AGREEMENT AND PLAN OF REORGANIZATION
among Xxxxxxx Technology, Inc.
Concept Acquisition Corporation and
Concept Systems Design, Inc.
July 10, 1998
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered into
this 10th day of July 1998, by and among Xxxxxxx Technology, Inc., a Delaware
corporation ("Xxxxxxx"), Concept Acquisition Corporation, a California
corporation and wholly-owned subsidiary of Xxxxxxx ("Sub"), and Concept Systems
Design, Inc., a California Corporation ("Concept").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Sub shall be merged with and into Concept, with
Concept the surviving corporation (the "Merger"), pursuant to the Agreement
of Merger substantially in the form attached hereto as EXHIBIT ERROR!
REFERENCE SOURCE NOT FOUND. (the "Agreement of Merger") and the applicable
provisions of the laws of the State of California. Upon the Merger, the
shareholders of Concept (the "Concept Shareholders") shall be entitled to
receive shares of Xxxxxxx common stock, $0.001 par value, at the exchange
ratio set forth herein.
B. For federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended.
AGREEMENT
NOW, THEREFORE, in reliance on the foregoing recitals and in and for the
consideration and mutual covenants set forth herein, the parties agree as
follows:
1. DEFINITIONS.
1.1 "Affiliate" shall have the meaning set forth in the rules and
regulations promulgated by the Commission pursuant to the Securities Act.
1.2 "Closing" and "Closing Date" shall have the meanings set forth in
Section 2.4.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Concept Common Stock" shall mean shares of Concept common stock,
no par value, issued and outstanding at the Effective Time.
1.6 "Concept Option" shall mean an option to purchase Concept Common
Stock prior to Closing.
1.7 "Concept Optionee" shall refer to holders of options to purchase
Concept Common Stock prior to the Closing.
1
1.8 "Concept Preferred Stock" shall mean shares of Concept preferred
stock, no par value, issued and outstanding prior to the Closing Date.
1.9 "Concept Shares" shall mean the shares of Concept Common Stock
issued and outstanding at the Effective Time.
1.10 "Confidential Information" shall mean that information of a party
("Disclosing Party") which is disclosed to another party ("Receiving Party")
pursuant to this Agreement, in written form and marked "Confidential." If
Confidential Information is initially disclosed orally, the Disclosing Party
shall send a written summary of such information to the Receiving Party within
fifteen (15) days of disclosure and xxxx such summary "Confidential."
Confidential Information shall include, but not be limited to, trade secrets,
know-how, inventions, techniques, processes, algorithms, software programs,
schematics, designs, contracts, customer lists, financial information, sales and
marketing plans and business information.
1.11 "Contaminant" shall mean, without limitation, any pollutants,
residues, infectious materials, flammable, dangerous, toxic or hazardous
substances, hazardous materials or waste of any description whatsoever, except
for non-hazardous waste of the kind generated in the normal course of
operations, including any of the foregoing as defined in or regulated under any
Environmental Law, including but not limited to polychlorinated biphenyls,
asbestos or asbestos containing materials, petroleum and petroleum containing
materials.
1.12 "Damages" shall include any loss, damage, injury, decline in
value, liability, claim, demand, settlement, judgment, award, fine, penalty,
tax, fee (including reasonable attorneys' fees), charge, cost (including costs
of investigation) or expense of any nature, net of insurance recovery or
reimbursement or tax benefits realized.
1.13 "Dissenting Shares" shall mean any Concept Shares held by persons
who have not voted such shares for approval of the Merger and with respect to
which such persons have become entitled to exercise dissenter's rights in
accordance with Chapter 13 of the California Corporations Code.
1.14 "Effective Time" shall mean the time the Merger becomes effective
as defined in Section 2.5.
1.15 "Entity" shall mean corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
1.16 "Environmental Activity" shall mean, without limitation, any
activity, event or circumstance in respect of a Contaminant, including, without
limitation, its storage, use, holding, collection, purchase, accumulation,
assessment, generation, manufacture, construction, processing, treatment,
recycling, stabilization, disposition, handling or transportation or its
affirmative or accidental release into the natural environment including
movement through or in the air, soil, subsoil, surface water or groundwater or
any other activity, event or circumstance
2
which is subject to any of the Environmental Laws including but not limited
to noise, vibration, odor or similar nuisance.
