Document:

Exhibit 4.6.3

 

Catalyst Semiconductor, Inc.

Restricted Stock Unit Agreement

 

2003 STOCK INCENTIVE PLAN

 

1.                                      NOTICE OF GRANT OF RESTRICTED
STOCK UNITS

 

You have been
granted the right to receive an Award of Restricted Stock Units, subject to the
terms and conditions of the Plan and this Agreement.  Each such Unit is equivalent to one Share of
Common Stock of the Company for purposes of determining the number of Shares
subject to this Award.  Unless otherwise
defined herein, the terms defined in the 2003 Stock Incentive Plan (the “Plan”)
will have the same defined meanings in this Notice of Grant of Restricted Stock
Units (the “Notice of Grant”) and the Terms and Conditions of the agreement
section of this document (together, the “Restricted Stock Unit Agreement” or
the “Agreement”).

 

	
  Name of
  Participant and Address

  	
   

  	
  Number of Restricted Stock Units Granted

  	
   

  	
  Grant Date

  	
   

  	
  Grant Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Vesting
Schedule:

 

Subject to any
acceleration provisions contained in the Plan or set forth below, the
Restricted Stock Units will vest in accordance with the following schedule:

 

	
  Vesting
  Date

  	
   

  	
  Vesting in period occurs at

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

Notwithstanding
any contrary provision of this Agreement, in the event you cease to provide
Service for any or no reason before you vest in the right to acquire the Shares
to be issued pursuant to the Restricted Stock Unit, the Restricted Stock Unit
and your right to acquire any Shares hereunder will immediately terminate.

 

By your signature and the signature of the Company’s representative below,
you and the Company agree that this Award is granted under and governed by the
terms and conditions of the Plan and this Restricted Stock Unit Agreement, both
of which are made a part of this document. 
Your acceptance also confirms that you have reviewed and fully
understand all provisions of the Plan and this Restricted Stock Unit Agreement
in their entirety, and understand that you may choose to obtain the advice of
counsel prior to accepting this Award of Restricted Stock Units.  As the Participant, you hereby agree to
accept as binding, conclusive and final all decisions or interpretations of the
Committee about any questions relating to the Plan and this Restricted Stock
Unit Agreement.

 

	
  PARTICIPANT

  	
   

  	
  CATALYST SEMICONDUCTOR, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature

  	
   

  	
  By

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name

  	
   

  	
  Title

  

 

 

 

2.                                      TERMS AND CONDITIONS

 

A.                                    Grant of Restricted Stock Units:

 

The Company hereby
grants to the individual named in the Notice of Grant (the “Participant”), an
award of Restricted Stock Units as set forth, and otherwise described in the
Notice of Grant, subject to the terms and conditions of the Plan, which is
incorporated herein by reference.

 

B.                                    Company’s Obligation:

 

Each Restricted
Stock Unit represents the right to receive a Share on the vesting date (or at
such later time indicated in this Agreement). Unless and until the Restricted
Stock Units vest, Participant will have no right to receive Shares under such Restricted
Stock Units.  Prior to actual
distribution of Shares pursuant to any vested Restricted Stock Units, such Restricted
Stock Units will represent an unsecured obligation of the Company, payable (if
at all) only from the general assets of the Company.

 

C.                                    Vesting Schedule:

 

Except as provided
in Section D, the Restricted Stock Units awarded by this Agreement will
vest in accordance with the vesting provisions set forth in the Notice of Grant,
subject to Participant remaining in Service through each applicable vesting
date.

 

D.                                    Forfeiture upon Termination as Service
Provider:

 

Notwithstanding
any contrary provision of this Agreement, the balance of Restricted Stock Units
awarded by this Agreement that have not vested at the time of Participant’s
termination as a Service Provider for any reason will be forfeited and
automatically transferred to and reacquired by the Company at no cost to the
Company upon the date of such termination.

 

E.                                     Payment after Vesting:

 

Any Restricted
Stock Units that vest in accordance with Section C will be paid to the
Participant (or in the event of the Participant’s death, to his or her estate)
in whole Shares, provided that to the extent determined appropriate by the
Company, any federal, state and local withholding taxes with respect to such
Restricted Stock Units will be paid by reducing the number of Shares actually
paid to the Participant. Subject to the provisions of the following paragraph,
such vested Restricted Stock Units shall be paid in Shares as soon as
practicable after vesting, but in each such case no later than the date that is
two-and-one-half months from the end of the Company’s tax year that includes
the vesting date.

 

Notwithstanding
anything in the Plan or this Agreement to the contrary, if the vesting of the
balance, or some lesser portion of the balance, of the Restricted Stock Units
is accelerated in connection with Participant’s termination of Service
(provided that such termination is a “separation from service” within the
meaning of Section 409A, as determined by the Company), other than due to
death, and if  (x) Participant is a “specified
employee” within the meaning of Section 409A at the time of such
termination of Service and (y) the payment of such accelerated Restricted
Stock Units will result in the imposition of additional tax under Section 409A
if paid to Participant on or within the six (6) month period following
Participant’s termination of Service, then, to the extent necessary to avoid
the imposition of such additional tax, the payment of such accelerated
Restricted Stock Units otherwise payable to Participant during such six (6) month
period will accrue and will not be made until the date six (6) months and
one (1) day following the date of Participant’s termination of Service,
unless the Participant dies following his or her 

 

 

 

termination of
Service, in which case, the Restricted Stock Units will be paid in Shares
pursuant to Section F as soon as practicable following his or her
death.  It is the intent of this
Agreement to comply with the requirements of Section 409A so that none of
the Restricted Stock Units provided under this Agreement or Shares issuable
thereunder will be subject to the additional tax imposed under Section 409A,
and any ambiguities herein will be interpreted to so comply.  For purposes of this Agreement, “Section 409A”
means Section 409A of the Internal Revenue Code of 1986, as amended, and
any proposed, temporary or final Treasury Regulations and Internal Revenue
Service guidance thereunder, as each may be amended from time to time.

 

F.                                      Payments after Death:

 

Any distribution
or delivery to be made to Participant under this Agreement will, if Participant
is then deceased, be made to the administrator or executor of Participant’s
estate.  Any such administrator or
executor must furnish the Company with (1) written notice of his or her
status as transferee, and (2) evidence satisfactory to the Company to
establish the validity of the transfer and compliance with any applicable laws pertaining
to said transfer.

 

G.                                    Rights as a Stockholder:

 

Neither
Participant nor any person claiming under or through Participant will have any
of the rights or privileges of a stockholder of the Company in respect of any
Shares deliverable hereunder unless and until certificates representing such
Shares will have been issued, recorded on the records of the Company or its
transfer agents or registrars, and delivered to Participant or Participant’s
broker.

 

H.                                   Address for Notices:

 

Any notice to be
given to the Company under the terms of this Agreement will be addressed to the
Company at Catalyst Semiconductor, Inc., 2975 Stender Way, Santa Clara, CA 95054, or at such other address as
the Company may hereafter designate in writing.

 

I.                                        Grant is Not Transferable:

 

Except to the
limited extent provided in Section F above, the Restricted Stock Units
subject to this grant and the rights and privileges conferred hereby will not
be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and will not be subject to sale under execution,
attachment or similar process.  Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
Restricted Stock Units subject to this grant, or any right or privilege
conferred hereby, or upon any attempted sale under any execution, attachment or
similar process, this grant and the rights and privileges conferred hereby
immediately will become null and void.

 

J.                                        Binding Agreement:

 

Subject to the
limitation on the transferability of this grant contained herein, this
Agreement will be binding upon and inure to the benefit of the heirs, legatees,
legal representatives, successors and assigns of the parties hereto.

 

K.                                   Withholding of Taxes:

 

Notwithstanding
any contrary provision of this Agreement, no certificate representing the
Shares will be issued to the Participant, unless and until satisfactory
arrangements (as determined by the Committee) will have been made by the
Participant with respect to the payment of income, 

 

 

2

 

employment and
other taxes which the Company determines must be withheld with respect to such
Shares so issuable.  The Committee, in
its sole discretion and pursuant to such procedures as it may specify from time
to time, may permit the Participant to satisfy such tax withholding obligation,
in whole or in part by one or more of the following (without limitation): (a) paying
cash, (b) electing to have the Company withhold otherwise deliverable
Shares having a Fair Market Value equal to the minimum amount required to be
withheld, (c) delivering to the Company already vested and owned Shares
having a Fair Market Value equal to the amount required to be withheld, or (d) selling
a sufficient number of such Shares otherwise deliverable to Participant through
such means as the Company may determine in its sole discretion (whether through
a broker or otherwise) equal to the amount required to be withheld.  To the extent determined appropriate by the
Company in its discretion, it will have the right (but not the obligation) to
satisfy any tax withholding obligations by reducing the number of Shares
otherwise deliverable to Participant.  If
the Participant fails to make satisfactory arrangements for the payment of any
required tax withholding obligations hereunder at the time any applicable
Restricted Stock Units otherwise are scheduled to vest pursuant to Section C
or taxes are otherwise required to be withheld, the Participant will
permanently forfeit such Restricted Stock Units and right to acquire any Shares
with respect thereto the Restricted Stock Units will be returned to the Company
at no cost to the Company. All income and other taxes related to the RSUs and
any Shares delivered in payment thereof are the sole responsibility of the
Participant.

