AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger (“Agreement”) is made and entered into as of February 13, 2011, by and among: Anaren, Inc., a New York corporation (“Parent”), Project Orange Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”); and AML Communications, Inc., a Delaware corporation (the “Company”).

 

 

WHEREAS, Parent, Merger Sub and the Company intend to effect a merger of Merger Sub into the Company (the “Merger”) in accordance with this Agreement and the DGCL.  Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a wholly-owned subsidiary of Parent;

 

WHEREAS, the respective boards of directors of Merger Sub and the Company have approved this Agreement and the Merger, and this Agreement and the Merger have been approved on behalf of Parent; and

 

WHEREAS, in order to induce Parent to enter into this Agreement and cause the Merger to be consummated, certain stockholders of the Company are executing voting and support agreements in favor of Parent concurrently with the execution and delivery of this Agreement (the “Support Agreements”).

 

NOW, THEREFORE, in consideration of the mutual covenants, representations, and agreements herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

For purposes of this Agreement,

 

“Acquisition Inquiry” means an inquiry, indication of interest or request for non-public information (other than an inquiry, indication of interest or request for non-public information made or submitted by Parent or any of its Subsidiaries) that could reasonably be expected to lead to an Acquisition Proposal.

 

“Acquisition Proposal” means any offer or proposal (other than an offer or proposal made or submitted by Parent or any of its Subsidiaries) contemplating or otherwise relating to any Acquisition Transaction.

 

“Acquisition Transaction” means any transaction or series of transactions (other than the Transactions) involving:

(a) any merger, consolidation, amalgamation, share exchange, business combination, joint venture, issuance of securities, acquisition of securities, reorganization, recapitalization, tender offer, exchange offer or other similar transaction: (i) in which any of the Company Entities is a constituent or participating corporation; (ii) in which a Person or “group” (as defined in the Exchange Act and the rules thereunder) of Persons directly or indirectly acquires beneficial or record ownership of securities representing 15% or more of the outstanding securities of any class (or instruments convertible into or exercisable or exchangeable for 15% or more of any such class) of any of the Company Entities; or (iii) in which any Company Entity issues securities representing 15% or more of the outstanding securities of any class of such Company Entity (or instruments convertible into or exercisable or exchangeable for 15% or more of any such class);

 

(b) any sale, lease, exchange, transfer, license, sublicense, acquisition or disposition of any business or businesses or assets that constitute or account for 15% or more of the consolidated net revenues, consolidated net income or consolidated assets of the Company Entities; or

 

(c) any liquidation or dissolution of any of the Company Entities, other than Mica-Tech, International, Inc., a California corporation.

 

“Affiliate” of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person.

 

“Agreement” means this Agreement and Plan of Merger and all schedules, exhibits and other attachments hereto, as such may be amended from time to time.

 

“business day” means any day other than a Saturday, a Sunday or a day on which banking institutions in New York or California are authorized or obligated by law or executive order to close.

 

“Closing” has the meaning set forth in Section 2.3.

 

“Closing Date” has the meaning set forth in Section 2.3.

 

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

 

“Collective Bargaining Agreement” has the meaning set forth in Section 3.20(a).

 

“Company Associate” means any current or former employee, independent contractor, consultant or director of or to any of the Company Entities or any Affiliate of the Company.

 

“Company Balance Sheet” means the unaudited consolidated balance sheet of the Company and its consolidated subsidiaries as of, included in the Company’s Report on Form 10-Q for the fiscal quarter ended September 30, 2010, as filed with the SEC on November 12, 2010.

 

“Company Board Recommendation” has the meaning set forth in Section 6.2(b).

 

“Company Capital Stock” means the Company Common Stock and the Company Preferred Stock.

“Company Common Stock” means the Common Stock, $0.01 par value per share, of the Company.

 

“Company Employee Plan” has the meaning set forth in Section 3.19(a).

 

“Company Entities” means the Company and its Subsidiaries.  “Company Entity”, means any one of the Company or one of its Subsidiaries.

 

“Company Equity Award” means any Company Option or any Company Stock-Based Award.

 

“Company Equity Plan” means (a) the AML Communications, Inc. 2005 Equity Incentive Plan and (b) AML Communications, Inc. 1995 Stock Incentive Plan, as amended.

 

“Company Intellectual Property” means all Intellectual Property that is used or held for use by any Company Entity.

 

“Company Intellectual Property Agreements” has the meaning set forth in Section 3.16(b).

 

“Company Intellectual Property Right” means each Intellectual Property Right owned by, or filed in the name of, any Company Entity.

 

“Company Option” means each outstanding option, warrant, other right, agreement, arrangement or commitment to purchase shares of Company Common Stock from the Company, whether granted by the Company pursuant to a Company Equity Plan, assumed by the Company in connection with any merger, acquisition or similar transaction or otherwise issued or granted and whether vested or unvested, including, without limitation, the Warrants.

 

“Company Preferred Stock” means the Preferred Stock, $0.01 par value per share, of the Company.

 

“Company SEC Reports” has the meaning set forth in Section 3.8(a).

 

“Company Stock-Based Award” means any outstanding restricted stock award or stock award relating to Company Common Stock, whether granted under any of the Company Equity Plans or otherwise and whether vested or unvested.

 

“Company Stock Certificate” has the meaning set forth in Section 2.7.

 

“Common Stock Per Share Amount” means $2.15 payable in United States Dollars.

 

“Company Stockholders’ Meeting” has the meaning set forth in Section 6.2(a).

 

“Confidentiality Agreement” means that certain Confidentiality Agreement dated as of November 24, 2010 between the Company and Parent.

“Consent” means any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

 

“Contest” has the meaning ascribed to that term in Section 7.9(a).

 

“Contest Notice” has the meaning ascribed to that term in Section 7.9(a).

 

“Contest Period” has the meaning ascribed to that term in Section 7.9(a).

 

“Contract” means any written, oral or other agreement, contract, subcontract, lease, understanding, arrangement, settlement, instrument, note, option, warranty, purchase order, license, sublicense, insurance policy, benefit plan or legally binding commitment or undertaking.

 

“Copyrights” means any copyrights, and registrations and applications therefor, mask works, whether registered or not, and all other rights corresponding thereto throughout the world including moral and economic rights of authors and inventors, however denominated.