1.17 "Exchange Ratio" shall mean that for each outstanding share of
Concept Common Stock, such share will be converted into the right to receive 1/3
of a share of Xxxxxxx Common Stock.
1.18 "Environmental Laws" shall mean laws relating to the environment
or any Environmental Activity.
1.19 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
1.20 "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body, or Entity and any court or
other tribunal).
1.21 "Indemnification Period" shall mean the period commencing on the
Closing Date and ending at the close of business on the one year anniversary of
the Closing Date.
1.22 "Legal Proceeding" shall mean any action, suit, litigation,
arbitration proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit, examination or
investigation commenced, brought, conducted or heard by or before, or otherwise
involving any court or other Governmental Body or any arbitrator or arbitration
panel.
1.23 "Material" when capitalized and used in reference to the
business, products or financial situation of Concept shall be construed,
except as specifically provided, to qualify the matter referred to herein to
matters with a value in excess of $50,000. For example, a "Material adverse
effect" would be an adverse effect resulting in costs or expenses in excess
of $50,000. When the word "material" is not capitalized it shall mean
material with respect to the matter referenced. For example, a reference to
a material breach of a particular agreement would mean a breach that is
material with respect to the particular contract (and not necessarily with
respect to the overall business of Concept or Xxxxxxx).
1.24 "Xxxxxxx Shares" shall mean the aggregate number of shares of
Xxxxxxx common stock, $0.001 par value, equal to one-third of the Concept
Shares.
1.25 "Merger" shall mean the merger of Sub with and into Concept, on
the terms and conditions described herein.
1.26 "Person" shall mean any individual, Entity or Governmental Body.
3
1.27 "Proprietary Asset" shall mean: (a) any patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; and (b) any right to use or exploit any of
the foregoing including rights granted by third parties under license
agreements.
1.28 "Representatives" shall mean officers, directors, employees,
agents, attorneys, accountants and advisors.
1.29 "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
1.30 "Tax" or "Taxes" shall mean all U.S. federal, territorial, state,
municipal, local or other taxes, including without limitation income capital,
sales and use taxes, value added and goods and services taxes, excise taxes,
transfer and stamp taxes, custom duties and franchise taxes, real and personal
property taxes and payroll taxes (including tax withholdings, employer health
taxes, workers' compensation assessments and ERISA plans and unemployment
insurance premiums, contributions and remittances and the U.S. equivalents
thereof), and penalties, interest and surcharges in respect of any of the
foregoing and all words derived from or including the word "Tax," such as
"Taxing" and "Taxation" shall bear a corresponding meaning.
1.31 "Transaction Documents" shall mean all documents or agreements
required to be delivered by any party hereunder including the Agreement of
Merger.
2. PLAN OF REORGANIZATION.
2.1 THE MERGER. Subject to the terms and conditions of this
Agreement, Sub shall be merged with and into Concept in accordance with the
applicable provisions of the laws of the State of California and with the terms
and conditions of this Agreement so that:
(a) At the Effective Time, Sub shall be merged with and into
Concept. As a result of the Merger, the separate corporate existence of Sub
shall cease and Concept shall continue as the surviving corporation (sometimes
referred to herein as the "Surviving Corporation") and shall succeed to and
assume all of the rights and obligations of Sub in accordance with the laws of
the State of California.
(b) The Articles of Incorporation and the Bylaws of Sub in
effect immediately prior to the Effective Time shall be the articles of
incorporation and bylaws, respectively, of the Surviving Corporation after the
Effective Time unless and until further amended as provided by law.
4
(c) The directors and officers of Sub immediately prior to the
Effective Time shall be the directors and officers of the Surviving Corporation
after the Effective Time. Such directors and officers shall hold their position
until the election and qualification of their respective successors or until
their tenure is otherwise terminated in accordance with the Bylaws of Surviving
Corporation.
2.2 CANCELLATION OF SHARES AND DELIVERY OF CONSIDERATION.
(a) At the Effective Time, each share of Concept capital stock,
if any, that is owned directly or indirectly by Concept shall be canceled and no
cash or other consideration shall be delivered in exchange therefor.
