AGREEMENT AND PLAN OF MERGER DATED AS OF MARCH 4, 2005

Execution Version

Execution Version

This AGREEMENT AND PLAN OF MERGER , dated as of March 4, 2005 (this “ Agreement ”), is entered into by and among (i) BEL FUSE INC. , a New Jersey corporation (the “ Parent ”), (ii) BEL WESTBORO INC. , a Massachusetts corporation and a wholly-owned subsidiary of the Parent (the “ Acquirer ”), and (iii) GALAXY POWER INC. , a Massachusetts corporation (the “ Company ”).

WHEREAS , the Company manufactures and sells high current, high density dc to dc converters and supplying products to the telecommunications, computer and networking industries (the “ Business ”);

WHEREAS , the Company has authorized capital stock consisting of 2,000,000 shares of common stock, par value $.01 per share (“ Company Common Stock ”), of which 914,463 shares are issued and outstanding as of the date hereof;

WHEREAS , the Company has outstanding options to purchase an aggregate of 153,500 shares of Company Common Stock (“ Company Options ”), 129,750 of which are exercisable as of the date hereof and/or will be exercisable immediately preceding or as a result of the closing of the transactions contemplated hereby (“ Eligible Company Options ”) and has outstanding warrants for the purchase of an aggregate of 278,447 shares of Company Common Stock (“ Company Warrants ”), all of which are exercisable as of the date hereof;

WHEREAS , the stockholders of the Company identified on Exhibit A annexed hereto (the “ Principal Stockholders ”) own, not less than two-thirds of the issued and outstanding shares of Company Common Stock and have entered into that certain Voting Agreement, dated on even date herewith, by and among the Parent, the Acquirer and the Principal Stockholders, pursuant to which the Principal Stockholders have committed to voting in favor of the transactions contemplated by this Agreement at any meeting of the Company’s stockholders for the purpose of approving the transactions contemplated by this Agreement (the “ Voting Agreement ”); and

WHEREAS , the Boards of Directors of each of the Parent, the Acquirer, and the Company believe that the merger of the Acquirer with and into the Company, pursuant to which the shares of Company Common Stock would be exchanged for cash consideration and the Eligible Company Options and Company Warrants would be exchanged for cash consideration net of their applicable exercise price (the “ Merger ”), would be advantageous and beneficial to their respective corporations and stockholders.

NOW, THEREFORE , in consideration of the mutual covenants and agreements hereinafter set forth, the parties hereto hereby agree as follows:

Section 1.1.   Closing and Effective Date of Merger . Subject to and upon the terms and conditions set forth in this Agreement, the closing of the transactions contemplated under this Agreement (the “ Closing ”) will be held at the offices of Bowditch & Dewey, LLP, 311 Main Street, Worcester, Massachusetts 01608 at 10:00 AM Eastern Time, on the fifth Business Day following the satisfaction or waiver of all conditions set forth in Articles 5 and 6 hereof, or such other date, place or time as may be agreed upon among the parties hereto (the “ Closing Date ”). Upon consummation of the Closing, the Company and the Acquirer shall cause to be definitively executed and delivered to each other articles of merger (the “ Articles of Merger ”) consistent with the terms hereof and prepared in accordance with the Massachusetts Business Corporation Act (“ MBCA ”) and cause the Articles of Merger to be duly filed with the Secretary of the Commonwealth for the Commonwealth of Massachusetts in order to cause the Merger to become effective under, and in accordance with, the laws of the Commonwealth of Massachusetts and this Agreement. The Merger shall become effective on the date and at the time of the filing of the Articles of Merger with the Secretary of the Commonwealth for the Commonwealth of Massachusetts, or at such later time as shall be agreed upon by the Company and the Acquirer and as shall be set forth in the Articles of Merger (the “ Effective Time ”). The date on which the Effective Time occurs shall be referred to herein as the “ Effective Date .” For all purposes, all of the document deliveries and other actions to occur at the Closing will be conclusively presumed to have occurred at the same time, immediately before the Effective Time.

Section 1.2.   Terms and Conditions of Merger . At the Effective Time, pursuant to this Agreement and the Articles of Merger, automatically and without further action:

(a)   The Acquirer shall be merged with and into the Company and the separate existence of the Acquirer shall cease.

(b)   The Company shall continue as the surviving corporation in the Merger (the “ Surviving Corporation ”).

(c)   The effect of the Merger will be as provided in the applicable provisions of the MBCA.

(d)   All of the estates, properties, rights, privileges, powers and franchises of the Company and the Acquirer and all of their property, real, personal and mixed, and all debts due on whatever account to either of the Company or the Acquirer shall vest in the Surviving Corporation, without further act or deed, except as contemplated by this Agreement.

(e)   The Surviving Corporation shall be responsible for all of the liabilities and obligations of each of the Company and the Acquirer and the liabilities of the Company and the Acquirer shall not be affected nor shall the rights of creditors thereof or of any Persons dealing with the Company or the Acquirer be impaired.

(f)   The Articles of Organization of the Company shall be amended in the Merger to read in its entirety as set forth on Annex A to the Articles of Merger and as so amended shall be the Articles of Organization of the Surviving Corporation until thereafter amended as provided therein and by law.

(g)   The By-laws of the Acquirer, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended as provided therein and by law.

(h)   From and after the Effective Time, the Board of Directors of the Surviving Corporation will consist of the individuals set forth on Exhibit B . Each such director will hold office, subject to the applicable provisions of the Articles of Organization and the By-Laws of the Surviving Corporation, until the next annual meeting of stockholders of the Surviving Corporation and until his/her successor shall be duly elected or appointed and shall duly qualify. If, at or after the Effective Time, a vacancy shall exist in such Board of Directors by reason of death or inability to act, or for any other reason, such vacancy may be filled in the manner provided in the By-Laws of the Surviving Corporation.

(i)   From and after the Effective Time, the individuals set forth on Exhibit C shall be the officers of the Surviving Corporation and shall act as such and hold the offices set forth opposite their names until their respective successors are duly elected or appointed and qualified. If, at or after the Effective Time, a vacancy shall exist in any of the offices of the Surviving Corporation by reason of death or inability to act, or for any other reason, such vacancy may be filled in the manner provided in the By-Laws of the Surviving Corporation.

(j)   Each issued and outstanding share of the capital stock of the Acquirer shall be converted into and represent the right to receive ten (10) shares of common stock, par value $0.01 per share, of the Surviving Corporation, whereupon the Parent shall own all of the issued and outstanding capital stock of the Surviving Corporation.

(k)   Subject to Section 1.3(b) , each share of Company Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive an amount in cash equal to the quotient of dividing the Gross Merger Proceeds by the number of Fully Diluted Shares (the “ Per Share Closing Amount ”). The Per Share Closing Amount less the Per Share/Option/Warrant Escrow Amount (calculated in the manner provided for in Section 1.3(b) ) shall be referred to herein as the “ Adjusted Per Share Closing Amount .”

(l)   Each holder of an Eligible Company Option and each holder of a Company Warrant shall be entitled to receive, subject to Section 1.3(b) , with respect to each share of Company Common Stock subject to a Company Option or a Company Warrant, an amount in cash equal to the excess, if any, of the Per Share Closing Amount over the applicable exercise price of such Eligible Company Option or Company Warrant (the “ Per Option/Warrant Share Closing Amount ”). The Per Option/Warrant Share Closing Amount for each applicable Company Option and Company Warrant less the Per Share/Option/Warrant Escrow Amount (calculated in the manner provided for in Section 1.3(b) ) shall be referred to herein as the “ Adjusted Option/Warrant Per Share Closing Amount .”

(m)   Each share of Company Common Stock held as treasury stock by the Company shall be canceled and retired, and shall cease to exist, and no payment shall be made with respect thereto.

Section 1.3.   Payment for Stock; Procedures .

