the Company at will. The Company has delivered to Parent accurate and
complete copies of all employee manuals and handbooks, disclosure materials,
policy statements and other materials relating to the employment of the current
and former employees of the Company.

            (c) To the knowledge of the Company and the Signing Shareholders:

                  (i) no employee of the Company intends to terminate his
employment with the Company;

                  (ii) no employee of the Company has received an offer to join
a business that may be competitive with the Company's business; and

                  (iii) no employee of the Company is a party to or is bound by
any confidentiality agreement, noncompetition agreement or other Contract (with
any Person) that may have an adverse effect on: (A) the performance by such
employee of any of his duties or responsibilities as an employee of the Company;
or (B) the Company's business or operations.

            (d) Except as set forth in Part 2.15(d) of the Disclosure Schedule,
the Company is not a party to or bound by, and the Company has never been a
party to or bound by, any employment agreement or any union Contract, collective
bargaining agreement or similar Contract.

            (e) Except as set forth in Part 2.15(e) of the Disclosure Schedule,
the Company is not engaged, and the Company has never been engaged, in any
unfair labor practice of any nature. There has never been any slowdown, work
stoppage, labor dispute or union organizing activity, or any similar activity or
dispute, affecting the Company, any such slowdown, work stoppage, labor dispute
or union organizing activity or any similar activity or dispute. No event has
occurred, and no condition or circumstance exists, that might directly or
indirectly give rise to or provide a basis for the commencement of any such
slowdown, work stoppage, labor dispute or union organizing activity or any
similar activity or dispute. There are no actions, suits, claims, labor disputes
or grievances pending or, to the knowledge of the Company and the Signing
Shareholders, threatened in writing or, to the knowledge of the Company and the
Signing Shareholders, otherwise, or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Company Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints.


                                       18
<PAGE>

            (f) None of the current or former independent contractors of the
Company could be reclassified as an employee. There are no, and at no time have
there been any, independent contractors who have provided services to the
Company or any Company Affiliate for a period of six consecutive months or
longer. The Company has never had any temporary or leased employees. No
independent contractor of the Company is eligible to participate in any Company
Employee Plan other than the 2005 Stock Plan.

            (g) Part 2.15(g) of the Disclosure Schedule contains an accurate and
complete list as of the date hereof of each Company Employee Plan and each
Company Employee Agreement. The Company does not intend nor has it committed to
establish or enter into any new Company Employee Plan or Company Employee
Agreement, or to modify any Company Employee Plan or Company Employee Agreement
(except to conform any such Company Employee Plan or Company Employee Agreement
to the requirements of any applicable Legal Requirements, in each case as
previously disclosed to Parent in writing or as required by this Agreement).

            (h) The Company has delivered to Parent: (i) correct and complete
copies of all documents setting forth the terms of each Company Employee Plan
and each Company Employee Agreement, including all amendments thereto and all
related trust documents; (ii) the three most recent annual reports (Form Series
5500 and all schedules and financial statements attached thereto), if any,
required under ERISA or the Code in connection with each Company Employee Plan;
(iii) if the Company Employee Plan is subject to the minimum funding standards
of Section 302 of ERISA, the most recent annual and periodic accounting of
Company Employee Plan assets; (iv) the most recent summary plan description
together with the summaries of material modifications thereto, if any, required
under ERISA with respect to each Company Employee Plan; (v) all material written
Contracts relating to each Company Employee Plan, including administrative
service agreements and group insurance Contracts; (vi) all written materials
provided to any Company Employee relating to any Company Employee Plan and any
proposed Company Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules or other events that would result in any
liability to the Company or any Company Affiliate; (vii) all correspondence to
or from any Governmental Body relating to any Company Employee Plan; (viii) all
COBRA forms and related notices; (ix) all insurance policies in the possession
of the Company or any Company Affiliate pertaining to fiduciary liability
insurance covering the fiduciaries for each Company Employee Plan; (x) all
discrimination tests required under the Code for each Company Employee Plan
intended to be qualified under Section 401(a) of the Code for the three most
recent plan years; and (xi) the most recent IRS determination or opinion letter
issued with respect to each Company Employee Plan intended to be qualified under
Section 401(a) of the Code.

            (i) The Company and each of the Company Affiliates have performed
all obligations required to be performed by them under each Company Employee
Plan and are not in default or violation of, and neither the Company nor any of
the Signing Shareholders has knowledge of any default or violation by any other
party to, the terms of any Company Employee Plan, and each Company Employee Plan
has been established and maintained substantially in accordance with its terms
and in substantial compliance with all applicable Legal Requirements, including
ERISA and the Code. Any Company Employee Plan intended to be qualified under
Section 401(a) of the Code has obtained a favorable determination letter (or
opinion letter, if applicable) as to its qualified status under the Code. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 408 of
ERISA, has occurred with respect to any Company Employee Plan. There are no
claims or Proceedings pending, or, to the knowledge of the Company and the
Signing Shareholders, threatened in writing or, to the knowledge of the Company
and the Signing Shareholders, otherwise, or reasonably anticipated (other than
routine claims for benefits), against any Company Employee Plan or against the
assets of any Company Employee Plan. Except as set forth in Part 2.15(i) of the


                                       19
<PAGE>

Disclosure Schedule, each Company Employee Plan (other than any Company Employee
Plan to be terminated prior to the Closing in accordance with this Agreement)
can be amended, terminated or otherwise discontinued after the Closing in
accordance with its terms, without liability to Parent, the Company or any
Company Affiliate (other than ordinary administration expenses). There are no
audits, inquiries or Proceedings pending or, to the knowledge of the Company and
the Signing Shareholders, threatened in writing or, to the knowledge of the
Company and the Signing Shareholders, otherwise by the IRS, DOL, or any other
Governmental Body with respect to any Company Employee Plan. Neither the Company
nor any Company Affiliate has ever incurred any penalty or tax with respect to
any Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code. The Company and each Company Affiliate has made all
contributions and other payments required by and due under the terms of each
Company Employee Plan.

            (j) Neither the Company nor any Company Affiliate has ever
maintained, established, sponsored, participated in, or contributed to any: (i)
Company Pension Plan subject to Title IV of ERISA; or (ii) "multiemployer plan"
within the meaning of Section (3)(37) of ERISA. Neither the Company nor any
Company Affiliate has ever maintained, established, sponsored, participated in
or contributed to, any Company Pension Plan in which stock of the Company or any
Company Affiliate is or was held as a plan asset. The fair market value of the
assets of each funded Foreign Plan, the liability of each insurer for any
Foreign Plan funded through insurance, or the book reserve established for any
Foreign Plan, together with any accrued contributions, is sufficient to procure
or provide in full for the accrued benefit obligations, with respect to all
current and former participants in such Foreign Plan according to the actuarial
assumptions and valuations most recently used to determine employer
contributions to and obligations under such Foreign Plan, and no transaction
contemplated by this Agreement shall cause any such assets or insurance
obligations to be less than such benefit obligations.

            (k) No Company Employee Plan provides (except at no cost to the
Company or any Company Affiliate), or reflects or represents any liability of
the Company or any Company Affiliate to provide, retiree life insurance, retiree
health benefits or other retiree employee welfare benefits to any Person for any
reason, except as may be required by COBRA or other applicable Legal
Requirements. Other than commitments made that involve no future costs to the
Company or any Company Affiliate, neither the Company nor any Company Affiliate
has ever represented, promised or contracted (whether in oral or written form)
to any Company Employee (either individually or to Company Employees as a group)
or any other Person that such Company Employee(s) or other person would be
provided with retiree life insurance, retiree health benefit or other retiree
employee welfare benefits, except to the extent required by applicable Legal
Requirements.

            (l) Except as set forth in Part 2.15(l) of the Disclosure Schedule,
and except as expressly required or provided by this Agreement, neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereby will (either alone or upon the occurrence of any additional
or subsequent events) constitute an event under any Company Employee Plan,
Company Employee Agreement, trust or loan that will or may result (either alone
or in connection with any other circumstance or event) in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any Company Employee.

            (m) Except as set forth in Part 2.15(m) of the Disclosure Schedule,
the Company and each of the Company Affiliates: (i) are, and at all times have
been, in substantial compliance with all applicable Legal Requirements
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Company Employees, including
the health care continuation requirements of COBRA, the requirements of FMLA,
the requirements of HIPAA and any similar provisions of state law; (ii) have
withheld and reported all amounts required by applicable Legal Requirements or
by Contract to be withheld and reported with respect to wages, salaries and
other payments to Company Employees; (iii) are not liable for any arrears of
wages or any taxes or any penalty for failure to comply with the Legal
Requirements applicable of the foregoing; and (iv) are not liable for any
payment to any trust or other fund governed by or maintained by or on behalf of
any Governmental Body with respect to unemployment compensation benefits, social
security or other benefits or obligations for Company Employees (other than


                                       20
<PAGE>

routine payments to be made in the normal course of business and consistent with
past practice). There are no pending or, to the knowledge of the Company and the
Signing Shareholders, threatened in writing or, to the knowledge of the Company
and the Signing Shareholders, otherwise, or reasonably anticipated claims or
Proceedings against the Company or any Company Affiliate under any worker's
compensation policy or long-term disability policy.

            (n) To the knowledge of the Company and the Signing Shareholders, no
shareholder nor any Company Employee is obligated under any Contract or subject
to any judgment, decree, or order of any court or other Governmental Body that
would interfere with such Person's efforts to promote the interests of the
Company or that would interfere with the business of the Company or any Company
Affiliate. Neither the execution nor the delivery of this Agreement, nor the
carrying on of the business of the Company or any Company Affiliate as presently
conducted nor any activity of such shareholder or Company Employees in
connection with the carrying on of the business of the Company or any Company
Affiliate as presently conducted will, to the knowledge of the Company and the
Signing Shareholders, conflict with, result in a breach of the terms, conditions
or provisions of, or constitute a default under, any Contract under which any of
such shareholders or Company Employees is now bound.

      2.16 Environmental Matters. To the knowledge of the Company and the
Signing Shareholders, the Company is in compliance in all material respects with
all applicable Environmental Laws, which compliance includes the possession by
the Company of all permits and other Governmental Authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. The Company has not received any written notice or, to the knowledge of
the Company and the Signing Shareholders, other communication, whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that the
Company is not in compliance with any Environmental Law, and, to the knowledge
of the Company and the Signing Shareholders, there are no circumstances that may
prevent or interfere with the Company's compliance with any Environmental Law in
the future. To the knowledge of the Company and the Signing Shareholders, no
current or prior owner of any property leased or controlled by the Company has
received any notice or other communication (in writing or otherwise), whether
from a Government Body, citizens group, employee or otherwise, that alleges that
such current or prior owner or the Company is not in compliance with any
Environmental Law. There are no Governmental Authorizations currently held by
the Company pursuant to Environmental Laws. (For purposes of this Section 2.16:
(a) "Environmental Law" means any currently enacted and effective federal,
state, local or foreign Legal Requirement relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (b) "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products and any other substance that is now or hereafter
regulated by any Environmental Law or that is otherwise a danger to health,
reproduction or the environment.) This Section 2.16 contains the sole and
exclusive representations and warranties of the Company and the Signing
Shareholders with respect to the Company's compliance with Environmental Laws.

      2.17 Insurance. Except as set forth in Part 2.17 of the Disclosure
Schedule, each insurance policy maintained by, at the expense of or for the
benefit of the Company is in full force and effect. The Company has never
received any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any


                                       21
<PAGE>

coverage or rejection of any claim under any insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any insurance
policy.

      2.18 Related Party Transactions. No Related Party has, and no Related
Party has at any time had, any direct or indirect interest in any material asset
used in or otherwise relating to the business of the Company. No Related Party
is, or has at any time been, indebted to the Company. Except as set forth in
Part 2.18 of the Disclosure Schedule, no Related Party has entered into, or has
had any direct or indirect financial interest in, any material Contract,
transaction or business dealing involving the Company. To the knowledge of the
Company and the Signing Shareholders, no Related Party is competing, or has at
any time competed, directly or indirectly, with the Company. Except as set forth
in Part 2.18 of the Disclosure Schedule, no Related Party has any claim or right
against the Company (other than rights under Company Options and rights to
receive compensation for services performed as an employee of the Company). (For
purposes of the Section 2.18 each of the following shall be deemed to be a
"Related Party": (a) each of the Signing Shareholders; (b) each individual who
is, or who has at any time since incorporation of the Company been, an officer
of the Company; (c) each member of the immediate family of each of the
individuals referred to in clauses "(a)" and "(b)" above; and (d) any trust or
other Entity (other than the Company) in which any one of the individuals
referred to in clauses "(a)", "(b)" and "(c)" above holds (or in which more than
one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.)

      2.19 Legal Proceedings; Orders.

            (a) There is no pending Legal Proceeding, and (to the knowledge of
the Company and the Signing Shareholders) no Person has threatened to commence
any Legal Proceeding: (i) that involves the Company or any of the assets owned
or used by the Company or any Person whose liability the Company has or may have
retained or assumed, either contractually or by operation of law; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement. To the knowledge of the Company and the Signing
Shareholders, no event has occurred, and no claim, dispute or other condition or
circumstance exists, that will, or that could reasonably be expected to, give
rise to or serve as a basis for the commencement of any such Legal Proceeding.

            (b) Except as set forth in Part 2.19 of the Disclosure Schedule, no
Legal Proceeding has ever been commenced by or has ever been pending against the
Company.

            (c) There is no order, writ, injunction, judgment or decree of any
Governmental Body to which the Company, or any of the assets owned or used by
the Company, is subject. None of the Signing Shareholders is subject to any
order, writ, injunction, judgment or decree that relates to the Company's
business or to any of the assets owned or used by the Company. To the knowledge
of the Company and the Signing Shareholders, no officer or other employee of the
Company is subject to any such order, writ, injunction, judgment or decree that
prohibits such officer or other employee from engaging in or continuing any
conduct, activity or practice relating to the Company's business.

      2.20 Authority; Binding Nature of Agreement. The Company has the absolute
and unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
the Company of this Agreement have been duly authorized by all necessary action
on the part of the Company and its board of directors, subject to obtaining the
shareholder vote referenced in Section 2.22. This Agreement constitutes the
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to (a) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (b) rules of
law governing specific performance, injunctive relief and other equitable
remedies.


                                       22
<PAGE>

      2.21 Non-Contravention; Consents. Neither the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):

            (a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of incorporation or bylaws, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;

            (b) subject to Parent obtaining the approval of its stockholders as
described in Section 3.6, contravene, conflict with or result in a violation of,
or give any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;

            (c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;

            (d) except as set forth in Part 2.21(d) of the Disclosure Schedule,
contravene, conflict with or result in a violation or breach of, or result in a
default under, any provision of any Company Contract that is or would constitute
a Material Contract, or give any Person the right to (i) declare a default or
exercise any remedy under any such Company Contract, (ii) accelerate the
maturity or performance of any such Company Contract, or (iii) cancel, terminate
or modify any such Company Contract; or

            (e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).

Except as described in Section 2.22 and Section 4.3, the Company is not and will
not be required to make any filing with or give any notice to, or to obtain any
Consent from, any Person in connection with (i) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, or (ii) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.

      2.22 Vote Required. The affirmative vote of the holders of a majority of
the shares of Company Common Stock outstanding as of the date hereof is the only
vote of the holders of any class or series of the Company's capital stock
necessary to adopt this Agreement and approve the Merger and the other
transactions contemplated by this Agreement.

      2.23 Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated
hereby based upon arrangements made by or on behalf of the Company or any of its
shareholders.

      2.24 No Other Representations. Notwithstanding anything to the contrary
contained in this Agreement, it is the explicit intent of each party hereto that
none of the Company or its Representatives or shareholders are making any


                                       23
<PAGE>

representation or warranty whatsoever, express or implied, except those
representations and warranties contained in this Agreement (including any
schedule or exhibit attached hereto) and in any certificate delivered pursuant
hereto.