 

L.                                     Additional Conditions to Issuance of
Stock:

 

If at any time the
Company will determine, in its discretion, that the listing, registration or
qualification of the Shares upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental regulatory
authority is necessary or desirable as a condition to the issuance of shares to
the Participant (or his estate), such issuance will not occur unless and until
such listing, registration, qualification, consent or approval will have been
effected or obtained free of any conditions not acceptable to the Company.  Where the Company determines that the
delivery of the payment of any Shares will violate federal securities laws or
other applicable laws, the Company will defer delivery until the earliest date
at which the Company reasonably anticipates that the delivery of Shares will no
longer cause such violation.  The Company
will make all reasonable efforts to meet the requirements of any such state or
federal law or securities exchange and to obtain any such consent or approval
of any such governmental authority.

 

M.                                 Plan Governs:

 

This Agreement is subject
to all terms and provisions of the Plan. 
In the event of a conflict between one or more provisions of this
Agreement and one or more provisions of the Plan, the provisions of the Plan
will govern.

 

N.                                    Committee Authority:

 

The Committee will
have the power to interpret the Plan and this Agreement and to adopt such rules for
the administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules (including,
but not limited to, the determination of whether or not any Restricted Stock
Units have vested).  All actions taken
and all interpretations and determinations made by the Committee in good faith
will be final and binding upon Participant, the Company and all other interested
persons.  No member of the Committee will
be personally liable for any action, determination or interpretation made in
good faith with respect to the Plan or this Agreement.

 

 

3

 

O.                                    Modifications to the Agreement:

 

Participant
expressly warrants that he or she is not accepting this Agreement in reliance
on any promises, representations, or inducements other than those contained
herein.  Modifications to this Agreement
or the Plan can be made only in an express written amendment executed by a duly
authorized officer of the Company. 
Notwithstanding anything to the contrary in the Plan or this Agreement,
the Company reserves the right to revise this Agreement as it deems necessary
or advisable, in its sole discretion and without the consent of Participant, to
comply with Section 409A of the Code or to otherwise avoid imposition of
any additional tax or income recognition under Section 409A of the Code
prior to the actual payment of Shares pursuant to this award of Restricted
Stock Units.

 

P.                                      Amendment, Suspension or Termination of
the Plan:

 

By accepting this
Award, Participant expressly warrants that he or she has receive a Restricted
Stock Unit Award under the Plan, and has received, read and understood a
description of the Plan.  Participant
understands that the Plan is discretionary in nature and may be amended,
suspended or terminated by the Company at any time.

 

Q.                                    Entire Agreement; Governing Law:

 

The Plan is
incorporated herein by reference.  The Plan
and this Restricted Stock Unit Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Participant
with respect to the subject matter hereof, and may not be modified adversely to
Participant’s interest except by means of a writing signed by the Company and
Participant.  This Restricted Stock Unit
Agreement is governed by the internal substantive laws, but not the choice of law
rules, of California without regard to principles of conflict of laws.

 

R.                                    NO GUARANTEE OF
CONTINUED SERVICE:

 

PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF RESTRICTED
STOCK UNITS PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING
TO PROVIDE SERVICE AT THE WILL OF THE COMPANY (OR THE PARENT OR SUBSIDIARY
EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS RESTRICTED STOCK UNIT. 
PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN
DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL
NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY
(OR THE PARENT OR SUBSIDIARY EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE
PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.

 

 

4Exhibit
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.

 

2

 

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 

 

3

 

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 

 

4

 

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.

 

5

 

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 

 

7

 

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;

 

8

 

(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 

 

9

 

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 

 

10

 

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
and other contracts, summary plan descriptions, summaries of material
modifications and material communications distributed to the participants of
each Employee Benefit Plan (and written summaries of any unwritten Employee
Benefit Plans, modifications to Employee Benefit Plans and employee
communications), (c) to the extent annual reports on Form 5500 are
required with respect to any Employee Benefit Plan, the three most recent
annual reports and attached schedules for each Employee Benefit Plan as to
which such report is required to be filed, (d) where applicable, the most
recent (A) opinion, notification and determination letters, (B) actuarial
valuation reports, and (C) nondiscrimination tests performed under the
Code (including 401(k) and 401(m) tests) for each Employee Benefit
Plan, (e) all material communications received from or sent to the Internal
Revenue Service or the Department of Labor (including a written description of
any oral communication), and (f) any Forms 5330 required to be filed by
the Company or any Affiliate, whether related to an Employee Benefit Plan or
otherwise.

 

(iii)                               Each Pension Plan identified in Schedule 3.1(v)(i) hereto
which is intended to be “qualified” within the meaning of Section 401(a) of
the Code has been determined 

 

16

 

by the Internal Revenue
Service (the “IRS”) to be so qualified as of the date of the
determination letter set forth on Schedule 3.1(v)(iii), and the
Company is not aware of any fact which would indicate that the qualified status
of each such Pension Plan or the tax exempt status of each trust created
thereunder has been adversely affected. 
None of the Pension Plans identified in Schedule 3.1(v)(i) hereto
are currently the subject of an audit or other investigation by the IRS, the
Department of Labor, the Pension Benefit Guaranty Corporation (the “PBGC”)
or any other Governmental Authority nor are any the subject of any law suits,
complaints, claims or legal proceedings of any kind.

 

(iv)                              No “prohibited transaction,” as such term
is defined in Section 406 of ERISA, has occurred with respect to any Pension
Plan or Welfare Plan identified in Schedule 3.1(v)(i) hereto which
has resulted or may result in Liability to the Company or any of the ERISA
Affiliates.  No breach of fiduciary
responsibility under Part 4 of Title I of ERISA has occurred which has
resulted or may result in Liability to the Company such Pension Plan or Welfare
Plan.  Except as disclosed on Schedule
3.1(v)(iv), no ERISA Affiliate has incurred any material Liability for any
penalty or Tax, nor, to the knowledge of the Company, does any fact exist which
would subject the Company to any penalty or Tax under Sections 4971, 4972,
4975, 4976, 4977, 4978, 4979, 4980, 4980B, 4980D, 5000 of the Code or Section 502
of ERISA with respect to any such Pension Plan or Welfare Plan.

 

(v)                                 Except as disclosed in Schedule
3.1(v)(v), each Welfare Plan identified thereon has, to the extent
applicable, at all times been in compliance with the provisions of Section 4980B
of the Code and Parts 6 and 7 of Title I of ERISA.  Except as disclosed on Schedule 3.1(v)(v) and
except as described in the immediately preceding sentence, none of the Welfare
Plans provides or promises post-retirement health or life benefits to current
employees or retirees of the Company or its ERISA Affiliates.

 

(vi)                              Except as disclosed on Schedule 3.1(v)(vi),
all contributions required to be paid under the terms of each Employee Benefit
Plan identified in Schedule 3.1(v)(i) hereto have been
made.  As of and including the Closing
Date, the Company shall have made all contributions required to be made by it
up to and including the Closing Date with respect to each Employee Benefit
Plan, or adequate accruals therefor will have been provided for and will be
reflected on an unaudited balance sheet of the Company provided to Parent by
the Company.

 

(vii)                           Except as disclosed in Schedule 3.1(v)(vii)
and in subsection (ix) below, no Pension Plan identified in Schedule 3.1(v)(i) hereto
or trust created thereunder has been terminated or partially terminated by the
Company and the Company has no knowledge of any events which would cause a
voluntary or involuntary termination of any such Pension Plan.

 

(viii)                        Neither the Company nor any of its ERISA
Affiliates has maintained or contributed to, been obligated or required to
contribute to, or withdrawn in a partial or complete withdrawal from, a “Multiemployer
Plan,” as such term is defined in Section 4001(a)(3) of ERISA.