(a)   As of the Effective Time, either the Parent or the Acquirer (as shall be determined by the Parent and the Acquirer, the “ Paying Party ”) shall deposit with the Exchange Agent for the benefit of the holders of shares of Company Common Stock (who are not Dissenting Stockholders), Eligible Company Options and Company Warrants, cash in an amount equal to the Adjusted Closing Cash Merger Proceeds less the Escrow Amount and less the amount, if any, the Paying Party is entitled to retain pursuant to Section 1.3(e) . The amount required to be deposited pursuant to this Section 1.3(a) is referred to herein as the “ Exchange Fund .”

(b)   At the Closing, the Paying Party shall deliver to the Escrow Agent, on behalf of the Company Stockholders, Company Optionholders and Company Warrant Holders, the Escrow Amount, which Escrow Amount shall be held in an account pursuant to the terms of the Escrow Agreement. The Company Stockholders, Company Optionholders and Company Warrant Holders shall be deemed to have contributed to the Escrow Amount an amount equal to the Per Share Escrow Amount multiplied by, (i) with respect to the Company Stockholders, the number of shares of Company Common Stock owned by the Company Stockholder immediately prior to the Effective Time and (ii) with respect to the Company Optionholders and Company Warrant Holders, the number of shares of Company Common Stock issuable upon the full exercise of all Eligible Company Options held by the Company Optionholder immediately prior to the Effective Time and all Company Warrants held by Company Warrant Holders immediately prior to the Effective Time (in each instance, a “ Per Share/Option/Warrant Escrow Amount ”).

(c)   The Parent, the Acquirer and the Company have previously agreed upon forms of (i) a notice and letter of transmittal (which shall specify that delivery of the Certificate or Certificates held by a Company Stockholder, Option Documents held by Company Optionholders or Warrant Documents held by a Company Warrant Holder shall be effected, and risk of loss and title to such Certificate, Certificates, Option Documents or Warrant Documents shall pass, only upon proper delivery of such Certificate, Certificates, Option Documents or Warrant Documents to the Paying Party, each as the case may be) and (ii) instructions for use in effecting the surrender of such Certificate, Certificates, Option Documents or Warrant Documents, in each case, that the Paying Party will require in order for the Company Stockholders, Company Optionholders or Company Warrant Holders to obtain payment in respect of shares of Company Common Stock, Eligible Company Options or Company Warrants, as the case may be. Such instructions shall provide, among other things, that each Certificate surrendered shall be duly endorsed or otherwise accompanied by a stock power or other instrument of transfer, in form satisfactory to the Paying Party. As soon as practicable after the Effective Time, the Surviving Corporation shall send to each Person who was, at the Effective Time, a Company Stockholder, a Company Optionholder or a Company Warrant Holder a copy of the foregoing materials (in the forms to be mutually agreed upon by the Parent and the Company). Upon surrender to the Exchange Agent after the Effective Time of Certificates for cancellation, together with such letter of transmittal duly executed and such other documents as the Exchange Agent may reasonably require, each such Company Stockholder shall be entitled to receive in exchange therefor the Adjusted Per Share Closing Amount multiplied by the number of shares of Company Common Stock represented by such Certificates and the Certificates so surrendered shall then be canceled. Subject to Section 1.4 , until surrendered as contemplated by this Section 1.3(c) , each Certificate from and after the Effective Time shall be deemed to represent only the right to receive, upon such surrender, the amount of cash described herein. Upon surrender to the Exchange Agent after the Effective Time of Option Documents or Warrant Documents for cancellation, together with such letter of transmittal duly executed and such other documents as the Exchange Agent may reasonably require, such Company Optionholder or Company Warrant Holder shall be entitled to receive in exchange therefor the applicable Adjusted Option/Warrant Per Share Closing Amount multiplied by the number of shares of Company Common Stock issuable upon the full exercise of such Eligible Company Option or Company Warrant and the Option Documents or Warrant Documents so surrendered shall then be canceled. Subject to Section 1.4 , until surrendered as contemplated by this Section 1.3(c) , each Option Document or Warrant Document from and after the Effective Time shall be deemed to represent only the right to receive, upon such surrender, the amount of cash described herein. To the extent that any amounts are properly withheld by the Paying Party or the Exchange Agent for the payment of withholding Taxes from a Company Stockholder’s Adjusted Per Share Closing Amount or a Company Optionholder’s or a Company Warrant Holder’s Adjusted Option/Warrant Per Share Closing Amount, then such withheld amounts will be treated for all purposes of this Agreement as having been paid to the Company Stockholder, the Company Optionholder or the Company Warrant Holder from whom such deduction and withholding were made by the Paying Party, and the Surviving Corporation shall be obligated as an employer of such Company Stockholder, Company Optionholder or Company Warrant Holder to report and/or pay such withheld amounts to the appropriate Government Entities.

(d)   In the case of Company Stockholders, in the event any Certificate shall have been lost, stolen or destroyed, upon receipt of an affidavit as to such loss, theft or destruction and to the ownership of such Certificate by the Company Stockholder claiming such Certificate to be lost, stolen or destroyed, the receipt by the Paying Party of appropriate and customary indemnification and the receipt by the Paying Party of any other required documents (in each case, as reasonably satisfactory to the Paying Party), the Paying Party will pay and distribute to such Company Stockholder the Adjusted Per Share Closing Amount multiplied by the number of shares of Company Common Stock represented by such lost, stolen or destroyed Certificate.

(e)   If any stockholders of the Company exercise, perfect and/or reserve their appraisal or dissenters rights pursuant to, and in accordance with, the MBCA and if such stockholders or any of them do not withdraw such stockholder’s or stockholders’ demand for appraisal prior to the expiration of the period of time during which such stockholders or stockholder are permitted to effect such withdrawal under the MBCA (each, a “ Dissenting Stockholder ”), then immediately after the expiration of such period of time, the Paying Party shall (i) retain the amounts which otherwise would have been contributed to the Exchange Fund and paid to each such Dissenting Stockholder pursuant to Section 1.2(k) ; and (ii) in accordance with Section 13.24 of the MBCA, pay to each such Dissenting Stockholder the amount which is required to be paid to such Dissenting Stockholder pursuant to Section 13.24 of the MBCA.

Section 1.4.   Dissenting Shares . Notwithstanding any provision of this Agreement to the contrary, with respect to any shares of Company Common Stock held by Dissenting Stockholders (the “ Dissenting Shares ”) in accordance with the MBCA, such Dissenting Shares shall not be converted into or represent the right to receive the consideration payable pursuant to this Agreement upon consummation of the Merger, but, instead, the Dissenting Stockholders shall be entitled to payment of the appraised value of such Dissenting Shares in accordance with the provisions of the MBCA, unless and to the extent that any Dissenting Stockholders shall have irrevocably forfeited his/her right to appraisal under the MBCA or irrevocably withdrawn its demand for appraisal. If any Dissenting Stockholders has so irrevocably forfeited or withdrawn its right to appraisal of Dissenting Shares, then, as of the occurrence of such event, such Dissenting Stockholders shares of Company Common Stock shall cease to be Dissenting Shares and shall be converted into and represent the right to receive the consideration payable in respect of such shares pursuant to this Agreement, which payments shall be made pursuant to the terms of this Agreement.

Section 1.5.   No Further Transfers . After the Effective Time, there shall be no further registration of transfer on the stock transfer books of the Company of any shares of Company Stock. If, after the Effective Time, any Certificate is presented (for transfer or otherwise) to the Surviving Corporation, such Certificate shall be canceled and, subject to Section 1.2(k) and the procedures provided for in Section 1.3 hereof, payment shall be made of the consideration provided for in this Agreement in respect of the number of shares of Company Common Stock represented by such Certificate.