      2.25 Full Disclosure. This Agreement (when read together with the
Disclosure Schedule) does not, and the Company Closing Certificate when read
together with any disclosure provided by or on behalf of the Company under
Section 5.10, will not, (i) contain any representation, warranty or information
that is false or misleading with respect to any material fact, or (ii) omit to
state any material fact, in each case necessary in order to make the
representations, warranties and information contained in this Agreement
(including the Disclosure Schedule), in light of the circumstances under which
such representations, warranties and information were provided, not false or
misleading.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

      Parent and Merger Sub jointly and severally represent and warrant to the
Company and the Signing Shareholders as follows:

      3.1 Due Organization. Parent and Merger Sub are each a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
California, respectively, with corporate power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted; (ii)
to own and use its assets in the manner in which its assets are currently owned
and used; and (iii) to perform its material obligations under material Parent or
Merger Sub Contracts.

      3.2 Certificate/Articles of Incorporation and Bylaws. Parent and Merger
Sub have made available to the Company accurate and complete copies of Parent's
and Merger Sub's certificate or articles of incorporation or articles of
organization, as applicable, and bylaws or operating agreement, as applicable,
including all amendments thereto. There has not been any violation of any of the
provisions of such Parent or Merger Sub organizational documents, and Parent and
Merger Sub have not taken any action that is inconsistent in any material
respect with any resolution adopted by Parent or Merger Sub's stockholders or
member, as applicable, Parent or Merger Sub's boards of directors or managing
member, as applicable, or any committee of Parent or Merger Sub's boards of
directors or managing member, as applicable.

      3.3 Capitalization, Etc.

            (a) The authorized capital stock of Parent consists of: (i)
25,000,000 shares of Common Stock (par value $0.001 per share), of which
5,214,538 shares have been issued and are outstanding as of the date of this
Agreement. All of the outstanding shares of Parent Common Stock have been duly
authorized and validly issued, and are fully paid and non-assessable.

            (b) Parent has reserved 2,794,215 shares of Parent Common Stock for
issuance (net of shares issued and outstanding) under its stock option plans and
employee stock purchase plan. Options to purchase 2,086,627 shares of Parent
Common Stock granted under Parent's stock option plans are outstanding as of the
date of this Agreement. Except as disclosed in the foregoing sentence or the
Parent SEC Documents (as defined in Section 3.4), there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
Parent; (ii) outstanding security, instrument or obligation that is or may
become convertible into or exchangeable for any shares of the capital stock or
other securities of Parent; (iii) Contract under which Parent is or may become
obligated to sell or otherwise issue any shares of its capital stock or any
other securities; or (iv) to the knowledge of Parent, condition or circumstance
that may give rise to or provide a basis for the assertion of a claim by any
Person to the effect that such Person is entitled to acquire or receive any
shares of capital stock or other securities of Parent.


                                       24
<PAGE>

      3.4 SEC Filings; Financial Statements.

            (a) Parent has made available to the Company, by directing the
Company to the SEC's online EDGAR database, each report, registration statement
and definitive proxy statement filed by Parent with the SEC since January 1,
2002 (the "Parent SEC Documents"). Since January 1, 2002, Parent has timely made
all filings with the SEC required under the applicable requirements of the
Securities Act or the Exchange Act. As of the time it was filed with the SEC
(or, if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such 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 consolidated financial statements contained in the Parent
SEC Documents: (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 United States generally accepted accounting
principles applied on a consistent basis throughout the periods covered, except
as may be indicated in the notes to such financial statements and (in the case
of unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes as permitted by Form
10-Q and the Exchange Act, and are subject to year-end audit adjustments; and
(iii) are accurate and complete in all material respects and present fairly the
consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof and the consolidated results of operations of Parent
and its subsidiaries for the periods covered thereby.

      3.5 Authority; Binding Nature of Agreement. Parent and Merger Sub have the
absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. This Agreement constitutes the legal,
valid and binding obligation of Parent and Merger Sub, enforceable against them
in accordance with its terms, subject to (a) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (b) rules of
law governing specific performance, injunctive relief and other equitable
remedies.

      3.6 Vote Required. The only vote of Parent's stockholders required to
approve the issuance of Parent Common Stock in the Merger (the "Required Parent
Stockholder Vote") is the vote prescribed by Marketplace Rule 4310 of the
National Association of Securities Dealers (the "NASD").

      3.7 Non-Contravention; Consents. Neither the execution and delivery of
this Agreement by Parent and Merger Sub nor the consummation by Merger Sub of
the Merger will (a) contravene, conflict with or result in any breach of any
provision of the certificate of incorporation or bylaws of Parent or the
articles of organization or operating agreement of Merger Sub or of any
resolution adopted by the stockholders, the board of directors or any committee
of the board of directors of Parent or the member or managing member of Merger
Sub; (b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge the Merger or any of
the other transactions contemplated by this Agreement or to exercise any remedy
or obtain any relief under any Legal Requirement or any order, writ, injunction,
judgment or decree to which Parent, or any of the assets owned or used by
Parent, is subject; (c) contravene, conflict with or result in a violation or
breach of, or result in a default under, any provision of any material Contract
to which Parent is a party, or give any Person the right to declare a default or
exercise any remedy under any such Contract to which Parent is a party; or (d)


                                       25
<PAGE>

result in a violation by Parent or Merger Sub of any order, writ, injunction,
judgment or decree to which Parent or Merger Sub is subject. Except as may be
required by the Securities Act, the Exchange Act, state securities or "blue sky"
laws, the CCC, the Delaware General Corporation Law and the NASD Bylaws, Parent
is not and will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with the execution,
delivery or performance of this Agreement by Parent or Merger Sub or the
consummation by Merger Sub of the Merger.

      3.8 Legal Proceedings; Orders.

            (a) There is no pending Legal Proceeding, and (to the knowledge of
Parent) no Person has threatened to commence any Legal Proceeding: (i) that
involves Parent or any of the assets owned or used by Parent; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement. To the knowledge of Parent no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will or could reasonably be expected to, give rise to or serve as a basis for
the commencement of any such Legal Proceeding.

            (b) There is no material order, writ, injunction, judgment or decree
to which Parent, or any of the assets owned or used by Parent, is subject. To
the knowledge of Parent, no officer or key employee of Parent is subject to any
order, writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to the business of Parent.

      3.9 Valid Issuance. Subject to Section 1.5(c), the Parent Common Stock to
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.

      3.10 Offering Valid. Assuming the accuracy of the representations and
warranties of the shareholders set forth in Section 2 of the Shareholder
Agreement and the information provided in the investor questionnaires provided
by such shareholders to Parent, and the Company's compliance with its covenants
set forth in Sections 4.3 and 5.3, the offer, sale and issuance of the Parent
Common Stock will be exempt from the registration requirements of the Securities
Act, and will have been registered or qualified (or are exempt from registration
and qualification) under the registration, permit or qualification requirements
of all applicable state securities laws.

      3.11 Brokers. No broker, investment banker, financial advisor or other
person, other than Houlihan, Lokey, Howard & Zukin, the fees and expenses of
which will be paid by Parent, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Merger Sub.

SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND THE SIGNING SHAREHOLDERS

      4.1 Access and Investigation. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (b)
provide Parent and Parent's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request.

      4.2 Operation of the Company's Business. During the Pre-Closing Period:


                                       26
<PAGE>

            (a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;

            (b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;

            (c) the Company shall keep in full force all insurance policies
identified in Part 2.17 of the Disclosure Schedule;

            (d) the Company shall cause its officers to report regularly (but in
no event less frequently than weekly) to Parent concerning the status of the
Company's business;

            (e) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities (except that the Company may repurchase
Company Common Stock from former employees pursuant to the terms of existing
restricted stock purchase agreements);

            (f) the Company shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted to issue Company Common Stock to employees upon the exercise
of outstanding Company Options;

            (g) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of its 2005 Stock
Plan, (ii) any provision of any agreement evidencing any outstanding Company
Option, or (iii) any provision of any restricted stock purchase agreement;

            (h) neither the Company nor any of the Signing Shareholders shall
amend or permit the adoption of any amendment to the Company's articles of
incorporation or bylaws, or effect or permit the Company to become a party to
any Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;

            (i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;

            (j) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $5,000 per
month;

            (k) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or would
constitute a Material Contract, or (ii) amend or prematurely terminate, or waive
any material right or remedy under, any such Contract;

            (l) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by the Company pursuant to Contracts that are not Material Contracts;


                                       27
<PAGE>

            (m) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business), or (ii) incur or guarantee any indebtedness for borrowed money;

            (n) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees, or (iii) hire any new
employee;

            (o) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;

            (p) the Company shall not make any Tax election;

            (q) the Company shall not commence or settle any material Legal
Proceeding;

            (r) after any extension of Funds pursuant to Section 5.14, the
Company shall not make any payment to any third party without the prior consent
of Parent (which will not be unreasonably withheld); and

            (s) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(r)" above.

Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(r)" above if Parent gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld (it being understood that Parent's withholding of consent to any action
will not be deemed unreasonable if Parent determines in good faith that the
taking of such action would not be in the best interests of Parent or would not
be in the best interests of the Company).

      4.3 Company Shareholders' Vote.

            (a) Within 10 days after the date hereof, the Company shall prepare
and distribute a notice to its shareholders containing the information required
by Section 1300 et seq. of the CCC. As promptly as practicable after the
execution of this Agreement, the Company shall prepare and distribute an
information statement that describes the material terms of this Agreement and
the transactions contemplated hereby (the "Information Statement") to each
shareholder of the Company who is entitled to vote (or provide a written
consent) with respect to the Merger, this Agreement and the transactions
contemplated by this Agreement. The Information Statement shall meet the
requirements of Rule 502(b)(2)(ii) under the Securities Act of 1933, and the
Company shall provide it to its shareholders in accordance in accordance with
Rule 502(b)(1) under the Securities Act. The Company shall provide Parent a
reasonable opportunity to review and comment on the proposed form of Information
Statement prior to its distribution to the Company's shareholders. The
Information Statement shall contain copies of Parent's (a) Annual Report on Form
10-K for the fiscal year ended October 31, 2004 (the "Form 10-K"), Definitive
Proxy Statement on Schedule 14A filed on February 10, 2005, Current Report on
Form 8-K filed on February 23, 2005, and Quarterly Report on Form 10-Q for the
quarter ended January 31, 2005 (the "Form 10-Q"), each as filed with the SEC.
The information supplied by the Company for inclusion in the Information
Statement shall not, as of the date of the Information Statement, (i) contain
any statement that is inaccurate or misleading with respect to any material
fact, in light of the circumstances in which made, or (ii) omit to state any
material fact necessary in order to make such information (in the light of the
circumstances under which it is provided) not false or misleading.


                                       28
<PAGE>

            (b) Parent and Merger Sub shall promptly furnish to the Company all
information concerning Parent and Merger Sub that may be required or reasonably
requested in connection with any action contemplated by this Section 4.3. The
information supplied by Parent and Merger Sub for inclusion or incorporation by
reference in, or which may be deemed to be incorporated by reference in, the
Information Statement shall not, as of the date of the Information Statement,
(i) contain any statement that is inaccurate or misleading with respect to any
material fact, in light of the circumstances in which made, or (ii) omit to
state any material fact necessary in order to make such information (in light of
the circumstances under which it is provided) not false or misleading. If at any
time subsequent to the date of the Information Statement any event with respect
to Parent or Merger Sub, or with respect to any information supplied by Parent
or Merger Sub for inclusion in the Information Statement, shall occur which is
required to be described in an amendment of, or a supplement to, such document
in order for such document not to be false or misleading, Parent or Merger Sub
shall so describe the event in writing to the Company.

      4.4 No Negotiation. During the Pre-Closing Period, or until the
termination of this Agreement if prior to the end of the Pre-Closing Period,
neither the Company nor any of the Signing Shareholders shall, directly or
indirectly:

            (a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;

            (b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or

            (c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.

The Company shall promptly notify Parent in writing of any material inquiry,
proposal or offer relating to a possible Acquisition Transaction that is
received by the Company or any of the Signing Shareholders during the
Pre-Closing Period.

SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES

      5.1 Filings and Consents. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. Each party
shall (upon reasonable request) promptly deliver to the other party a copy of
each such filing made, each such notice given and each such Consent obtained
during the Pre-Closing Period.

      5.2 SEC Filings.

            (a) As promptly as practicable after the date of this Agreement,
Parent shall prepare and cause to be filed with the SEC a proxy statement with
respect to the transactions contemplated hereby (the "Proxy Statement"). Parent
shall use its best efforts to cause the Proxy Statement to comply with the rules
and regulations promulgated by the SEC and to respond promptly to any comments
of the SEC or its staff. Parent will use its best efforts to cause the Proxy
Statement to be mailed to Parent's stockholders. The Company shall promptly
furnish to Parent all information concerning the Company and the Company's
shareholders that may be required or reasonably requested in connection with any


                                       29
<PAGE>

action contemplated by this Section 5.2. If any event relating to the Company
occurs, or if the Company becomes aware of any information, that should be
disclosed in an amendment to the Proxy Statement, then the Company shall
promptly inform Parent thereof and shall cooperate with Parent in filing such
amendment or supplement with the SEC.

            (b) Within 90 days after the Effective Time, Parent shall have
prepared and filed with the SEC a registration statement on Form S-8 with
respect to the Company Options assumed by Parent at the Effective Time.

      5.3 Securities Compliance; Blue Sky. Parent and the Company shall take
such action as Parent shall reasonably determine to be necessary in order for
the issuance of the Parent Common Stock in connection with the Merger under Rule
506 under the Securities Act and applicable state securities or "Blue Sky" laws;
provided, however, that Parent shall not for any such purpose be required to
qualify to transact business as a foreign corporation in any jurisdiction where
it is not so qualified or to consent to general service of process in any such
jurisdiction. To that end, without limitation, (a) the Company shall cause each
shareholder that Parent determines is not an "accredited investor" and is not
"sophisticated" within the meaning of Rule 506 under the Securities Act to
appoint a "purchaser representative" in accordance with Rule 501(h) under the
Securities Act and (b) the Company shall cause such purchaser representative to
make such disclosures as may be required under Rule 501(h) under the Securities
Act.

      5.4 Public Announcements. During the Pre-Closing Period, (a) neither the
Company nor any of the Signing Shareholders shall (and the Company shall not
permit any of its Representatives to) issue any press release or make any public
statement regarding this Agreement or the Merger, or regarding any of the other
transactions contemplated by this Agreement, without Parent's prior written
consent, and (b) Parent will use reasonable efforts to consult with the Company
prior to issuing any press release or making any public statement regarding the
Merger.

      5.5 Affiliate Agreements. Each Signing Shareholder shall execute and
deliver to Parent, and the Company shall use all commercially reasonable efforts
to cause Andre Hedrick and Greg Yamamoto (and any other Person that could
reasonably be deemed to be an "affiliate" of the Company for purposes of the
Securities Act), to execute and deliver to Parent, as promptly as practicable
after the execution of this Agreement, an Affiliate Agreement in the form of
EXHIBIT C.

      5.6 Best Efforts. During the Pre-Closing Period, (a) the Company and the
Signing Shareholders shall use their best efforts to cause the conditions set
forth in Section 6 to be satisfied on a timely basis, and (b) Parent and Merger
Sub shall use their best efforts to cause the conditions set forth in Section 7
to be satisfied on a timely basis.

      5.7 Noncompetition Agreements. At or prior to the Closing, each of the
employee-shareholders of the Company as of the Closing Date shall execute and
deliver to the Company and Parent a Noncompetition Agreement in the form of
EXHIBIT D.