 

17

 

(ix)                                With respect to each Pension Plan
identified in Schedule 3.1(v)(i) subject to Title IV of ERISA (A) neither
the Company nor any ERISA Affiliate has withdrawn from any such Plan during a
plan year in which it was a “substantial employer” (within the meaning of Section 4001
(a)(2) of ERISA), (B) neither the Company nor any ERISA Affiliate has
filed a notice of intent to terminate any such Pension Plan or adopted any
amendment to treat any such Pension Plan as terminated, (C) the PBGC has
not instituted proceedings to terminate any such Pension Plan, and no other
event or condition has occurred which might constitute grounds under Section 4042
of ERISA for the termination of, or the appointment of a trustee to administer,
any such Pension Plan, (D) no accumulated funding deficiency, whether or
not waived, exists with respect to any such Pension Plan and no condition has
occurred or exists which by the passage of time would be expected to result in
an accumulated funding deficiency as of the last day of the current plan year
of any such Pension Plan, (E) all required premium payments to the PBGC
have been paid when due, (F) no reportable event (as described in Section 4043
of ERISA) for which the notice requirements to the PBGC have not been waived,
has occurred with respect to any such Pension Plan, (G) no amendment with
respect to which security is required under Section 307 of ERISA has been
made or is reasonably expected to be made to any Pension Plan, and (H) as
of the last day of the most recent prior plan year, the market value of assets
under each such Pension Plan subject to the minimum funding standards equaled
or exceeded the present value of benefit liabilities thereunder as determined
in accordance with the actuarial valuation assumptions set forth in such
Pension Plan.

 

(x)                                   Except as required by law or by the terms
of an Employee Benefit Plan, the Company has not proposed or agreed to any
changes to any Employee Benefit Plan that would cause an increase in benefits
under any such Employee Benefit Plan (or the creation of new benefits or plans)
nor to change any employee coverage which would cause an increase in the
expense of maintaining any such Employee Benefit Plan.

 

(xi)                                No Employee Benefit Plan provides
benefits or payments based on or measured by the value of an equity security of
or interest in the Company or any ERISA Affiliate.

 

(xii)                             Except as disclosed on Schedule
3.1(v)(ii), no Employee Benefit Plan is a plan, agreement or arrangement
providing for benefits, in the nature of severance benefits, and the Company
does not have outstanding any liabilities with respect to any severance
benefits available under any Employee Benefit Plan.

 

(w)                               Employee Matters.

 

(i)                                   The Company has provided to the Parent
lists all current employees of the Company and their hourly rates of
compensation or base salaries (as applicable), the date of last increase in
such compensation or salaries, and all other compensation paid to such
employees.  To the knowledge of the
Company, no employee of the Company has any plans to terminate employment with
the Company.  The Company has complied
with all Laws relating to the hiring of employees and the employment of labor,
including provisions thereof relating to wages, hours, equal opportunity,
collective bargaining and the withholding and payment of social security and
other Taxes.

 

18

 

(ii)                                Except as set forth on Schedule 3.1(w):  (A) the Company has neither accrued nor
is not delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed by
them to date or amounts required to be reimbursed to such employees and, upon
termination of the employment of any such employees, neither the Parent nor the
Company will by reason of any event, fact or circumstance occurring or existing
prior to the Closing be liable to any of such employees for severance pay or
any other payments; (B) there is no unfair labor practice complaint
against the Company pending before the National Labor Relations Board or any
other Governmental Authority; (C) there is no labor strike, material
dispute, slowdown or stoppage actually pending or, to the knowledge of the
Company, threatened against the Company; (D) the Company has not
experienced any significant deterioration in its relationship with its
employees; and (E) no labor union currently represents the employees of
the Company and, to the knowledge of the Company, no labor union has taken any
action with respect to organizing the employees of the Company.

 

(iii)                             Except for payment of the Merger
Consideration to the Shareholders, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
will:  (A) result in any payment
(including, without limitation, severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any director or employee of the
Company, under any Employee Benefit Plan or otherwise; (B) increase any
compensation or benefits payable under any Employee Benefit Plan or otherwise;
or (C) result in the acceleration of the time of payment or vesting of any
such compensation benefits.  No Employee
Benefit Plan or other arrangement provides benefits or payments contingent
upon, triggered by or increased as a result of a change in the ownership or
effective control of the Company.

 

(x)            Brokerage Fees.  The Company has not engaged or authorized any
broker, investment banker or other Person to act on its behalf, directly or
indirectly, as a broker or finder who might be entitled to a fee, commission or
other remuneration in connection with the transactions contemplated by this
Agreement.

 

(y)                                 Books and Records. All accounts, books, ledgers and
official and other records prepared and kept by the Company are true, complete
and accurate in all material respects and have been kept in accordance with
sound business practices.

 

(z)                                   Disclosure.  No
representation or warranty made by the Company in this Agreement, nor any
information contained in any Ancillary Document to be delivered by the Company
or the Shareholder pursuant hereto, or any information relating to the Company
provided or made available to the Parent in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
or will omit to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in any material respect in light of
the circumstances under which they were made.

 

3.2                                 Representations and Warranties of the
Shareholders.  The Shareholders, severally but not jointly,
hereby represent and warrant to the Parent as follows:

 

19

 

(a)                                  Authority.  Each
Shareholder has all corporate or limited liability company power or legal
capacity and authority to enter into and deliver this Agreement and each of the
Ancillary Documents to which such Shareholder is a party, to carry out such
Shareholder’s obligations hereunder and under such Ancillary Document and to
consummate the transactions contemplated hereby and by such Ancillary Documents.  All actions, authorizations and consents
required by Law for the execution, delivery and performance by each Shareholder
of this Agreement and each Ancillary Document to which such Shareholder is a
party, and the consummation of the transactions contemplated hereby and
thereby, have been properly taken or obtained.

 

(b)                                 Execution and Delivery. 
This Agreement has been, and each Ancillary Document to which it is a
party will be at the Closing, duly authorized, executed and delivered by such
Shareholder and constitutes or will constitute at the Closing a legal, valid
and binding obligation of such Shareholder, enforceable against such
Shareholder 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 each Shareholder 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 such
Shareholder under, (i) any Laws to which such Shareholder or any of its or
his assets are subject, (ii) any permit, judgment, order, writ, injunction,
decree or award of any Governmental Authority to which such Shareholder or any
of its or his assets are subject, (iii) with respect to a Shareholder that
is an entity, the certificate of formation or incorporation or the operating
agreement or bylaws of such Shareholder (or their equivalent), or (iv) any
license, indenture, promissory note, bond, credit or loan agreement, lease,
agreement, commitment or other instrument or document to which such Shareholder
is a party or by which such Shareholder or any of its or his 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 each Shareholder 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 such Shareholder’s obligations hereunder or thereunder.

 

(e)                                  Organization, Standing and Qualification. 
Each Shareholder that is an entity is a corporation or limited liability
company duly incorporated, validly existing and in good standing under the Laws
of the jurisdiction of its organization. 
Each such Shareholder has all corporate or limited liability company
power and authority to own, lease and operate its properties and to carry on
its business as now being conducted.

 

20

 

(f)                                    Ownership.  Each
Shareholder owns, beneficially and of record, free and clear of any Liens, such
number of Company Shares as is set forth opposite his or its name on Schedule
3.1(f).  At the Closing, upon
delivery of and payment for such Company Shares as provided in this Agreement,
all of the Company Shares owned by each Shareholder shall be transferred to the
Parent, and the Parent shall have good and valid title to such Company Shares,
free and clear of any Liens.  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 a Shareholder is or may become obligated to sell,
assign or transfer any shares of capital stock of the Company owned by such
Shareholder.

 

(g)                                 Brokerage Fees. 
None of the Shareholders have engaged or authorized any broker,
investment banker or other Person to act on its behalf, directly or indirectly,
as a broker or finder who might be entitled to a fee, commission or other
remuneration in connection with the transactions contemplated by this
Agreement.

 

3.3                               Representations and Warranties of the
Parent. The
Parent hereby represents and warrants to the Shareholders as follows:

 

(a)                                  Authority.  The Parent
has all necessary power and authority to enter into and deliver this Agreement
and each of the Ancillary Documents to which it is a party, to carry out its
obligations hereunder and thereunder 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 Parent 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 or
prior to the Closing will have been properly taken or obtained.

 

(b)                                 Execution and Delivery. 
This Agreement has been, and each Ancillary Document to which the Parent
is a party will be at the Closing, duly authorized, executed and delivered by
the Parent and constitutes a legal, valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its 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 Parent 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 Parent under, (i) any
Laws to which the Parent or any of its assets are subject, (ii) any
judgment, order, writ, injunction, decree or award of any Governmental
Authority to which the Parent or any of its assets are subject, (iii) the
Certificate of Incorporation or Bylaws of the Parent, or (iv) any license,
indenture, promissory note, bond, credit or loan agreement, lease, agreement,
commitment or other instrument or document to which the Parent is a party or by
which any of 

 

21

 

its assets are bound,
except where, in the case of clause (iv), such violation, conflict, breach,
etc. would not, individually or in the aggregate, have a Material Adverse
Effect on the Parent.

