Exhibit 10.1
EXECUTION COPY
AGREEMENT AND PLAN OF
MERGER
THIS AGREEMENT AND
PLAN OF MERGER (this “ Agreement ”) is made and
entered into as of February 19, 2008, by and among AML
Communications, Inc., a Delaware corporation (the “
Parent ”), Mica-Tech Acquisition Corp, a California
corporation (the “ Merger Sub ”),
Mica-Tech, Inc., a California corporation (the “
Company ”), and the shareholders of the Company who
are signatories hereto (each, a “ Shareholder ”
and collectively, the “ Shareholders ”).
Capitalized terms used in this Agreement without definition shall
have the meanings set forth or referenced in Article X
.
W I T N E S S E T
H:
WHEREAS, the
Shareholders are collectively the beneficial and record owners of
all of the issued and outstanding capital stock of the Company,
comprised of 7,907,170 shares of common stock, no par value per
share (collectively, the “ Company Shares
”);
WHEREAS, the
respective Boards of Directors of the Parent, Merger Sub, and the
Company have approved the merger (the “ Merger
”) of the Merger Sub into Company on the terms and subject to
the conditions set forth in this Agreement, whereby each issued
Company Share not owned by the Parent, Merger Sub, or the Company
shall be converted into the right to receive the Merger
Consideration (as defined in Section 2.1 below);
WHEREAS, the
Parent, as the sole stockholder of Merger Sub, will approve this
Agreement immediately following the execution of this
Agreement;
WHEREAS, the
Shareholders executing this Agreement have voted in favor of the
Merger;
WHEREAS, the
Shareholders believe that the Company lacks sufficient capital and
resources in order to repay its outstanding and anticipated
liabilities;
WHEREAS, the
Parent intends to provide cash and services to the Company in order
to attempt to develop the Company’s business and that Parent
intends to issue to the Shareholders options to purchase Parent
common stock that are conditioned upon performance by the Company;
and
WHEREAS, the
Parent, Merger Sub, and the Company desire to make certain
representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the
Merger;
NOW, THEREFORE, in
consideration of the mutual covenants and agreements herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
MERGER
1.1
The Merger
. On the terms and
subject to the conditions set forth in this Agreement, and in
accordance with the California Corporations Code (the “
CCC ”), the Merger Sub shall be merged with and into
the Company at the Effective Time. At the Effective Time and
as a result of the Merger, the separate corporate existence of the
Merger Sub shall cease and the Company shall continue as the
surviving entity (the “ Surviving Entity
”). The Merger and the other transactions contemplated
by this Agreement are referred to in this Agreement as the “
Transactions .”
1.2
Closing
. The closing
(the “ Closing ”) of the Merger shall take place
at the offices of AML Communications, 1000 Avenida Acaso,
Camarillo, California 93012 at 10:00 a.m., Pacific Daylight
Time, on the Business Day following the satisfaction (or, to
the extent permitted by Law, waiver by the party or parties
entitled to the benefits thereof) of the conditions set forth in
Sections 5.1 and 5.2 (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions), or at such other place,
time and date as shall be agreed in writing by the Parent and the
Company. The date on which the Closing occurs is referred to
in this Agreement as the “ Closing Date
.”
1.3
Effective
Time . Prior to the Closing, the Parent
shall prepare, and on the Closing Date, the Surviving Entity shall
file with the Secretary of State of the State of California, a
certificate of merger or other appropriate documents (in any such
case, the “ Certificate of Merger ”) executed in
accordance with the relevant provisions of the CCC and shall make
all other filings or recordings required under the CCC. The
Merger shall become effective at such time as the Certificate of
Merger is duly filed with such Secretary of State on the Closing
Date, or at such later time as the Parent and the Company shall
agree and specify in the Certificate of Merger (the time the Merger
becomes effective being the “ Effective Time
”).
1.4
Effect of the
Merger .
At the Effective Time, the effect of the Merger shall be as
provided herein and in the applicable provisions of
the CCC.
1.5
Articles of
Incorporation and By-laws .
(a)
The articles of
incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the articles of incorporation of the
Surviving Entity until thereafter changed or amended as provided
therein or by the CCC or applicable Law.
(b)
The by-laws of the
Company, as in effect immediately prior to the Effective Time,
shall be the by-laws of the Surviving Entity until thereafter
changed or amended as provided therein or by applicable
Law.
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1.6
Directors
. The
directors of the Company immediately prior to the Effective Time
shall be the directors of the Surviving Entity, until the earlier
of their resignation or removal or until their respective
successors are duly elected and qualified, as the case may
be.
1.7
Officers
. The officers
of the Company immediately prior to the Effective Time shall be the
officers of the Surviving Entity, until the earlier of their
resignation or removal or until their respective successors are
duly elected or appointed and qualified, as the case may
be.