      5.8 Tax Matters.

            (a) At the Closing, the Company shall deliver to (a) Parent a
statement in the form agreed upon by Parent and the Company prior to the
execution hereof and (b) the IRS the notification required under Section 1.897 -
2(h)(2) of the United States Treasury Regulations.

            (b) Parent, the Company and the Signing Shareholders agree to report
the Merger as a reorganization within the meaning of Section 368(a) of the Code
for all tax purposes. Parent shall not take any action, or fail to take any
action, and will cause the Company and the Surviving Entity after the Closing,
not to take any action or fail to take any action, that could cause the Merger
to fail to qualify as a reorganization within the meaning of Section 368(a) of


                                       30
<PAGE>

the Code. Parent is the sole member of Merger Sub and after the Merger will
remain the sole member of the Surviving Entity, and neither the Parent nor the
Surviving Entity will make an election to treat the Surviving Entity, or take
any action that may cause the Surviving Entity to be treated, as an association
or otherwise as an entity separate from Parent for federal income tax purposes,
if such action could cause the Merger to fail to qualify as a reorganization
within the meaning of Section 368(a) of the Code.

      5.9 Release. At the Closing, each of the shareholders and optionholders of
the Company shall execute and deliver to the Company a Release in the form of
EXHIBIT E.

      5.10 Notification; Updates to Disclosure Schedule.

            (a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:

                  (i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that could cause or constitute an inaccuracy in or breach of any
representation or warranty made by the Company or any of the Signing
Shareholders in this Agreement;

                  (ii) any material breach of any covenant or obligation of the
Company or any of the Signing Shareholders; and

                  (iii) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.

            (b) During the Pre-Closing Period, Parent shall promptly notify the
Company in writing of:

                  (i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that could cause or constitute an inaccuracy in or breach of any
representation or warranty made by Parent or Merger Sub in this Agreement;

                  (ii) any material breach of any covenant or obligation of
Parent or Merger Sub; and

                  (iii) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.

            (c) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.10(a) requires any change in the
Disclosure Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Disclosure Schedule were dated as of the date
of the occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
the Signing Shareholders in this Agreement, or (ii) determining whether any of
the conditions set forth in Section 6 or Section 7 has been satisfied.

            (d) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.10(b) requires a Parent Disclosure
Schedule or the filing by Parent of a report on Form 8-K, no such schedule or


                                       31
<PAGE>

report on Form 8-K filed by Parent after the date hereof shall be deemed to
supplement or amend the representations and warranties made by Parent in this
Agreement for the purpose of (i) determining the accuracy of any of the
representations and warranties made by Parent in this Agreement, or (ii)
determining whether any of the conditions set forth in Section 6 or Section 7
has been satisfied.

      5.11 Employee Matters.

            (a) On or before the Effective Time, Parent shall deliver written
offer letters (providing for "at will" employment with Parent and salary,
benefits and bonus no less favorable than that provided to similarly situated
employees of Parent) to Andre Hedrick, Greg Yamamoto, Nick Bellinger, Leo Fang
and Chris Short to become employees of Parent (the individuals who accept such
employment shall be referred to as "Affected Employees"). The Affected Employees
shall be subject to and employed in compliance with Parent's applicable human
resources policies and procedures.

            (b) Following the Effective Time, Parent shall, or shall cause its
affiliates to, recognize each Affected Employee's service with the Company or
any of its subsidiaries prior to the Effective Time (or such later transition
date) as service with Parent and its affiliates in connection with any
tax-qualified pension plan and welfare benefit plan (including paid time off,
vacations and holidays) maintained by Parent or any of its affiliates in which
such Affected Employee participates and which is made available following the
Effective Time by Parent or any of its affiliates for purposes of any waiting
period, vesting, eligibility and benefit entitlement (but excluding benefit
accruals under any defined benefit pension plan). Parent shall, or shall cause
its affiliates to, waive any pre-existing condition exclusions, evidence of
insurability provisions, waiting period requirements or any similar provision
under any of the welfare plans (as defined in Section 3(1) of ERISA) maintained
by Parent or any of its affiliates in which Affected Employees participate
following the Effective Time.

      5.12 Indemnification.

            (a) Parent, the Company, the Signing Stockholders and the Surviving
Entity agree that all rights to indemnification or exculpation now existing in
favor of the directors and officers of the Company provided in the Company's
articles of incorporation and bylaws as in effect immediately prior to the
Effective Time shall continue in full force and effect for a period of six years
after the Effective Time.

            (b) After the Effective Time, the Surviving Entity shall, to the
fullest extent permitted under applicable law, indemnify and hold harmless,
those persons who are currently covered by the indemnification provisions in the
Company's articles of incorporation and bylaws (such persons, "Tail
Indemnitees") against all costs and expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and settlement amounts
paid in connection with any claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Time), whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director, employee, fiduciary or
agent, whether occurring before or after the Effective Time, for a period of six
years after the date hereof to the same extent as provided in the articles of
incorporation and bylaws of the Company. In the event of any such claim, action,
suit, proceeding or investigation, (i) the Surviving Entity shall pay the
reasonable fees and expenses of counsel selected by the Tail Indemnitees, which
counsel shall be reasonably satisfactory to the Surviving Entity, promptly after
statements therefor are received and (ii) the Surviving Entity shall cooperate
in the defense of any such matter; provided, however, that the Surviving Entity
shall not be liable for any settlement effected without its written consent


                                       32
<PAGE>

(which consent shall not be unreasonably withheld or delayed); and provided,
further, that the Surviving Entity shall not be obligated pursuant to this
Section 5.12 to pay the fees and expenses of more than one counsel for all Tail
Indemnitees in any single action except to the extent that two or more of such
Tail Indemnitees shall have conflicting interests in the outcome of such action;
and provided, further, that, in the event that any claim for indemnification is
asserted or made within such six year period, all rights to indemnification in
respect of such claim shall continue until the disposition of such claim.

            (c) If the Surviving Entity or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then, and in each such case, proper provision shall be made so that the
successors and assigns of the Surviving Entity, as the case may be, or at
Parent's option, Parent, shall assume the obligations set forth in this Section
5.12.

            (d) Parent shall cause the Surviving Entity to perform all of the
obligations of the Surviving Entity under this Section 5.12.

      5.13 SEC Filings. With a view to making available the benefits of certain
rules and regulations of the SEC which may permit the sale of the Parent Common
Stock by the Company shareholders to the public without registration, Parent
will use all commercially reasonable efforts to:

            (a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;

            (b) file with the SEC in a timely manner all reports and other
documents required of the Parent under the Securities Act and the Exchange Act;
and

            (c) furnish to each Company shareholder promptly upon request a
written statement by the Parent as to its compliance with the reporting
requirements of such Rule 144 and of the Securities Act and the Exchange Act and
such other reports and documents so filed by the Parent as such Company
shareholders may reasonably request in availing themselves of any rule or
regulation of the SEC allowing such shareholders to sell any Parent Common Stock
without registration.

      5.14 Extension of Funds. If the Closing shall not have occurred on or
prior to May 15, 2005, Parent shall extend, on the 15th day of each month
commencing on May 15, 2005 and continuing until the earlier of the Closing or
the termination of this Agreement, a loan in the amount of $50,000. Such loan,
notwithstanding anything to the contrary in this Agreement or the Disclosure
Schedule shall not be the obligation or responsibility of the Shareholders, and
shall in no circumstances be secured by any source code of the Company. Merger
Sub and Parent on behalf of itself, the Surviving Entity and all other Parent
Indemnitees, hereby covenants and agrees that Merger Sub, Parent, the Surviving
Entity and all other Parent Indemnitees shall not make a claim for any such loan
amounts against the Shareholders under the indemnification or other provisions
of this Agreement or otherwise.

      5.15 Dilution. During the Pre-Closing Period, Parent shall not grant any
options, subscription rights, calls, warrants or other rights to acquire any
shares of the capital stock or other securities of Parent to any new or existing
employee, officer or director without first notifying the Chief Executive
Officer of the Company and giving him reasonable opportunity to consult with
Parent regarding any such grant.

SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB

      The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:


                                       33
<PAGE>

      6.1 Accuracy of Representations. Each of the representations and
warranties made by the Company and the Signing Shareholders in this Agreement
and in each of the other agreements and instruments delivered to Parent in
connection with the transactions contemplated by this Agreement (without giving
effect to any "Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, contained or incorporated directly or indirectly in
such representations and warranties), shall be accurate in all respects when
made and as of the Scheduled Closing Time as if made at the Scheduled Closing
Time (except to the extent such representations and warranties speak as of a
specified date other than the date made or the Scheduled Closing Time, and
without giving effect to any update to the Disclosure Schedule), except where
the failure of such representations and warranties to be true and correct
(individually or in the aggregate) would not have a Material Adverse Effect on
the Company.

      6.2 Performance of Covenants. All of the covenants and obligations that
the Company and the Signing Shareholders are required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all material respects.

      6.3 Dissenters' Rights. At the Scheduled Closing Date, no more than 5% of
the Company Common Stock outstanding as of the Effective Time shall be eligible
to be "dissenting shares" within the meaning of Section 1300(b) of the CCC and
the Company shall have delivered proper notice to the holders of such
"dissenting shares" as required by the CCC.

      6.4 Shareholder Approval. The issuance of Parent Common Stock in the
Merger shall have been duly approved by the Required Parent Stockholder Vote.

      6.5 Consents. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.21 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.

      6.6 Agreements and Documents. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:

            (a) Affiliate Agreements in the form of EXHIBIT C, executed by Andre
Hedrick and Greg Yamamoto and by any other Person who could reasonably be deemed
to be an "affiliate" of the Company for purposes of the Securities Act;

            (b) Noncompetition Agreements in the form of EXHIBIT D, executed by
each of the employee-shareholders of the Company as of the Closing Date;

            (c) The Escrow Agreement in the form of EXHIBIT F, executed by the
Shareholders' Agent (as defined in Section 2 of the Shareholder Agreement) and
the Escrow Agent;

            (d) The Shareholder Agreement in the form of EXHIBIT G, executed by
Parent and each shareholder of the Company (the "Shareholder Agreement");

            (e) a Release in the form of EXHIBIT E, executed by the Signing
Shareholders and of the other shareholders of the Company;

            (f) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by each of the current
employees of the Company;

            (g) a certificate executed on behalf of the Company by its
President, certified as to the President's title by its Secretary, certifying
that each of the representations and warranties set forth in Section 2 is
accurate in all respects as of the Closing Date as if made on the Closing Date


                                       34
<PAGE>

and certifying that the conditions set forth in Sections 6.1, 6.2, 6.3, 6.5,
6.8, 6.10, 6.11 and 6.12 have been duly satisfied (the "Company Closing
Certificate");

            (h) a legal opinion of Orrick, Herrington & Sutcliffe LLP, dated as
of the Closing Date, containing the opinions delivered to Parent prior to the
date hereof;

            (i) written resignations of all directors of the Company, effective
as of the Effective Time; and

            (j) offer letters for employment with Parent, effective as of the
Effective Time, executed by each of the Signing Shareholders.

      6.7 Questionnaires. Parent, or its counsel, shall have received a Selling
Stockholder Questionnaire and an Investor Questionnaire from each of the
shareholders of the Company.

      6.8 FIRPTA Compliance. The Company shall have filed with the IRS the
notification referred to in Section 5.8(a).

      6.9 Financing. Parent shall have entered into a binding financing
agreement or agreements pursuant to which Parent shall be entitled to receive at
least $5,000,000 in aggregate gross proceeds (the "Parent Financing Agreement")
in connection with or immediately following the Closing (performance of which
agreement is subject only to the condition that the Closing shall have
occurred).

      6.10 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.

      6.11 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Parent of any material right pertaining to its ownership of
stock of the Surviving Entity.

      6.12 No Material Adverse Effect. There shall have been no Material Adverse
Effect on the Company, and no event shall have occurred or circumstances exist
that, in combination with any other events or circumstances, could reasonably be
expected to have or result in a Material Adverse Effect on the Company.

      6.13 Amendment of Pelco Agreement. The Company shall have amended its
existing agreement with Pelco in form and substance reasonably acceptable to
Parent.

      6.14 Audited Financial Statements. Parent shall have received a complete
copy of the audited financial statements of the Company described in Section
2.4(a)(i) of this Agreement, including the notes thereto and the unqualified
report and opinion of BDO Seidman, LLP relating thereto.

SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY

      The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:


                                       35
<PAGE>

      7.1 Accuracy of Representations. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement and in each of the
other agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement (without giving effect to any
"Material Adverse Effect" or other materiality qualifications, or any similar
qualifications, contained or incorporated directly or indirectly in such
representations and warranties), shall be accurate in all respects when made and
as of the Scheduled Closing Time as if made at the Scheduled Closing Time
(except to the extent such representations and warranties speak as of a
specified date other than the date made or the Scheduled Closing Time, and
without giving effect to any update to the Disclosure Schedule), except where
the failure of such representations and warranties to be true and correct
(individually or in the aggregate) would not have a Material Adverse Effect on
Parent and its subsidiaries taken as a whole.

      7.2 Performance of Covenants. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.

      7.3 Shareholder Approval. The issuance of Parent Common Stock in the
Merger shall have been duly approved by the Required Parent Stockholder Vote.

      7.4 Agreements and Documents. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:

            (a) a certificate executed on behalf of Parent by its President and
its Secretary certifying that each of the representations and warranties set
forth in Section 3 is accurate in all respects as of the Closing Date as if made
on the Closing Date and that the conditions set forth in Sections 7.1, 7.2, 7.3,
7.5, 7.6, 7.7 and 7.8 have been duly satisfied (the "Parent Closing
Certificate"); and

            (b) a written notice in the name of each holder of an assumed
Company Option setting forth (i) the number of shares of Parent Common Stock
subject to such assumed Company Option, and (ii) the exercise price per share of
Parent Common Stock issuable upon exercise of such assumed Company Option;

            (c) the Escrow Agreement, executed by Parent and the Escrow Agent;

            (d) the Shareholder Agreement, executed by Parent;

            (e) certificates representing the Applicable Fraction of shares of
Parent Common Stock in the names of each the Signing Shareholders with respect
to the shares to be delivered to the Signing Shareholders in connection with the
Closing and the shares to be delivered to the Escrow Agent in accordance with
Section 1.10; and

            (f) offer letters for employment with Parent to Andre Hedrick, Greg
Yamamoto, Nick Bellinger, Leo Fang and Chris Short, effective as of the
Effective Time, executed by Parent and in accordance with the terms and
conditions of Section 5.11(a).

      7.5 Financing. Parent shall have entered into the Parent Financing
Agreement, and shall have provided an executed copy of the Parent Financing
Agreement (and all exhibits thereto) to the Company.

      7.6 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by the Signing Shareholders of any material right pertaining to
their ownership of stock of Parent.


                                       36
<PAGE>

      7.7 No Material Adverse Effect. There shall have been no Material Adverse
Effect on Parent, and no event shall have occurred or circumstances exist that,
in combination with any other events or circumstances, could reasonably be
expected to have or result in a Material Adverse Effect on Parent.

      7.8 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.

SECTION 8. TERMINATION

      8.1 Termination Events. This Agreement may be terminated prior to the
Closing:

            (a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement or in any other agreement or instrument delivered to the
Company);

            (b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company or
any of the Signing Shareholders to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or instrument
delivered to Parent);

            (c) by Parent at or after the Scheduled Closing Time if any
condition set forth in Section 6 has not been satisfied by the Scheduled Closing
Time;

            (d) by the Company at or after the Scheduled Closing Time if any
condition set forth in Section 7 has not been satisfied by the Scheduled Closing
Time;

            (e) by Parent if the Closing has not taken place on or before July
31, 2005 (other than as a result of any failure on the part of Parent to comply
with or perform any covenant or obligation of Parent set forth in this Agreement
or in any other agreement or instrument delivered to the Company);

            (f) by the Company if the Closing has not taken place on or before
July 31, 2005 (other than as a result of the failure on the part of the Company
or any of the Signing Shareholders to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or instrument
delivered to Parent); or

            (g) by the mutual consent of Parent and the Company.