(b) At the Effective Time, each Concept Share (other than shares
owned directly or indirectly by Concept) shall, by virtue of the Merger, and
without further action on the part of any holder thereof, be converted and
exchanged into one-third of a share of Xxxxxxx common stock. Notwithstanding
the foregoing, 100,000 shares from the Xxxxxxx Shares otherwise issuable to the
Concept Shareholders pursuant to the terms of this Section 2.2(b) (the "Revenue
Contingent Share Pool") shall not be issuable initially and shall only be issued
if Concept achieves aggregate net revenues of $16,667,000 based upon generally
accepted accounting principals (the "Concept Revenue Milestone") during the
first twenty-four (24) full calendar months following the Closing (the
"Measurement Period").
(c) At the Effective Time, each share of capital stock of Sub
outstanding immediately prior to the Merger shall, by virtue of the Merger, and
without further action on the part of any holder thereof, continue to be issued
and shall be converted into one share of Concept common stock outstanding after
the Merger.
(d) At the Effective Time, a pool equal to 50% of the number of
Xxxxxxx Shares will be available to be issued as further consideration (the
"Additional Share Pool"). The Additional Share Pool shall be made available to
the Concept Shareholders if and only if (i) the Concept Revenue Milestone has
been met by Concept during the Measurement Period and (ii) if for any
consecutive ten (10) day trading period during the Measurement Period, the
closing price of Xxxxxxx Common Stock (as reported by the Wall Street Journal)
does not equal or exceed $12 per share (as adjusted by stock splits, stock
dividends and the like) (the "Xxxxxxx Share Price Threshold"). If, for any
consecutive ten (10) day trading period during the Measurement Period, the
Xxxxxxx Share Price Threshold is met, the Concept Shareholders shall receive no
additional shares from the Additional Share Pool. If, during the Measurement
Period the Concept Revenue Milestone is met and the Xxxxxxx Share Price
Threshold is not satisfied, then at the end of such period, the Concept
Shareholders shall be issued additional shares from the Additional Share Pool
calculated as follows: (i) the highest closing price at or above which Xxxxxxx
Common Stock closed for any consecutive ten trading days during the Measurement
Period shall be used (the "Measurement Price"); (ii) the Concept Shareholders
shall be issued additional shares from the Additional Share Pool with a total
value (the "Target Additional Value") calculated as (X) $12 less the Measurement
Price, multiplied by (Y) the Xxxxxxx Shares; and (iii) the number of shares
issuable shall be calculated as the Target Additional Value divided by the
Measurement Price, but shall in no event be in excess of the Additional Share
Pool. Thus,
5
for example, if the number of Xxxxxxx Shares were 900,000 and the number of
shares in the Additional Share Pool were 450,000 and the Measurement Price
were $10, the maximum number of additional shares to be issued to the Concept
Shareholders from the Additional Share Pool would be 180,000 ($12.00 - $10.00 =
$2.00 x 900,000 = $1,800,000 DIVIDED BY $10 = 180,000 shares).
(e) At the Effective Time, Concept's 1994 Long-Term Stock
Incentive Stock Option Plan (the "Concept Stock Option Plan") shall be canceled
and all options to purchase Concept Common Stock then outstanding under the
Concept Stock Option Plan shall be exchanged or provided for in accordance with
Section 6.6 of this Agreement.
(f) The Exchange Ratio shall be adjusted to reflect the effect
of any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Xxxxxxx Common Stock or Concept
Common Stock or Concept Preferred Stock), reorganization, recapitalization or
other like change with respect to Xxxxxxx Common Stock or Concept Common Stock
or Concept Preferred Stock occurring after the date hereof and prior to the
Effective Time.
(g) No fraction of a share of Xxxxxxx Common Stock shall be
issued, but in lieu thereof each holder of Concept Shares who would otherwise be
entitled to a fraction of a share of Xxxxxxx Common Stock (after aggregating all
fractional shares of Xxxxxxx Common Stock to be received by such holder) shall
receive from Xxxxxxx an amount of cash (rounded to the nearest whole cent) equal
to the product of (i) such fraction, multiplied by (ii) the average closing
price of a share of Xxxxxxx Common Stock for the five most recent days that
Xxxxxxx Common Stock has traded ending on the trading day immediately prior to
the Effective Time, as reported on the Nasdaq National Market.