ARTICLE II
EFFECT ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
2.1
Effect on Capital
Stock . At the Effective Time, by virtue
of the Merger and without any action on the part of the holder of
any Company Shares or any shares of capital stock of Merger
Sub:
(a)
Capital Stock of the
Company . Each issued and outstanding share
of common stock of Merger Sub that shall be outstanding immediately
prior to the Effective Time shall be converted into the right to
receive one (1) share of common stock of the Surviving Entity,
so that at the Effective Time, Parent shall be the holder of all of
the issued and outstanding shares of the Surviving
Entity;
(b)
Cancellation of
Treasury Stock and Parent-Owned Stock . Each share of common stock of the
Company held in the treasury of the Company immediately prior to
the Effective Time shall be cancelled in the Merger and cease to
exist.
(c)
Conversion of Company
Shares .
(1)
Subject to
Sections 2.1(b) and 2.1(d), each issued and outstanding
Company Share outstanding prior to the Effective Time shall be
converted into the right to receive: pro rata portion of $1,000
cash payment (the “ Merger Consideration
”);
(2)
As of the Effective Time,
all such Company Shares shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Company Shares
shall cease to have any rights with respect thereto, except the
right to receive Merger Consideration upon surrender of such
certificate in accordance with Section 2.2.
(d)
Dissenters
Rights .
Notwithstanding anything in this Agreement to the contrary, Company
Shares (“ Dissenter Shares ”) that are
outstanding immediately prior to the Effective Time and that are
held by any person who is entitled to demand and properly demands
payment for such Dissenter Shares pursuant to, and who complies in
all respects with, Sections 1300 et. seq. of the CCC (the
“ Dissenter Rights ”) shall not be converted
into Merger
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Consideration as
provided in Section 2.1(c)(1), but rather the holders of
Dissenter Shares shall be entitled to payment for such Dissenter
Shares in accordance with the Dissenter Rights; provided,
however , that if any such holder shall fail to perfect or
otherwise shall waive, withdraw or lose the right to receive
payment under the Dissenter Rights, then the right of such holder
to be paid in accordance with the Dissenter Rights shall cease and
such Dissenter Shares shall be deemed to have been converted as of
the Effective Time into, and to have become exchangeable solely for
the right to receive, Merger Consideration as provided in
Section 2.1(c)(1). The Company shall serve prompt notice
to the Parent of any written notice of intent to demand payment, or
any written demand for payment, received by the Company in respect
of any Company Shares, and the Parent shall have the right to
participate in and direct all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of the Parent,
make any payment with respect to, or settle or offer to settle, any
such demands, or agree to do any of the foregoing.
2.2
Exchange of
Certificates .
(a)
Exchange
Agent .
Heera Lee shall serve as Exchange Agent (the “ Exchange
Agent ”) for payment of Merger Consideration upon
surrender of certificates representing Company Shares.
Promptly following the Effective Time, Parent shall reserve and/or
deposit with the Exchange Agent, for the benefit of the holders of
Company Shares, for exchange in accordance with this
Article II, through the Exchange Agent: $1,000 cash
payment. The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Merger Consideration contemplated to be
issued pursuant to Section 2.1.
(b)
Exchange
Procedures . As soon as reasonably practicable after
the Effective Time, each holder of record of a certificate or
certificates (the “ Certificates ”) that,
immediately prior to the Effective Time, represented outstanding
Company Shares whose shares were converted into the right to
receive Merger Consideration pursuant to
Section 2.1(c) shall surrender such holder’s
Certificate for cancellation to the Company and/or the Exchange
Agent (or to such other agent or agents as may be appointed by
Parent) together with a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to
the Parent and shall be in such form and have such other provisions
as Parent may reasonably specify), duly executed, and such other
documents as may reasonably be required by the Parent or the
Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor the holder’s pro rata portion of
the Merger Consideration, into which the aggregate number of
Company Shares previously represented by such Certificate shall
have been converted pursuant to Section 2.1(c), and the
Certificate so surrendered shall forthwith be canceled. In
the event of a transfer of ownership of Company Shares that is not
registered in the transfer records of the Company, payment may be
made to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate shall
be properly endorsed or otherwise be in proper form for transfer
and the person requesting such payment shall pay any transfer or
other taxes required by reason of the payment to a person other
than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this
Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive
upon such surrender the Merger Consideration into
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which the Company
Shares theretofore represented by such Certificate have been
converted pursuant to Section 2.1(c). No interest shall
be paid or accrue on any cash payable upon surrender of any
Certificate.