      8.2 Termination Procedures. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), Parent shall
deliver to the Company a written notice stating that Parent is terminating this
Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), the Company shall
deliver to Parent a written notice stating that the Company is terminating this
Agreement and setting forth a brief description of the basis on which the
Company is terminating this Agreement.

      8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company nor Parent shall be
relieved of any obligation or liability arising from any prior breach by such


                                       37
<PAGE>

party of any provision of this Agreement; (b) the parties shall, in all events,
remain bound by and continue to be subject to the provisions set forth in
Section 10; and (c) the Company shall, in all events, remain bound by and
continue to be subject to Section 5.4.

SECTION 9. INDEMNIFICATION, ETC.

      9.1 Survival of Representations, Etc.

            (a) The representations and warranties made by the Company and the
Signing Shareholders in Section 2 (other than Sections 2.3 and 2.19) and in the
Company Closing Certificate shall survive the Closing and shall expire on the
first anniversary of the Closing Date, the representations and warranties made
by the Company and the Signing Shareholders in Section 2.3 shall survive the
Closing and shall expire on the fifth anniversary of the Closing Date and the
representations and warranties made by the Company and the Signing Shareholders
in Section 2.19 shall survive the Closing and shall expire on the third
anniversary of the Closing Date; provided, however, that if, at any time prior
to the first, third or fifth anniversary of the Closing Date, as applicable, any
Parent Indemnitee (acting in good faith) delivers to the Shareholders' Agent a
written notice alleging the existence of an inaccuracy in or a breach of any of
such representations and warranties (and setting forth in reasonable detail the
basis for such Parent Indemnitee's belief that such an inaccuracy or breach may
exist) and asserting a claim for recovery under Section 9.2 based on such
alleged inaccuracy or breach, then the claim asserted in such notice shall
survive such anniversary of the Closing until such time as such claim is fully
and finally resolved.

            (b) All representations and warranties made by Parent and Merger Sub
in Section 3 shall survive the Closing and shall expire on the first anniversary
of the Closing Date; provided, however, that if, at any time prior to the first
anniversary of the Closing Date, any Shareholder Indemnitee (acting in good
faith) delivers to Parent a written notice alleging the existence of an
inaccuracy in or a breach of any of such representations and warranties (and
setting forth in reasonable detail the basis for such Shareholder Indemnitee's
belief that such an inaccuracy or breach may exist) and asserting a claim for
recovery under Section 9.2 based on such alleged inaccuracy or breach, then the
claim asserted in such notice shall survive the first anniversary of the Closing
until such time as such claim is fully and finally resolved.

            (c) The representations, warranties, covenants and obligations of
the Company and the Signing Shareholders, on the one hand, and Parent and Merger
Sub on the other, and the rights and remedies that may be exercised by the
applicable Indemnitees, shall not be limited or otherwise affected by or as a
result of any information furnished to, or any investigation made by or
knowledge of, any of the applicable Indemnitees or any of their Representatives.

            (d) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company and the Selling Shareholders in this Agreement.

      9.2 Indemnification by Signing Shareholders and by Parent.

            (a) From and after the Effective Time (but subject to Section
9.1(a)), the shareholders of the Company immediately prior to the Closing (the
"Company Shareholders"), jointly and severally (except with respect to claims
under notices delivered following the first anniversary of the Closing Date, for
which indemnification shall be several and not joint) but subject to the
limitations set forth in this Section 9, shall hold harmless and indemnify each
of the Parent Indemnitees from and against, and shall compensate and reimburse
each of the Parent Indemnitees for, any Damages which are directly or indirectly
suffered or incurred by any of the Parent Indemnitees or to which any of the
Parent Indemnitees may otherwise become subject (regardless of whether or not
such Damages relate to any third-party claim) and which arise from or as a


                                       38
<PAGE>

result of, or are directly or indirectly connected with: (i) any inaccuracy in
or breach of any representation or warranty set forth in Section 2 as of the
date of this Agreement (without giving effect to any "Material Adverse Effect"
or other materiality qualification or any similar qualification contained or
incorporated directly or indirectly in such representation or warranty, and
without giving effect to any update to the Disclosure Schedule); (ii) any
inaccuracy in or breach of any representation or warranty set forth in Section 2
as if such representation and warranty had been made on and as of the Closing
Date (without giving effect to any "Material Adverse Effect" or other
materiality qualification or any similar qualification contained or incorporated
directly or indirectly in such representation or warranty, and without giving
effect to any update to the Disclosure Schedule); (iii) any breach of or failure
to comply with any covenant or obligation of the Company or any of the Signing
Shareholders (including the covenants set forth in Sections 1, 4 and 5); or (iv)
any Legal Proceeding relating to any inaccuracy or breach of the type referred
to in clause "(i)," "(ii)" or "(iii)" above (including any Legal Proceeding
commenced by any Parent Indemnitee for the purpose of enforcing any of its
rights under this Section 9).

            (b) From and after the Effective Time (but subject to Section
9.1(a)), Parent and the Surviving Entity, jointly and severally, shall hold
harmless and indemnify each of the Shareholder Indemnitees from and against, and
shall compensate and reimburse each of the Shareholder Indemnitees for, any
Damages which are directly or indirectly suffered or incurred by any of the
Shareholder Indemnitees or to which any of the Shareholder Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are directly
or indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in Section 3 as of the date of this
Agreement (without giving effect to any "Material Adverse Effect" or other
materiality qualification or any similar qualification contained or incorporated
directly or indirectly in such representation or warranty, and without giving
effect to any update to the Disclosure Schedule); (ii) any inaccuracy in or
breach of any representation or warranty set forth in Section 3 as if such
representation and warranty had been made on and as of the Closing Date (without
giving effect to any "Material Adverse Effect" or other materiality
qualification or any similar qualification contained or incorporated directly or
indirectly in such representation or warranty, and without giving effect to any
update to the Disclosure Schedule); (iii) any breach of or failure to comply
with any covenant or obligation of Parent, Merger Sub or the Surviving Entity
(including the covenants set forth in Sections 1, 4 and 5); or (iv) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)," "(ii)" or "(iii)" above (including any Legal Proceeding commenced
by any Shareholder Indemnitee for the purpose of enforcing any of its rights
under this Section 9).

            (c) If the Surviving Entity suffers, incurs or otherwise becomes
subject to any Damages as a result of or in connection with any inaccuracy in or
breach of any representation, warranty, covenant or obligation solely with
respect to matters prior to the Effective Time, then (without limiting any of
the rights of the Surviving Entity as a Parent Indemnitee) Parent shall also be
deemed, by virtue of its ownership of the stock of the Surviving Entity, to have
incurred Damages as a result of and in connection with such inaccuracy or breach
prior to the Effective Time.

            (d) Following the Effective Time, the indemnification provisions of
this Section 9.2 shall be the sole and exclusive remedies of Parent, the
Surviving Entity and the Company Shareholders for any breach by the other party
of the representations and warranties in this Agreement, except that the
foregoing limitation shall not apply to any such breach arising directly or
indirectly from any circumstance involving fraud or intentional
misrepresentation.

            (e) The maximum liability of each Company Shareholder under Section
9.2(a) (except as set forth in the following sentence) shall be equal to such
Company Shareholder's pro rata portion of the Escrow Shares. The maximum
liability of each Signing Shareholder under Section 9.2(a) for breaches by the
Company or the Signing Shareholders of Sections 2.3, 4.3 and 5.3 shall be equal


                                       39
<PAGE>

to the total number of shares to which such Signing Shareholder was entitled
based on the conversion of the Company Common Stock listed on EXHIBIT A hereto
pursuant to Section 1.5(a)(i) of this Agreement (which consideration is payable
as described in Section 9.3) and the maximum liability of each Signing
Shareholder under Section 9.2(a) for breaches by the Company and the Signing
Shareholders of Section 2.19 shall be equal to the shares received by such
Signing Shareholder from the escrow pursuant to the Escrow Agreement; provided,
however, the limitations on the liability of the Signing Shareholders contained
in this sentence and the previous sentence shall not apply to any such breach
arising directly or indirectly from any circumstance involving fraud or an
intentional misrepresentation on the part of the Company or the Signing
Shareholders.

            (f) No Parent Indemnitee shall be entitled to seek indemnification
hereunder for Damages until the aggregate of all Damages under this Agreement
payable to such Parent Indemnitees (in the aggregate) exceeds $25,000 (the
"Threshold"); after which time the Parent Indemnitees may seek recovery from the
first dollar and not merely the amounts in excess of the Threshold. No
Shareholder Indemnitee shall be entitled to seek indemnification hereunder for
Damages until the aggregate of all Damages under this Agreement payable to all
Shareholder Indemnitees exceeds the Threshold; after which time the Shareholder
Indemnitees may seek recovery from the first dollar and not merely the amounts
in excess of the Threshold. Notwithstanding the foregoing, the Threshold shall
not apply to Damages involving fraud or an intentional misrepresentation, a
breach of covenants in this Agreement or a breach of Sections 2.3, 2.19, 4.3 or
5.3 of this Agreement, in which case Shareholder Indemnitees or the Parent
Indemnitees, as the case may be, shall be entitled to seek indemnification
hereunder for Damages from the first dollar.

            (g) Parent, the Surviving Entity, the Company and the Signing
Shareholders and their respective affiliates (including all Indemnitees) shall
act in good faith and in a commercially reasonable manner to mitigate any
Damages they may suffer.

      9.3 Satisfaction of Indemnification Claim. In the event any Company
Shareholder shall have any liability (for indemnification or otherwise) to any
Parent Indemnitee under this Section 9, such liability shall be satisfied by
delivering to such Parent Indemnitee the number of shares of Parent Common Stock
determined by dividing (a) the aggregate dollar amount of such liability by (b)
the Designated Parent Stock Price (as adjusted as appropriate to reflect any
stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction effected by Parent between the Effective Time and the date
such liability is satisfied). Notwithstanding the foregoing, in the event of a
breach of Section 2.3, 2.19, 4.3 or 5.3 for which notice is delivered by Parent
following the first anniversary of the Closing or for which the Escrow Shares
are insufficient to satisfy the indemnification liability, the liability shall
be satisfied by delivering to the Parent Indemnitee, at the option of each of
the Signing Shareholders in his sole discretion, either (i) cash in the
aggregate dollar amount of such liability or (ii) (A) such number of shares of
Parent Common Stock held by such Signing Shareholder at the time of such
delivery equal to the amount of such liability divided by the average of the
closing sale prices of a share of Parent Common Stock as reported on the Nasdaq
SmallCap Market for each of the 10 consecutive trading days immediately
preceding the date of such notice plus (B) to the extent the total number of
shares delivered pursuant to clause (A) is insufficient to satisfy such
liability, cash, except that in no event shall the payments required by this
clause (ii) exceed the value of the shares of Parent Common Stock held by such
Signing Shareholder plus the gross proceeds received by the Signing Shareholder
upon his sale of Parent Common Stock, net of (x) income taxes paid by the
Signing Shareholder in respect of his sale of Parent Common Stock plus (y)
income taxes payable upon the delivery of shares to the Parent Indemnitee
pursuant to (A) above.


                                       40
<PAGE>

      9.4 No Contribution. Each Company Shareholder, by virtue of its approval
of this Agreement, waives, and acknowledges and agrees that he shall not have
and shall not exercise or assert (or attempt to exercise or assert), any right
of contribution, right of indemnity or other right or remedy against the
Surviving Entity in connection with any indemnification obligation or any other
liability to which he may become subject under or in connection with this
Agreement or the Company Closing Certificate.

      9.5 Interest. Any Person who is required to hold harmless, indemnify,
compensate or reimburse any Indemnitee pursuant to this Section 9 with respect
to any Damages shall also be liable to such Indemnitee for interest, payable as
described in the last sentence of Section 9.3), on the amount of such Damages
(for the period commencing as of the date on which such Person first received
notice of a claim for recovery by such Indemnitee and ending on the date on
which the liability of such Person to such Indemnitee is fully satisfied by such
Person) at a floating rate equal to the rate of interest publicly announced by
Bank of America, N.T. & S.A. from time to time as its prime, base or reference
rate.

      9.6 Defense of Third Party Claims.

            (a) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Surviving Entity, against
Parent or against any other Person) with respect to which any of the Parent
Indemnitees may be entitled to indemnification or any other remedy pursuant to
this Section 9, Parent shall promptly give the Shareholders' Agent and the
Escrow Agent written notice (a "Claim Notice") of such claim (a "Claim") or
Legal Proceeding; provided, however, that any failure on the part of Parent to
so notify the Shareholders' Agent shall not limit any of the Parent Indemnitees'
rights to indemnification under this Section 9 (except to the extent such
failure materially prejudices the defense of such Legal Proceeding). Parent
shall have the right, at its election, to proceed with the defense of such Claim
or Legal Proceeding on its own. If Parent proceeds with the defense of any such
Claim or Legal Proceeding, it shall so notify the Shareholders' Agent in the
Claim Notice. If Parent makes the foregoing election, the Shareholders' Agent
will have the right to participate at its own expense in all proceedings and
will provide the Shareholders' Agent with reasonable access to all relevant
information and documentation relating to the Claim or Legal Proceeding, and the
prosecution or defense thereof. If the Shareholders' Agent acknowledges in
writing the obligation of the Shareholders of the Company to indemnify Parent
hereunder against any Damages arising out of such Claim or Legal Proceeding, all
reasonable and documented third-party expenses relating to the defense of such
Claim or Legal Proceeding shall be recovered by Parent by having Parent and the
Shareholders' Agent instruct the Escrow Agent to release to Parent that number
of Escrow Shares, to the extent available, equal in value (as determined in
accordance with the terms and conditions of the Escrow Agreement) to the
aggregate amount of such expenses. Such recovery shall be made from Escrow
Shares on a basis proportional to the Escrow Shares contributed under the Escrow
Agreement by or on behalf of each Company Shareholder. Notwithstanding the
foregoing, in the event the Claim or Legal Proceeding relates to a breach of
Section 2.3, 2.19, 4.3 or 5.3 of this Agreement, if no Escrow Shares are
available Parent shall be entitled to receive reimbursement from Signing
Shareholders as provided in the last sentence of Section 9.3.

            (b) Within ten days of delivery of the Claim Notice, if Parent has
not elected to proceed with the defense of such Claim or Legal Proceeding on its
own, the Shareholders' Agent may elect (by written notice delivered to Parent)
to take all necessary steps properly to contest any Claim or Legal Proceeding
involving third parties or to prosecute such Claim or Legal Proceeding to
conclusion or settlement. If the Shareholders' Agent makes the foregoing
election, a Parent Indemnitee will have the right to participate at its own
expense in all proceedings. If the Shareholders' Agent does not make such
election within such period or fails to diligently contest such Claim or Legal
Proceeding after such election, then the Parent Indemnitee shall handle the
prosecution or defense of any such Claim or Legal Proceeding, and will take all
necessary steps to contest the Claim or Legal Proceeding involving third parties
or to prosecute such Claim or Legal Proceeding to conclusion or settlement, and
will notify the Shareholders' Agent of the progress of any such Claim or Legal


                                       41
<PAGE>

Proceeding, will permit the Shareholders' Agent, at the sole cost of the
Shareholders' Agent, to participate in such prosecution or defense and will
provide the Shareholders' Agent with reasonable access to all relevant
information and documentation relating to the Claim or Legal Proceeding and the
prosecution or defense thereof. If Parent proceeds with the defense of any such
Claim or Legal Proceeding in these circumstances, all Parent's reasonable,
documented, third-party expenses relating to the defense of such Claim or Legal
Proceeding shall be recovered by obtaining that number of Escrow Shares, to the
extent available, equal in value (as determined in accordance with the terms and
conditions of the Escrow Agreement) to the aggregate amount of such expenses.
Such recovery shall be made from the Escrow Shares on a basis proportional to
the Escrow Shares contributed under the Escrow Agreement by or on behalf of each
Company Shareholder.