 

“Determination” has the meaning set forth in Section 7.9.

 

“DGCL” means the General Corporation Law of the State of Delaware.

 

“Disclosure Schedule” means the disclosure schedule that has been prepared by the Company in accordance with the requirements of Section 10.6 of this Agreement and that has been delivered by the Company to Parent on the date of this Agreement.

 

“Dispute” has the meaning ascribed to that term in Section 7.9(a).

 

“Dispute Notice” has the meaning ascribed to that term in Section 7.9(a).

 

“Dispute Period” has the meaning ascribed to that term in Section 7.9(a).

 

“Dissenting Shares” has the meaning set forth in Section 2.8.

 

“DOL” means the United States Department of Labor.

 

“Domain Name” means the any or all of the following and all worldwide rights in, arising out of, or associated therewith: domain names, uniform resource locators and other names and locators associated with the internet.

 

“Effective Time” has the meaning set forth in Section 2.3.

 

“Encumbrance” means any lien, pledge, hypothecation, charge, mortgage, easement, encroachment, imperfection in title, title exception, title defect, right of possession, lease, tenancy license, security interest, encumbrance, claim, option, right of first refusal, preemptive right, or restriction of any nature (including any restriction on the voting of any security, any restriction on the transfer of any security or other asset, any restriction on the receipt of any income derived from any asset, any restriction on the use of any asset and any restriction on the possession, exercise or transfer of any other attribute of ownership of any asset).

“End Date” means the later of (i) May 31, 2011 or (ii) June 30, 2011 if the Proxy Statement has been duly submitted in accordance with Section 6.1 and the SEC has provided comments to the Company that would make it reasonably impracticable to obtain SEC approval of the Proxy Statement before May 31, 2011.  Notwithstanding the foregoing, if a Legal Proceeding described in clause (b) of Section 7.8 is pending or threatened, or if the third party resolution procedure described in Section 7.9(b) is pending, the End Date shall be August 1, 2011, unless otherwise agreed to by Parent and the Company.

 

“Endorsement” has the meaning set forth in Section 5.7.

 

“Entity” means any corporation (including any non-profit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, company limited by shares, limited liability company, joint stock company, firm, society or other enterprise, association, organization or entity.

 

“Environmental Law” means any Law relating to the protection of the environment (including ambient air, surface water, groundwater or land) or human health and safety (including exposure of any individual to Hazardous Substances), or otherwise relating to the production, use, emission, storage, treatment, transportation, recycling, disposal, discharge, release or other handling of any Hazardous Substances or the investigation, analysis, removal or other remediation thereof.

 

“Environmental Professional” has the meaning set forth in 40 C.F.R. 312.10 who is an expert in interpreting air quality and soil vapor analytical data and in assessing, in accordance with the Guidelines, the risks to humans of exposure to Hazardous Substances.

 

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

 

“ERISA Affiliate” has the meaning set forth in Section 3.19(a).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Expense Payment” means a cash payment to be made by the Company to Parent in an amount equal to the lesser of $200,000 or the aggregate amount of all fees, costs and other expenses (including legal fees, financial advisory fees, consultant fees, filing fees and travel expenses) that Parent shall have directly or indirectly paid or otherwise borne in connection with or in anticipation of the Transactions (including all fees and expenses relating directly or indirectly to the preparation and negotiation of this Agreement, the Confidentiality Agreement and the other documents referred to in this Agreement, and all fees and expenses relating to Parent’s due diligence investigation of the Company Entities).

 

“Fee” has the meaning set forth in Section 9.3(c).

 

“Foreign Official” means any: (i) officer or employee of a government or public international organization, including any public authority and any department, agency or instrumentality of a government, or any person acting in an official capacity for or on behalf of any government or government department, agency or instrumentality, or for or on behalf of any public international organization; or (ii) officer or employee of a government-owned or government-controlled entity of any kind, including a government-owned or government-controlled business enterprise.

“GAAP” means generally accepted accounting principles in the United States.

 

“Government” means any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, ministry, fund, foundation, center, organization, unit, body or Entity and any court or other tribunal); or (d) self-regulatory organization, including the Financial Industry Regulatory Authority (FINRA).

 

“Government Contract” means any Contract to which a Company Entity is a party and that involves supply of goods or services, directly or indirectly, to a Government.  A Government Contract can include a subcontract at any tier or any level below a prime contract.

 

“Governmental Authorization” means any (a) permit, license, certificate, franchise, permission, variance, clearance, registration, qualification or authorization issued, granted, given or otherwise made available by or under the authority of any Government or pursuant to any Law or (b) right under any Contract with any Government.

 

“Guidelines” means applicable laws, regulations and guidance issued by authorized Government agencies relating to air quality and soil vapor.

 

“Hazardous Substance” means any substance, material or waste that is characterized or regulated under any Environmental Law as “hazardous,” “pollutant,” “contaminant,” “toxic” or words of similar meaning or effect, including petroleum and petroleum products, polychlorinated biphenyls and asbestos.

 

“Independent Environmental Professional” means an Environmental Professional mutually selected by the Company’s Environmental Professional and Parent’s Environmental Professional.

 

“Intellectual Property” means any or all of the following: (a) proprietary inventions (whether patentable or not), invention disclosures, industrial designs, improvements, trade secrets, proprietary information, know how, technical data and customer lists, and all documentation relating to any of the foregoing; (b) proprietary technical and know-how information, and rights to limit the use or disclosure thereof by any Person including databases and data collections and all rights therein; (c) works of authorship (including computer programs, source code and object code, whether embodied in software, firmware or otherwise), architecture, documentation, files, records, schematics, verilog files, netlists, emulation and simulation reports, test vectors and hardware development tools; and (d) Domain Names.

 

“Intellectual Property Rights” means any or all of the following and all worldwide common law and statutory rights in, arising out of or associated with any or all of the following: (a) Copyrights, (b) Patents, (c) industrial designs and any registrations and applications therefore, (d) Trademarks, (e) Trade Secrets, and (f) any similar or equivalent proprietary rights to any of the foregoing (as applicable).

“IRS” means the United States Internal Revenue Service.