(c)
No Further Ownership
Rights in Company Shares . The Merger Consideration paid in
accordance with the terms of this Article II upon conversion
of any Company Shares shall be deemed to have been paid in full
satisfaction of all rights pertaining to such Company Shares,
subject, however, to the Surviving Entity’s obligation to pay
any dividends or make any other distributions with a record date
prior to the Effective Time that may have been declared or made by
the Company on such Company Shares in accordance with the terms of
this Agreement or prior to the date of this Agreement and which
remain unpaid at the Effective Time, and after the Effective Time
there shall be no further registration of transfers on the stock
transfer books of the Surviving Entity of Company Shares that were
outstanding immediately prior to the Effective Time. If,
after the Effective Time, any Certificates formerly representing
Company Shares are presented to the Surviving Entity or the
Exchange Agent for any reason, they shall be canceled and exchanged
as provided in this Article II.
2.3
Company Equity
Awards .
(a) At the
Effective Time, each Company Stock Option then outstanding, whether
or not then exercisable, shall be assumed by Parent and converted
into an option to purchase the number of shares of Parent Common
Stock (each a “ Parent Option ”) equal to the
number of shares currently subject to a Company Stock Option. The
terms and conditions of each Parent Option shall be subject to
Parent’s existing option plan. The Parent Options shall
be exercisable at the then current “fair market value”
as determined by the Parent Board of Directors but equal to the
then current trading price of Parent common stock on the OTC
Bulletin Board as of the date of this Agreement.
Notwithstanding the foregoing, the conversion of any Company Stock
Options which are “incentive stock options,” within the
meaning of Section 422 of the Code, into options to purchase
Parent Common Stock shall be made so as not to constitute a
“modification” of such Company Stock Options within the
meaning of Section 424 of the Code. Any Company
options reserved for issuance under the Stock Option Plan will be
terminated. All options issued under this
Section 2.3(a) shall not be exercisable unless and until
receipt of a first monthly payment by the Parent or the Company of
a minimum of $160,000 from a customer for management of a minimum
of 20 MW of power by October 1, 2008 (“Cancellation
Date”). If no such customer payment(s) is received
by the Cancellation Date, then such option shall be cancelled
automatically; provided however, that the Cancellation Date may be
extended for 60 days by mutual agreement of the Company and the
optionees.
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ARTICLE III
REPRESENTATIONS AND
WARRANTIES
3.1
Representations and
Warranties concerning the Company . The Shareholders and the Company
jointly and severally, hereby represent and warrant to the Parent
as follows:
(a)
Authority
. The Company has
the corporate power and authority to enter into and deliver this
Agreement and each of the other agreements, certificates,
instruments and documents contemplated hereby (collectively, the
“ Ancillary Documents ”) to which it is a party,
to carry out its obligations hereunder and under any Ancillary
Document and to consummate the transactions contemplated hereby and
by the Ancillary Documents. All actions, authorizations and
consents required by Law for the execution, delivery, and
performance by the Company of this Agreement and each Ancillary
Document to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, have been properly
taken or obtained, including without limitation, the approval of
this Agreement and the transactions contemplated by it by the Board
of Directors of the Company.
(b)
Execution and
Delivery . This Agreement has been, and each
Ancillary Document to which the Company is a party will be at the
Closing, duly authorized, executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with their respective
terms and conditions, except as enforceability thereof may be
limited by applicable bankruptcy, reorganization, insolvency or
other similar laws affecting or relating to creditors’ rights
generally or by general principles of equity.
(c)
No Conflicts
. The execution,
delivery and performance by the Company of this Agreement and each
Ancillary Document to which it is a party, and the consummation of
the transactions contemplated hereby and thereby, do not and will
not violate, conflict with or result in a breach of any term,
condition or provision of, or require the consent of any Person
under, or result in the creation of or right to create any Lien
upon any of the assets of the Company under, (i) any Laws to
which the Company or any of its assets are subject, (ii) any
permit, judgment, order, writ, injunction, decree or award of any
Governmental Authority to which the Company or any of its assets
are subject, (iii) the articles of incorporation or bylaws of
the Company, or (iv) any license, indenture, promissory note,
bond, credit or loan agreement, lease, agreement, commitment or
other instrument or document to which the Company is a party or by
which the Company or any of its assets are bound.
(d)
Governmental
Consents . No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Authority, is required to be obtained by the Company
in connection with or as a result of the execution and delivery of
this Agreement or any of the Ancillary Documents, or the
performance of its obligations hereunder and thereunder.
(e)
Organization, Standing
and Qualification . The Company is a corporation duly
incorporated, validly existing, and in good standing under the Laws
of the State of California. The Company has corporate power
and authority to own, lease and operate its properties and to carry
on its business as now being conducted, to use its name and is duly
qualified, licensed or authorized to do business and in good
standing, in each jurisdiction where the nature of the activities
conducted by it or the character of the properties owned, leased
or
6
operated by it require
such qualification, licensing or authorization. Each such
jurisdiction is identified on Schedule 3.1(e) . The
Company’s corporate minute books reflect all resolutions
approved and other actions taken by its shareholders or Board of
Directors and any committees thereof since the date of its
incorporation. The Shareholders or the Company have
previously delivered to the Parent true, correct and complete
copies of the Articles of Incorporation and Bylaws of the Company,
each as currently in effect (collectively, the “
Organization Documents ”).