 

(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 Parent 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 thereunder.

 

(e)                                  Organization, Standing and Qualification. 
The Parent is a corporation duly incorporated, validly existing and in
good standing under the Laws of the State of Delaware (or such other applicable jurisdiction of incorporation or formation). 
The Parent has all requisite power and authority to own, lease and
operate its properties and to carry on their businesses as now being conducted,
to use their names and are duly qualified, licensed or authorized to do
business and in good standing, in each jurisdiction where the nature of the
activities conducted by them or the character of the properties owned, leased
or operated by them require such qualification, licensing or authorization.

 

(f)                                    Parent Stock. 
The authorized capital stock of the Parent consists of 15,000,000 shares
of common stock, par value $0.01. All of the issued and outstanding shares of
capital stock of the Parent have been duly authorized, validly issued, fully
paid and non-assessable.  Except as
disclosed in Schedule 3.3(f) or in any SEC Document, 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
Parent 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 Parent 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.  Except as set forth on Schedule
3.3(f) or in any SEC Document, none of the Parent’s stock purchase
agreements or stock option documents contains a provision for acceleration of
vesting (or lapse of a repurchase right) upon the occurrence of any event or
combination of events.  Except as set
forth on Schedule 3.3(f) or in any SEC Document, the Parent has never
adjusted or amended the exercise price of any stock options previously awarded,
whether through amendment, cancellation, replacement grant, repricing, or any
other means.

 

(g)                                 SEC Documents; Financial Statements. 
The Parent has filed, on a timely basis (except as permitted by Rule 12b-25
under the Exchange Act), all forms, reports and documents that to its knowledge
were required to be filed by it with the SEC since the end of its last fiscal
year.  The SEC Documents (i) complied
in all material respects in accordance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) did not at the time they were filed (or
if amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing) to its knowledge contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.  Except as set forth on Schedule 

 

22

 

3.3(g), all material agreements to
which the Parent is a party or to which the property or assets of the Parent
are subject are, to its knowledge, included as part of or specifically
identified in the SEC Documents to the extent required by the rules and
regulations of the SEC as in effect at the time of filing.  The Parent has to its knowledge prepared and
filed with the SEC all filings and reports required by the Securities Act and
the Exchange Act to make the Parent’s filings and reports current in all
respects. Since the end of its last fiscal year, the financial statements included in SEC Documents
filed by the Parent (the “Parent Financial Statements”) fairly present
in all material respects, and the Parent Financial Statements included in SEC
Documents filed after the date of this Agreement will fairly present in all
material respects, the consolidated financial position of the Parent as of the
dates indicated and the consolidated income, changes in shareholders’ equity
and cash flows of the Parent for the periods then ended and each such financial
statement has been or will be, as the case may be, prepared in conformity with
GAAP applied on a consistent basis, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments (which
individually and in the aggregate are not material), and may not contain certain related notes as may be
permitted by the applicable rules promulgated by the SEC.  The Parent Financial
Statements included in the SEC Documents comply in all material respects with
applicable accounting requirements and the rules and regulations of the
SEC with respect thereto in effect at the time of filing.  All “off-balance sheet arrangements” (as defined in
Item 303(a)(4) of Regulation S-K promulgated by the SEC) which the Parent
is required to disclose under Item 303(a) of Regulation S-K in its SEC
Documents are set forth in the SEC Documents. 
The Parent maintains a system of internal accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management’s general or specific authorization; (ii) transactions
are recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain accountability for assets; (iii) access
to assets is permitted only in accordance with management’s general or specific
authorization; (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences, and (v) the Parent is
otherwise in compliance with the Securities Act, the Exchange Act and all other
rules and regulations promulgated by the SEC and applicable to the Parent,
including such rules and regulations to implement the Sarbanes-Oxley Act
of 2002, as amended.

 

(h)                                 Brokerage Fees. 
The Parent has not engaged or authorized any broker, investment banker
or other Person to act on its behalf, directly or indirectly, as a broker or
finder who might be entitled to a fee, commission or other remuneration in
connection with the transactions contemplated by this Agreement.

 

(i)                                     Disclosure.  No
representation or warranty made by the Parent in this Agreement, nor any
information contained in any Ancillary Document to be delivered by the Parent
pursuant hereto, or any information relating to the Parent provided or made
available to the Parent in connection with the transactions contemplated
hereby, including any SEC Document, contains any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements or facts contained herein or therein not misleading in any material
respect in light of the circumstances under which they were made.

 

23

 

ARTICLE IV

 

CERTAIN COVENANTS

 

4.1           Conduct of Business Pending the
Closing.  The Company hereby
covenants and agrees that, prior to the Closing, except as contemplated by this
Agreement or as set forth in Schedule 4.1, it shall (and each of
the Shareholders hereby covenants and agrees to cause the Company to comply
with the provisions of this Section 4.1):

 

(a)           conduct its business in the usual,
regular and ordinary course consistent with recent past practice and use its
commercially reasonable efforts to take, or refrain from taking, as the case
may be, any action which would cause the representations and warranties made in
Section 3.1, including, without limitation, Section 3.1(j),
to become untrue or inaccurate; and

 

(b)           use its commercially reasonable efforts
to maintain and preserve its business organization and relationships with its
customers, vendors, suppliers and others having business dealings with it and
retain the services of its officers and employees.

 

4.2           Tax Matters; Cooperation and
Records Retention.  The Parent and
the Company will (i) each provide the other with such assistance as may
reasonably be requested by any of them in connection with the preparation of
any Tax Return, audit or other examination by any taxing authority or judicial
or administrative proceedings relating to liability for Taxes, (ii) each
retain and provide the other with any records or other information which may be
relevant to such Tax Return, audit or examination, proceeding or determination,
and (iii) each provide the other with any final determination of such
audit or examination, proceeding or determination that affects any amount
required to be shown on any Tax Return of the other for any period.  Without limiting the generality of the
foregoing, the Parent and the Company will retain, until the applicable
statutes of limitations (including all extensions) have expired, copies of all
Tax Returns, supporting work schedules and other records or information which
may be relevant to such Tax Returns for all Tax periods or portions thereof
ending on or before the Closing and will not destroy or otherwise dispose of
any such records without first providing the other party with a reasonable
opportunity to review and copy the same.

 

4.4           Reasonable Efforts; Assurances.  Upon the terms and subject to the conditions
of this Agreement, each of the parties hereto shall use all reasonable efforts
to take or cause to be taken all action, and to do or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the transactions contemplated by this Agreement, including using commercially
reasonable efforts to (a) obtain all consents or approvals required or
desirable in connection with the transactions contemplated hereby, (b) effect
promptly all necessary or appropriate registrations or filings with any
Governmental Authorities, and (c) fulfill or cause the fulfillment of the
conditions to Closing set forth in Article V.  In case at any time after the Closing Date
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement, each of the parties hereto shall take such further
action without additional consideration.

 

24

 

4.5           Notification of Certain Matters.  The Company and Parent shall promptly notify
each other in writing:

 

(a)           if, subsequent to the date of this
Agreement and prior to the Closing Date, either of them becomes aware of the
occurrence of any event or the existence of any fact that would render any of
the representations and warranties made by it (and, in case of the Company,
made by any Shareholder) in Sections 3.1, 3.2 or 3.3,
as the case may be, if made on or as of the date of such event or the Closing
Date, inaccurate or untrue (other than with respect to representations and
warranties made as of a specified date);

 

(b)           of any breach by either of them of
any of its (and, in case of the Company, any of the Shareholders’) covenant or
agreement contained in this Agreement;

 

(c)           of any notice or other communication
from any third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement;

 

(d)           of any notice or other communication
from any Governmental Authority in connection with or relating to the
transactions contemplated hereby; or

 

(e)           if the Company or any Shareholder
become aware of any material deterioration in the relationship with any
customer, supplier or employee of the Company.

 

4.6           Transfer Taxes.  All stock transfer, real
estate transfer, documentary, stamp, recording and other similar Taxes
(including interest, penalties and additions to any such Taxes) (“Transfer Taxes”) incurred in
connection with the Transactions shall be paid by either Merger Sub or the
Surviving Entity (provided any such payments shall not be funded, directly or
indirectly, by the Company), and the Company shall cooperate with Merger Sub
and Parent in preparing, executing and filing any Tax Returns with respect to
such Transfer Taxes.