            (c) Neither party will compromise or settle any such Claim or Legal
Proceeding without the written consent of either Parent (if the Shareholders'
Agent defends the Claim or Legal Proceeding) or the Shareholders' Agent (if
Parent or other Parent Indemnitees defend the Claim or Legal Proceeding), such
consent not to be unreasonably withheld, conditioned or delayed. In any case,
the party not in control of the Claim or Legal Proceeding will cooperate with
the other party in the conduct of the prosecution or defense of such Claim or
Legal Proceeding.

      9.7 Exercise of Remedies by Indemnitees. No Parent Indemnitee (other than
Parent or any successor thereto or assign thereof) shall be permitted to assert
any indemnification claim or exercise any other remedy under this Agreement
unless Parent (or any successor thereto or assign thereof) shall have consented
to the assertion of such indemnification claim or the exercise of such other
remedy. No Shareholder Indemnitee shall be permitted to assert any
indemnification claim or exercise any remedy under this Agreement unless the
Shareholders' Agent shall have consented to the assertion of such
indemnification claim or the exercise of such other remedy. 9.8 Escrow Fund.
Each shareholder of the Company receiving Parent Common Stock in the Merger will
be deemed to have received and deposited with the Escrow Agent the Escrow Shares
(plus any additional shares as may be issued upon any stock split, stock
dividend or recapitalization effected by Company after the Effective Time of the
Merger with respect to the Escrow Amount) for purposes of satisfying any
indemnification claims made pursuant to this Section 9. The Escrow Shares will
be deposited with and will be held by an institution mutually acceptable to
Company and the Shareholders' Agent, such deposit to constitute an escrow fund
to be governed by the terms set forth in the Escrow Agreement. Payment of any
amounts in respect of the Company Shareholders' indemnity obligations pursuant
to this Section 9 shall first be taken from the Escrow Shares as set forth in
the Escrow Agreement.

SECTION 10. MISCELLANEOUS PROVISIONS

      10.1 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.

      10.2 Fees and Expenses. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by or on behalf of such party in
connection with the transactions contemplated by this Agreement, including all
fees, costs and expenses incurred by such party in connection with or by virtue
of (a) the investigation and review conducted by Parent and its Representatives
with respect to the Company's business (and the furnishing of information to
Parent and its Representatives in connection with such investigation and
review), (b) the negotiation, preparation and review of this Agreement


                                       42
<PAGE>

(including the Disclosure Schedule) and all agreements, certificates, opinions
and other instruments and documents delivered or to be delivered in connection
with the transactions contemplated by this Agreement, (c) the preparation and
submission of any filing or notice required to be made or given in connection
with any of the transactions contemplated by this Agreement, and the obtaining
of any Consent required to be obtained in connection with any of such
transactions, (d) the preparation and audit of the Company's financial
statements conducted by Parent and Representatives of Parent, and (e) the
consummation of the Merger.

      10.3 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).

      10.4 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):

                  if to Parent:             SBE, Inc.
                                            Attn:  David Brunton
                                            2305 Camino Ramon
                                            Suite 200
                                            San Ramon, CA 94583
                                            Facsimile: (925) 355-2041

                  with copy to:             Cooley Godward LLP
                                            Attn:  Jodie Bourdet
                                            One Maritime Plaza, 20th Floor
                                            San Francisco, CA 94111
                                            Facsimile: (415) 951-3699

                  if to the Company
                  or the Signing
                  Shareholders:             PyX Technologies, Inc.
                                            Attn:  Greg Yamamoto
                                            2305 Camino Ramon, Suite 210
                                            San Ramon, CA  94583
                                            Facsimile:  (408) 354-7335

                  with copy to:             Orrick, Herrington & Sutcliffe LLP
                                            Attn:  Jim Black
                                            405 Howard Street
                                            San Francisco, CA 94105
                                            Facsimile: (415) 773-5759

      10.5 Time of the Essence. Time is of the essence of this Agreement.

      10.6 Headings. The headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.


                                       43
<PAGE>

      10.7 Counterparts. This Agreement may be executed in several counterparts,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.

      10.8 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).

      10.9 Successors and Assigns. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Signing Shareholders and
their respective personal representatives, executors, administrators, estates,
heirs, successors and assigns (if any); Parent and its successors and assigns
(if any); and Merger Sub and its successors and assigns (if any). This Agreement
shall inure to the benefit of: the Company; the Company's shareholders (to the
extent set forth in Section 1.5); the holders of assumed Company Options (to the
extent set forth in Section 1.6); Parent; Merger Sub; the other Indemnitees
(subject to Section 9.7); and the respective successors and assigns (if any) of
the foregoing. Parent may freely assign any or all of its rights under this
Agreement (including its indemnification rights under Section 9), in whole or in
part, to any other Person without obtaining the consent or approval of any other
party hereto or of any other Person.

      10.10 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.

      10.11 Waiver.

            (a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.

            (b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.

      10.12 Amendments. This Agreement may not be amended, modified, altered or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.

      10.13 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to


                                       44
<PAGE>

expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.

      10.14 Parties in Interest. Except for the provisions of Sections 1.5, 1.6
and 9, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).

      10.15 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof; provided, however, that (a) the Confidentiality
Agreement executed on behalf of Parent and the Company on February 11, 2005
shall not be superseded by this Agreement and shall remain in effect until the
date on which such Confidentiality Agreement is terminated in accordance with
its terms and (b) paragraphs 7 through 11 of the Term Sheet, executed by Parent
and the Company on February 7, 2005, shall remain in effect until such
paragraphs are terminated in accordance with the terms of the Term Sheet. Each
of the Signing Shareholders will abide by the obligations of the Company under
the Confidentiality Agreement.

      10.16 Construction.

            (a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.

            (b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.

            (c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."

            (d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.


                                       45
<PAGE>

      The parties hereto have caused this Agreement to be executed and delivered
as of the date first above written.

                                      SBE, INC.,
                                      a Delaware corporation

                                      By: /s/ Dan Grey


                                      PYX ACQUISITION SUB, LLC,
                                        a California limited liability company

                                      By: /s/ Dan Grey
                                          ------------------------------------


                                      PYX TECHNOLOGIES, INC.,
                                        a California corporation

                                      By: /S/ Greg Yamamoto
                                          ------------------------------------



                                      /s/ Andre Hedrick
                                      ----------------------------------------
                                      ANDRE HEDRICK


                                      /S/ NICK BELLINGER
                                      ----------------------------------------
                                      NICK BELLINGER


                                       46
<PAGE>

                                    EXHIBIT A

                              SIGNING SHAREHOLDERS




NAME                    Shares of Company Common Stock
----                    ------------------------------
Andre Hedrick                      3,200,000
Nick Bellinger                     750,000
TOTAL:


                                        1
<PAGE>

                                    EXHIBIT B

                               CERTAIN DEFINITIONS

      For purposes of the Agreement (including this EXHIBIT B):

      Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:

            (a) the sale, license, disposition or acquisition of all or a
material portion of the Company's business or assets;

            (b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock issued to
employees of the Company, upon exercise of Company Options or otherwise, in
routine transactions in accordance with the Company's past practices), (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or

            (c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.

      Agreement. "Agreement" shall mean the Agreement and Plan of Merger and
Reorganization to which this EXHIBIT B is attached (including the Disclosure
Schedule), as it may be amended from time to time.

      COBRA. "COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended.

      Company Affiliate. "Company Affiliate" shall mean any Person under common
control with the Company within the meaning of Sections 414(b), (c), (m) and (o)
of the Code, and the regulations issued thereunder.

      Company Contract. "Company Contract" shall mean any Contract: (a) to which
the Company is a party; (b) by which the Company or any of its assets is or may
become bound or under which the Company has, or may become subject to, any
obligation; or (c) under which the Company has or may acquire any right or
interest.

      Company Employee. "Company Employee" shall mean any current or former
employee, independent contractor or director of the Company or any Company
Affiliate.

      Company Employee Agreement. "Company Employee Agreement" shall mean each
management, employment, severance, consulting, relocation, repatriation or
expatriation agreement or other Contract between the Company or any Company
Affiliate and any Company Employee, other than any such management, employment,
severance, consulting, relocation, repatriation or expatriation agreement or
other Contract with a Company Employee which is terminable "at will" without any
obligation on the part of the Company or any Company Affiliate to make any
payments or provide any benefits in connection with such termination.

      Company Employee Plan. "Company Employee Plan" shall mean any plan,
program, policy, practice, Contract or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee


                                       1
<PAGE>

benefits or remuneration of any kind, whether written, unwritten or otherwise,
funded or unfunded, including each "employee benefit plan," within the meaning
of Section 3(3) of ERISA (whether or not ERISA is applicable to such plan), that
is or has been maintained, contributed to, or required to be contributed to, by
the Company or any Company Affiliate for the benefit of any Company Employee, or
with respect to which the Company or any Company Affiliate has or may have any
liability or obligation, except such definition shall not include any Company
Employee Agreement.

      Company IP. "Company IP" shall mean all Intellectual Property Rights and
Intellectual Property in which the Company has (or purports to have) an
ownership interest or an exclusive license or similar exclusive right.

      Company IP Contract. "Company IP Contract" shall mean any Contract to
which the Company is or was a party or by which the Company is or was bound,
that contains any assignment or license of, or any covenant not to assert or
enforce, any Intellectual Property Right or that otherwise relates to any
Company IP or any Intellectual Property developed by, with or for the Company.

      Company Pension Plan. "Company Pension Plan" shall mean each Company
Employee Plan that is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA.

      Company Software. "Company Software" shall mean any software (including
firmware and other software embedded in hardware devices) owned, developed (or
currently being developed), used, marketed, distributed, licensed or sold by the
Company at any time (other than non-customized third-party software licensed to
the Company for internal use on a non-exclusive basis).

      Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).

      Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.

      Damages. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.

      Designated Parent Stock Price. "Designated Parent Stock Price" shall have
the meaning given to such term in Section 1.8(c).

      Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Parent on behalf of the Company
and the Signing Shareholders.

      DOL. "DOL" means the United States Department of Labor.

      Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right, community
property interest or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).

      Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability


                                       2
<PAGE>

partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.

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

      Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

      FMLA. "FMLA" shall mean the Family Medical Leave Act of 1993, as amended.

      Foreign Plan. "Foreign Plan" shall mean: (i) any plan, program, policy,
practice, Contract or other arrangement mandated by a Governmental Body other
than the United States; (ii) any Company Employee Plan maintained or contributed
to by the Company or any Company Affiliate that is not subject to United States
law; and (iii) any Company Employee Plan that covers or has covered Company
Employees whose services are performed primarily outside of the United States.

      Government Bid. "Government Bid" shall mean any quotation, bid or proposal
submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.

      Government Contract. "Government Contract" shall mean any prime contract,
subcontract, letter contract, purchase order or delivery order executed or
submitted to or on behalf of any Governmental Body or any prime contractor or
higher-tier subcontractor, or under which any Governmental Body or any such
prime contractor or subcontractor otherwise has or may acquire any right or
interest.

      Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.

      Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).

      HIPAA. "HIPAA" shall mean the Health Insurance Portability and
Accountability Act of 1996, as amended.

      Indemnitees. "Indemnitees" shall mean the Parent Indemnitees and the
Shareholder Indemnitees.

      Intellectual Property. "Intellectual Property" shall mean algorithms,
APIs, apparatus, circuit designs and assemblies, gate arrays, IP cores, net
lists, photomasks, semiconductor devices, test vectors, databases, data
collections, diagrams, formulae, inventions (whether or not patentable),
know-how, logos, marks (including brand names, product names, logos, and
slogans), methods, network configurations and architectures, processes,
proprietary information, protocols, schematics, specifications, software,
software code (in any form, including source code and executable or object
code), subroutines, techniques, user interfaces, URLs, web sites, works of
authorship and other forms of technology (whether or not embodied in any
tangible form and including all tangible embodiments of the foregoing, such as
instruction manuals, laboratory notebooks, prototypes, samples, studies and
summaries).


                                       3
<PAGE>

      Intellectual Property Rights. "Intellectual Property Rights" shall mean
all past, present, and future rights of the following types, which may exist or
be created under the laws of any jurisdiction in the world: (A) rights
associated with works of authorship, including exclusive exploitation rights,
copyrights, moral rights and mask works; (B) trademark and trade name rights and
similar rights; (C) trade secret rights; (D) patent and industrial property
rights; (E) other proprietary rights in Intellectual Property; and (F) rights in
or relating to registrations, renewals, extensions, combinations, divisions, and
reissues of, and applications for, any of the rights referred to in clauses
"(A)" through "(E)" above.

      IRS. "IRS" shall mean the United States Internal Revenue Service.

      Knowledge. "Knowledge" with respect to the Company and the Signing
Shareholders shall mean the actual knowledge of Andre Hedrick, Greg Yamamoto,
Nick Bellinger, Leo Fang or Chris Short of a particular fact or other matter.

      Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.

      Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.

      Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on a person if such violation or other matter
(considered together with all other matters that would constitute exceptions to
the representations and warranties set forth in the Agreement or in the person's
Closing Certificate but for the presence of "Material Adverse Effect" or other
materiality qualifications, or any similar qualifications, in such
representations and warranties) would have a material adverse effect on the
person's business, condition, assets, liabilities, operations, financial
performance or prospects.

      Parent Indemnitees. "Parent Indemnitees" shall mean (a) Parent; (b)
Parent's current and future affiliates (including the Surviving Entity); (c) the
respective Representatives of the Persons referred to in clauses "(a)" and "(b)"
above; and (d) the respective successors and assigns of the Persons referred to
in clauses "(a)", "(b)" and "(c)" above.

      Person. "Person" shall mean any individual, Entity or Governmental Body.

      Registered IP. "Registered IP" shall mean all Intellectual Property Rights
that are registered, filed, or issued under the authority of, with or by any
Governmental Body, including all patents, registered copyrights, registered mask
works and registered trademarks and all applications for any of the foregoing.

      Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.

      SEC. "SEC" shall mean the United States Securities and Exchange
Commission.

      Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.

      Shareholder Indemnitees. "Shareholder Indemnitees" shall mean (a) each
shareholder of the Company immediately prior to the Effective Time; (b) the


                                       4
<PAGE>

respective Representatives of the Persons referred to in clauses "(a)" above;
and (c) the respective successors and assigns of the Persons referred to in
clauses "(a)" and "(b)" above.

      Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff or duty
(including any customs duty), and any related charge or amount (including any
fine, penalty or interest), imposed, assessed or collected by or under the
authority of any Governmental Body.

      Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.


                                       5
<PAGE>

================================================================================

                 AGREEMENT AND PLAN OF MERGER AND REORGANIZATION


                                     among:


                                   SBE, INC.,
                             a Delaware corporation;


                            PYX ACQUISITION SUB, LLC,
                     a California limited liability company;


                             PYX TECHNOLOGIES, INC.,
                            a California corporation;


                                       and


                 CERTAIN SHAREHOLDERS OF PYX TECHNOLOGIES, INC.,





                           ---------------------------

                           Dated as of March 28, 2005
                           ---------------------------



================================================================================

<PAGE>

EXHIBIT C

                            NONCOMPETITION AGREEMENT

      THIS NONCOMPETITION AGREEMENT is being executed and delivered as of
_______, 2005 by [ ] ("Shareholder") in favor of, and for the benefit of: SBE,
Inc., a Delaware corporation ("Parent"); PyX Technologies, Inc., a California
corporation (together with its subsidiaries, the "Company"); and the other
"Indemnitees" (as hereinafter defined). Certain capitalized terms used in this
Noncompetition Agreement are defined in Section 19. Capitalized terms not
otherwise defined herein shall have the meaning assigned to them in the Merger
Agreement (as defined below).