(f)
Capitalization . The authorized capital stock of the
Company consists solely of 10,000,000 shares of common stock, of
which 7,907,170 shares are issued and outstanding. As of the
date hereof, each Shareholder owns of record such number of shares
of Common Stock as is set forth opposite such Shareholder’s
name on Schedule 3.1(f) . The Company Shares
constitute all of the issued and outstanding capital stock of the
Company. All of the issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully
paid and non-assessable. No shares of Common Stock are held
in treasury. Except as disclosed in Schedule 3.1(f) ,
there are no outstanding subscriptions, options, warrants, calls,
contracts, demands, commitments, convertible or exchangeable
securities, profits interests, conversion rights, preemptive
rights, rights of first refusal or other rights, agreements,
arrangements or commitments of any nature whatsoever under which
the Company is or may become obligated to issue, redeem, assign or
transfer any shares of capital stock or purchase or make payment in
respect of any shares of capital stock of the Company now or
previously outstanding, and there are no outstanding or authorized
stock appreciation, phantom stock or similar rights with respect to
or any shares of its capital stock.
(g)
No Subsidiaries or
Other Equity Interests . Except for Mica-Tech
International, Inc. (the “Subsidiary”), the
Company does not, nor has it ever at any time since its
organization, had a direct or indirect Subsidiary or owned,
directly or indirectly, any equity, investment or other
equity interest, or any right (contingent or otherwise) to
acquire the same, in any other Person.
(h)
Financial Statements;
Internal Controls . The Company has previously delivered to
the Parent true, complete and correct copies of unaudited financial
statements of the Company for the fiscal years ended
December 31, 2006 and 2007 (the “ Financial
Statements ”). The Financial Statements comply as
to form in all material respects with the applicable accounting
requirements and the published rules and regulations with
respect thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved and fairly present the
financial position of the Company as of the respective dates
thereof and the results of its operations and cash flows for the
respective periods then ended.
(i)
Absence of Undisclosed
Liabilities . Except to the extent adequately
reflected on or reserved against in the Financial Statements and
except for recurring Liabilities incurred in the ordinary course of
business consistent with recent past practice, as of
December 31, 2007 (the “ Balance Sheet Date
”), the Company had no direct or indirect Liabilities for any
period prior to such date or arising out of transactions entered
into or any set of facts existing prior thereto. Since the
Balance Sheet Date, the Company has not incurred any Liabilities
except
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in the ordinary course
of business consistent with recent past practice, none of which
are, individually or in the aggregate, material.
(j)
Ordinary
Course .
Since the Balance Sheet Date, except as otherwise disclosed on
Schedule 3.1(j) , the Company has operated its business
in the ordinary course consistent with past practice and there has
not occurred:
(i)
any change in the
condition (financial or otherwise), properties, assets,
liabilities, business, prospects, operations or results of
operations that has had or could reasonably be expected to have a
Material Adverse Effect on the Company;
(ii)
any amendments or changes
in any of its Organization Documents;
(iii)
any issuance or sale of
any shares of or interests in, or rights of any kind to acquire any
shares of or interests in, or receipt of any payment based on the
value of, its capital stock or any securities convertible or
exchangeable into shares of its capital stock (including, without
limitation, any stock options, phantom stock or stock appreciation
rights) or any adjustment, split, combination or reclassification
of its capital stock, or any declaration or payment of any dividend
or any distribution on, or any redemption, purchase, retirement or
other acquisition, directly or indirectly, of any shares of its
capital stock or any securities or obligations convertible into or
exchangeable for any shares of its capital stock;
(iv)
any investment of a
capital nature on its own account;
(v)
any entering into,
amendment of, modification in, relinquishment, termination, or
non-renewal by the Company of any contract, lease, transaction,
commitment or other right or obligation, except for purchase and
sale commitments entered into in the ordinary course of business
consistent with recent past practice;
(vi)
any waiver, forfeiture, or
failure to assert any rights of a material value or made, whether
directly or indirectly, any payment of any material Liability
before the same came due in accordance with its terms;
(vii)
any material damage,
destruction or loss of the Company’s assets or properties,
whether covered by insurance or not;
(viii)
any payment of (or any
making of oral or written commitments or representations to pay)
any bonus, increased salary or special remuneration to any
director, officer, employee or consultant or any entry into or
alterations of the terms of any employment, consulting or severance
agreement with any such person; any payment of any severance or
termination pay (other than payments made in accordance with
existing plans or agreements); any grant of stock option or
issuance of any restricted stock; any entry into or modification of
any agreement or Employee Benefit Plan (except as required by law)
or any similar agreement;
(ix)
any modification of any
term of benefits payable under any Employee Benefit
Plan;
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(x)
(A) any creation,
incurrence or assumption of any Liability for borrowed money except
those Liabilities incurred in the ordinary course of business
consistent with recent past practice, (B) issuance or sale of