 

ARTICLE V

 

CONDITIONS
TO CLOSING

 

5.1           Conditions to Obligation of the
Company.  The obligation of the
Company to consummate the transactions contemplated hereby shall be subject to
the satisfaction on or prior to the Closing of the following conditions (any of
which may be waived in writing by the Company):

 

(a)           the Parent shall have performed and
complied with all obligations and agreements required to be performed and complied
with by it hereunder on or prior to the Closing (including, without limitation,
those specified in Section 6.3);

 

25

 

(b)           the representations and warranties of
the Parent contained in this Agreement shall be true and correct as of the
Closing Date as if made as of such date (other than those representations and
warranties that address matters only as of a particular date or only with
respect to a specific period of time, which need only be true and correct as of
such date or with respect to such period);

 

(c)           there shall be no order, decree or
ruling by any Governmental Authority nor any action, suit, claim or proceeding
by or before any Governmental Authority shall be pending, which seeks to
restrain, prevent or materially delay or restructure the transactions
contemplated hereby or by any Ancillary Document, or which otherwise questions
the validity or legality of any such transactions;

 

(d)           there shall be no statute, rules,
regulation or order enacted, entered or enforced or deemed applicable to the
transactions contemplated hereby which would prohibit or, render illegal the
transactions contemplated by this Agreement or the Ancillary Documents;

 

(e)           each of the documents to be delivered
by the Parent pursuant to Section 6.3 shall have been so delivered
by the Parent at the Closing;

 

(f)            the Company and Steven Ow shall have
entered into an amended and restated promissory note (“Amendment to Ow Note”)
in the principal amount of approximately $521,000, such that the maturity date
of said note is extended to April 4, 2010 accruing interest at 8% annually
on a simple basis commencing from the close of transaction with interest and
principal payable upon maturity; and

 

(g)           the Company shall have entered into a
settlement and release agreement converting all accrued salary of Toni Ow
(approximately $7,000) into a two-year note bearing 8% annual simple interest
with interest and principal payable upon maturity (“Toni Ow Settlement”).

 

5.2           Conditions to Obligation of the
Parent.  The obligation of the Parent
to consummate the transactions contemplated hereby shall be subject to the
satisfaction on or prior to the Closing of the following conditions (any of
which may be waived in writing by the Parent):

 

(a)           the Company and Steven Ow shall have
entered into an amended and restated promissory note (“Amendment to Ow Note”)
in the principal amount of approximately $521,000, such that the maturity date
of said note is extended to April 4, 2010 accruing interest at 8% annually
on a simple basis commencing from the close of transaction with interest and
principal payable upon maturity;

 

(b)           the Company shall have entered into a
settlement and release agreement converting all accrued salary of Toni Ow
(approximately $7,000) into a two-year note bearing 

 

26

 

8% annual simple interest
with interest and principal payable upon maturity (“Toni Ow Settlement”);

 

(d)           the Shareholders and the Company
shall have performed or complied with all obligations and agreements required
to be performed or complied with by any of them hereunder on or prior to the
Closing (including, without limitation, those specified in Section 6.2);

 

(e)           the representations and warranties of
the Shareholders and the Company contained in this Agreement shall be true and
correct as of the Closing Date as if made as of such date (other than those
representations and warranties that address matters only as of a particular
date or only with respect to a specific period of time, which need only be true
and correct as of such date or with respect to such period);

 

(f)            there shall be no order, decree or
ruling by any Governmental Authority nor any action, suit, claim or proceeding
by or before any Governmental Authority shall be pending, which seeks to
restrain, prevent or materially delay or restructure the transactions
contemplated hereby or any Ancillary Document, or which otherwise questions the
validity or legality of any such transactions;

 

(g)           there shall be no statute, rules,
regulation or order enacted, entered or enforced or deemed applicable to the
transactions contemplated hereby which would prohibit or render illegal the
transactions contemplated by this Agreement or the Ancillary Documents;

 

(h)           the Company shall have obtained on
terms and conditions satisfactory to the Parent all consents and approvals of
third parties (including Governmental Authorities) that are required (i) for
the consummation of the transactions contemplated hereby or any Ancillary
Document, or (ii) in order to prevent a breach of, a default under or a
termination, material change in the terms or conditions or material
modification of, any Material Agreement as a result of the consummation of the
transactions contemplated hereby;

 

(i)            each of the documents to be
delivered by Shareholders or the Company pursuant to Section 6.2
shall have been so delivered by Shareholders or the Company at the Closing; and

 

(j)            no Shareholder shall have exercised
Dissenter’s Rights.

 

ARTICLE
VI

 

CLOSING

 

6.1           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 

 

27

 

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.”

 

6.2           Company’s Deliveries at Closing.  At the Closing, the Company shall deliver or
cause to be delivered to the Parent all of the following:

 

(a)           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),
together with a duly executed  letter of
transmittal;

 

(b)           the corporate minute book, seal, and
stock ledger of the Company;

 

(c)           evidence that the Company has
obtained on terms and conditions reasonably satisfactory to the Company all
consents and approvals of third parties (including Governmental Authorities)
that are required (i) for the consummation of the transactions
contemplated hereby or (ii) in order to prevent a material breach of, a
default under or a termination, material change in the terms or conditions or
material modification of, any Contract as a result of the consummation of the
transaction contemplated hereby;

 

(d)           certified resolutions of the Board of
Directors and Shareholders of the Company authorizing the consummation of the
transactions contemplated by this Agreement;

 

(e)           a certificate of good standing of the
Company from the state of California as of the most recent practicable date;

 

(f)            certificates of the Company, in form
and substance reasonably satisfactory to the Company, dated the Closing Date,
certifying compliance with the conditions set forth in Sections 5.2(d) and
5.2(e);

 

(i)            copies of executed Amendment to Ow
Note and Toni Ow Settlement;

 

(j)            letter
of resignation from Steven Ow as Chairman of the Board, Chief Executive
Officer, President and director of the Company; and

 

(i)            such other documents and instruments
as shall be reasonably necessary to effect the transactions contemplated
hereby.

 

6.3           Parent’s Deliveries at Closing.  At the Closing, the Parent shall deliver or
cause to be delivered to the Company all of the following:

 

(a)           certified resolutions of the Board of
Directors of the Parent authorizing the consummation of the transactions
contemplated by this Agreement;

 

(b)           certified resolutions of the Board of
Directors and Stockholders of the Merger Sub authorizing the consummation of
the transactions contemplated by this Agreement;

 

28

 

(c)           a Form D pursuant to Regulation
D promulgated under the Securities Act, the filing of which will be effected
within fifteen (15) days of Closing;

 

(d)           such other documents and instruments
as shall be reasonably necessary to effect the transactions contemplated
hereby.

 

6.4           Post Closing Obligations.

 

Parent shall enter into
an option agreement with Steven Ow for 1,200,000 options, an option agreement
with Larry Janssen for 58,605 options, and a warrant agreement with Jeffrey
Romney for 816 warrants to purchase Parent common stock at an exercise price of
$1.20 per share.  Ow and Janssen
agree that his respective option agreements described in Sections 6.4 will be
governed under the Parent’s applicable stock option plan. Ow agrees that the
option shall not be effective until the increase in the number of shares
underlying such stock option plan has been approved by the Parent’s Board of
Directors and the holders of a majority of shares of Parent common stock.  The Parent’s Board of Directors shall approve
such increase prior to the closing. 
Parent shall submit such increase in the option plan to a vote at the
shareholder meeting at or prior to September 2008.

 

6.5           Other Documents.  The parties agree to execute and deliver on
or before the Closing all other documents that are reasonably necessary or
desirable in order to consummate the transactions contemplated hereby and to
carry out the intent of this Agreement.

 

6.6           Expenses.  Except as otherwise specifically provided
herein, the Shareholders, the Company, Merger Sub, and the Parent, shall each
pay their own expenses, including, but not limited to, attorneys’, accountants’,
financial advisors’ and brokers’ or finders’ fees, incurred in connection with
the transactions contemplated hereby (“Expenses”).  It is the express intention of the parties
that the Company shall remain responsible for all Expenses incurred by the
Company, its Affiliates or their respective agents in connection with the
transactions contemplated hereby.