                                    RECITALS

      A. As a shareholder and employee of the Company, Shareholder has obtained
extensive and valuable knowledge and confidential information concerning the
businesses of the Company.

      B. Parent, the Company and PyX Acquisition Sub, LLC, a California limited
liability company, the sole member of which is Parent ("Merger Sub"), have
entered into an Agreement and Plan of Merger and Reorganization dated as of
March 28, 2005 (the "Merger Agreement"), providing for the merger of the Company
into Merger Sub (the "Merger"). The Merger Agreement contemplates that, upon
consummation of the Merger, (i) holders of shares of the common stock of the
Company ("Company Common Stock") will receive shares of common stock of Parent
("Parent Common Stock") in exchange for their shares of Company Common Stock,
and (ii) the Company will cease to exist, and Parent will continue as the sole
member of Merger Sub.

      C. As a condition to consummating the transactions contemplated by the
Merger Agreement, and to enable Parent to secure more fully the benefits of the
Merger, including the acquisition of the goodwill of the company, Parent has
required that Shareholder enter into this Noncompetition Agreement and
Shareholder is entering into this Noncompetition Agreement in order to induce
Parent to consummate the transactions contemplated by the Merger Agreement.

      D. Parent, the Company and Parent's other subsidiaries have conducted and
are conducting their respective businesses on a national basis.


                                    AGREEMENT

In order to induce Parent to consummate the transactions contemplated by the
Merger Agreement, and for other good and valuable consideration, Shareholder
agrees as follows:

      1. Restriction on Competition. Shareholder agrees that, during the
Noncompetition Period, Shareholder shall not:

            (a) engage directly or indirectly in Competition in any Restricted
Territory; or

            (b) directly or indirectly be or become an officer, director,
shareholder, owner, co-owner, partner, employee, agent, consultant, advisor or
manager of, for or to, or acquire or hold (of record, beneficially or otherwise)
any direct or indirect interest in, any Person that engages directly or
indirectly in Competition in any Restricted Territory;

<PAGE>

provided, however, that Shareholder may, without violating this Section 1, own,
as a passive investment, shares of capital stock of a publicly-held corporation
that engages in Competition if (i) such shares are actively traded on an
established national securities market in the United States, (ii) the number of
shares of such corporation's capital stock that are owned beneficially (directly
or indirectly) by Shareholder represent less than five percent of the total
number of shares of such corporation's capital stock outstanding, and (iii)
Shareholder is not otherwise associated directly or indirectly with such
corporation.

      2. No Hiring or Solicitation of Employees. Shareholder agrees that, during
the Noncompetition Period, Shareholder shall not, directly or indirectly: (a)
hire any Specified Employee, or (b) directly or indirectly, personally or
through others, encourage, induce, attempt to induce, solicit or attempt to
solicit (on Shareholder's own behalf or on behalf of any other Person) any
Specified Employee to leave his or her employment with Parent, the Company or
any of Parent's other subsidiaries. For purposes of this Section 2, "Specified
Employee" shall mean any individual who is an employee of the Company at any
time during Shareholder's employment with the Company or, to such Shareholder's
actual knowledge, at any time thereafter during the Noncompetition Period.

      3. Confidentiality. Shareholder agrees that he shall hold all Confidential
Information in strict confidence and shall not at any time (whether during or
after the Noncompetition Period) reveal, report, publish, disclose or transfer
any Confidential Information to any Person (other than Parent or the Company),
except in the performance of his obligations as an employee or consultant of
Parent or the Company or as may be required by law or binding court order. If
there is a conflict between this confidentiality provision and the terms and
conditions of any other confidentiality provision between Parent or the Company,
on the one hand, and Shareholder on the other hand, these confidentiality
provisions shall govern; provided, however, that nothing in this Noncompetition
Agreement shall have any effect on the provisions of any employee proprietary
information agreement executed and delivered by Shareholder in favor of the
Company or Parent.

      4. Representations and Warranties. Shareholder represents and warrants, to
and for the benefit of the Indemnitees, that: (a) he has full power and capacity
to execute and deliver, and to perform all of his obligations under, this
Noncompetition Agreement; and (b) neither the execution and delivery of this
Noncompetition Agreement nor the performance of this Noncompetition Agreement
will result directly or indirectly in a violation or breach of (i) any agreement
or obligation by which Shareholder may be bound, or (ii) any law, rule or
regulation. Shareholder's representations and warranties shall survive the
expiration of the Noncompetition Period for an unlimited period of time.

      5. Specific Performance. Shareholder agrees that, in the event of any
breach or threatened breach by Shareholder of any covenant or obligation
contained in this Noncompetition Agreement, each of Parent, the Company and the
other Indemnitees shall be entitled (in addition to any other remedy that may be
available to it, including monetary damages) to seek and obtain (a) a decree or
order of specific performance to enforce the observance and performance of such
covenant or obligation, and (b) an injunction restraining such breach or
threatened breach. Shareholder further agrees that no Indemnitee shall be
required to obtain, furnish or post any bond or similar instrument in connection
with or as a condition to obtaining any remedy referred to in this Section 5,
and Shareholder irrevocably waives any right he may have to require any
Indemnitee to obtain, furnish or post any such bond or similarly instrument.

      6. Indemnification. Without in any way limiting any of the rights or
remedies otherwise available to any of the Indemnitees, Shareholder shall
indemnify and hold harmless each Indemnitee against and from any loss, damage,
injury, harm, detriment, lost opportunity, liability, exposure, claim, demand,
settlement, judgment, award, fine, penalty, tax, fee (including attorneys'


                                       2
<PAGE>

fees), charge or expense (whether or not relating to any third-party claim) that
is directly or indirectly suffered or incurred at any time (whether during or
after the Noncompetition Period) by such Indemnitee, or to which such Indemnitee
otherwise becomes subject at any time (whether during or after the
Noncompetition Period), and that arises directly or indirectly out of or by
virtue of, or relates directly or indirectly to, (a) any inaccuracy in or breach
of any representation or warranty contained in this Noncompetition Agreement, or
(b) any failure on the part of Shareholder to observe, perform or abide by, or
any other breach of, any restriction, covenant, obligation or other provision
contained in this Noncompetition Agreement.

      7. Non-Exclusivity. The rights and remedies of Parent, the Company and the
other Indemnitees under this Noncompetition Agreement are not exclusive of or
limited by any other rights or remedies which they may have, whether at law, in
equity, by contract or otherwise, all of which shall be cumulative (and not
alternative). Without limiting the generality of the foregoing, the rights and
remedies of Parent, the Company and the other Indemnitees under this
Noncompetition Agreement, and the obligations and liabilities of Shareholder
under this Noncompetition Agreement, are in addition to their respective rights,
remedies, obligations and liabilities under the law of unfair competition, under
laws relating to misappropriation of trade secrets, under other laws and common
law requirements and under all applicable rules and regulations. Nothing in this
Noncompetition Agreement shall limit any of Shareholder's obligations, or the
rights or remedies of Parent, the Company or any of the other Indemnitees, under
the Merger Agreement; and nothing in the Merger Agreement shall limit any of
Shareholder's obligations, or any of the rights or remedies of Parent, the
Company, or any of the other Indemnitees, under this Noncompetition Agreement.
Except as specifically provided in this Noncompetition Agreement, no breach on
the part of Parent, the Company or any other party of any covenant or obligation
contained in the Merger Agreement or any other agreement shall limit or affect
any right or remedy of Parent, the Company or any of the other Indemnitees under
this Noncompetition Agreement.

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

      9. Governing Law; Venue.

            (a) This Noncompetition Agreement shall be construed in accordance
with, and governed in all respects by, the laws of the State of California
(without giving effect to principles of conflicts of laws).

            (b) Any legal action or other legal proceeding relating to this
Noncompetition Agreement or the enforcement of any provision of this
Noncompetition Agreement may be brought or otherwise commenced in any state or
federal court located in the County of Contra Costa, California. Shareholder:


                                       3
<PAGE>

            (i) expressly and irrevocably consents and submits to the
      jurisdiction of each state and federal court located in the County of
      Contra Costa, California (and each appellate court located in the State of
      California), in connection with any such legal proceeding;

            (ii) agrees that service of any process, summons, notice or document
      by U.S. mail addressed to him at the address set forth on the signature
      page of this Noncompetition Agreement shall constitute effective service
      of such process, summons, notice or document for purposes of any such
      legal proceeding (it being understood that nothing in this Section
      9(b)(ii) shall affect the right of any party to serve process in any other
      manner permitted by law);

            (iii) agrees that each state and federal court located in the County
      of Contra Costa, California, shall be deemed to be a convenient forum; and

            (iv) agrees not to assert (by way of motion, as a defense or
      otherwise), in any such legal proceeding commenced in any state or federal
      court located in the County of Contra Costa, California, any claim that
      Shareholder is not subject personally to the jurisdiction of such court,
      that such legal proceeding has been brought in an inconvenient forum, that
      the venue of such proceeding is improper or that this Noncompetition
      Agreement or the subject matter of this Noncompetition Agreement may not
      be enforced in or by such court.

Nothing contained in this Section 9 shall be deemed to limit or otherwise affect
the right of any Indemnitee to commence any legal proceeding or otherwise
proceed against Shareholder in any other forum or jurisdiction.

      10. Waiver. No failure on the part of Parent, the Company or any other
Indemnitee to exercise any power, right, privilege or remedy under this
Noncompetition Agreement, and no delay on the part of Parent, the Company or any
other Indemnitee in exercising any power, right, privilege or remedy under this
Noncompetition Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy. No Indemnitee shall be deemed to
have waived any claim of such Indemnitee arising out of this Noncompetition
Agreement, or any power, right, privilege or remedy of such Indemnitee under
this Noncompetition Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such Indemnitee; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.

      11. Successors and Assigns. Each of Parent, the Company and the other
Indemnitees may freely assign any or all of its rights under this Noncompetition
Agreement, at any time, in whole or in part, to any Person without obtaining the
consent or approval of Shareholder or of any other Person. This Noncompetition
Agreement shall be binding upon Shareholder and his heirs, executors, estate,
personal representatives, successors and assigns, and shall inure to the benefit
of Parent, the Company and the other Indemnitees.

      12. Further Assurances. Shareholder shall (at Shareholder's sole expense)
execute and/or cause to be delivered to each Indemnitee such instruments and
other documents, and shall (at Shareholder's sole expense) take such other
actions, as such Indemnitee may reasonably request at any time (whether during
or after the Noncompetition Period) for the purpose of carrying out or
evidencing any of the provisions of this Noncompetition Agreement.

      13. Attorneys' Fees. If any legal action or other legal proceeding
relating to this Noncompetition Agreement or the enforcement of any provision of


                                       4
<PAGE>

this Noncompetition Agreement is brought against Shareholder, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party may
be entitled).

      14. Captions. The captions contained in this Noncompetition Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Noncompetition Agreement and shall not be referred to in connection with the
construction or interpretation of this Noncompetition Agreement.

      15. Construction. Whenever required by the context, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders. Any rule of construction to the effect that ambiguities
are to be resolved against the drafting party shall not be applied in the
construction or interpretation of this Noncompetition Agreement. Neither the
drafting history nor the negotiating history of this Noncompetition Agreement
shall be used or referred to in connection with the construction or
interpretation of this Noncompetition Agreement. As used in this Noncompetition
Agreement, the words "include" and "including," and variations thereof, shall
not be deemed to be terms of limitation, and shall be deemed to be followed by
the words "without limitation." Except as otherwise indicated in this
Noncompetition Agreement, all references in this Noncompetition Agreement to
"Sections" are intended to refer to Sections of this Noncompetition Agreement.

      16. Survival of Obligations. Except as specifically provided herein, the
obligations of Shareholder under this Noncompetition Agreement (including his
obligations under Sections 3, 6 and 12) shall survive the expiration of the
Noncompetition Period. The expiration of the Noncompetition Period shall not
operate to relieve Shareholder of any obligation or liability arising from any
prior breach by Shareholder of any provision of this Noncompetition Agreement.

      17. Obligations Absolute. Shareholder's obligations under this
Noncompetition Agreement are absolute and shall not be terminated or otherwise
limited by virtue of any breach (on the part of Parent, the Company, any other
Indemnitee or any other Person) of any provision of the Merger Agreement or any
other agreement, or by virtue of any failure to perform or other breach of any
obligation of Parent, the Company, any other Indemnitee or any other Person.

      18. Amendment. This Noncompetition Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of Shareholder, Parent (or any successor to
Parent) and the Company (or any successor to the Company).

      19. Defined Terms. For purposes of this Noncompetition Agreement:

            (a) "Cause" for Shareholder's termination shall mean:

            (i) Shareholder has materially breached this Noncompetition
Agreement or any other written agreement between Shareholder and Parent or the
Company, including any applicable employee proprietary information agreement;

            (ii) Shareholder (A) has failed to follow specific directions of
Parent's Board of Directors, Chief Executive Officer or Chief Financial Officer,
and such failure to follow direction represents a failure to perform duties
required by Shareholder's position with Parent or causes material harm to
Parent, or (B) has engaged in gross neglect of his duties as an employee of
Parent, which neglect or failure to follow direction has not been corrected
within 10 days after delivery of written notice to Shareholder describing in
detail the gross neglect or failure to follow specific directions;


                                       5
<PAGE>

            (iii) Shareholder has committed an act of gross negligence or gross
misconduct, including, without limitation, Shareholder's theft, misuse or
unauthorized disclosure of material proprietary information; and

            (iv) Shareholder is convicted of or has entered a plea of nolo
contendere to a felony or a crime involving moral turpitude.

            (b) "Competing Product" means any: (i) iSCSI software or similar
product; (ii) product, equipment, device or system that has been designed,
developed, manufactured, assembled, promoted, sold, supplied, distributed,
resold, installed, supported, maintained, repaired, refurbished, licensed,
sublicensed, financed, leased or subleased by or on behalf of the Company (or
any predecessor of the Company) at any time on or prior to this date of this
Noncompetition Agreement; (iii) storage or network product, equipment, device or
system that is designed, developed, manufactured, assembled, promoted, sold,
supplied, distributed, resold, installed, supported, maintained, repaired,
refurbished, licensed, sublicensed, financed, leased or subleased by or on
behalf of Parent or the Company at any time while Shareholder is employed by the
Company; or (iv) product, equipment, device or system that is substantially the
same as, incorporates, is a material component or part of, is based upon, is
functionally similar to or competes in any material respect with any product,
equipment, device or system of the type referred to in clause "(i)", clause
"(ii)" or clause "(iii)" of this sentence.

            (c) "Competing Service" means any: (i) service that has been
provided, performed or offered by or on behalf of the Company (or any
predecessor of the Company) at any time on or prior to the date of this
Noncompetition Agreement; (ii) service that is provided, performed or offered by
Parent or the Company at any time while Shareholder is employed by the Company;
(iii) service that facilitates, supports or otherwise relates to the design,
development, manufacture, assembly, promotion, sale, supply, distribution,
resale, installation, support, maintenance, repair, refurbishment, licensing,
sublicensing, financing, leasing or subleasing of any Competing Product; or (iv)
service that is substantially the same as, is based upon or competes in any
material respect with any service referred to in clause "(i)", clause "(ii)" or
clause "(iii)" of this sentence.