any securities convertible into or exchangeable for debt securities
of the Company; or (C) issuance or sale of options or other
rights to acquire from the Company, directly or indirectly, debt
securities of the Company or any securities convertible into or
exchangeable for any such debt securities;
(xi)
any material change in the
amounts or scope of coverage of insurance policies;
(xii)
any merger or
consolidation with any other Person, acquisition of any capital
stock or other securities of any other Person, or acquisition of
all or a significant portion of the assets of any other Person, or
acquisition of any assets or properties from any Shareholder or its
affiliate or family member;
(xiii)
any assumption or
guarantee of any Liability or responsibility (whether primarily,
secondarily, contingently or otherwise) for the obligations of any
other Person;
(xiv)
any loan, advance
(including, without limitation, any loan or advance to any
stockholder, officer, director or employee of such Company) or
capital contribution to, or investment in, any Person, except
travel advances or advances of no more than $500 to employees in
the ordinary course of business consistent with recent past
practice;
(xv)
any sale, transfer or
lease to others of, any grant, creation or assumption of Liens
against, or otherwise disposed of, any of its material assets,
whether tangible or intangible;
(xvi)
any lapse, failure to take
any actions to protect, or any adverse change in respect of any of
its Proprietary Rights;
(xvii)
any consummation of any
other transaction that is not in the Company’s ordinary
course of business consistent with recent past practice;
(xviii)
any collection of the
Company’s accounts receivable, or any payment of the
Company’s accounts payable, in each case that is not in the
Company’s ordinary course of business consistent with recent
past practice; or
(xix)
any agreement or
commitment, in writing or otherwise, to take any of the actions
described in the foregoing subclauses (i) through
(xviii).
(k)
Title to
Assets .
Except as disclosed on Schedule 3.1(k) , the Company
has good and marketable title to all of the tangible and intangible
assets owned by it, free and clear of any Liens, and none of such
assets are owned by any Person other than the Company. The Company
owns, leases, licenses or otherwise has the contractual right to
use all of the assets used
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in or necessary for the
conduct of its business as currently conducted. The Company
has delivered to the Parent a schedule of the fixed assets of the
Company dated within thirty (30) days prior to the date
hereof. All personal property owned or leased by the Company,
taken as a whole, is in good repair and is operational and usable
in the operation of the Company, subject to ordinary wear and
tear.
(l)
Receivables and
Payables . Except as disclosed on
Schedule 3.1(l) , (i) the accounts and notes
receivable reflected on the Financial Statements or arising since
the Balance Sheet Date (collectively, the “
Receivables ”), are bona fide, represent valid
obligations to the Company, and have arisen or were acquired
in the ordinary course of business and in a manner consistent with
recent past practice and with the Company’s regular credit
practices; (ii) the Company’s provision for doubtful
accounts reflected on its Financial Statements or reserved on its
books since the Balance Sheet Date has been determined in
accordance with GAAP consistently applied; (iii) the
Receivables have been collected or are collectible in full, net of
any allowance for uncollectibles recorded on the Financial
Statements or properly reserved on its books since the Balance
Sheet Date, in a manner consistent with past practice in the
ordinary course of business and without resort to litigation;
(iv) none of the Receivables is or will at the Closing Date be
subject to any defense, counterclaim or setoff; (v) since the
Balance Sheet Date, the Company has not canceled, reduced,
discounted, credited or rebated or agreed to cancel, reduce,
discount, credit or rebate, in whole or in part, any Receivables;
and (vi) there has been no material adverse change since the
Balance Sheet Date in the amounts of Receivables or the allowances
with respect thereto, or accounts payable of the Company, from
those reflected in the balance sheet of the Company as of such
date. The Company has provided to the Parent a schedule of
aged Receivables and payables for the Company as of a date which is
within three (3) business days of the date hereof.
(m)
Real
Property .
(i)
The Company does not now
own, and has never owned, any real property.
(ii)
Schedule 3.1(m)
sets forth a true and
complete list of all real property leased or otherwise used by the
Company, identifying the lessor or other owner thereof (the “
Real Property ”).
(iii)
There is not existing or
proposed as a matter of public record or, to the knowledge of the
Company, presently contemplated, any condemnation or similar
action, or zoning action or proceeding, with respect to any portion
of the Real Property. None of the existing buildings and
improvements which in part comprise the Real Property fails to
comply fully with all size, height, set back, use and other zoning
restrictions and regulations applicable thereto, including, without
limitation, the parking space requirements of all applicable zoning
ordinances and regulations. The Company or its landlord has
obtained all licenses, permits, approvals, certificates, and other
authorizations required by applicable Laws for the use and
occupancy of the Real Property as it is currently being
utilized. None of the Real Property is subject to any
encumbrance, easement, right-of-way, building or use restriction,
exception, variance, reservation, limitation or other Liens which
might in any material respect interfere with
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or impair the continued
use thereof as currently utilized or proposed to be utilized by the
Company.