Section 1.6.   Termination of Rights . After the Effective Time, (a) holders of Company Common Stock will cease to be, and will have no rights as, stockholders of the Company, and such holders’ rights will consist only of (i) in the case of shares of Company Common Stock other than Dissenting Shares, the right to receive the consideration provided for in this Agreement in respect of such shares, without interest, and (ii) in the case of Dissenting Shares, the rights afforded to the holders thereof under the applicable provisions of the MBCA, (b) holders of Eligible Company Options shall be entitled to receive only the consideration provided for in this Agreement in respect of such Eligible Company Options, and (c) holders of Company Warrants shall be entitled to receive only the consideration provided for in this Agreement in respect of such Company Warrants. Until surrendered for cancellation in accordance with the provisions of this Article 1 , each stock certificate representing shares of Company Common Stock shall, from and after the Effective Time, represent (i) in the case of shares other than Dissenting Shares, the right to receive the consideration provided for in this Agreement in respect of such shares and (ii) in the case of Dissenting Shares, the rights afforded to the holders thereof under the applicable provisions of the MBCA.

Section 1.7.   Working Capital Adjustment .

(a)   Delivery of Accounts Receivable Report . At least three (3) Business Days prior to the Closing, the Company shall deliver to the Parent a report estimating all of the Accounts Receivable as of the Closing Date (the “ Estimated Accounts Receivable Report ”). The Estimated Accounts Receivable Report shall (i) identify the dollar amount of each Account Receivable and (ii) include an aging schedule for the Company’s Accounts Receivable reflecting, as of the Closing Date, the aggregate amount of the Accounts Receivable outstanding: (i) 30 days or less; (ii) more than 30 days but less than or equal to 60 days; (iii) more than 60 days but less than or equal to 90 days; and (iv) more than 90 days. The aggregate dollar amount of the Accounts Receivable evidenced on the Estimated Accounts Receivable Report (the “ Estimated Accounts Receivable Amount ”) shall be determined in a manner consistent with GAAP and take into consideration the Company’s then current reserve for bad debts.

(b)   Taking of Inventory; Joint Inventory Report . No more than five (5) days immediately preceding the Closing Date, the parties shall take the following actions (the “ Inventory Audit ”):

(i)   the Company shall deliver to the Parent a certificate which identifies all raw materials to which the Company owns good and marketable title and are (1) in transit to the Company, (2) located at the Facility or (3) located at an Off-Site Warehouse (collectively, the “ Raw Materials ”);

(ii)   the Company shall deliver to the Parent a certificate which identifies (1) all finished goods located at the Facility or (2) located at an Off-Site Warehouse (collectively, the “ FG ”); and

(iii)   the Company shall deliver to the Parent a certificate which identifies all of the Company’s work-in-process inventory located at the Facility (the “ WIP ”).

Upon receipt of the certificates referenced in items (i), (ii) and (iii) above (the “ Inventory Certificates ”), the Parent shall have the right prior to the Closing to audit the accuracy of the Inventory Certificates and should the Parent identify any inaccuracies in the Inventory Certificates, the Parent shall have the right to require representatives of the Company and the Parent to conduct a physical audit as of the Closing of all or any portion of the Raw Materials, FG or WIP. In the event that any physical audit reveals an inaccuracy in any of the Inventory Certificates, the Company shall so amend the applicable Inventory Certificate(s). Once the Parent is satisfied with the content of the Inventory Certificates, as amended, if applicable, the Company and the Parent shall jointly prepare a report (the “ Inventory Report ”) which (i) details, for each type of Raw Material, WIP and FG, the number, amount and/or weight, as applicable, of items of such type identified on the Inventory Certificates, (ii) sets forth the agreed upon per-item values set forth in Exhibit D for each type of Raw Material, WIP and FG (the “ Agreed Upon Inventory Values ”), (iii) multiplies the Agreed Upon Inventory Values for each type of Raw Materials, WIP and FG by the number, amount and/or weight, as applicable, as identified in the Inventory Certificates (each an “ Inventory Category Value ”) and (iv) determines the aggregate value of the Raw Materials, WIP and FG by adding the Inventory Category Values (the “ Closing RM/WIP/FG Amount ”).

(c)   Closing Report . On the Closing Date, the Company shall deliver to the Parent a report (“ Estimated Closing Report ”) which identifies (i) the Estimated Accounts Receivable Amount, (ii) the Closing RM/WIP/FG Amount, and (iii) the Company’s estimate of (A) its cash and cash equivalents as of the Closing Date (the “ Cash Amount ”), (B) its prepaid assets as of the Closing Date (the “ Prepaid Assets Amount ”) and (C) its current liabilities as of the Closing Date (the “ Liabilities Amount ”), in each case determined in accordance with GAAP and in a manner consistent with the preparation of the Financial Statements. The sum of the estimated Accounts Receivable Amount plus the Closing RM/WIP/FG Amount plus the Cash Amount plus the Prepaid Assets Amount and minus the Liabilities Amount, as set forth in the Estimated Closing Report, shall be referred to herein as the “ Estimated Working Capital Amount .” The Estimated Working Capital Amount shall be calculated in the same manner as the Benchmark Working Capital Amount, which is calculated as shown on Schedule 1.7(c) attached hereto. Notwithstanding the foregoing, the Liabilities Amount shall include any and all amounts (i) due and owing to any former employees of the Company pursuant to chapter 149, section 183 of the Massachusetts General Laws to the extent arising from the termination of such employee’s employment with the Company prior to the Closing; (ii) due and owing to Howard Kaepplein to the extent arising from the termination of his employment (whether resulting from obligations under that certain Employment Severance Agreement dated as of March 31, 2004 by and between Howard Kaepplein and the Company or otherwise); and (iii) required to be expended in order to obtain all those software licenses necessary to operate the Business in the manner in which it is currently being operated and in compliance with applicable Law.

(d)   Adjustment at Closing . In the event that the Estimated Working Capital Amount is less than $2,363,000 (the “ Benchmark Working Capital Amount ”), the Cash Merger Proceeds shall be reduced on a dollar-for-dollar basis, by an amount equal to the difference (the “ Negative Amount ”) between the Benchmark Working Capital Amount and the Estimated Working Capital Amount. In the event that the Estimated Working Capital Amount is greater than the Benchmark Working Capital Amount, the Cash Merger Proceeds shall be increased on a dollar-for-dollar basis, by an amount equal to the difference (the “ Positive Amount ”) between the Estimated Working Capital Amount and the Benchmark Working Capital Amount. The amount equal to the Cash Merger Proceeds plus the Positive Amount or minus the Negative Amount, whichever is applicable, shall be referred to as the “ Adjusted Closing Cash Merger Proceeds .”

(e)   Post-Closing Adjustmen t. Concurrently with the delivery of the Estimated Closing Report, the Company shall deliver such documentation and work papers as the Company used to prepare the calculations set forth in the Estimated Closing Report. In the event the Parent disputes the actual sum of the Accounts Receivable Amount plus the Closing RM/WIP/FG Amount plus the Cash Amount plus the Prepaid Assets Amount and minus the Liabilities Amount as of the Effective Date (the “ Actual Working Capital Amount ”) as shown on the Estimated Closing Report, the Parent shall, within sixty (60) days after the Closing, advise the Stockholder Representative in writing of any objections the Parent may have with respect to the Estimated Closing Report (any such objection shall (i) be set forth in reasonable detail, (ii) include supporting calculations and documentation (if necessary) and (iii) propose an adjustment to the Estimated Working Capital Amount) (a “ WC Objection ”). In the event the Parent fails to deliver to the Stockholder Representative a WC Objection within such sixty (60) day period, the Parent shall be deemed to have accepted and consented to the calculations and determinations made in the Estimated Closing Report and the calculation of the Estimated Working Capital Amount contained in the Estimated Closing Report shall be deemed to be final (the “ Final Working Capital Amount ”). In the event the Parent delivers a WC Objection within sixty (60) days after the Closing, the Stockholder Representative and the Parent shall utilize commercially reasonable efforts to try to resolve the objections set forth in the WC Objection (the “ Disputed Items ”) within sixty (60) days of the Stockholder Representative’s receipt of a WC Objection. If the parties are unable to resolve the Parent’s objections within that period, either party may refer the Disputed Items to the Boston office of Ernst & Young or, if such firm is unwilling or unable to serve, the parties shall engage the Boston office of another internationally known, mutually acceptable accounting firm (the “ Arbiter ”) to determine how the Disputed Items should be resolved. By execution of this Agreement, each of the Parent and the Company hereby represents and warrants to the other that Ernst & Young has not performed any services for such party at any time during the five (5) year period immediately preceding the date hereof. The Arbiter shall determine (i) the Actual Working Capital Amount based solely upon