 

ARTICLE VII

 

TERMINATION

 

7.1           Termination.  This Agreement may be terminated at any time
prior to the Closing:

 

(a)           by mutual consent of the Parent and
the Company;

 

(b)           by either the Parent or the Company
if the Closing shall not have been consummated on or before March 15, 2008
(provided that the terminating party is not otherwise in material breach of its
obligations under this Agreement), which date may be extended by written
agreement of the Parent and the Company; or

 

(c)           by either the Parent or the Company,
if a permanent injunction or other order by any Federal or state court which
would make illegal or otherwise restrain or prohibit the 

 

29

 

consummation of the
transactions contemplated hereby shall have been issued and shall have become
final and non-appealable.

 

7.2           Effect of Termination.  In the event of the termination of this
Agreement in accordance with this Article VII, this Agreement shall
thereafter become void and there shall be no liability on the part of any party
hereto or their respective directors, officers, stockholders or agents, except
that any such termination shall be without prejudice to the rights of any party
hereto arising out of any breach by any other party of this Agreement.

 

ARTICLE
VIII

 

INDEMNIFICATION

 

8.1           Survival; Indemnity.  The representations, warranties, covenants
and agreements of the parties contained in this Agreement, and the
indemnification rights set forth in this Article VIII, shall
survive the Closing.  Notwithstanding the
foregoing, the representations and warranties of the parties shall only so
survive until the first anniversary of the Closing Date (the period from the
Closing Date to such applicable date is hereinafter referred to as the “Survival
Period”).  Nothing contained in the
foregoing sentence shall prevent recovery under this Article after the
expiration of the Survival Period so long as the party making a claim or
seeking recovery complies with the provisions of clause (x) and (y) of
the following sentence. No party shall have any claim or right of recovery for
any breach of a representation, warranty, covenant or agreement unless (x) written
notice is given in good faith by that party to the other party of the
representation, warranty, covenant or agreement pursuant to which the claim is
made or right of recovery is sought setting forth in reasonable detail the
basis for the purported breach of the representation, warranty, covenant or
agreement, the amount or nature of the claim being made, if then ascertainable,
and the general basis therefor and (y) such notice is given prior to the
expiration of the Survival Period.

 

8.2           General Indemnification by the
Shareholders and the Company.  The
Shareholders, jointly and severally, agree to indemnify the Parent and its
officers, directors, shareholders, employees, Affiliates, attorneys,
accountants and agents (the “Parent Parties”), and hold them harmless
from and against any and all damages, losses, liabilities, costs and expenses
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys’ fees and expenses in connection with any action, suit or
proceeding) (collectively, “Parent Damages”) incurred or suffered by the
Parent Parties as a result of any breach or inaccuracy of any representation,
warranty, covenant or agreement of the Shareholders or the Company contained in
this Agreement, or any certificate delivered by the Shareholders or the Company
pursuant to this Agreement (including without limitation, any Investor Representation
Letter), other than any breach or inaccuracy of any representation or warranty
contained in Section 3.2 or in any Investor Representation Letter,
as to which the Shareholders, severally but not jointly, agree to indemnify the
Parent Parties as aforesaid.

 

8.3           Indemnification by Parent.  The Parent agrees to indemnify the
Shareholders from and after the Closing and to hold the Shareholders and their
respective officers, directors, stockholders, employees, Affiliates, attorneys,
accountants and agents (the “Shareholder 

 

30

 

Parties”) harmless from and against any and all
damages, losses, liabilities, costs and expenses (including, without
limitation, reasonable expenses of investigation and reasonable attorneys ‘
fees and expenses in connection with any action, suit or proceeding)
(collectively, “Shareholder Damages”) incurred or suffered by the
Shareholder Parties arising out of any breach of any representation, warranty,
covenant or agreement of the Parent.

 

8.4           Indemnification Procedures

 

(a)           Notification of Claims.  Upon any party (the “Indemnified Party”)
becoming aware of a fact, condition or event that constitutes a basis for a
claim for Parent Damages or Shareholder Damages, as the case may be, in respect
thereof against the other party (the “Indemnifying Party”) under Section 8.2
or 8.3, if such a claim is to be made, the Indemnified Party will with
reasonable promptness and specificity notify the Indemnifying Party or Parties
in writing of such fact, condition or event. 
The failure to notify the Indemnifying Party or Parties under this Section 8.4
shall not relieve any Indemnifying Party of any liability that it may have to
the Indemnified Party except to the extent that such failure to notify shall
have resulted in a waiver of any lawful and valid affirmative defense to any
third-party claim or otherwise materially prejudices the Indemnifying Party or
Parties in connection with the administration or defense of such third-party
claim.

 

(b)           Third-Party Claims.

 

(i)            Upon receipt by the Indemnifying
Party or Parties of any notice of claim for indemnification hereunder arising
from a third-party claim, the Indemnifying Party or Parties shall assume the
administration and defense of such third-party claim with counsel that is
reasonably satisfactory to the Indemnified Party and shall proceed with the
administration and defense of such third-party claim diligently and in good
faith; provided, however, that any Indemnifying Party shall be
entitled to assume the administration and defense of such third-party claim
only if it agrees in writing with the Indemnified Party that it is obligated to
indemnify the Indemnified Party pursuant to this Article with respect to
such third-party claim; and provided, further that no
Indemnifying Party shall be entitled to assume the administration and defense
of any third-party claim that (A) seeks an injunction or other equitable
relief that might materially and adversely affect any Indemnified Party, or (B) involves
any criminal action or any claim that could reasonably be expected to result in
a criminal action against any Indemnified Party.  Each parties’ counsel in connection with this
transaction shall be deemed to be reasonably satisfactory to the other party
for purposes of this Section 8.4(b)(i).  The Indemnified Party shall be fully
consulted by the Indemnifying Party or Parties and shall have the right to
participate, at its own expense, in the investigation, administration and
defense of such third-party claim.  Any
party hereto receiving notice of any proposed settlement of any such
third-party claim shall promptly provide a copy of such notice to the other
parties hereto.  The Indemnifying Party
or Parties shall not have the right to settle or compromise any third-party
claim for which indemnification is being sought hereunder without the consent
of the Indemnified Party unless as a result of such settlement or compromise
the Indemnified Party is fully discharged and released from any and all
liability with respect to such third-party claim. The Indemnified Party shall
make available to the Indemnifying Party or Parties and its counsel all books,
records, documents and other information relating to any third-party claim for
which indemnification is sought hereunder, and 

 

31

 

the parties to this
Agreement shall render to each other reasonable assistance in the defense of
any such third-party claim.

 

(ii)           Notwithstanding any other provision
of this Agreement, if the Indemnified Party is not entitled to defend a
third-party claim under Section 8.4(b)(i), the Indemnified Party
shall have the absolute right, at its election (to be exercised in its sole
discretion by written notice to the Indemnifying Party or Parties) to assume
from the Indemnifying Party or Parties the administration and defense of any
such third-party claim against the Indemnified Party with counsel that is
reasonably satisfactory to the Indemnifying Party.  In such event, the Indemnified Party shall proceed
with the administration and defense of such third-party claim(s) diligently
and in good faith, and the Indemnifying Party shall be fully consulted by the
Indemnified Party or Parties and shall have the right to participate, at its
own expense, in the investigation, administration and defense of such
third-party claim.  The Indemnifying
Party or Parties shall be responsible for the costs and expenses of the
administration and defense of such claim(s) incurred prior to the
Indemnified Party or Parties’ assumption of the administration and defense of
such claim(s) and shall not be responsible for costs and expenses incurred
after such assumption, and the Indemnifying Party shall have the right to
participate in, but not control, the defense of such claim(s) at the sole
cost and expense of the Indemnifying Party.

 

ARTICLE
IX

 

SHAREHOLDER
REPRESENTATIVE

 

9.1           Appointment and Powers of
Shareholder Representative.  By
virtue of their execution and delivery of this Agreement, the Shareholders
shall be deemed to have irrevocably constituted and appointed, effective as of
the date of this Agreement, Steven Ow (the “Shareholder Representative”),
as their true and lawful agent and attorney-in-fact to enter into any agreement
in connection with the transactions contemplated by this Agreement, to exercise
all or any of the powers, authority and discretion conferred on it hereunder,
to waive any terms and conditions of this Agreement, to give and receive
notices and communications, to authorize delivery to the Parent of any portion
of the Merger Consideration in satisfaction of indemnification claims by the
Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and to take all actions necessary or
appropriate in the judgment of the Shareholder Representative for the
accomplishment of the foregoing.

 

9.2           Notice of Third Party Claims;
Binding Effect, Etc.  Any notice of
any third party claim for which the Parent is an Indemnified Party shall be
deemed to have been delivered by the Parent to the Shareholders pursuant to Section 8.4(b) if
validly delivered to the Shareholder Representative. The Shareholders shall be
bound by all actions taken by and all omissions of the Shareholder
Representative in its capacity thereof. 
The Shareholder Representative shall at all times act in its capacity as
Shareholder Representative in a manner that the Shareholder Representative
believes in good faith to be in the best interest of the Shareholders as a
group.