(n)
Proprietary
Rights .
(i)
The Company owns or
possesses licenses or other rights to use all trademarks, trade and
business names, internet domain names, service marks, service
names, copyrights, customer lists, trade secrets and inventions
(whether or not patentable) (collectively, “ Proprietary
Rights ”) that are necessary to the conduct of the
Company’s business as currently conducted or anticipated
except for such Proprietary Rights held by Mica-Tech
International, Inc., its wholly-owned subsidiary.
(ii)
Schedule 3.1(n)(ii)
sets forth a true and
complete list of all trademarks, trade names, service marks,
service names, internet domain names, copyrights and patents
included in the Proprietary Rights of the Company (identifying
which are owned and which are licensed), including all United
States, state and foreign registrations or applications for
registration thereof and all agreements relating thereto. All
filing, registration, maintenance or similar fees payable in
connection with each registration (or application therefor) of
Proprietary Rights set forth on Schedule 3.1(n)(ii)
have been paid and each such registration is valid and in full
force and effect.
(iii)
Except as disclosed in
Schedule 3.1(n)(iii) , the Company is not required to pay
any royalty, license fee or similar compensation in connection with
the conduct of its business as currently conducted.
(iv)
To the knowledge of the
Company, the Company has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with the
Proprietary Rights of any other Person or committed any acts of
unfair competition, and no claims have been asserted by any Person
alleging such interference, infringement, misappropriation,
conflict or act of unfair competition.
(v)
To the knowledge of the
Company, no Person is infringing upon its Proprietary
Rights.
(vi)
There are no Proprietary
Rights developed by any shareholder, director, officer, consultant
or employee of the Company that are used in the Company’s
business and that have not been transferred to, or are not owned
free and clear of any Liens by, the Company.
(o)
Material
Agreements . Schedule 3.1(o)(1)
sets forth a true and complete list, and the Company has provided
to the Parent complete copies (including all amendments and
extensions thereof and all waivers thereunder) or, if oral, an
accurate and complete description, of each of the following,
whether written or oral, to which the Company is a party or is
otherwise bound (each, a “ Material Agreement
”):
11
(i)
all loan agreements,
indentures, mortgages, notes, installment obligations, capital
leases or other agreements or instruments relating to the borrowing
of money (or guarantees thereof);
(ii)
all continuing contracts
or commitments for the future purchase, sale or manufacture of
products, materials, supplies, equipment or services requiring
payment to or from the Company in an amount in excess of $75,000
per annum which are not terminable on 30 days’ or less notice
without cost or other liability at or any time after the Closing
Date, or in which the Company has granted or received manufacturing
rights, most favored nation pricing provisions or exclusive rights
relating to any product or service;
(iii)
all contracts with any
Governmental Authority;
(iv)
all leases, subleases or
any other agreements or arrangements under which the Company has
the right or license to use any personal property, whether tangible
or intangible, owned or licensed by another Person;
(v)
all agreements or
arrangements under which any other Person has the right or license
to use any real property or personal property, whether tangible or
intangible, owned, leased or licensed by the Company;
(vi)
all contracts or
understandings which by their terms restrict the ability of the
Company to conduct its business or to otherwise compete, including
as to manner or place;
(vii)
all joint venture or
similar agreements or understandings;
(viii)
lease and other agreements
pertaining to the Real Property;
(ix)
all collective bargaining,
employment, severance, consulting, nondisclosure or
confidentiality agreements, and agreements requiring a charge of
control or parachute payments, or any other type of contract or
understanding with any officer, employee or consultant, other than
pursuant to Employee Benefit Plans, which is not immediately
terminable by the Company without cost or other liability to the
Company;
(x)
all agreements with sales
agents or representatives, wholesalers, distributors and
dealers;
(xi)
all agreements concerning
any Hazardous Materials; and
(xii)
all other contracts,
without regard to monetary amount, which were not entered into in
the ordinary course of business consistent with past practice or
which are material to the conduct of the Company’s business
and not listed above.