the provisions of this Agreement and the presentations by the parties and their respective representatives, and not by independent review, and (ii) the appropriate amount, if any, by which the Estimated Working Capital Amount should be adjusted as a result of the manner in which the Company calculated the Disputed Items in preparing the Estimated Closing Report. In resolving any Disputed Item, the Arbiter (i) shall limit its review to matters specifically set forth in the WC Objection, (ii) shall further limit its review to whether the calculations are mathematically accurate and have been prepared in accordance with the provisions of this Agreement and (iii) shall not assign a value to any item greater than the greatest value for such item claimed by a party hereto or less than the smallest value for such item claimed by a party hereto. The determinations of the Arbiter shall be final, conclusive and binding (also, the “ Final Working Capital Amount ”). The fees and expenses of the Arbiter shall be shared equally between the Company Stockholders and Company Optionholders, on the one hand, the Parent on the other hand, with the Company Stockholders’ and Company Optionholders’ portion of such expenses being payable from the WC/Indemnity Escrow Amount pursuant to the terms of the Escrow Agreement. On the fifteenth day following the date on which the Final Working Capital Amount is determined, (i) in the event that the Final Working Capital Amount is greater than the Estimated Working Capital Amount, the Parent shall deliver to the Company Stockholders and the Company Optionholders their Pro Rata Portion of the amount equal to the difference between (y) the Final Actual Working Capital Amount and (z) the Estimated Working Capital Amount and (ii) in the event that the Final Working Capital Amount is less than the Estimated Working Capital Amount, the Parent shall be entitled to receive from the WC/Indemnity Escrow Amount pursuant to the terms of the Escrow Agreement an amount equal to the difference between (y) the Estimated Working Capital Amount and (z) the Final Actual Working Capital Amount.

Section 1.8.   Disposition of the Exchange Fund . Any portion of the Exchange Fund which remains undistributed to the former holders of Company Common Stock or Eligible Company Options or Company Warrants for twelve (12) months after the Effective Time shall be delivered to the Surviving Corporation, upon its request, to be held as a cash reserve for the cash payment of Company Common Stock or Eligible Company Options or Company Warrants pursuant to the Merger and any such former holders who have not theretofore surrendered to the Exchange Agent their Certificates, Option Documents and/or Warrant Documents in compliance herewith shall thereafter look only to the Surviving Corporation for payment of the cash to be paid pursuant to the Merger. None of the Surviving Corporation, the Exchange Agent, the Escrow Agent or the Company shall be liable to any former holder of Company Common Stock or Eligible Company Options or Company Warrants for any such cash held in the Exchange Fund or in escrow hereunder which is delivered to a public official pursuant to an official request under any applicable abandoned property, escheat or similar law.

Section 1.9.   Appointment of Stockholder Representative .

(a)   In order to efficiently administer the transactions contemplated hereby, including the indemnification provisions set forth in Article 7 , each Company Stockholder, Company Optionholder and Company Warrant Holder hereby designates each of Howard Kaepplein, Bernhard Schroter and Robert Chmielinski P.C. as their representatives (collectively, the “ Stockholder Representative ”). By virtue of (i) the adoption of this Agreement and the approval of the Merger by the Company Stockholders at a meeting of the stockholders of the Company (or by written consent in lieu of a meeting) pursuant to, and in accordance with, the applicable provisions of the MBCA, each Company Stockholder (regardless of whether or not such Company Stockholder votes in favor of the adoption of this Agreement and the approval of the Merger by written consent) and (ii) each Company Optionholder’s or Company Warrant Holder’s receipt of the Adjusted Option/Warrant Per Share Closing Amount, each Company Optionholder and Company Warrant Holder, shall be deemed to agree as follows:

(i)   the Parent, the Acquirer and the Surviving Corporation shall be able to rely conclusively on the instructions and decisions of the Stockholder Representative (acting by the majority) as to any actions required or permitted to be taken by the Stockholder Representative hereunder, and no party hereunder shall have any cause of action against the Parent, the Acquirer and/or the Surviving Corporation to the extent the Parent, the Acquirer and/or the Surviving Corporation has relied upon the instructions or decisions of the Stockholder Representative;

(ii)   all actions, decisions and instructions of the Stockholder Representative shall be based on a majority vote of the individuals serving in the capacity of a Stockholder Representative and any and all such actions, decisions and instructions approved by a majority of the individuals serving as a Stockholder Representative shall be conclusive and binding upon all of the Company Stockholders, Company Optionholders and Company Warrant Holders, and no Company Stockholder, Company Optionholder or Company Warrant Holder shall have any cause of action against the Stockholder Representative for any action taken, decision made or instruction given by the Stockholder Representative under this Agreement (or for any failure to take such action, make such decision or give such instruction), except for fraud or willful misconduct by the Stockholder Representative; and each Company Stockholder, Company Optionholder and Company Warrant Holder, jointly and severally, shall indemnify each Stockholder Representative for any and all claims, liabilities, losses, damages, costs and expenses which such Stockholder Representative shall suffer and which relate to or arise, directly or indirectly, out of any action taken by him/her in his/her capacity as a Stockholder Representative in accordance with the terms of this Agreement and which are asserted by any other Company Stockholder, Company Optionholder or Company Warrant Holder against such Stockholder Representative in accordance with the terms of this Agreement;

(iii)   the provisions of this Section 1.9 are independent and severable, are irrevocable and coupled with an interest, and shall be enforceable notwithstanding any rights or remedies that any Company Stockholder, Company Optionholder or Company Warrant Holder may have in connection with the transactions contemplated by this Agreement;

(iv)   remedies available at law for any breach of the provisions of this Section 1.9 are inadequate; therefore, the Parent, the Acquirer and/or the Surviving Corporation shall be entitled to temporary and permanent injunctive relief without the necessity of proving damages if the Parent, the Acquirer and/or the Surviving Corporation brings an action to enforce the provisions of this Section 1.9 ; and

(v)   the provisions of this Section 1.9 shall be binding upon the executors, heirs, legal representatives, personal representatives, successor trustees, and successors of each Company Stockholder, Company Optionholder and Company Warrant Holder, and any references in this Agreement to a Company Stockholder, Company Optionholder and Company Warrant Holder shall mean and include the successors to such Company Stockholder’s, Company Optionholder’s or Company Warrant Holder’s rights hereunder, whether pursuant to testamentary disposition, the laws of descent and distribution or otherwise.

(b)   Each Company Stockholder, Company Optionholder and Company Warrant Holder hereby authorizes the Stockholder Representative to take any and all action as is contemplated to be taken by or on behalf of such Company Stockholder, Company Optionholder or Company Warrant Holder, and to assert the Company Stockholder’s, Company Optionholder’s or Company Warrant Holder’s rights granted, pursuant to the terms of this Agreement.