 

“Knowledge” means, with respect to the Company, the actual knowledge of Jacob Inbar, Tibby Mazilu and/or Ed McAvoy after due inquiry and investigation, which includes diligent review of files, books and records and the making of reasonable inquiry of the directors, officers and managers of the Company Entities.

 

“Law” means any federal, state, local, municipal, foreign or other law, statute, constitution, principle of common law, resolution, ordinance, code, edict, decree, rule, regulation, order, award, or ruling issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Government.

 

“Leases” has the meaning set forth in Section 3.14(b).

 

“Leased Real Property” has the meaning set forth in Section 3.14(b).

 

“Legal Proceeding” means any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, claim, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court or other Government or any arbitrator or arbitration panel.

 

“Liability” means any debt, obligation, duty or liability of any nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted, contingent, indirect, conditional, implied, vicarious, derivative, joint, several or secondary liability), regardless of whether such debt, obligation, duty or liability would be required to be disclosed on a balance sheet prepared in accordance with GAAP and regardless of whether such debt, obligation, duty or liability is immediately due and payable.

 

“Licensed Company Intellectual Property” means all Company Intellectual Property and Company Intellectual Property Rights, other than the Owned Company Intellectual Property.

 

“Material Adverse Effect” means any effect, change, event or circumstance that, considered individually or together with all other effects, changes, events and circumstances that exist as of, or shall have occurred or arisen on or before, the date of determination of the occurrence of the Material Adverse Effect, is or would reasonably be expected to be materially adverse to, or has or would reasonably be expected to have or result in a material adverse effect on, (a) the business, assets, operations, financial condition, or results of operation of the Company Entities, taken as a whole, or (b) the ability of the Company to consummate the Merger or any of the other Transactions; prov ided, however, that an effect, change, event or circumstance occurring after the date of this Agreement shall not, either alone or in combination, be deemed to be a Material Adverse Effect if such effect, change, event or circumstance results directly from:

(1) general economic conditions in the United States or in the industry in which the Company Entities operate;

 

(2) political conditions (or changes in such conditions) in the United States or any other country or region in which the Company operates or acts of war, sabotage or terrorism (including any escalation or general worsening of any such acts of war, sabotage or terrorism) in the United States or any other country or region in which the Company operates, except in each case to the extent such political conditions, changes, acts, escalation or worsening have a disproportionate effect on the Company as compared to any of the other companies in the industry in which the Company operates;

 

(3) any change in any Law or GAAP or other accounting standards (or the interpretation thereof);

 

(4) the announcement of this Agreement and the Transaction contemplated hereby; or

 

(5) any actions taken or omitted to be taken at the written direction of Parent.

 

For purposes of this definition of Material Adverse Effect, one or more effects, changes, events or circumstances shall be considered material if the cost, value or amount of their impact on any Company Entity or the Company Entities, individually or collectively, presently and/or future, contingently or actually, equals or exceeds $800,000.

 

“Material Contract” means

 

(i) any Contract that would be required to be filed by the Company as a “material contract” pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act or that would be required to be disclosed under Item 404 of Regulations S-K under the Securities Act,

 

(ii) any other Contract or similar arrangement that could reasonably be expected to involve expenditures or receipt by any Company Entity in excess of $25,000 in the aggregate whether or not made in the ordinary course of business,

 

(iii) any agreement restricting the nature or geographic scope of any Company Entity’s business activities in any material respect, except for the sales representative agreements set forth on Part 1 of the Disclosure Schedule are not Material Contracts,

 

(iv) any agreement, indenture or other instrument relating to the borrowing of money by the Company or any of its Subsidiaries or the guarantee by the Company of any of its Subsidiaries of any Liabilities,

 

(v) any agreement, arrangement or commitment relating to the employment or retention of a Company Associate to perform services for the Company or any of its Subsidiaries,

(vi) any agreement, arrangement or commitment that would obligate the Company or any of its Subsidiaries to pay any stay or retention bonus or change-in-control, severance or termination payment to any current or former Company Associate as a result of the consummation of the Transactions or the separation from service to the Company or any of its Subsidiaries,

 

(vii) any contract, agreement or understanding with a labor union, in each case whether written or oral,

 

(viii) any Company Intellectual Property Agreements identified or required to be identified in Part 3.16(b) of the Disclosure Schedule,

 

(ix) any Contract that requires or permits a Company Entity, or any successor to or acquirer of a Company Entity, to make any payment to another Person as a result (in whole or in part) of a change in control of such Company Entity (a “Change in Control Payment”) or gives another Person a right to receive, or elect to receive, a Change in Control Payment, and

 

(x) any Contract, or group of Contracts with a Person (or group of affiliated Persons), the termination or breach of which would have a Material Adverse Effect and is not disclosed pursuant to clauses (i) through (ix).

 

“Merger Consideration” means the sum of the cash consideration that holders of shares of Company Common Stock who do not perfect their appraisal rights under the DGCL are entitled to receive in exchange for such shares of Company Common Stock and the holders of the Vested Company Options are entitled to receive in exchange for their Option Consent pursuant to Section 2.6.

 

“Merger Option Consideration” means with respect to any Vested Company Option, the Common Stock Per Share Amount, without interest, less the option exercise price with respect to each share of Company Common Stock issuable under such Vested Company Option (it being understood and agreed that such exercise price shall not actually be paid to the Company by the holder of a Vested Company Option).

 

“Option Consent” has the meaning set forth in Section 2.11(a).

 

“Order” means any order, writ, injunction, judgment or decree.

 

“OTCBB” means the OTC Bulletin Board.

 

“Other Filings” means any document, other than the Proxy Statement, to be filed with the SEC in connection with this Agreement.

 

“Owned Company Intellectual Property” means that portion of the Company Intellectual Property and Company Intellectual Property Rights that is owned by the Company Entities.

 

“Patents” means any patents and applications therefor and all reissues, divisions, renewals, extensions, provisionals, certificates of invention and statutory invention registrations, continued prosecution applications, requests for continued examination, reexaminations, continuations and continuations-in-part thereof.

“Paying Agent” has the meaning set forth in Section 2.9.

 

“Payment Fund” has the meaning set forth in Section 2.9.