Except as
disclosed on Schedule 3.1(o)(2) , the Company is not, and to
the knowledge of the Company, any other party thereto is not, in
default under any Material
12
Agreement and no event
has occurred or is reasonably expected to occur which (after notice
or lapse of time or both) would become a breach or default under,
or would otherwise permit modification, cancellation, acceleration
or termination of, any Material Agreement or would result in the
creation of or right to obtain any Lien upon, or any Person
obtaining any right to acquire, any assets, rights or interests of
the Company. Except as disclosed on
Schedule 3.1(o)(3): (i) each Material
Agreement is in full force and effect and is a valid and binding
obligation of the Company, and, to the knowledge of the Company,
the other parties thereto; (ii) there are no unresolved
disputes with respect to any Material Agreement; and (iii) the
Company has no reasonable basis to believe that any party to a
Material Agreement intends either to modify, cancel or terminate
such Material Agreement.
(p)
Litigation
. Except as
disclosed on Schedule 3.1(p) , there is no claim,
legal action, suit, arbitration, investigation or other
proceeding pending threatened against or relating to the Company or
its assets. Neither the Company nor any of its assets are
subject to any outstanding judgment, order, writ, injunction or
decree of any Governmental Authority. There is currently no
investigation or review by any Governmental Authority with respect
to the Company pending or, to the knowledge of the Company,
threatened, nor has any Governmental Authority notified the Company
of its intention to conduct the same.
(q)
Compliance with
Laws .
The Company has all licenses, permits and other authorizations from
all applicable Governmental Authorities necessary or desirable for
the conduct of its business as currently conducted or as currently
expected to be conducted following the Closing Date.
Schedule 3.1(q) hereto sets forth a true and
complete list of all such licenses, permits and other
authorizations obtained by the Company, each of which is in full
force and effect and no violations thereunder have been recorded.
The Company is in compliance, and has complied, with all Laws
applicable to it and has not received any notice of any violation
thereof.
(r)
Environmental
Matters .
Except as disclosed in Schedule 3.1(r) :
(i)
During the period that the
Company has owned, leased or operated any properties or facilities,
neither it nor any other Person has disposed, released, or
participated in or authorized the release or threatened release of
Hazardous Materials on, from or under such properties or
facilities. There is not now nor has there ever been any
presence, disposal, release or threatened release of Hazardous
Materials on, from or under any of such properties or facilities,
which may have occurred prior to the Company having taken
possession of any of such properties or facilities. For the
purposes of this Agreement, the terms “disposal,”
“release,” and “threatened release” shall
have the definitions assigned thereto by the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42
U. S.C. § 9601 et seq., as amended (“ CERCLA
”).
(ii)
The operations of the
Company and properties that the Company owns, leases or operates,
are in compliance with Environmental Law. During the time
that the Company has owned, leased or operated its properties and
facilities, neither the Company nor any other Person has used,
generated, manufactured or stored on, under or about such
properties or facilities or transported or arranged for disposal to
or from such properties or facilities, any Hazardous Materials
which may be considered a violation of applicable Environmental
Law.
13
(iii)
During the time that the
Company has owned, leased or operated its properties and
facilities, there has been no litigation or proceeding brought or,
to the knowledge the Company, threatened against the Company by, or
any settlement reached the Company with, any Persons alleging the
presence, disposal, release or threatened release of any Hazardous
Materials, on from or under any of such properties or
facilities.
(iv)
There are no facts,
circumstances or conditions relating to the properties and
facilities owned, leased or operated by the Company which could
give rise to a claim under any Environmental Law or to any material
Environmental Costs and Liabilities.
(s)
Related Party
Transactions . Except as disclosed on
Schedule 3.1(s) , no Related Party has been directly or
indirectly a party to any contract or other arrangement (whether
written or oral) with the Company providing for services (other
than as an employee of the Company), products, goods or supplies,
rental of real or personal property, or other wise requiring
payments from or to the Company. For purposes hereof, the
term “ Related Party ” shall mean any
Shareholder or a director or officer of the Company or any member
of his or her family or any corporation, partnership, limited
liability company, other business entity or trust in which he or
she or any member of his or her family has greater than a ten
percent (10%) interest, or of which he or she or any member of his
or her family is an officer, director, general partner, member or
trustee.
(t)
Insurance
.
Schedule 3.1(t)(l) sets forth a list of the
Company’s insurance policies (including property, casualty,
liability (general, professional and directors and officers) and
workers’ compensation), listing for each policy the identity
of the insurance carrier, the policy period, the limits and
retentions and any special exclusions. Except as set forth on
Schedule 3.1(t)(2) , such insurance coverage and
coverage amounts are customary for the business engaged in by the
Company. Such policies are currently in full force and
effect, all premiums have been paid in full with respect thereto
and the Company has not received any notice of termination or
modification from the insurance carriers.
Schedule 3.1(t)(l) also sets forth a true and complete
description of any self-insurance arrangement by or affecting the
Company, including any reserves established thereunder, if
any.
14
(u)
Taxes
.
(i)
The Company has timely
filed with the appropriate taxing authorities all returns and
reports in respect of Taxes (“ Returns ”)
required to be filed by it (taking into account any extension of
time to file granted to or on the account of the Company).