 

32

 

9.3           Limitation on Liability.  Neither the Shareholder Representative nor
its respective shareholders, officers, directors, affiliates, members, agents
or representatives shall be liable to any Shareholder or any of its or his
shareholders, officers, directors, affiliates, heirs, estate, successors,
assigns and agents for any error of judgment, or any action taken, suffered or
omitted to be taken, under this Agreement, except in the case of its gross
negligence, bad faith or willful misconduct. 
The Shareholder Representative may consult with legal counsel,
independent public accountants and other experts selected by it and shall not
be liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts.  The Shareholder Representative shall not have
any duty to ascertain or to inquire as to the performance or observance of any
of the terms, covenants or conditions of this Agreement.  As to any matters not expressly provided for
in this Agreement, the Shareholder Representative shall not be required to
exercise any discretion or take any action. 
Each Shareholder severally shall indemnify and hold harmless and shall
reimburse the Shareholder Representative from and against such Shareholder’s
ratable share of any and all liabilities, losses, damages, claims, costs or
expenses suffered or incurred by the Shareholder Representative arising out of
or resulting from any action taken or omitted to be taken by the Shareholder Representative
under this Agreement, other than such liabilities, losses, damages, claims,
costs or expenses arising out of or resulting from the Shareholder
Representative’s gross negligence, bad faith or willful misconduct (the “Shareholder
Representative Expenses”).  The
Shareholder Representative shall be entitled to reimbursement of
expenses..  The Shareholder
Representative shall make available to each Shareholder reasonable documentation
of the Shareholder Representative Expenses. 
Notwithstanding anything to the contrary, in all matters relating to Article VIII,
the Shareholder Representative shall be the only party entitled to assert the
rights of the Shareholders, and the Shareholder Representative shall perform
all of the obligations of the Shareholders hereunder.  The Parent and the Company shall be entitled
to rely on all statements, representations and decisions of the Shareholder
Representative as those of the Shareholders, without any independent investigation
or verification.

 

ARTICLE X

 

DEFINITIONS

 

For
purposes of this Agreement, the following terms and phrases shall have the
following meanings:

 

“Affiliate”
shall have the meaning ascribed to it in Rule 405 promulgated under the
Securities Act.

 

“Business
Day” shall mean any Monday, Tuesday, Wednesday, Thursday or Friday that is
not a day on which banking institutions in the State of California are
authorized by law, regulation or executive order to close.

 

“Company
Stock Option” shall mean any option to purchase Company Shares granted
under a plan or otherwise.

 

33

 

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

 

“Employee
Benefit Plan” shall mean any “employee benefit plan” as defined in Section 3(3) of
ERISA and any other plan, policy, program, practice, agreement, understanding
or arrangement (whether written or unwritten) providing compensation or other
benefits to any current or former director, officer, employee or consultant (or
to any dependent or beneficiary thereof), of the Company or any ERISA
Affiliate, which are now, or were within the past six years, maintained by the
Company or any ERISA Affiliate, or under which the Company or any ERISA
Affiliate has or could have any obligation or liability, whether actual or contingent
(and including, without limitation, any liability arising out of an
indemnification, guarantee, hold harmless or similar agreement), including,
without limitation, all incentive, bonus, deferred compensation, vacation,
holiday, cafeteria, medical, disability, stock purchase, stock option, stock
appreciation, phantom stock, restricted stock or other stock-based compensation
plans, policies, programs, practices or arrangements.

 

“Environmental
Law” shall mean any federal, state, local or foreign law (including any
common law), statute, code, ordinance, rule, regulation or other requirement
relating to the environment, natural resources or public or employee health and
safety, and includes, but not limited to, CERCLA, the Hazardous Materials
Transportation Act, 49 U.S.C. § 1801 et seq., as amended, the Resource
Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., as amended, the Clean
Water Act, 33 U.S.C. § 2601 et seq., as amended, the Clean Air Act, 42 U.S.C. §
7401 et seq., as amended, the Toxic Substances Control Act, 15 U.S.C. § 6901 et
seq., as amended, the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. § 136 et seq., as amended, the Oil Pollution Act of 1990, 33 U.S.C. §
2701 et seq., as amended, the New York Navigation Law, as amended, and the
Occupational Safety and Health Act, 29 U.S.C. § 6901 et seq., as amended.

 

“Environmental
Costs and Liabilities” shall mean any and all losses, liabilities,
obligations, damages, fines, penalties, judgments, actions, claims, costs and
expenses (including, without limitation, fees, disbursements and expenses of
legal counsel, experts, engineers and consultants and the costs of
investigation and feasibility studies and remedial activities) arising from or
under any Environmental Law or order or contract with any Governmental
Authority or any other Person.

 

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

 

“ERISA
Affiliate” shall mean any entity that, together with the Company, is or was
treated as a single employer under Section 414(b), (c) or (m) of
the Code.

 

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

 

“GAAP”
shall mean generally accepted accounting principles as in effect in the United
States.

 

34

 

 

“Governmental
Authority” shall mean any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign.

 

“Hazardous Materials”
shall mean any petroleum or petroleum products, radioactive materials, asbestos-containing
materials, radon gas, PCBs and any other hazardous or toxic substance, material
or waste which is or becomes prior to the Closing regulated under, or defined
as a “hazardous substance,” “pollutant,” “contaminant,” “hazardous waste,” “toxic
chemical,” “hazardous materials,” “toxic substance” or “hazardous chemical”
under any Environmental Law.

 

“Laws” shall mean
all applicable statutes, rules, regulations, ordinances, orders, writs,
injunctions, judgments, decrees, awards or restrictions of any governmental
entity.

 

“Liabilities”
shall mean any liability or obligation, including without limitation, any
direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, whether known or
unknown, fixed or unfixed, choate or inchoate, liquidated or unliquidated,
secured or unsecured.

 

“Liens” shall mean
any security interest, mortgage, lien, charge, claims, option and encumbrance.

 

“Material Adverse
Effect” used in connection with a party shall mean any event, change or
effect that is or is reasonably likely to become materially adverse to the
condition (financial or otherwise), properties, assets, liabilities,
businesses, operations, results of operations or prospects of such party and
its subsidiaries, if any, on a consolidated basis.

 

“Pension Plan”
shall mean any qualified or non-qualified Employee Pension Benefit Plan
(including, any Multiemployer Plan), as such term is defined in Section 3(2) of
ERISA.

 

“Person” shall
mean any individual, firm, corporation, partnership, trust, incorporated or
unincorporated association, joint venture, joint stock company, governmental
entity of any kind.

 

“Pre-Closing Period”
shall mean all taxable periods ending on or before the Closing Date and the
portion ending on or before the Closing Date of any taxable period that
includes (but does not end on) the Closing Date.

 

“SEC” shall mean
the United States Securities and Exchange Commission.

 

“SEC Documents”
shall mean all reports and registration statements filed, or required to be
filed, by the Parent pursuant to the Securities Laws.

 

“Securities Act”
shall mean the Securities Act of 1933, as amended.

 

“Securities Laws”
shall mean the Securities Act; the Exchange Act; the Investment Company Act of
1940, as amended; the Investment Advisers Act of 1940, as amended; the Trust 

 

35

 

Indenture Act of 1939, as amended; and the rules and regulations
of the SEC promulgated thereunder.

 

“Subsidiary” shall
mean, as to any Person, any corporation, partnership, limited liability company
or other entity which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors, the general
managers or other persons performing similar functions, are at the time
directly or indirectly owned by such Person; unless otherwise specified, “Subsidiary”
means a Subsidiary of the Company.

 

“Taxes” shall mean
taxes, fees, levies, duties, tariffs, imposts, and governmental impositions or
charges of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, including (without
limitation) (i) income, franchise, profits, gross receipts, ad valorem, net worth, value added, sales, use, service,
real or personal property, special assessments, capital stock, license,
payroll, withholding, employment, social security, workers’ compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, and (ii) interest,
penalties, additional taxes and additions to tax imposed with respect thereto.

 

“Welfare Plan”
shall mean any Employee Welfare Benefit Plan, as such term is defined in Section 3(1) of
ERISA.

 

ARTICLE
XI

 

MISCELLANEOUS

 

11.1         Notices.  All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered personally (including delivery by courier service), transmitted by
telecopy or mailed by registered or certified mail, postage prepaid, return
receipt requested, or sent by a nationally recognized overnight courier
service, as follows:

 

(a)                                 If
to the Parent, to:

 

AML
Communications, Inc.