 

“Permitted Encumbrance” means the following: (a) liens for Taxes, assessments and governmental charges or levies either not yet delinquent or not yet due and payable or which are being contested in good faith by appropriate proceedings, for which adequate reserves have been maintained in accordance with GAAP; (b) Encumbrances imposed by Law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens securing obligations arising in the ordinary course of business that are not yet due; (c) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (d) pledges and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature, in each case in the ordinary course of business consistent with past practice; (e) liens identified on Part 3.10 of the Disclosure Schedule; (f) purchase money security interests for inventory; (g) statutory, common law or contractual liens of landlords; and (h) other exceptions with respect to title to real property that do not and would not materially impact the ownership of such real property or materially impact with the current use and/or market value of such property.

 

“Person” means any individual, Entity or Government.

 

“Phase I REC” means the Recognized Environmental Concern stated in the Phase I Environmental Site Assessment performed by Ninyo & Moore for Parent for the Santa Clara Facility.

 

“Pre-Closing Period” has the meaning set forth in Section 5.1.

 

“Property Covenants” has the meaning set forth in Section 3.14(e).

 

“Proxy Statement” shall mean the proxy statement/prospectus (or similar documents) together with any supplements thereto and related materials sent to the stockholders of AML Communications, Inc. to solicit their votes in connection with this Agreement and the Merger.

 

“Recommendation Change” has the meaning set forth in Section 6.2(d).

 

“Recommendation Change Notice” has the meaning set forth in Section 6.2(d).

 

“Representatives” means directors, officers, other employees, agents, attorneys, accountants, advisors and representatives.

 

“Requisite Stockholder Approval” has the meaning set forth in Section 3.3.

 

“Santa Clara Facility” means Santa Clara, California facility of the Company.

“Sarbanes-Oxley Act” means the Sarbanes-Oxley Act of 2002, as it may be amended from time to time.

 

“SEC” means the United States Securities and Exchange Commission.

 

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

 

“Subject Person” means any: (i) Foreign Official; (ii) political party; (iii) official of a political party; or (iv) candidate for political office.

 

“Subsidiary” an entity shall be deemed to be a “Subsidiary” of another Person if such Person directly or indirectly owns or purports to own, beneficially or of record, (a) an amount of voting securities of other interests in such Entity that is sufficient to enable such Person to elect at least a majority of the members of such Entity’s board of directors or other governing body, or (b) at least 50% of the outstanding equity, voting or financial interests in such Entity.

 

“Superior Offer” means an unsolicited, bona fide, written offer by a third party to purchase substantially all of the outstanding shares of Company Common Stock or substantially all of the assets of the Company Entities (or any similar transaction or alternative to the Transactions involving the Company Entities) that: (a) was not obtained or made as a direct or indirect result of a breach of or any action inconsistent with any of the provisions set forth in Section 5.3 or Section 6.2 of this Agreement or in the Confidentiality Agreement; (b) contains terms and conditions that the board of directors of the Company determines in good faith, after consultation with its financial advisor and legal counsel, after having taken into account the likelihood and timing of consummation of the purchase transaction contemplated by such offer, (i) to be more favorable to the Company’s stockholders (in their capacity as stockholders) and (ii) that the Person making such offer is financially capable of consummating the transactions contemplated by such offer or that the financing necessary to consummate such transactions, to the extent required, is then committed or is capable of being obtained by such Person.

 

“Support Agreements” has the meaning set forth in the recitals of this Agreement.

 

“Surviving Corporation” has the meaning set forth in Section 2.1.

 

“Tangible Assets” has the meaning set forth in Section 3.15.

 

“Tax” means any federal, state, local, foreign or other tax (including any income tax, franchise tax, capital gains tax, gross receipts tax, value-added tax, surtax, estimated tax, unemployment tax, national health insurance tax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty or interest), imposed, assessed or collected by or under the authority of any Government.  For purposes of this Agreement, “Tax” also includes any obligations under any agreements or arrangements with any person with respect to the Liability for, or sharing of, taxes (including pursuant to Treas. Reg. § 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any Liability for taxes as a transferee or successor, by contract or otherwise.

“Tax Items” has the meaning set forth in Section 3.17(a).

 

“Tax Returns” has the meaning set forth in Section 3.17(a).

 

“Taxing Authority” means, with respect to any Tax, the Government or political subdivision thereof that imposes such Tax, and the agency (if any) charged with the collection of such Tax for such Government or subdivision, including any Government or agency that imposes, or is charged with collecting, social security or similar charges or premiums.

 

“Trademarks” means any trade names, trade dress, slogans, all identifiers of source, fictitious business names (D/B/As), Domain Names, logos, trademarks and service marks, including all goodwill therein, and any and all common law rights, registrations and applications therefore.

 

“Trade Secrets” means any trade secrets (including, those trade secrets defined in the Uniform Trade Secrets Act and under corresponding foreign statutory and common law) and technical and know-how information, including all source code, documentation, processes, technology, formulae, inventions (whether or not patentable) and marketing information and rights to limit the use or disclosure thereof by any Person, including databases and data collections and all rights therein.

 

“Transactions” means all actions and transactions contemplated by this Agreement, including the Merger.

 

“Transaction Documents” means this Agreement, the Support Agreements and such other agreements required pursuant to the terms of or otherwise associated with this Agreement.

 

“Triggering Event” an event which shall be deemed to have occurred if: (a) the board of directors of the Company or any committee thereof shall have made a Recommendation Change; (b) the board of directors of the Company or any committee thereof, or any Company Entity or Representative of any Company Entity, shall have taken, authorized or publicly proposed any of the actions referred to in Section 6.2(c) of this Agreement; (c) the Company shall have failed to include the Company Board Recommendation in the Proxy Statement; (d) a tender or exchange offer relating to shares of Company Common Stock shall have been commenced and the Company shall not have sent to its security holders, within ten (10) business days after the commencement of such tender or exchange offer, a statement disclosing that the Company recommends rejection of such tender or exchange offer and reaffirming the Company Board Recommendation; (e) an Acquisition Proposal shall have been publicly announced, and the Company shall have failed to issue a press release that reaffirms the Company Board Recommendation within five (5) business days after such Acquisition Proposal is publicly announced; (f) any of the Company Entities or any Representative of any of the Company Entities shall have breached or taken any action inconsistent with any of the provisions set forth in Section 5.3 of this Agreement; or (g) the Company releases any Person from, or amends or waives any provision of, any “standstill” agreement or provision (including any “standstill” provision contained in any confidentiality agreement entered into pursuant to clause (iv)(B) of Section 5.3(b) of this Agreement).