The information on such Returns is complete and accurate in all
material respects. The Company has paid on a timely basis all
Taxes (whether or not shown on any Return) due and payable.
There are no Liens for Taxes (other than for current Taxes not yet
due and payable) upon the assets of the Company. As used in
this Section 3.1(u) , the Company shall mean,
individually and collectively, (i) the Company and
(ii) any individual, trust, corporation, partnership or other
entity as to which the Company may be liable for Taxes incurred by
such individual or entity as a transferee or pursuant to any
provision of federal, state, local or foreign law or
regulation.
(ii)
No unpaid (or unreserved
in accordance with GAAP applied on a consistent basis) deficiencies
for Taxes have been claimed, proposed or assessed by any taxing
authority or other Governmental Authority with respect to the
Company for any Pre-Closing Period and there are no pending audits,
investigations or claims for or relating to any liability in
respect of Taxes of the Company, nor has the Company been notified
of any request for such an audit, investigation or claim. The
Company has not requested any extension of time within which to
file any currently unfiled returns in respect of any Taxes and no
extension of a statute of limitations relating to any Taxes is in
effect with respect to the Company.
(iii)
(1) The Company has
made or will make provision for all Taxes payable by it with
respect to any Pre-Closing Period which are not payable prior to
the Closing Date; (2) the provisions for Taxes with respect to
the Company for the Pre-Closing Period are adequate to cover all
Taxes with respect to such period; (3) the Company has
withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party;
(4) all material elections with respect to Taxes made by or,
to the knowledge of the Company, affecting the Company as of the
date hereof are set forth in Schedule 3.1(u)(iii)(4) ;
(5) the Company is not a “consenting corporation”
under Section 341(f) of the Code, or any corresponding
provision of state, local or foreign law; (6) there are no
private letter rulings in respect of any Tax pending between the
Company and any taxing authority; (7) the Company has never
been a member of an affiliated group within the meaning of
Section 1504 of the Code, or filed or been included in a
combined, consolidated or unitary return of any Person other than
the Company; (8) the Company is not liable for Taxes of any
other Person, or is currently under any contractual obligation to
indemnify any Person with respect to Taxes, or is a party to any
tax sharing agreement or any other agreement providing for payments
by the Company with respect to Taxes; (9) the Company is not,
and has not been, a real property holding corporation (as defined
in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code;
(10) the Company is not a person other than a United States
person within the meaning of the Code; (11) the Company is not
a party to any joint venture, partnership, or other arrangement or
contract which could be treated as a partnership for federal income
tax purposes; (12) the Company has not entered into any sale
leaseback or any leveraged lease transaction that fails to satisfy
the requirements of Revenue Procedure 75-21 (or similar provisions
of foreign law); (13) the Company has not agreed and is not
required, as a result of a change in method of accounting or
otherwise, to include any adjustment under Section 481 of
the
15
Code (or any corresponding provision of state,
local or foreign law) in taxable income; (14) the Company is not a
party to any agreement, contract, arrangement or plan that would
result (taking into account the transactions contemplated by this
Agreement), separately or in the aggregate, in the payment of any
“excess parachute payments” within the meaning of
Section 280G of the Code; (15) the Company has never been a
Subchapter S corporation (as defined in
Section 1361(a)(1) of the Code); (16) Schedule
3.1(u)(iii)(16) contains a list of all jurisdictions to which
any Tax is properly payable by the Company; (17) the Company is not
a personal holding company within the meaning of Section 542
of the Code; (18) the Company has not made an election and is not
required to treat any of its assets as owned by another Person for
federal income tax purposes or as tax-exempt bond financed property
or tax-exempt use property within the meaning of Section 168
of the Code (or any corresponding provision of state, local or
foreign law).
(v)
Employee Benefit
Plans .
(i)
Schedule 3.1(v)(i) lists all Employee Benefit
Plans which have been maintained or contributed to by the Company
or to which the Company has been obligated to contribute.
Except as set forth on Schedule 3.1(v)(ii) , neither
the Company nor any of its ERISA Affiliates (as defined below),
maintains or has maintained, contributed to or been obligated to
contribute to a Pension Plan subject to Title IV of ERISA or
Section 412 of the Code. Except as set forth on
Schedule 3.1(v)(iii) , each Pension Plan and Welfare Plan
disclosed on Schedule 3.1(v)(i) has been maintained in
compliance with its terms and all material provisions of ERISA and
the Code, applicable thereto (including rules and regulations
thereunder).
(ii)
The Company has delivered
or made available to Parent prior to the date hereof complete and
correct copies of (a) any employment agreements and any
procedures and policies relating to the employment of employees of
the Company and the use of temporary employees and independent
contractors by the Company (including summaries of any procedures
and policies that are unwritten), (b) plan instruments and
amendments thereto for all Employee Benefit Plans and related trust
agreements, insurance a
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