(c)   In the event that any of Howard Kaepplein, Bernhard Schroter and Robert Chmielinski P.C. (or any of their substitutes as Stockholder Representative) dies, becomes unable to perform his or her responsibilities hereunder or resigns from such position, then David Steadman (or his substitute) shall fill such vacancy and shall be deemed to be a Stockholder Representative for all purposes of this Agreement and the documents delivered pursuant hereto. In the event that all of the foregoing individuals are unable or unwilling to serve as a Stockholder Representative, alternate Stockholder Representatives shall be elected by the holders of a majority of the shares of Company Common Stock outstanding immediately prior to the Effective Time, assuming the conversion, exchange and/or exercise of all outstanding Eligible Company Options and Company Warrants which are then currently convertible, exercisable or exchangeable for Common Stock.

(d)   Each Stockholder Representative shall be compensated for his or her services rendered in connection with the performance of his or her duties as a Stockholder Representative, whether arising under this Agreement or otherwise, at hourly rates commensurate with such Stockholder Representative’s customary hourly rates for his or her other professional activities and shall be reimbursed for his or her reasonable costs and expenses incurred in connection with the performance of his or her duties as a Stockholder Representative, whether arising under this Agreement or otherwise, including the reasonable fees of a certified public accountant or other professional advisor retained by the Stockholder Representative in connection with their duties under this Agreement. Notwithstanding the foregoing, all rights of a Stockholder Representative to compensation and/or expense reimbursement, whether arising under this Agreement or otherwise, shall be satisfied exclusively by payment out of, and only to the extent of, the Stockholder Representative Escrow Amount, which shall be maintained by Bowditch & Dewey, LLP, as escrow agent. In no event shall the Surviving Corporation (i) be obligated to pay to any Stockholder Representative any amounts pursuant to this Section 1.9(d) or (ii) have any recourse against the Stockholder Representative Escrow Amount or Bowditch & Dewey, LLP in its capacity as escrow agent.

Section 1.10.   Effect of Stockholder Approval of Merger . The adoption of this Agreement and the approval of the Merger by the Company Stockholders at a meeting of stockholders of the Company (or by written consent in lieu of a meeting) pursuant to, and in accordance with, the applicable provisions of the MBCA shall be deemed to constitute approval by each Company Stockholder individually (regardless of whether or not such Company Stockholder votes in favor of the adoption of this Agreement and the approval of the Merger at such meeting or by written consent) to the same extent as if such Company Stockholder were a party to this Agreement of, and the execution of the transmittal letter and other required documentation by a Company Optionholder or a Company Warrant Holder shall be deemed a consent to, (a) the appointment of the Stockholder Representative, (b) the grant to the Stockholder Representatives of all of the powers, rights and privileges contemplated under this Agreement, including the right to indemnification set forth in Section 1.9(a)(ii) hereof, (c) the provisions of this Agreement concerning the replacement and substitution of a person serving as a Stockholder Representative and (d) the terms and conditions of this Agreement.

Section 1.11.   Post-Closing Accounts Receivable Adjustment . Following the Closing, the Parent shall cause the Surviving Corporation to use commercially reasonable efforts to collect the Accounts Receivable (each a “ Pre-Closing Receivable ”). Within twenty (20) days of the close of each of the first six (6) calendar months following the calendar month in which the Closing occurs, the Parent will deliver a report to the Stockholder Representative indicating which Pre-Closing Receivables were collected by the Surviving Corporation in the then most recently completed month. During the one hundred eighty (180) day period following the Closing, the Parent shall cause the Surviving Corporation to authorize its employee in charge of collecting the Pre-Closing Receivables to respond to any reasonable inquiries made by the Stockholder Representative concerning the collection of the Pre-Closing Receivables. Any and all payments received by the Surviving Corporation after the Closing (a “ Post-Closing Account Payment ”) from the customers of the Business (the “ Accounts ”) shall be applied to the longest outstanding Pre-Closing Receivable; provided , however , that if a customer objects to the amount of an invoice or the quality of a product to which such Pre-Closing Receivable relates, such customer payment shall be applied to the customer’s next longest outstanding Accounts Receivable with which the customer has not objected to the amount of an invoice or the quality of a product to which such Accounts Receivable relates. If the Surviving Corporation is unable to collect a Pre-Closing Receivable within one hundred eighty (180) days from the invoice date of the Pre-Closing Receivable (the “ Receivable Cut-Off Date ”), the Parent shall be entitled to receive from the WC/Indemnity Escrow Amount an amount equal to the unpaid portion of any such Pre-Closing Receivable; provided , however , that if prior to the Receivable Cut-Off Date the Surviving Corporation enters into an arrangement with a customer pursuant to which such customer is permitted to pay all or a portion of a Pre-Closing Receivable after the Receivable Cut-Off Date, such unpaid portion of such Pre-Closing Receivable due after the Receivable Cut-Off Date shall not be payable out of the WC/Indemnity Escrow Amount until (i) the customer breaches the terms of its payment arrangements with the Surviving Company or (ii) five (5) Business Days prior to the date the WC/Indemnity Escrow Amount is due to be released pursuant to the terms of the Escrow Agreement.

Section 1.12.   Payments to Persons other than Registered Holders . If any cash is to be paid to any Person other than the registered holder of the Certificate surrendered in exchange therefor, it shall be a condition to such exchange that such surrendered Certificate shall be properly endorsed and otherwise in proper form for transfer and such Person either (i) shall pay to the Exchange Agent any transfer or other Taxes required as a result of such cash payment to such Person or (ii) shall establish to the satisfaction of the Exchange Agent that such Tax has been paid or is not applicable. The Acquirer, the Escrow Agent or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as the Acquirer, the Escrow Agent or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax law. To the extent that amounts are so withheld by the Acquirer, the Escrow Agent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by the Acquirer, the Escrow Agent or the Exchange Agent. All amounts in respect of Taxes received or withheld by the Acquirer, the Escrow Agent or the Exchange Agent shall be disposed of by the Acquirer, the Escrow Agent or the Exchange Agent, as applicable, in accordance with the Code or such state, local or foreign Tax law, as applicable.

The Company hereby represents and warrants to the Parent and the Acquirer as follows:

Section 2.1.   Organization; Authority . The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all requisite corporate power and authority to own or lease and operate its properties and to carry on its business as now conducted. The Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where the nature of its operations or properties requires such a qualification. The Company has delivered to the Parent true, complete and correct copies of its Articles of Organization and By-Laws, and all amendments thereto.

Section 2.2.   Approval, Binding Effect . The Company has all requisite corporate power and authority to execute and deliver this Agreement and to perform all of its agreements and obligations under, and to consummate the transactions contemplated by, this Agreement. This Agreement and the transactions contemplated hereby have been duly authorized by the Board of Directors of the Company and no other corporate approvals, other than the approval of the Company Stockholders owning two-thirds of the issued and outstanding shares of the Company Common Stock, on the part of the Company are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company. This Agreement constitutes the legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency and similar Laws affecting creditor's rights generally or equitable principles relating to the availability of remedies.

Section 2.3.   Non-Contravention . Except as set forth on Schedule 2.3 , the execution and delivery of this Agreement, the performance and compliance by the Company with the terms hereof and the consummation of all transactions, including the Merger, contemplated hereby will not conflict with, result in a breach or violation of, constitute a default (with or without due notice or lapse of time or both) under, or give rise to any Encumbrance, right of termination, cancellation, acceleration, vesting or modification of any right or obligation or loss of any benefit under (a) any provision of the Articles of Organization or By-Laws of the Company, (b) any Law or restriction applicable to the Company or its properties or assets, (c) any judgment, order, writ, injunction or decree of any court or judicial or quasi-judicial tribunal applicable to the Company or its properties or assets or (d) any contract, commitment, lease, agreement, mortgage, note, bond, indenture or other instrument or obligation to which the Company is a party or by which it or its assets are bound.

Section 2.4.   No Consents . Except as set forth on Schedule 2.4 , no consent, notice, approval, waiver, license or other authorization or action by or filing, registration or qualification with any Governmental Entity or any other Person (including any party to any agreement with the Company) is required in connection with the execution and delivery by the Company of this Agreement, the consummation by the Company of the transactions contemplated hereby, or the performance by the Company of its obligations hereunder.