“Vested Company Option” means all Company Options that are outstanding and vested on the Closing Date, including those that become vested by acceleration as a result of the Transactions, and which have an exercise price which is less than the Common Stock Per Share Amount.

 

“Warrants” means the warrants issued and issuable pursuant to the Financial Advisory Agreement by and among the C.K. Cooper & Company, Inc. and the Company dated August 1, 2010, as amended, for the purchase of 100,000 shares of the Company Common Stock.

 

 

2.1 Merger of Merger Sub into the Company.  Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 2.3), Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease.  The Company will continue as the surviving corporation in the Merger (the “Surviving Corporation”).

 

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

 

2.3 Closing; Effective Time. The consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Bond, Schoeneck & King, PLLC, One Lincoln Center, Syracuse, New York 13203 no later than the third business day after the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in ARTICLE 7 and ARTICLE 8, unless another time, date or place is agreed to in writing by the parties hereto.  The date on which the Closing actually take s place is referred to as the “Closing Date”.  Subject to the provisions of this Agreement, a certificate of merger satisfying the applicable requirements of the DGCL shall be duly executed by the Company and Merger Sub in connection with the Closing and, concurrently with or immediately following the Closing, filed with the Secretary of State of the State of Delaware.  The Merger shall become effective (the “Effective Time”) at the time of the filing of such certificate of merger with the Secretary of State of the State of Delaware or at such later time as may be specified in such certificate of merger with the consent of Parent.

 

2.4 Surviving Corporation Certificate of Incorporation and Bylaws.  The Certificate of Incorporation and By-Law of the Surviving Corporation shall be amended in their entirety pursuant to the Merger at the Effective Time to conform to the Certificate of Incorporation and By-Law of Merger Sub as in effect immediately prior to the Effective Time, except that the name of the Surviving Corporation shall be “AML COMMUNICATIONS, INC.”.

2.5 Directors and Officers.  The directors and officers of the Merger Sub immediately before the Effective Time shall be the only directors and officers, respectively, of the Surviving Corporation immediately after the Effective Time.

 

2.6 Conversion of Shares.

 

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:

 

(i)

any shares of Company Common Stock held by the Company, any wholly-owned Subsidiary of the Company (or held in the Company’s treasury), Parent, Merger Sub, and any other wholly-owned Subsidiary of Parent, immediately prior to the Effective Time shall be cancelled without any conversion thereof and no payment or distribution shall be made with respect thereto;

 

(ii)	subject to Sections 2.6(b), 2.8 and 2.9, each share of Company Common Stock outstanding immediately prior to the Effective Time and not described in Section 2.6(a)(i) shall automatically be converted into the right to receive the Common Stock Per Share Amount, without interest;

 

(iii)

each share of the common stock, $0.01 par value per share, of Merger Sub outstanding immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation;

 

(iv)

subject to Section 2.6(b), each Vested Company Option outstanding and unexercised for which an Option Consent is obtained immediately prior to the Effective Time shall automatically be deemed exercised and the deemed shares of Company Common Stock associated with such exercise shall automatically be cancelled and, in consideration for such deemed exercise and automatic cancellation, the holder of such Vested Company Option shall be entitled to receive, with respect to each share of Company Common Stock issuable upon the exercise of such Vested Company Option and in full satisfaction of the rights of the holder with respect thereto, an amount in cash equal to the positive result, if any, of the Merger Option Consideration less any required withholding of Taxes; for avoidance of doubt, as a result of the foregoing, each Vested Company Option, and any de emed issuance of Company Common Stock associated with the deemed exercise, which shall not be issued, shall both be cancelled at the Effective Time;

(v)	each Vested Company Option outstanding and unexercised for which an Option Consent is not obtained immediately prior to the Effective Time shall automatically be terminated; and

 

(vi)	each outstanding Company Option that is not a Vested Company Option shall be automatically cancelled, without any exercise thereof and no payment or distribution shall be made with respect thereto.

 

(b) Notwithstanding anything to the contrary including the definitions of Common Stock Per Share Amount and Merger Option Consideration, the maximum aggregate consideration to be paid pursuant to this Section 2.6 is $29,302,000.  If (i) the number, type and rights of the shares of capital stock of the Company are not as set forth in Section 3.6, and/or (ii) the rights (whether options, warrants or any other rights) to acquire capital stock of the Company are not as set forth in Section 3.6, the consideration to be delivered in respect of a share of Company Common Stock and a Vested Company Option for which an Option Consent has been obtained (and accordingly, pursuant to Section 2.6) shall be adjusted d ownward as appropriate.

 

2.7 Cancellation of Shares and Closing of Transfer Books.  At the Effective Time: (a) all shares of Company capital stock outstanding immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist, and all holders of shares of Company capital stock that were outstanding immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company; and (b) the stock transfer books of the Company shall be closed with respect to all shares of Company capital outstanding immediately prior to the Effective Time.  No further transfer of any such shares of C ompany capital stock shall be made on such stock transfer books after the Effective Time.  If, after the Effective Time, a valid certificate previously representing any shares of Company Common Stock outstanding immediately prior to the Effective Time (a “Company Stock Certificate”) is presented to the Paying Agent or to the Surviving Corporation or Parent, such Company Stock Certificate shall be marked canceled and shall be exchanged as provided in Section 2.9.

 

2.8 Dissenting Shares.

 

(a) Notwithstanding anything to the contrary contained in this Agreement, shares of Company Common Stock held by a holder who has made a proper demand for appraisal of such shares of Company Common Stock in accordance with Section 262 of the DGCL and who has otherwise complied with all applicable provisions of Section 262 of the DGCL (any such shares being referred to as “Dissenting Shares” until such time as such holder fails to perfect or otherwise loses such holder’s appraisal rights under Section 262 of the DGCL with respect to such shares) shall not be converted into or represent the right to receive Merger Consideration in accordance with Section 2.6, but shall be entitled only to such rights as are granted by the DGCL to a holder of Dissenting Shares.