            (d) A Person shall be deemed to be engaged in "Competition" if: (i)
such Person or any of such Person's subsidiaries is engaged directly or
indirectly in the design, development, manufacture, assembly, promotion, sale,
supply, distribution, resale, installation, support, maintenance, repair,
refurbishment, licensing, sublicensing, financing, leasing or subleasing of any
Competing Product; or (ii) such Person or any of such Person's subsidiaries is
engaged directly or indirectly in providing, performing or offering any
Competing Service; provided, however that in no event shall a Person be deemed
to be engaged in Competition solely by virtue of such Person being a customer or
supplier of Parent.

            (e) "Confidential Information" means any non-public information
(whether or not in written form and whether or not expressly designated as
confidential) relating directly or indirectly to Parent, the Company or any of
Parent's other subsidiaries or relating directly or indirectly to the business,
operations, financial affairs, performance, assets, technology, processes,
products, contracts, customers, licensees, sublicensees, suppliers, personnel,
consultants or plans of Parent, the Company or any of Parent's other
subsidiaries (including any such information consisting of or otherwise relating
to trade secrets, know-how, technology, inventions, prototypes, designs,
drawings, sketches, processes, license or sublicense arrangements, formulae,
proposals, research and development activities, customer lists or preferences,
pricing lists, referral sources, marketing or sales techniques or plans,
operations manuals, service manuals, financial information, projections, lists


                                       6
<PAGE>

of consultants, lists of suppliers or lists of distributors); provided, however,
that "Confidential Information" shall not be deemed to include information (i)
of the Company that was already publicly known and in the public domain prior to
the time of its initial disclosure to Shareholder (ii) that is or becomes
generally available to the public other than as a result of disclosure by
Shareholder, (iii) that becomes available to Shareholder on a non-confidential
basis from a source other than the Company or Parent and (iv) open-source
disclosures to open-source licensees of the type made by the Company in
accordance with past practices of the Company.

            (f) "Good Reason" means:

            (i) Without Shareholder's consent, the assignment to the Shareholder
of any duties materially inconsistent with those required by the Shareholder's
position, duties, responsibilities and status with Parent as set forth in
Shareholder's offer letter from Parent attached hereto (the "Offer Letter") (it
being agreed that, in the case of a promotion, the acceptance of such position
shall be deemed the Shareholder's consent under this clause (i), and that in any
other case, the failure to resign from Parent within 30 days after such
assignment shall be deemed the Shareholder's consent under this clause (i));

            (ii) Without Shareholder's consent, a reduction by Parent of the
Shareholder's base salary specified in the Offer Letter (it being agreed that a
failure to resign from Parent within 30 days after such reduction shall be
deemed the Shareholder's consent under this clause (ii));

            (iii) Parent requiring Shareholder to be based anywhere other than
within 40 miles from the current principal offices of Parent, except for
required travel on the Company's, Parent's or an affiliate's business to an
extent substantially consistent with the Shareholder's present business travel
obligations; or

            (iv) Any other material breach by Parent of this Noncompetition
Agreement or any other written agreement between Shareholder and Parent or the
Company, including any applicable employee proprietary information agreement.

            (g) "Indemnitees" shall include: (i) Parent; (ii) the Company and
(iii) the successors and assigns of each of the Persons referred to in clauses
"(i)", "(ii)" and "(iii)" of this sentence.

            (h) "Noncompetition Period" shall mean the period commencing on the
date of this Noncompetition Agreement and ending on the earliest of: (i) in the
event such Shareholder accepts employment with Parent on the Closing Date, the
earlier of (A) in the event of termination by Parent of Shareholder's employment
with Parent without Cause or a resignation by Shareholder of his employment with
Parent for Good Reason, the one year anniversary of the date of such termination
of employment with Parent, and (B) in the event of Shareholder's termination of
his employment with Parent for any reason other than Good Reason, the three year
anniversary of the date of Shareholder's termination of employment with Parent,
(ii) in the event of a material breach by Parent or the Surviving Entity of any
provision of the Merger Agreement, the Shareholders' Agreement (as defined in
the Merger Agreement) or this Noncompetition Agreement, the date of such
material breach and (iii) the five year anniversary of the date of this
Noncompetition Agreement.

            (i) "Person" means any: (i) individual; (ii) corporation, general
partnership, limited partnership, limited liability partnership, trust, company
(including any limited liability company or joint stock company) or other
organization or entity; or (iii) governmental body or authority.

            (j) "Restricted Territory" means each county or similar political
subdivision of each State of the United States of America (including each of the
counties in the State of California), and each State, territory or possession of
the United States of America.


                                       7
<PAGE>

                            [SIGNATURE PAGE FOLLOWS]


                                       8
<PAGE>

      IN WITNESS WHEREOF, Shareholder has duly executed and delivered this
Noncompetition Agreement as of the date first above written.



                                     __________________________________________
                                     [Name of Shareholder]

                                     Address: _________________________________
                                              _________________________________
                                              _________________________________
                                     Telephone No.: ( )________________________
                                     Facsimile: ( )____________________________


                                       9
<PAGE>
EXHIBIT G


                              SHAREHOLDER AGREEMENT


      THIS SHAREHOLDER AGREEMENT is entered into as of ________________, 2005,
by and among SBE, INC., a Delaware corporation ("Parent"), and each of the
shareholders of the Company (as defined below) (referred to hereinafter as the
"Shareholders" and each individually as a "Shareholder").


                                    RECITALS

      A. Pursuant to an Agreement and Plan of Merger and Reorganization dated as
of March 28, 2005 (the "Merger Agreement"), among Parent, PyX Acquisition Sub,
LLC, a California limited liability company, the sole member of which is Parent
("Merger Sub"), and PyX Technologies, Inc., a California corporation (the
"Company"), it is contemplated that (i) the Company will merge with and into
Merger Sub (the merger of the Company with and into Merger Sub being referred to
in this Shareholder Agreement as the "Merger") with the Company ceasing to
exist, and Parent continuing as the sole member of Merger Sub, (ii) the
Company's stockholders will receive shares of common stock, $0.001 par value per
share, of Parent ("Parent Common Stock") in exchange for their shares of common
stock, $0.001 par value per share, of the Company ("Company Common Stock") and
(iii) any outstanding options to purchase Company Common Stock will be converted
into options to purchase Parent Common Stock in accordance with the Merger
Agreement.

      B. Parent's obligations in the Merger Agreement are conditioned upon the
execution and delivery of this Shareholder Agreement by each Shareholder.

      C. Capitalized terms used but not otherwise defined herein shall have the
respective meanings assigned to them in the Merger Agreement.

                                    AGREEMENT


      Parent and Shareholders, intending to be legally bound, agree as follows:


SECTION 1. CONSENT OF SHAREHOLDER.

      1.1 Consent. Pursuant to Section 603 of the CCC, each Shareholder, with
respect to all the shares of Company Common Stock owned of record by such
Shareholder (the "Shares"), does hereby adopt the Merger Agreement and approve
the Merger and the transactions contemplated by the Merger Agreement.

SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SHAREHOLDER.

      2.1 Representations, Warranties and Certifications. Each Shareholder
represents, warrants and certifies to Parent as follows:

            (a) Shareholder is the holder and beneficial owner of the Shares,
and has good and valid title to the Shares free and clear of any Encumbrances.
The Shares are the only outstanding shares of the capital stock of the Company
beneficially owned by Shareholder. Shareholder has the sole power to vote all of


                                       1
<PAGE>

the Shares at any meeting of the stockholders of the Company and the sole power
to act by written consent with respect to the Shares in lieu of any such
meeting. Shareholder has not appointed or granted any proxy or entered into any
agreement, contract, commitment or understanding that is now in force with
respect to any of the Shares.

            (b) Shareholder has the absolute and unrestricted right, power,
authority and capacity to enter into, execute, deliver and perform all of his
obligations under the Merger Agreement (if Shareholder is, or is to become, a
party to the Merger Agreement) and under each other agreement, document or
instrument referred to in or contemplated by the Merger Agreement to which
Shareholder is or is to become a party (each such other agreement, document or
instrument being referred to herein as an "Other Applicable Document").

            (c) The Merger Agreement (if Shareholder is, or is to become, a
party to the Merger Agreement) and each Other Applicable Document (i) has been
(or will when executed by Shareholder be) duly and validly executed by
Shareholder, and (ii) constitutes (or will when executed by Shareholder
constitute) a valid and binding obligation of Shareholder, enforceable against
Shareholder in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and to general
equitable principles.

            (d) Neither the execution, delivery or performance of the Merger
Agreement or of any Other Applicable Agreement, nor the consummation of the
Merger or any of the other transactions contemplated by the Merger Agreement or
by any Other Applicable Document, will directly or indirectly: (i) result in any
violation or breach of any agreement or other instrument to which Shareholder is
a party or by which Shareholder or any of the Shares is bound or affected; or
(ii) result in a violation of any Legal Requirement or order to which
Shareholder or any of the Shares is subject. No authorization, consent or
approval of, or notice to, any Person is required to be obtained or given by
Shareholder in connection with the execution, delivery or performance of the
Merger Agreement or of any Other Applicable Document.

            (e) There is no Legal Proceeding by or before any Governmental Body
pending or, to the knowledge of Shareholder, threatened against Shareholder that
challenges or would challenge the execution, delivery or performance of the
Merger Agreement or of any Other Applicable Document or the taking of any of the
actions required to be taken under the Merger Agreement or under any Other
Applicable Agreement.

            (f) Shareholder is aware that (i) the Parent Common Stock to be
issued to Shareholder in the Merger will not be issued pursuant to a
registration statement under the Securities Act, but will instead be issued in
reliance on the exemption from registration set forth in Section 4(2) of the
Securities Act, and (ii) neither the Merger nor the issuance of such Parent
Common Stock has been approved or reviewed by the SEC or by any other
Governmental Body.

            (g) Shareholder is aware that (i) the Parent Common Stock to be
issued in the Merger cannot be offered, sold or otherwise transferred, assigned,
pledged or hypothecated unless such Parent Common Stock is registered under the
Securities Act or unless an exemption from registration is available, (ii)
except as provided in Section 3 of this Shareholder Agreement, Parent is under
no obligation to file a registration statement with respect to the Parent Common
Stock to be issued to Shareholder in the Merger, and (iii) the provisions of
Rule 144 under the Securities Act will permit resale of the Parent Common Stock
to be issued to Shareholder in the Merger only under limited circumstances, and
such Parent Common Stock must be held by Shareholder for at least one year
before it can be sold pursuant to Rule 144.


                                       2
<PAGE>

            (h) The Parent Common Stock to be issued to Shareholder in the
Merger will be acquired by Shareholder for investment purposes only and for
Shareholder's own account, and not with a view to, or for resale in connection
with, any unregistered distribution thereof.

            (i) If Shareholder is not a U.S. person (as defined in the
Securities Act Rule 902(o)), he, she, or it represents and warrants that:

                  (i) Such Shareholder is not a U.S. person and is not acquiring
the shares of Parent Common Stock for the account or benefit of any U.S. person;

                  (ii) Such Shareholder is familiar with Regulation S
promulgated under the Securities Act, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act; and

                  (iii) Such Shareholder will not offer or sell the shares of
Parent Common Stock to a U.S. person or to or for the account or benefit of a
U.S. person prior to the one-year anniversary of the Effective Time.

            (j) Shareholder has received and carefully examined Parent's Annual
Report on Form 10-K for the fiscal year ended October 31, 2004 (the "Form
10-K"), Current Report on Form 8-K filed on February 23, 2005, Quarterly Report
on Form 10-Q for the quarter ended January 31, 2005 (the "Form 10-Q"),
Definitive Proxy Statement on Schedule 14A filed on February 10, 2005, and the
Information Statement. Shareholder has paid particular attention to the
information set forth in the Information Statement and the risk factors
described in the Form 10-K and Form 10-Q.

            (k) Shareholder has been given the opportunity: (i) to ask questions
of, and to receive answers from, persons acting on behalf of the Company and
Parent concerning the terms and conditions of the Merger and the contemplated
issuance of Parent Common Stock in the Merger, and the business, properties,
prospects and financial condition of the Company and Parent; and (ii) to obtain
any additional information (to the extent the Company or Parent possesses such
information or is able to acquire it without unreasonable effort or expense)
that is necessary to verify the accuracy of the information set forth in the
documents provided or made available to Shareholder.

            (l) Shareholder understands that stop transfer instructions will be
given to Parent's transfer agent with respect to the Parent Common Stock to be
issued to Shareholder in the Merger, and that there will be placed on the
certificate or certificates representing such Parent Common Stock a legend
identical or similar in effect to the following legend (together with any other
legend or legends required by applicable state securities laws or otherwise):

            "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD
      OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS
      REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM THE REGISTRATION
      REQUIREMENTS OF THE ACT IS AVAILABLE."

      2.2 Reliance. Shareholder acknowledges that Parent will rely on
Shareholder's representations, warranties and certification set forth in Section
2.1 above for purposes of determining Shareholder's suitability as an investor
in Parent Common Stock and for purposes of confirming the availability of an
exemption from the registration requirements of the Securities Act for the
issuance of shares of Parent Common Stock in the Merger.


                                       3
<PAGE>

      2.3 No "Net Short" Position. For so long as Shareholder owns any Shares,
such Shareholder shall not maintain a Net Short Position. For purposes of this
Section 2.3, a "Net Short Position" by a person means a position whereby such
person has executed one or more sales of Parent Common Stock that is marked as a
short sale and that is executed at a time when such Shareholder has no
equivalent offsetting long position in the Parent Common Stock. For purposes of
determining whether a Shareholder has an equivalent offsetting long position in
the Parent Common Stock, all Parent Common Stock that is owned by such
Shareholder shall be deemed to be held long by such Shareholder.

      2.4 Questionnaires. Shareholder has completed or caused to be completed
and delivered to Parent a Selling Stockholder Questionnaire and an Investor
Questionnaire, each in the forms provided by Parent and the answers to the
questions in the Questionnaires are true and correct as of the date of this
Shareholder Agreement; provided, that Shareholders shall be entitled to update
such information by providing written notice thereof to Parent before the
effective date of the Registration Statement.

SECTION 3. REGISTRATION RIGHTS; RESTRICTIONS ON TRANSFER.

      3.1 Definitions. For the purpose of this Section 3:

            (a) the term "Registration Statement" shall mean any registration
statement required to be filed by Section 3.3 and shall include any preliminary
prospectus, final prospectus, exhibit or amendment included in or relating to
such registration statements; and

            (b) the term "Registrable Shares" shall mean all shares of Parent
Common Stock issued to Shareholders in connection with the Merger.

      3.2 Restrictions on Transfer. Shareholder shall not effect any sale,
transfer or other disposition, or any assignment, pledge or hypothecation, of
any shares of Parent Common Stock that he is to receive in the Merger unless:

            (a) such sale, transfer, disposition, assignment, pledge or
hypothecation has been registered under the Securities Act; and

            (b) if such sale, transfer, disposition, assignment, pledge or
hypothecation occurs within two years following the Closing, (1) counsel
reasonably satisfactory to Parent shall have advised Parent in a written opinion
letter (satisfactory in form and content to Parent), upon which Parent may rely,
that such sale, transfer, disposition, assignment, pledge or hypothecation will
be exempt from registration under the Securities Act, or (2) an authorized
representative of the SEC shall have rendered advice to Shareholder or
Shareholder's representative to the effect that the SEC would take no action, or
that the staff of the SEC would not recommend that the SEC take action, with
respect to such sale, transfer, disposition, assignment, pledge or hypothecation
and a transcript of such advice and all other related communications with the
SEC shall have been delivered to Parent.