Section 2.5.   No Subsidiaries . The Company does not have, nor has it ever had, any Subsidiaries and does not own or hold of record or beneficially, and is not obligated to acquire, any equity or ownership interest in any other Person.

Section 2.6.   Capitalization .

(a)   The authorized capital stock of the Company consists solely of 2,000,000 shares of Company Common Stock, 914,463 shares of which are issued and outstanding on the date hereof. All such outstanding shares of capital stock of the Company are owned of record as of the date hereof by the stockholders set forth on Schedule 2.6(a) , and are duly authorized, validly issued, fully paid, nonassessable and free and clear of any preemptive rights or Encumbrances. Schedule 2.6(a) sets forth a complete list of all Company Options and Company Warrants, and showing for each such option: (i) the name of the optionee or warrant holder, (ii) the number of shares issuable, (iii) the number of vested shares, (iv) the date of expiration, (v) the exercise price, (vi) in the case of an option, whether or not such option is intended to be an “incentive stock option” under Section 422 of the Code and (vii) whether the option or warrant shall become exercisable upon the consummation of the transactions contemplated by this Agreement. The Company has delivered to the Parent true and complete copies of each agreement evidencing the grant of each Company Option and Company Warrant. The Company has caused, or prior to the Effective Time shall cause, all Company Options other than Eligible Company Options (the “ Non-Eligible Company Options ”) to be canceled, terminated and of no further force and effect. All of the Company Warrants will be exercisable as of the Effective Time. The Company Options and Company Warrants were validly issued by the Company. Except for the Voting Agreement, there are no voting trusts or other agreements or understandings to which the Company or any of its stockholders are a party with respect to the voting of the Company Common Stock. The amendments made by the Company in 2005 to (i) the Company’s Incentive Stock Option Plan, adopted in 1999, as amended, and the Company’s Incentive Stock Option Plan, adopted in 2002, as amended (collectively, the “ Plans ”), and (ii) the Stock Option Agreements and Warrants identified on Schedule 2.6(b) , which such amendments provide for cashless exercise of Company Options and Company Warrants and partial acceleration of the unvested Company Options, will have received prior to the Effective Time the necessary corporate and non-corporate approvals (i) on the part of the Board of Directors of the Company, the Company’s shareholders and the holders of the Company Options and Company Warrants and (ii) to satisfy the requirements contained in the Company’s Articles of Organization, as amended, the Company’s Bylaws, and the MBCA.

(b)   Except as set forth on Schedule 2.6(b) , (i) the Company does not have any shares of capital stock or voting securities reserved for issuance and (ii) does not have and is not bound by any outstanding subscriptions, options, warrants, calls, commitments or agreements of any character calling for the Company to issue, deliver or sell, or cause to be issued, delivered or sold any shares of Company Common Stock or any other ownership interest of the Company or any securities convertible into, exchangeable for or representing the right to subscribe for, purchase or otherwise receive any shares of Company Common Stock or any other ownership interest of the Company or obligating the Company to grant, extend or enter into any such subscriptions, options, warrants, calls, commitments or agreements. There are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company.

Section 2.7.   Financial Statements .

(a)   Attached as Schedule 2.7 are true and complete copies of (a) the audited balance sheet of the Company as of the years ended December 31, 2003 and 2002, and the related audited income statement, audited statement of cash flows and audited statement of changes in stockholders’ equity of the Company for the three years ended December 31, 2003 (the “ Audited Financial Statements ”), (b) the unaudited balance sheet (the “ Balance Sheet ”) of the Company as of December 31, 2004 and the related unaudited income statement, unaudited statement of cash flows and unaudited statement of retained earnings for the twelve (12) months then ended (the “ Unaudited Financial Statements ” and, together with the Audited Financial Statements, the “ Financial Statements ”). The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby, except for the absence of footnotes thereto. The Financial Statements fairly present the financial condition and the results of operations of the Company and its Subsidiaries as of the dates and for the periods covered thereby.

(b)   The accounts receivable of the Company reflected in the Unaudited Financial Statements arose from bona fide transactions in the ordinary course of business and reflect credit terms consistent with the past practices of the Company. The Company has not received notice of any counterclaims or setoffs against such accounts receivable for which reserves have not been established in accordance with GAAP.

(c)   The raw materials, work in process and finished goods inventory of the Company to the extent reflected on the Unaudited Financial Statements net of reserves are usable or saleable in the ordinary course of business of the Company and are recorded on the books of the Company at the lower of cost or market value in accordance with GAAP.

Section 2.8.   Absence of Certain Changes . Except as set forth on Schedule 2.8 , since December 31, 2003, there has not been:

(a)   any adverse change in the condition (financial or otherwise), results of operations, assets, liabilities or business of the Company other than changes arising in the ordinary course of business;

(b)   any acquisition or disposition by the Company outside the ordinary course of business of any asset or property used by the Company;

(c)   any damage, destruction or casualty loss to any material asset of the Company, whether or not covered by insurance;

(d)   any (i) increase in the compensation, pension or other benefits payable or to become payable to any of the present or former directors, officers, employees, directors, agents or representatives of the Company or any bonus payments or arrangements made to or with any of them, (ii) grant of any severance or termination pay to any present or former director, officer or employee of the Company, (iii) loan or advance of money or other property by the Company to any present or former director, officer or employee of the Company, (iv) establishment, adoption, entrance into, amendment or termination of any collective bargaining agreement or (v) grants of any equity or equity-based awards;

(e)   any voluntary forgiveness, cancellation, compromise, release or waiver of any right or claim (or series of related rights and claims) of the Company in excess of $25,000 individually or $25,000 in the aggregate or outside the ordinary course of business, or any voluntary waiver of any right of value other than immaterial compromises of accounts receivable in the ordinary course of business consistent with past practice;

(f)   the imposition of any Encumbrance on any of the assets of the Company;

(g)   any lapse, termination, acceleration, modification, amendment, cancellation or expiration, or to the Company’s Knowledge, threatened termination, acceleration, modification, amendment or cancellation, of any Material Contract or other material agreement, insurance policy, plan, lease, license or permit to which the Company is a party or from which the Company receives benefits;

(h)   any amendments to the Articles of Organization or By-Laws (or other organizational documents) of the Company;

(i)   any issuance, sale or disposal of any shares of capital stock or other ownership interest of the Company, or any grant of, options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any shares of capital stock or other ownership interest of the Company;

(j)   any capital expenditure (or series of related capital expenditures) either in excess of $25,000 or outside the ordinary course of business;

(k)   any change in any method of accounting, other than any such changes required by GAAP;

(l)   any declaration, setting aside or payment of any dividend or other distribution (whether in cash or in kind) on or with respect to, or redemption, purchase or other acquisition of, any shares of capital stock of the Company;

(m)   any loss or, to the Company’s Knowledge, any threatened loss of a customer group or group of customers which purchased individually or in the aggregate (on an annual basis) more than $100,000 of goods and services from or through the Company;

(n)   any act or omission outside of the ordinary course of business other than in connection with the transactions contemplated hereby; or

(o)   any commitment to do any of the foregoing.

Section 2.9.   No Undisclosed Liabilities . The Company does not have any material liability or obligation (absolute, accrued, contingent or otherwise) of a nature required by GAAP to be reflected on a balance sheet of the Company or reserved against or disclosed in the notes thereto, except (a) for liabilities set forth in the Balance Sheet or the notes thereto, (b) as set forth on Schedule 2.9 or (c) for incidental trade account payables and expenses incurred in the ordinary course of business since the Balance Sheet Date.

Section 2.10.   Title to Assets; Material Leases; Tangible Assets .