 

(b) If any Dissenting Shares shall lose their status as such (through failure to perfect or otherwise), then such shares shall be deemed automatically to have been converted into, as of the Effective Time, and to represent only, the right to receive Merger Consideration in accordance with Section 2.6, without interest thereon, upon surrender of the Company Stock Certificate representing such shares.

(c) The Company shall give Parent: (i) prompt notice of any demand for appraisal received by the Company prior to the Effective Time pursuant to the DGCL, any withdrawal of any such demand and any other demand, notice or instrument delivered to the Company prior to the Effective Time pursuant to the DGCL; and (ii) the opportunity to participate in all negotiations and proceedings with respect to any such demand, notice or instrument.  The Company shall not make any payment or settlement offer prior to the Effective Time with respect to any such demand, notice or instrument unless Parent shall have given its prior written consent to such payment or settlement offer.

 

2.9 Payment Fund.  Prior to the Closing Date, Parent, with the consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed, shall select and enter into an agreement with a reputable bank, trust company or transfer agent reasonably that will act as paying agent in the Merger (the “Paying Agent”).  Promptly after the Effective Time, Parent shall cause to be deposited with the Paying Agent cash sufficient to make payments of the cash consideration payable pursuant to Section 2.6 (the “Payment Fund”).  The Payment Fund shall not be used for any other purpose.  The Payment Fund shall be invested by the Paying Agent as directed by Parent.  The Surviving Corporation or Parent shall bear and pay all charges and expenses of the Paying Agent incurred in connection with the payment of Merger Consideration.

 

2.10 Exchange of Company Stock Certificates.  Promptly after the Effective Time, the Paying Agent will mail to the Persons who were record holders of Company Stock Certificates immediately prior to the Effective Time: (i) a letter of transmittal in customary form and containing such provisions as Parent may reasonably specify and as are reasonably acceptable to the Company (including provisions confirming that delivery of Company Stock Certificates shall be effected, and that risk of loss of, and title to, Company Stock Certificates shall pass, only upon delivery of such Company Stock Certificates to the Paying Age nt and releasing all claims against the Company and its officers and directors); and (ii) instructions for use in effecting the surrender of Company Stock Certificates in exchange for Merger Consideration.  Upon surrender of a Company Stock Certificate to the Paying Agent for exchange, together with a duly executed letter of transmittal and such other documents as may be reasonably required by the Paying Agent or Parent: (A) the holder of such Company Stock Certificate shall be entitled to receive in exchange therefor the cash consideration that such holder has the right to receive pursuant to the provisions of Section 2.6, in full satisfaction of all rights pertaining to the shares of Company Common Stock formerly represented by such Company Stock Certificate; and (B) the Company Stock Certificate so surrendered shall be canceled.  In the event of a transfer of ownership of any shares of Company Common Stock which are not registered in the transfer records of the Comp any, payment of Merger Consideration may be made to a Person other than the holder in whose name the Company Stock Certificate formerly representing such shares is registered if, to the satisfaction of Parent, any such Company Stock Certificate shall be delivered to Paying Agent, is accompanied by all documents required to evidence and effect such transfer and evidence is provided to Paying Agent that any applicable Transfer Taxes have been paid or are not applicable.  Until surrendered as contemplated by this Section 2.10, each Company Stock Certificate shall be deemed, from and after the Effective Time, to represent only the right to receive Merger Consideration as contemplated by Section 2.6.  If any Company Stock Certificate shall have been lost, stolen or destroyed, Parent may, in its discretion and as a condition precedent to the delivery of any Merger Consideration with respect to the shares of Company Common Stock previously represented by such Company Stock Certificate, require the owner of such lost, stolen or destroyed Company Stock Certificate to provide a reasonably appropriate affidavit and to deliver a bond (in such reasonable sum as Parent may direct) as indemnity against any claim that may be made against the Paying Agent, Parent, Merger Sub or the Surviving Corporation with respect to such Company Stock Certificate.  No interest shall be paid or will accrue on any cash payable to holders of Company Stock Certificates pursuant to the provisions of this Section 2.10.

2.11 Company Options.

 

(a) Prior to the Effective Time, the Company shall take all necessary action, and obtain the written consent (the “Option Consent”) of each holder of the Company Options give effect to the treatment of the Company Options as contemplated by Sections 2.6(a)(iv), 2.6(a)(v) and 2.6(a)(vi).

 

(b) Promptly after the Effective Time, the Paying Agent will mail to the Persons who were record holders of Vested Company Options immediately prior to the Effective Time and submitted an Option Consent: (i) a letter of transmittal in customary form and containing such provisions as Parent may reasonably specify and as are reasonably acceptable to the Company (including provisions releasing all claims against the Company and its officers and directors and all rights to the Company Options and the Company capital stock); and (ii) instructions for use in effecting the deemed exercise and cancellation of the associated Company Common Stock in exchange for Merger Option Consideration.  Promptly up on the delivery of a duly executed letter of transmittal and such other documents as may be reasonably required by the Paying Agent or Parent by the holder of a Vested Company Option that provided an Option Consent shall be entitled to receive in exchange therefor the cash consideration that such holder has the right to receive pursuant to the provisions of Section 2.6, in full satisfaction of all rights pertaining to such Vested Company Option and the associated deemed shares of Company Common Stock associated with the deemed exercise.  No interest shall be paid or will accrue on any cash payable to holders of Vested Company Options pursuant to the provisions of this Section 2.11.

 

(c) If within five years after the Effective Time Parent receives an Option Consent from a Person who was a record holder of a Vested Company Option immediately prior to the Effective Time that had not submitted an Option Consent prior to the Effective Time, Parent or Paying Agent shall deliver the items set forth in clauses (i) and (ii) of Section 2.11(b) to such Person.  If such Person then complies with the remainder of Section 2.11(b), Parent or Paying Agent shall pay the applicable Merger Option Consideration to such former holder of such Vested Company Option.  No interest shall be paid or will accrue on any cash payable to such former holder of Vested Company Option pursuant to the prov isions of this Section 2.11.