      3.3 Registration Procedures and Expenses. Parent shall:

            (a) use its best efforts to file a Registration Statement with the
SEC within 90 days following the Closing Date to register for resale the
Registrable Shares on Form S-3 and Rule 415 under the Securities Act or on such
other appropriate form that Parent may be permitted to use to register such
Registrable Shares for resale from time to time by Shareholders, and to have
such Registration Statement declared effective within 120 days following the
Closing Date;

                                       4
<PAGE>

            (b) not have any other registration statement filed with the SEC
with respect to the issuance or resale of any shares of its capital stock (other
than on Form S-8) declared effective unless the Registration Statement
referenced in paragraph (a) above has also been declared effective;

            (c) use commercially reasonable efforts, subject to receipt of
necessary information from Shareholders, to cause any such Registration
Statement filed pursuant to Section 3.3(a) above to become effective as promptly
thereafter as practicable;

            (d) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement continuously effective
until termination of such obligation as provided in Section 3.5, subject to
Parent's right to suspend pursuant to Section 3.4;

            (e) furnish to each Shareholder who received Registrable Shares (and
to each underwriter, if any, of such Registrable Shares) such number of copies
of prospectuses in conformity with the requirements of the Securities Act and
such other documents as Shareholders may reasonably request, in order to
facilitate the public sale or other disposition of all or any of the Registrable
Shares by Shareholders;

            (f) file such documents as may be required of Parent for normal
securities law clearance for the resale of the Registrable Shares in such states
of the United States as may be reasonably requested by each Shareholder;
provided, however, that Parent shall not be required in connection with this
paragraph "(e)" to qualify as a foreign corporation or execute a general consent
to service of process in any jurisdiction; and

            (g) advise each Shareholder who received Registrable Shares
promptly:

                  (i) of the effectiveness of the Registration Statement or any
post-effective amendments thereto;

                  (ii) once the Registration Statement is declared effective, of
any request by the SEC for amendments or supplements to the Registration
Statement or prospectus or for additional information relating thereto;

                  (iii) of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement under the Securities Act or of
the suspension by any state securities commission of the qualification of the
Registrable Shares for offering or sale in any jurisdiction, or the initiation
of any proceeding for any of the preceding purposes;

                  (iv) of the suspension by Parent of the use of the prospectus
forming a part of the Registration Statement; and

                  (v) of the existence of any fact and the happening of any
event that makes any statement of a material fact made in the Registration
Statement, the prospectus and amendment or supplement thereto, or any document
incorporated by reference therein, untrue, or that requires the making of any
additions to or changes in the Registration Statement or the prospectus in order
to make the statements therein not misleading;

            (h) use commercially reasonable efforts to cause all Registrable
Shares to be listed on each securities exchange, if any, on which equity
securities of Parent are then listed; and


                                       5
<PAGE>

            (i) Bear all expenses in connection with the procedures in this
Section 3.3 and the registration of the Registrable Shares on such Registration
Statement and the blue sky laws of such states, and the listing of the
Registrable Shares on one or more exchanges as required by this Shareholder
Agreement, except that Parent shall not be required to pay brokers' or
underwriters' fees, discounts or commissions relating to resale of the
Registrable Shares or fees of separate legal counsel of Shareholders.

      3.4 Delay and Suspension of Prospectus. At Parent's reasonable discretion,
Parent may delay the effectiveness of, and may suspend the use of, the
prospectus forming a part of the Registration Statement, including to the extent
necessary to file any post-effective amendment to the Registration Statement;
provided, however, that such delay right may not be exercised by Parent for more
than 20 consecutive days. In addition, notwithstanding any other provision of
this Shareholder Agreement, Shareholders understand that there may be periods
during which Parent's Board of Directors may determine, in good faith, that it
is in the best interest of Parent and its stockholders to defer disclosure of
non-public information until such information has reached a more advanced stage
and that, during such periods, sales of Registrable Shares and the effectiveness
of any registration statement covering Registrable Shares may be suspended or
delayed; provided, however, that such right may not be exercised by Parent for
more than 30 consecutive days or more than twice in any calendar year.
Shareholders agree that upon receipt of any notice from Parent of the
development of any non-public information, such Shareholders will forthwith
discontinue such Shareholders' disposition of Registrable Shares pursuant to the
registration statement relating to such Registrable Shares until such
Shareholder receives copies of an appropriately supplemented or amended
prospectus and, if so directed by Parent, such Shareholders will use their
commercially reasonable best efforts to deliver to Parent (at Parent's expense)
all copies, other than permanent file copies then in such Shareholders'
possession, of the prospectus relating to such Registrable Shares current at the
time of receipt of such notice. In the event Parent shall give any such notice,
the applicable time period during which a Registration Statement is to remain
effective shall be extended by the number of days during the period from and
including the date of the giving of such notice to and including the date when
each holder of a Registrable Shares covered by such registration statement shall
have received the copies of the appropriate supplemented or amended prospectus.

      3.5 Indemnification.

            (a) To the extent permitted by law, Parent will indemnify and hold
harmless each Shareholder and his or her successors and assigns against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by Parent: (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement or incorporated reference therein, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by Parent of
the Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law in connection with the offering covered by such registration
statement; and Parent will reimburse each such Shareholder for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.5(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of Parent, which consent
shall not be unreasonably withheld, nor shall Parent be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Shareholder.


                                       6
<PAGE>

            (b) To the extent permitted by law, each Shareholder will indemnify
and hold harmless Parent, each of its directors, its officers and each person,
if any, who controls Parent within the meaning of the Securities Act, any
underwriter and any other Shareholder selling securities under the Registration
Statement, against any losses, claims, damages or liabilities (joint or several)
to which Parent or any such director, officer, controlling person, underwriter
or other such Shareholder may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereto) arise out of or are based
upon any of the following statements: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement or
incorporated reference therein, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by Parent of the Securities Act
(collectively, a "Shareholder Violation"), in each case to the extent (and only
to the extent) that such Shareholder Violation occurs in reliance upon and in
conformity with written information furnished by such Shareholder under an
instrument duly executed by such Shareholder and stated to be specifically for
use in connection with such registration; and each such Shareholder will
reimburse any legal or other expenses reasonably incurred by Parent or any such
director, officer, controlling person, underwriter or other Shareholder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Shareholder Violation; provided, however, that the indemnity agreement contained
in this Section 2.5(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Shareholder, which consent shall not be unreasonably
withheld; provided further, that in no event shall any indemnity under this
Section 2.5 exceed the net proceeds from the offering received by such
Shareholder.

            (c) Promptly after receipt by an indemnified party under this
Section 2.5 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.5, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses thereof to
be paid by the indemnifying party, if representation of such indemnified party
by the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall relieve such indemnifying party of any
liability to the indemnified party under this Section 2.5 to the extent, and
only to the extent, such failure is prejudicial to its ability to defend such
action, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 2.5.

            (d) If the indemnification provided for in this Section 2.5 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) or Shareholder
Violation(s) that resulted in such loss, claim, damage or liability, as well as
any other relevant equitable considerations. The relative fault of the


                                       7
<PAGE>

indemnifying party and of the indemnified party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
shall any contribution by a Shareholder hereunder exceed the net proceeds from
the offering received by such Shareholder.

            (e) The obligations of Parent and Shareholders under this Section
2.5 shall survive completion of the offering of the Registrable Shares in the
Registration Statement and, with respect to liability arising from such
offering. No indemnifying party, in the defense of any such claim or litigation,
shall, except with the consent of each indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.

      3.6 "Market Stand-Off" Agreement. Each Shareholder hereby agrees that,
with respect to 95% of the Registrable Shares issuable to such Shareholder, such
Shareholder shall not sell, transfer, make any short sale of, grant any option
for the purchase of, or enter into any hedging or similar transaction with the
same economic effect as a sale, any such Registrable Shares held by such
Shareholder for a period of one year following the Effective Time.

      3.7 Termination of Obligations. The obligations of the Company pursuant to
Section 3.3 hereof shall cease and terminate upon the earlier to occur of (a)
such time as all of the Registrable Shares have been resold, (b) such time as
all of the Registrable Shares may be resold in a 90-day period pursuant to Rule
144 or (c) the second anniversary of the Closing Date.

      3.8 Rights Upon Transfer. No transferee of Registrable Shares shall be
entitled to have the shares transferred to it covered by the Registration
Statement unless such Transferee agrees in writing to be bound by all of the
provisions of this Shareholder Agreement applicable to such Shareholder and to
return a properly completed and executed Selling Stockholder Questionnaire in
substantially the form completed by the Shareholder pursuant to Section 2.4.

SECTION 4. MERGER INDEMNIFICATION OBLIGATIONS; APPOINTMENT OF SHAREHOLDERS'
AGENT

      4.1 Acknowledgement of Obligation. Each Shareholder acknowledges that a
portion of the shares of Parent Common Stock issuable to such Shareholder in
connection with the Merger has been or will be withheld on a pro rata basis to
satisfy the obligations set forth in Section 9 of the Merger Agreement, and
subject to any limitations contained therein, to hold harmless and indemnify
each of the Indemnitees from and against, and to compensate and reimburse each
of the Indemnitees for, any Damages directly or indirectly suffered or incurred
by such Indemnitee or to which such Indemnitee may otherwise be subject;
provided, however, that, except as otherwise set forth in Section 9 of the
Merger Agreement, each Shareholder's obligations pursuant to Section 9 of the
Merger Agreement (to the extent that such Shareholder is not and will not be a
party to the Merger Agreement) shall be limited to such Shareholder's pro rata
portion of the Escrow Shares. Each Shareholder hereby expressly agrees to be
bound by the provisions of Section 9 of the Merger Agreement.

      4.2 Shareholders' Agent. Shareholders hereby irrevocably appoint Greg
Yamamoto as their agent for purposes of Section 9 of the Merger Agreement.
Parent shall be entitled to deal exclusively with Shareholders' Agent on all
matters relating to Section 9 of the Merger Agreement, and shall be entitled to
rely conclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Shareholder by


                                       8
<PAGE>

Shareholders' Agent, and on any other action taken or purported to be taken on
behalf of any Shareholder by Shareholders' Agent, as fully binding upon such
Shareholder. If Shareholders' Agent shall die, become disabled or otherwise be
unable to fulfill his responsibilities as agent of Shareholders, then
Shareholders shall, within ten days after such death or disability, appoint a
successor agent and, promptly thereafter, shall notify Parent of the identity of
such successor. Any such successor shall become the "Shareholders' Agent" for
purposes of this Shareholders Agreement, the Merger Agreement and the Escrow
Agreement. If for any reason there is no Shareholders' Agent at any time, all
references herein and therein to Shareholders' Agent shall be deemed to refer to
Shareholders.

SECTION 5. MISCELLANEOUS PROVISIONS

      5.1 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Shareholder Agreement.

      5.2 Fees and Expenses. Except as explicitly contained in this Shareholder
Agreement, each party to this Shareholder Agreement shall bear and pay all fees,
costs and expenses (including legal fees and accounting fees) that have been
incurred or that are incurred by or on behalf of such party in connection with
the transactions contemplated by this Shareholder Agreement.

      5.3 Attorneys' Fees. If any action or proceeding relating to this
Shareholder Agreement or the enforcement of any provision of this Shareholder
Agreement is brought against any party hereto, the prevailing party shall be
entitled to recover reasonable attorneys' fees, costs and disbursements (in
addition to any other relief to which the prevailing party may be entitled).

      5.4 Notices. Any notice or other communication required or permitted to be
delivered to any party under this Shareholder Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile number set forth below such Shareholder's name on his
or her signature page hereto (or to such other address or facsimile telephone
number as such party shall have specified in a written notice given to the other
parties hereto).

      5.5 Confidentiality. Each Shareholder shall keep confidential, and shall
not disclose to any other Person, any non-public document or other non-public
information in such Shareholder's possession that relates to the business of the
Company or Parent.

      5.6 Time of the Essence. Time is of the essence of this Shareholder
Agreement.

      5.7 Headings. The headings contained in this Shareholder Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Shareholder Agreement and shall not be referred to in connection with the
construction or interpretation of this Shareholder Agreement.

      5.8 Counterparts. This Shareholder Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.

      5.9 Governing Law. This Shareholder Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws).


                                       9
<PAGE>

      5.10 Successors and Assigns. This Shareholder Agreement shall be binding
upon: each Shareholder and its successors and assigns (if any); and Parent and
its successors and assigns (if any). This Agreement shall inure to the benefit
of each Shareholder, Parent and the respective successors and assigns (if any)
of the foregoing. No Shareholder may assign any rights under this Shareholder
Agreement to any Person unless such Person agrees in writing to be bound by the
terms and provisions of this Shareholder Agreement, and such transfer is in
compliance with the terms and provisions of this Shareholder Agreement and
permitted by federal and state securities law. Parent may freely assign any or
all of its rights under this Shareholder Agreement, in whole or in part, to any
other Person without obtaining the consent or approval of any other party hereto
or of any other Person.

      5.11 Remedies Cumulative. The rights and remedies of the parties hereto
shall be cumulative (and not alternative).

      5.12 Waiver.

      t 12 (a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Shareholder Agreement, and no delay on the
part of any Person in exercising any power, right, privilege or remedy under
this Shareholder Agreement, shall operate as a waiver of such power, right,
privilege or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof or of
any other power, right, privilege or remedy.

            (b) No Person shall be deemed to have waived any claim arising out
of this Shareholder Agreement, or any power, right, privilege or remedy under
this Shareholder Agreement, unless the waiver of such claim, power, right,
privilege or remedy is expressly set forth in a written instrument duly executed
and delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it is
given.

      5.13 Amendments. This Shareholder Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all of the parties hereto.

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

      5.15 Parties in Interest. Except for the provisions of Section 4, none of
the provisions of this Shareholder Agreement is intended to provide any rights
or remedies to any Person other than the parties hereto and their respective
successors and assigns (if any).


                                       10
<PAGE>

      5.16 Entire Agreement. This Shareholder Agreement, the Merger Agreement
and each Other Applicable Document set forth the entire understanding of the
parties hereto relating to the subject matter hereof and thereof and supersede
all prior agreements and understandings among or between any of the parties
relating to the subject matter hereof and thereof; provided, however, that (a)
the Confidentiality Agreement executed on behalf of Parent and the Company on
February 11, 2005 shall not be superseded by this Shareholder Agreement and
shall remain in effect until the date on which such Confidentiality Agreement is
terminated in accordance with its terms and (b) paragraphs 7 through 11 of the
Term Sheet, executed by Parent and the Company on February 7, 2005, shall remain
in effect until such paragraphs are terminated in accordance with the terms of
the Term Sheet.

      5.17 Construction.

            (a) For purposes of this Shareholder Agreement, whenever the context
requires: the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the feminine
gender shall include the masculine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.

            (b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Shareholder Agreement.

            (c) As used in this Shareholder Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, but rather shall be deemed to be followed by the words "without
limitation."

            (d) Except as otherwise indicated, all references in this
Shareholder Agreement to "Sections" and "Exhibits" are intended to refer to
Sections of this Shareholder Agreement and Exhibits to this Shareholder
Agreement.

                            [Signature page follows]


                                       11
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this SHAREHOLDER
AGREEMENT as of the date set forth in the first paragraph hereof.




COMPANY:                                    SHAREHOLDERS:

PARENT, INC.

By:_____________________________________    By:________________________________

Address:        Attn: David Brunton         Printed Name:______________________
                2305 Camino Ramon
                Suite 200                   Entity Name (if applicable):_______
                San Ramon, CA 94583
                                            ___________________________________

Facsimile:(925) 355-2041                    Title (if applicable):_____________

                                            Address:___________________________

                                            ___________________________________

                                            Facsimile:_________________________

<PAGE>

                                    EXHIBITS

Exhibit A         -        Signing Shareholders

Exhibit B         -        Certain Definitions

Exhibit C         -        Form of Affiliate Agreement

Exhibit D         -        Form of Noncompetition Agreement

Exhibit E         -        Form of Release

Exhibit F         -        Form of Escrow Agreement

Exhibit G         -        Form of Shareholder Agreement


                                       1
<PAGE>
</TEXT>
</DOCUMENT>