(a)   Except as set forth in Schedule 2.10(a) , the Company has good and marketable title to (or valid leasehold or contractual interests in) all of the assets and properties used in connection with the operation of the Business, free and clear of any Encumbrances, except (i) mechanics’, carriers’, workmen’s, repairmen’s, warehousemen’s or other like Encumbrances arising or incurred in the ordinary course of business, (ii) liens for Taxes that are not yet due and payable or that may hereafter be paid without penalty and (iii) other imperfections of title or Encumbrances, if any, that do not, individually or in the aggregate, materially impair the continued use and operation of the assets to which they relate in the conduct of the Business as presently conducted. Schedule 2.10(a) also contains a complete list of all machinery, motor vehicles, computer equipment, other equipment, furniture, fixtures, and all other tangible personal property (i) owned by the Company and used in connection with the Business on the date hereof and (ii) leased by the Company and used in connection with the Business on the date hereof pursuant to leases which involve monthly payments of more than $500 per month on account of any such lease. Neither the Company nor, to the Company’s Knowledge, any lessor of any such lease is in default under any such lease and, to the Company’s Knowledge, no facts exists which, with notice and/or the passage of time, would constitute such a default.

(b)   All material tangible assets and properties reflected on the Balance Sheet and all of the assets leased by the Company identified on Schedule 2.10(a) are in all material respects in good operating condition and repair, reasonable wear and tear excepted, and no material properties or assets necessary for the conduct of the Business in substantially the same manner as the Business has heretofore been conducted are in need of replacement or material maintenance or repair except for routine replacement, maintenance and repair.

(c)   The Company has never owned any real property. Schedule 2.10(c) sets forth all material personal property leases to which the Company is a party or by which it is bound and all real property leases to which the Company is a party or by which it is bound (the “ Leases ”). The Business is conducted solely from the Facility. Except as disclosed in Schedule 2.10(c) , each Lease is the legal, valid and binding obligation of the Company, and to the Knowledge of the Company, of each other party thereto, enforceable against each such party thereto in accordance with its terms. Except as provided in Schedule 2.10(c) , the consummation of the transactions contemplated by this Agreement will not result in any default, penalty, termination, acceleration or modification to any Lease and each Lease will continue to be legal, valid, binding, enforceable, and in full force and effect on identical terms immediately following and after giving effect to the consummation of the transactions contemplated by this Agreement. The Company, and to the Knowledge of the Company, each other party thereto, is not in breach or default of, and no event has occurred which, with or without notice or lapse of time, would constitute a breach or default or permit termination, acceleration or modification under any Lease.

(d)   The rights, properties and assets owned by, leased or licensed to or otherwise freely available in the public domain for use by the Company include all rights, properties and other assets necessary to permit the Company to conduct its business in all material respects in the same manner as it is conducted on, or has been conducted immediately prior to, the date of this Agreement.

Section 2.11.   Indebtedness . Except for Indebtedness reflected in the Balance Sheet and set forth on Schedule 2.11 , the Company does not have any Indebtedness outstanding at the date hereof. The Company is not in default with respect to any outstanding Indebtedness or any instrument relating thereto and except as set forth on Schedule 2.11 , no such Indebtedness or any instrument or agreement relating thereto purports to limit the operation of the Business. Complete and correct copies of all instruments and agreements (including all amendments, supplements, waivers and consents) relating to any Indebtedness of the Company have been furnished to the Parent.

Section 2.12.   Taxes .

(a)   The Company has duly filed all Tax Returns required to be filed by it, all such filed Tax Returns are complete and accurate in all material respects and the Company has duly and timely paid all Taxes that are required to be paid by it, except with respect to matters contested in good faith in appropriate proceedings and identified on Schedule 2.12(a) . The Company has established as of the Balance Sheet Date, on its books and records, reserves in accordance with GAAP consistently applied that are adequate in the opinion of management of the Company for the payment of all Federal, state and local Taxes not yet due and payable, but are incurred in respect of the Company through such date. Except as set forth on Schedule 2.12(a) , the Company has withheld and paid all Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. The Company has not waived any statute of limitations with respect to any material Taxes or, to the extent related to such Taxes, agreed to any extension of time with respect to a Tax assessment or deficiency, in each case to the extent such waiver or agreement is currently in effect. Except as set forth in Schedule 2.12(a) , no Federal, state, local income, franchise or sales and use Tax Returns of the Company have been examined by the United States Internal Revenue Service (“ IRS ”) or the appropriate state, local or foreign Tax authority. With respect to each examination identified on Schedule 2.12(a) , no deficiencies were asserted as a result of such examinations which have not been resolved and paid in full. There is no action, suit, investigation, audit, claim or assessment pending or, to the Knowledge of the Company, proposed or threatened, with respect to Taxes of the Company. To the Knowledge of the Company, no claim has ever been made by a Tax authority in a jurisdiction where the Company does not file Tax Returns that the Company is or may be subject to Taxes assessed by such jurisdiction. The Company does not have any material liability for any Taxes of any Person, other than the Company, under Treasury Regulation Section 1.1502-6 or any comparable provision of state, local, or foreign law, as a transferee or successor, by contract or otherwise. The Company has made available to the Parent true and correct copies of the United States Federal, state, local and foreign income Tax Returns filed by the Company for Taxable years ended after December 31, 1999 and before the date hereof.

(b)   Except as set forth on Schedule 2.12(b) , the Company (i) has not requested any extension of time within which to file any Tax Return which Tax Return has not since been filed, (ii) is not a party to any agreement providing for the allocation or sharing of Taxes, (iii) is not required to include in income any adjustment pursuant to Section 481(a) of the Code, by reason of a voluntary change in accounting method initiated by the Company (nor does the Company have any Knowledge that the IRS has proposed any such adjustment or change of accounting method) or has any application pending with the IRS or any other Tax authority requesting permission for any change in accounting method, (iv) has not issued or assumed any obligation under Section 279 of the Code, any high yield discount obligation as described in Section 163(f)(1) of the Code or any registration-required obligation within the meaning of Section 163(f)(2) of the Code that is not in registered form, (v) is not, or has not been during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code, a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code, (vi) is not or has not been a member of an affiliated group (within the meaning of Section 1504(a) of the Code) filing consolidated United States Federal income Tax Returns (other than such a group the common parent of which is or was the Company), (vii) has not been a party to any distribution occurring during the last three years in which the parties to such distribution treated the distribution as one to which Section 355 of the Code (or any similar provision of state, local or foreign law) applied and (viii) has disclosed on its federal Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662.

(c)   Except as set forth on Schedule 2.12(c) , no officer, director, employee or agent (or former officer, director, employee or agent) of the Company is entitled to now, or will or may be entitled to as a consequence of this Agreement or the Merger or otherwise, to any payment or benefit from the Company, the Surviving Corporation or from the Parent or any of its Subsidiaries which if paid or provided would constitute an “excess parachute payment”, as defined in Section 280G of the Code or regulations promulgated thereunder.

Section 2.13.   Litigation, Etc . Except as set forth on Schedule 2.13 , no proceeding, arbitration, action, judgment, decision, settlement, writ, stipulation, decree, lawsuit, claim, complaint, injunction, order or investigation before any Governmental Entity or other forum is pending or, to the Knowledge of the Company, threatened against the Company. There is no judgment, decree, injunction, or order of a Governmental Entity outstanding against the Company. The Company has not received any written notice from any Governmental Entity of any pending or threatened governmental investigation relating to the Company. Except as set forth on Schedule 2.13 , there are no facts or circumstances known to the Company that could result in a claim against the Company for damages or equitable relief which, if decided adversely, could reasonably be expected to result in a Material Adverse Effect. Schedule 2.13 identifies and provides a short description of any and all proceedings, arbitrations, actions, judgments, decisions, settlements, writs, stipulations, decrees, lawsuits, claims, complaints, injunctions, orders and investigation to which the Company has been a party or which the Company has received, as applicable, during the five (5) year period preceding the date hereof.

Section 2.14.   Employee Matters .