 

2.12 Taxes.  Notwithstanding anything contained in this Agreement to the contrary, each of the Paying Agent, Parent, Merger Sub and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable pursuant to this Agreement to any holder or former holder of Company Common Stock and/or any Company Equity Award such amounts as may be required to be deducted or withheld from such consideration under the Code or any other applicable Law.  To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes under this Agreement as having been paid to the Person to whom such amounts would otherwise have been paid.

2.13 Consideration Not Paid.

 

(a) Any portion of the Payment Fund that remains undistributed to holders of Company Stock Certificates and Vested Company Options as of the date that is 180 days after the date on which the Merger becomes effective shall be delivered to Parent upon demand, and any holders of Company Stock Certificates and Vested Company Options who have not theretofore surrendered their Company Stock Certificates and delivered their letter of transmittal, as applicable, in accordance with Sections 2.10 and 2.11, respectively, shall thereafter look only to Parent for satisfaction of their claims for Merger Consideration and Merger Option Consideration, respectively, and Parent shall satisfy such claims in accordance with and subject to the terms of this ARTICLE 2.

 

(b) For each letter of transmittal and Company Stock Certificate, as applicable, that has not been delivered and/or surrendered to Parent by the earlier of: (i) the fifth anniversary of the date on which the Merger becomes effective; or (ii) the date immediately prior to the date on which the consideration under Section 2.6 would otherwise escheat to or become the property of any Government, then such cash amount shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of any claim or interest of any Person previously entitled thereto.

 

(c) None of Parent, Merger Sub, the Surviving Corporation and the Paying Agent shall be liable to any holder or former holder of Company Common Stock or Vested Company Option or to any other Person with respect to any Merger Consideration delivered to any public official pursuant to any applicable abandoned property law, escheat law or similar Law.

 

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

 

Except as set forth in the Disclosure Schedule delivered by the Company to Parent on the date of this Agreement, the Company hereby represents and warrants to Parent and Merger Sub as follows:

3.1 Organization; Good Standing.  The Company and each of its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, and have the requisite corporate power and authority to conduct its business as it is presently being conducted and to own, lease or operate its properties and assets.  The Company and each of its Subsidiaries is duly licensed and qualified to do business and is in good standing (or equivalent status) in each jurisdiction where the character of its respective properties owned or le ased or the nature of its respective activities make such qualification necessary, except where the failure to be so qualified, licensed or in good standing (or equivalent status) would not have, individually or in the aggregate, a Material Adverse Effect.  The Company has delivered or made available to Parent complete and correct copies of the certificates of incorporation and bylaws, as amended to date, of the Company and each of its Subsidiaries.  Neither the Company nor any of its Subsidiaries is in violation of its certificate of incorporation or bylaws.

 

3.2 Power; Enforceability.  The Company has all requisite corporate power and authority to execute and deliver this Agreement and the other Transaction Documents, to perform its covenants and obligations hereunder and thereunder and, subject to obtaining the Requisite Stockholder Approval (as defined in Section 3.3), to consummate the Transactions.  The execution and delivery by the Company of this Agreement and the other Transaction Documents, the performance by the Company of its covenants and obligations hereunder and thereunder and the consummation by the Company o f the Transactions have been duly authorized by all necessary corporate action on the part of the Company, and no additional corporate proceedings on the part of the Company are necessary to authorize the execution and delivery by the Company of this Agreement or the other Transaction Documents, the performance by the Company of its covenants and obligations hereunder and thereunder or the consummation by the Company of the Transactions, other than obtaining the Requisite Stockholder Approval.  As of the date of this Agreement, the board of directors of the Company (at a meeting duly called and held) has: (a) unanimously determined that the Merger is advisable and fair to and in the best interests of the Company and its stockholders; (b) unanimously approved and adopted this Agreement and approved the Merger and the other Transactions; and (c) subject to the right of the Company’s board of directors to withdraw or modify its recommendation in accordance with the terms of Sectio n 6.2(d), unanimously recommended the adoption of this Agreement by the Company’s stockholders and directed that this Agreement and the Merger be submitted for consideration by the Company’s stockholders at the Company Stockholders’ Meeting (as defined in Section 6.2(a)).  This Agreement has been and each of the other Transaction Documents has been duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with their respective terms, except that such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting or relating to creditors’ rights generally and by general equitable and public policy principles.

 

3.3 Required Stockholder Approval.  The affirmative vote of the holders of a majority of the shares of outstanding Company Common Stock is the only vote of the holders of any class or series of capital stock of the Company necessary to adopt this Agreement, approve the Merger and consummate the Transactions (the “Requisite Stockholder Approval”).

All outstanding shares of Company Common Stock are validly issued, fully paid and non-assessable and free of any preemptive rights.

 

(c) Except as set forth in Part 3.6(c) of the Disclosure Schedule, with respect to rights to acquire Company Capital Stock:

 

(i)	2,875,250 shares of Company Common Stock are subject to issuance pursuant to Company Options issued and outstanding, including the 100,000 of Warrants,

 

(ii)	2,875,250 shares of Company Common Stock are subject to issuance for the exercise of Vested Company Options, and

 

(iii)

1,739,760 shares of Company Common Stock are reserved for future issuance pursuant to the Company Equity Plan.

 

Other than as described in Section 3.6(c), there are no other options, rights, warrants, subscriptions, convertible instruments, stockholder rights plan or other agreements whereby any Person could acquire from any Company Entity any of their respective capital stock.  The Company has delivered to Parent accurate and complete copies of all equity plans pursuant to which any outstanding stock options, restricted stock units or restricted stock awards (including all outstanding Company Equity Awards) were granted by any Company Entity, including the Warrants, and the forms of all stock option, restricted stock unit and restricted stock award agreements evidencing such stock options, restricted stock units or restricted stock awards.  All shares of Company Common Stock subject to issuanc e under each Company Equity Plan, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable.  The exercise price of each Company Option is no less than the fair market value of a share of Company Common Stock as determined on the date of grant of such Company Option.  All grants of Company Equity Awards were recorded on the Company’s financial statements (including, any related notes thereto) contained in the Company SEC Reports, in accordance with GAAP.  Each outstanding Company Equity Award has been granted at an exercise price or purchase price, as applicable, as required under the terms of the applicable Company Equity Plan.  There are no Company Stock-Based Awards issued and outstanding.