1000 Avenida Acaso

Camarillo,
California 93012

 

 

(b)                                 If
to the Company, the Shareholders or the Shareholder Representative, to:

 

Steven Ow

4750 Calle Quetzal

Camarillo,
California 93010

 

36

 

or to such other address
as the Person to whom notice is to be given may have previously furnished to
the other parties in writing in accordance herewith.  Notice shall be deemed given on the date
received (or, if receipt thereof is refused, on the date of such refusal).

 

11.2         Amendments and Waivers.  This Agreement may not be amended, modified
or supplemented except by written agreement of the parties hereto.  No waiver by any party of any non-compliance,
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
non-compliance, default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.

 

11.3         Interpretation.  The headings preceding the text of Articles
and Sections included in this Agreement and the headings to Exhibits and
Schedules attached to this Agreement are for convenience only and shall not be
deemed part of this Agreement or be given any effect in interpreting this
Agreement.  The use of the masculine,
feminine or neuter gender herein shall not limit any provision of this
Agreement.  The use of the terms “including”
or “include” shall in all cases herein mean “including, without limitation” or “include,
without limitation,” respectively. 
References to any “Article”, “Section”, “Exhibit” or “Schedule” shall
refer to an Article or Section of, or an Exhibit or Schedule to,
this Agreement.  In any case where the
concept of materiality is applied more than once to qualify any provision of
this Agreement (whether by cross-referencing or incorporation or otherwise),
such provision shall be interpreted as if only one, but the broadest one, of
such materiality qualification applied to it. 
Any due diligence review, audit or other investigation or inquiry
undertaken or performed by or on behalf of a party shall not limit, qualify,
modify or amend the representations, warranties or covenants of, or indemnities
made by any other party pursuant to this Agreement, irrespective of the knowledge
and information received (or which should have been received) therefrom by the
investigating party and consummation of the transactions contemplated herein by
a party shall not be deemed a waiver of a breach of or inaccuracy in any
representation, warranty or covenant or of any other party’s rights and
remedies with regard thereto.

 

11.4         Assignment; Binding Upon Successors
and Assigns.  None of the parties
hereto may assign or delegate any of its rights or obligations hereunder
without the prior written consent of the other parties hereto.  This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective successors, heirs,
legatees, distributees and assigns.

 

11.5         Parties in Interest.  This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their respective
successors, permitted assigns and legal representatives, and nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature.

 

11.6         Counterparts; Facsimiles.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to the other
parties.  Counterparts may be executed either in original, faxed form, or “.pdf”
form and the parties adopt any signatures received by a receiving fax machine
or an e-mail as original 

 

37

 

signatures of the parties; provided, however, that
any party providing its signature in such manner shall promptly forward to the
other party an original of the signed copy of this Agreement which was so faxed
or e-mailed.

 

11.7         Governing Law; Venue; Jurisdiction.  The laws of the State of California
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms and the interpretation and enforcement
of the rights and duties of the parties hereto. 
This Agreement shall be enforceable in any court of competent
jurisdiction.  In furtherance of and not
in limitation of the foregoing, the parties hereto (i) agree and consent
to the personal jurisdiction and venue of the state and Federal courts sitting
in Los Angeles County, California in any action or proceeding arising out of or
connected in any way with this Agreement, (ii) irrevocably waive, to the
fullest extent permitted by law, any claim that any such proceeding brought in
such a court has been brought in an inconvenient forum, and (iii) agree
that service of process in any such action or proceeding will be sufficient if
sent by certified mail, return receipt requested, to applicable address set
forth above, and that such service shall constitute “personal service,” and
further agree to the invocation of said jurisdiction by service of process in
any other manner authorized by law.

 

11.8         Severability.  If any term or provision of this Agreement
shall, to any extent, be held by a court of competent jurisdiction to be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to Persons or circumstances other than those as to which
it has been held invalid or unenforceable, shall not be affected thereby and
this Agreement shall be deemed severable and shall be enforced otherwise to the
full extent permitted by law.

 

11.9         Entire Agreement.  This Agreement (including the Schedules and
Exhibits referred to herein and which form a part hereof) and the Ancillary
Documents constitute the entire agreement among the parties hereto and
supersedes all prior agreements and understandings, oral and written, among the
parties hereto with respect to the subject matter hereof except for a
confidentiality agreement by and among the parties hereto, if any.

 

11.10       Schedules and Exhibits.  The Schedules and Exhibits attached hereto
are incorporated herein and made a part hereof for all purposes.

 

11.11.      Construction.  The parties agree that each of them has
retained counsel or has an opportunity to retain counsel but has expressly
waived such opportunity.  The parties
have reviewed and had an opportunity to revise this Agreement and, therefore,
the normal rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments hereto.

 

[signature page follows]

 

38

 

IN WITNESS WHEREOF, this
Agreement and Plan of Merger has been duly executed and delivered by the
parties hereto on the date first above written.

 

	
   

  	
   

  	
  SHAREHOLDERS:

  	
   

  
	
  PARENT:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  AML COMMUNICATIONS,
  INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Steven Ow

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
  Name: Jacob Inbar

  	
   

  	
  Common Shares Held: 980,000

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Toni Ow

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  MERGER SUB:

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
  Common Shares Held: 1,020,000

  	
   

  
	
  MICA-TECH ACQUISITION

  	
   

  	
   

  	
   

  
	
  CORP.

  	
   

  	
  Steven and Toni Ow

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  Steven Ow

  	
   

  
	
   

  	
  Name: Jacob Inbar

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title: CEO

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Toni Ow

  	
   

  
	
   

  	
   

  	
  Common Shares Held: 1,583,333

  	
   

  
	
  COMPANY:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Larry Janssen

  	
   

  
	
  MICA-TECH, INC.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Common Shares Held: 175,000

  	
   

  
	
   

  	
  Name: Steven Ow

  	
   

  	
   

  	
   

  
	
   

  	
  Title: President

  	
   

  	
  Jeff Romney

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
  Common Shares Held: 2,437

  	
   

  
												

 

39

 

EXECUTION COPY

 

Schedule 3.1(f)

 

Capitalization

 

	
   

  	
   

  	
  Options

  	
   

  	
  Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AML
  Communications

  	
   

  	
   

  	
   

  	
  4,146,400

  	
   

  
	
  Steven Ow

  	
   

  	
   

  	
   

  	
  980,000

  	
   

  
	
  Toni Ow

  	
   

  	
   

  	
   

  	
  1,020,000

  	
   

  
	
  Steven and Toni
  Ow

  	
   

  	
   

  	
   

  	
  1,583,333

  	
   

  
	
  Larry Janssen

  	
   

  	
  19,000

  	
   

  	
  175,000

  	
   

  
	
  Eric Liefson

  	
   

  	
  12,500

  	
   

  	
  0

  	
   

  
	
  Cesar Urquidi

  	
   

  	
  3,000

  	
   

  	
  0

  	
   

  
	
  Doug Lai

  	
   

  	
  4,500

  	
   

  	
  0

  	
   

  
	
  Kahn Au

  	
   

  	
  3,000

  	
   

  	
  0

  	
   

  
	
  Dave Brooks

  	
   

  	
  3,750

  	
   

  	
  0

  	
   

  
	
  Dave Derby

  	
   

  	
  5,000

  	
   

  	
  0

  	
   

  
	
  Jeff Romney

  	
   

  	
   

  	
   

  	
  2,437

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total

  	
   

  	
  50,750

  	
   

  	
  7,907,170

  	
   

  

 

 

 

Schedule 3.1 (n)(iii)

Royalty/License Fee Disclosure

 

1.0 Royalty Paid to Southern California
Edison Per Commercialization Agreement Dated March 8, 2005

 

Royalty paid to Southern
California Edison is 10% of covered product per Section 4.
Payment of Royalties and Minimum Sales Compensation.

 

United States
Patents  Numbers

 

5,379,320

5,490,134

5,708,679

6,122,261

6,366,244

 

Mica-Tech International
pays the royalty.

 

2.0 Royalty Paid to Dr. Ross Fernandes
Per Patent License Agreement Dated November 25, 2002

 

Royalty paid to Dr. Fernandes
is 10% of Covered Product per Exhibit B Fixed
Payments & Royalties .

 

United States
Patents  Numbers

 

4,709,339

4,829,298

4,799,005

1,257,902

0,314,850

4,801,937

4,894,785

4,818,990

1,328,009

4,904,996

5,029,101

 

Mica-Tech Inc. pays the
royalty

 

41

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