(a)   Schedule 2.14(a) lists the names and titles of, and current annual compensation and most recent annual bonus for, each current employee of the Company, together with a description of any agreements concerning such employees and the individual’s employee status (e.g., full-time, part-time, temporary, active, leave of absence, hourly, salaried).

(b)   There are no personnel policies applicable to the employees of the Company, other than employee manuals, true and complete copies of which have previously been provided to the Parent.

(c)   Schedule 2.14(c) lists all Company Options and Company Warrants, showing for each such option or warrant: (i) the name of the optionee or warrant holder, (ii) the number of shares issuable, (iii) the number of vested shares, (iv) the date of expiration, (v) the exercise price and (vi) in the case of an option, whether or not such option is intended to be an “incentive stock option” under Section 422 of the Code. The Company has delivered to the Parent true and complete copies of each agreement evidencing the grant of each such option and warrant.

(d)   Schedule 2.14(d) lists all shares of Company Common Stock issued pursuant to any restricted stock agreement (written or unwritten) including (i) the date such shares were sold or awarded, (ii) the purchase price per share, if any, (iii) the number of shares issued, (iv) the number of such shares which, as of the date hereof, have vested and (v) the vesting schedule for such shares which, as of the date hereof, have not vested. The Company has delivered to the Parent true and complete copies of each such restricted stock agreement.

(e)   Except as set forth on Schedule 2.14(e) , with respect to current and former employees and service providers of the Company (each an “ Employee ”):

(i)   the Company is and has been in compliance in all material respects with all Laws respecting employment and employment practices, terms and conditions of employment and wages and hours, including any Laws respecting minimum wage and overtime payments, employment discrimination, workers’ compensation, family and medical leave, immigration, and occupational safety and health requirements, and has not and is not engaged in any unfair labor practice;

(ii)   there is no basis for any claim by any Employee that such Employee was subject to a wrongful discharge or any employment discrimination by the Company, or its management, arising out of or relating to such Employee’s race, sex, age, religion, national origin, ethnicity, handicap or any other protected characteristic under applicable Laws;

(iii)   there is not now, nor within the past six (6) years has there been, any actions, suits, claims, labor disputes or grievances pending, or, to the Knowledge of the Company, threatened or reasonably anticipated relating to any labor, safety or discrimination matters involving any Employee, including charges of unfair labor practices or discrimination complaints, which, if adversely determined, would, individually or in the aggregate, result in any liability to the Company;

(iv)   the Employees of the Company are not and have never been represented by any labor union, no collective bargaining agreement is binding and in force against the Company or currently being negotiated by the Company, and to the Company’s Knowledge, no union organization campaign is in progress with respect to any of the Employees, and no question concerning representation exists respecting such Employees;

(v)   the Company has not entered into any agreement, arrangement or understanding restricting its ability to terminate the employment of any or all of its Employees at any time, for any lawful or no reason, without penalty or liability;

(vi)   each person classified by the Company as an independent contractor satisfies and has satisfied the requirements of any Law to be so classified, and the Company has fully and accurately reported such independent contractors’ compensation on IRS Forms 1099 when required to do so;

(vii)   the Company has no liability for any payment with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees (other than routine payments to be made in the normal course of business and consistent with past practice); and

(viii)   there are no pending, threatened or reasonably anticipated claims or actions against the Company under any worker’s compensation policy or long-term disability policy.

(f)   No “mass layoff,” “plant closing” or similar event as defined by the Worker Adjustment and Retraining Notification Act with respect to the Company has occurred.

Section 2.15.   Contracts . Except for contracts, commitments, leases, plans, agreements and licenses listed on Schedule 2.15 (the “ Material Contracts ”), the Company is not a party to or otherwise bound by (whether written or oral):

(a)   any contract or purchase order for the future purchase of materials or supplies in excess of $100,000;

(b)   any executory contracts for capital expenditures;

(c)   any contracts or commitments for the future sale of products in excess of $100,000 or with a remaining term in excess of ninety (90) days, other than purchase orders relating to purchases to be made by customers of the Company in the ordinary course of business;

(d)   any contract with a distributor, dealer, sales representative, supplier, manufacturer or other Persons relating to the distribution, sale, supply or manufacture of products;

(e)   any contract or agreement with any director, officer or stockholder of the Company (or any of their respective Affiliates) or any other Person in which any of the foregoing has a ten percent (10%) or more direct or indirect interest;

(f)   any contract providing for stock awards or other equity-based compensation awards, bonuses, pensions, deferred or incentive compensation, retirement or severance payments, profit-sharing, insurance or other benefit plans or programs for any present or former officer, consultant, director or employee of the Company;

(g)   any employment, severance, change in control, consulting, commission, agency and representative agreement or agreement to which the Company is a party with any employee including, without limitation, all agreements and commitments relating to wages, hours or other terms or conditions of employment (other than unwritten employment arrangements terminable at will without payment of any contractual severance or other amount);

(h)   any agreement concerning confidentiality, non-competition or non-solicitation of employees;

(i)   any contract for the lease or sublease as lessee, lessor, sublessee or sublessor of real or personal property of the Company, or any license of computer software;

(j)   any contract or agreement that limits or purports to limit the ability of the Company to compete in any line of business or with any Person or in any geographic area or during any period of time or that limits or purports to limit any other Person’s ability to compete with the Company;

(k)   any contract or agreement concerning a partnership, joint venture, joint development or other cooperation agreement;

(l)   any contract or agreement for guaranty, indemnity or suretyship of Indebtedness of any Person;

(m)   any other agreement (or group of related agreements) the performance of which involves consideration in excess of $100,000 or is otherwise material to the Company and its business; and

(n)   any amendments, supplements or modifications (whether written or oral) in respect of any of the foregoing.

The Company has delivered or made available to the Parent a correct and complete copy of each Material Contract. Except as set forth on Schedule 2.15 , each Material Contract is legal, valid, binding, enforceable, and in full force and effect and will continue to be legal, valid, binding, enforceable, and in full force and effect immediately following the consummation of and after giving effect to the transactions contemplated by this Agreement. Except as set forth on Schedule 2.15 , neither the Company nor, to the Knowledge of the Company, any other party to any Material Contract to which the Company is a party, is in breach or default in complying with any provisions thereof and no event has occurred which with or without notice or lapse of time would constitute a breach or default, or permit termination, modification, or acceleration under any Material Contract. Except as set forth on Schedule 2.15 , the Company has not received any written notice of the intention of any party to terminate any Material Contract, whether as a termination for convenience or for default of the Company thereunder.

Section 2.16.   Pensions and Benefits .

(a)   Except as disclosed on Schedule 2.16(a) , (i) neither the Company nor any of its ERISA Affiliates maintains or sponsors, or makes or is required to make contributions to, or has any liability (contingent or otherwise) with respect to, any Plans, (ii) none of the Plans is a “multi-employer plan”, as defined in Section 3(37) of ERISA (a “ Multi-employer Plan ”), (iii) none of the Plans is a “single-employer plan” within the meaning of Section 4001(a)(15) of ERISA (a “ Single Employer Plan ”), (iv) none of the Plans provides post-retirement medical or health benefits, and (v) none of the Plans is a “welfare benefit fund,” as defined in Section 419(e) of the Code, or an organization described in Sections 501(c)(9) or 501(c)(20) of the Code. The Company has delivered to the Parent true and complete copies of (i) each Plan document (or written description of each unwritten Plan), and all amendments thereto, (ii) the summary plan description of each Plan and modifications thereto, (iii) each trust agreement or other funding medium with respect to each Plan, (iv) the three (3) most recent annual reports for each of the Plans (including all related schedules), (v) the most recent Internal Revenue Service determination letter, opinion, notification or advisory letter (as the case may be) for each Plan which is intended to constitute a qualified plan under Section 401 of the Code, (vi) for each Plan that is a Single Emp