 

(d) No Company Entity is a party to any Contract relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or other similar rights with respect to any shares of capital stock or other securities of such Company Entity.

 

3.7 Subsidiaries.

 

(a) Part 3.7(a) of the Disclosure Schedule contains a complete and accurate list of the name, jurisdiction of organization and capitalization of each Subsidiary of the Company and the amount and type of equity owned by the Company in each Subsidiary.

(b) All of the outstanding capital stock of, or other equity or voting interest in, each Subsidiary of the Company have been duly authorized, validly issued and are fully paid and non-assessable and free and clear of all Encumbrances and free of any other restriction that would prevent the operation by Parent or the Surviving Corporation of such Subsidiary’s business as presently conducted.

 

(c) Except as set forth in Part 3.7(c) of the Disclosure Schedule, neither the Company nor any of its Subsidiaries (i) owns any shares of capital stock of or other voting or equity interests in (including any securities exercisable or exchangeable for or convertible into shares of capital stock of or other voting or equity interest in) any other Entity, (ii) has agreed or is obligated to make, or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity, or (iii) has, at any time, been a general partner of, or has otherwise been liable for any of the debts or other obligations of, any general partnership, limited partnership or other Entity.

 

(d) No Company Entity owns an interest in any Entity organized outside the United States.

 

3.8 Company SEC Reports.

 

(a) Since March 31, 2008, the Company has filed all forms, reports, statements, schedules and other documents (including exhibits) with the SEC that were required to be filed by it under applicable Law (all such forms, reports, statements, schedules and other documents, together with any documents filed during any such periods by the Company with the SEC on a voluntary basis on Current Reports on Form 8-K and, in all cases, all exhibits and schedules thereto, the “Company SEC Reports”).  As of its effective date (in the case of any Company SEC Report that is a registration statement filed pursuant to the Securities Act), as of its mailing date (in the case of any Company SEC Report that is a proxy statement) and as of its filing date (or, if amended or superseded by a filing prior to the date of this Agreement, on the date of such amended or superseded filing), (i) each Company SEC Report complied in all material respects with all applicable Law, including the applicable requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, each as in effect on the date such Company SEC Report was filed, mailed or effective, as applicable, and (ii) each Company SEC Report did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading.  True and correct copies of all Company SEC Reports filed prior to the date hereof have been furnished to Parent or are publicly available in the Electronic Data Gathering, Analysis a nd Retrieval (EDGAR) database of the SEC.  None of the Company’s Subsidiaries is required to file any forms, reports, statements, schedules or other documents (including exhibits) with the SEC.  No executive officer of the Company has failed to make the certifications required of him under (A) Rule 13a-14 and 15d-14 of the Exchange Act or (B) Section 302 or 906 of the Sarbanes-Oxley Act, with respect to any Company SEC Report, except as disclosed in certifications filed with the Company SEC Reports.  Neither the Company nor any of its executive officers has received notice from any Government challenging or questioning the accuracy, completeness, form or manner of filing of such certifications.

 

 

(b) The Company and each of its officers and directors are in compliance in all material respects with the applicable provisions of the Sarbanes-Oxley Act.

 

(c) The Company is in compliance in all material respects with the rules and regulations of FINRA and the OTCBB, in each case, that are applicable to the Company, including the OTCBB’s Eligibility Rule.

 

(d) The Company has designed (and maintains) disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) to ensure that all material information relating to the Company required to be disclosed by the Company in its reports that it files or furnishes under the Exchange Act, including its consolidated Subsidiaries, is made known on a timely basis to the Chief Executive Officer and the Chief Financial Officer of the Company by others within those entities as appropriate so that such persons may make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act.

 

3.9 Company Financial Statements.

 

(a) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Reports, each as amended prior to the date of this Agreement, was prepared in accordance with GAAP applied on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act) and each fairly presented, in all material respects, the consolidated financial position, results of operations and cash flows of the Company and its consolidated Subsidiaries as of the respective dates thereof and for the respective periods indicated therein, except as otherwise noted therein (except that the unaudited interim financial statements may not contain footnotes and were or are subject to normal and recurring adjustments).

 

(b) The Company has designed (and maintains) internal controls over financial reporting (as such term is defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of the Company’s financial reporting and the preparation of its consolidated financial statements for external purposes in accordance with GAAP, in compliance with the requirements of Rule 13a-15 and Rule 15d-15 under the Exchange Act.  As of the date hereof, to the Knowledge of the Company, the Company has not identified any material weaknesses in the design or operation of its internal controls over financial reporting. To the Knowledge of the Company, there is no reason to believe that its Chief Executive Officer and Chief Financial Officer will not be able to give the certifications pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act when next due.

 

(c) Since March 31, 2008, the Company’s Chief Executive officer and Chief Financial Officer have disclosed to the Company’s auditors and the audit committee of the Company’s board of directors (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information of the Company on a consolidated basis and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

 

 

(d) Neither the Company nor any director or executive officer of the Company or any of its Subsidiaries has, and to the Knowledge of the Company, no other officer, employee or accountant of the Company or Subsidiary has, received any material complaint, allegation, assertion or claim, in writing (or to the Knowledge of the Company, orally) that the Company or any of its Subsidiaries has engaged in improper, illegal or fraudulent accounting or auditing practices, and (ii) no attorney representing the Company or any of its Subsidiaries, whether or not employed by the Company or any of its Subsidiaries, has reported evidence of a material violation of securities laws, breach of fiduciary duty or similar materia l violation by the Company, any of its Subsidiaries or any of their respective officers, directors, employees or agents to the board of directors or any committee thereof or to any director or officer of the Company or any of its Subsidiaries.

 

(e) No Company Entity is a party to, or has any commitment to become a party to, any joint venture, partnership agreement or any similar Contract (including any Contract relating to any transaction, arrangement or relationship between or among a Company Entity, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand (such as any arrangement described in Item 303(a)(4) of Regulation S-K under the Securities Act)) where the purpose or effect of such arrangement is to avoid disclosure of any material transaction involving any Company Entity in the Company’s consolidated financial statements.