(h) Any Dissenting Shares shall not be converted into Xxxxxxx
Common Stock but shall instead be converted into the right to Dissenting Shares
pursuant to the California Corporations Code. Concept agrees that, except with
the prior written consent of Xxxxxxx, or as required under the California
Corporations Code, it will not voluntarily make any payment with respect to, or
settle or offer to settle, any such purchase demand. Each holder of Dissenting
Shares (a "Dissenting Shareholder") who, pursuant to the provisions of the
California Corporations Code, becomes entitled to payment for Concept Shares
shall receive payment therefor (but only after the value therefor shall have
been agreed upon or finally determined pursuant to such provisions). If, after
the Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Xxxxxxx shall issue and deliver, upon surrender by such shareholder of
certificate or certificates representing Concept Shares, the number of shares of
Xxxxxxx Common Stock to which such shareholder would otherwise be entitled under
this Section 2.2 less the number of shares of Xxxxxxx Common Stock allocable to
such shareholder that have been deposited in the Indemnity Escrow.
2.3 EXCHANGE PROCEDURES.
(a) Prior to the Closing Date, Xxxxxxx shall appoint
IBJ Xxxxxxxx Bank & Trust Company or such other third party as shall be
reasonably satisfactory to Concept to act as exchange agent (the "Exchange
Agent") in the Merger.
6
(b) Xxxxxxx shall make available to the Exchange Agent for
exchange in accordance with this Section 2.2 the Xxxxxxx Shares in exchange
for all of the Concept Shares.
(c) Within five business days of the Closing Date, the Exchange
Agent or Xxxxxxx shall mail to each holder of record of certificate(s) or other
documents which represent Concept Shares (the "Certificates"), to be exchanged
pursuant to Section 2.2 hereof (i) a letter of transmittal (which shall specify
that, with respect to the Certificates, delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Xxxxxxx and the Exchange Agent shall reasonably agree) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for Xxxxxxx Shares. Upon surrender of a Certificate for cancellation
to the Exchange Agent or to such other agent or agents as may be appointed by
Xxxxxxx, together with such letter of transmittal, duly executed, the holder of
such Certificates shall be entitled to receive in exchange therefor his pro rata
allocation of the Xxxxxxx Shares as to which such holder is entitled pursuant to
Section 2.2 hereof. Certificates so surrendered pursuant to this Section 2.3
shall forthwith be canceled (if not otherwise canceled or terminated in
accordance with their terms). In the event of a transfer of ownership of
Concept Shares which is not registered on the transfer records of Concept, the
appropriate number of Xxxxxxx Shares may be delivered to a transferee if the
Certificate representing such transferred security is presented to the Exchange
Agent and accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.3, each Certificate
shall be deemed at any time after the Effective Time to represent solely the
right to receive upon such surrender that number of Xxxxxxx Shares (without
interest and subject to applicable withholding, escheat and other laws) to which
such holder is entitled.
(d) Notwithstanding anything to the contrary in this
Section 2.3, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to a holder of Concept Shares for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
(e) The Xxxxxxx Shares paid in accordance with the terms hereof
shall be deemed to be in full satisfaction of all rights pertaining to such
Concept Shares, and there shall be no further registration of transfers on the
records of the Surviving Corporation of Concept Shares. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in Section 2.2.
(f) In the event any Certificates evidencing Concept Shares
shall have been lost, stolen or destroyed, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of
an affidavit of that fact by the holder thereof, such holders pro rata
allocation of Xxxxxxx Shares, as may be required pursuant to Section 2.2;
provided, however, that Xxxxxxx may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably
direct as indemnity against any claim that may be made against Xxxxxxx or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
7
2.4 THE CLOSING. Subject to termination of this Agreement as
provided in Section 12 below, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxx Xxxx
Xxxx & Freidenrich LLP at 10:00 a.m. local time as soon as practicable after the
last of the conditions to closing set forth in Sections 9 and 10 either have
been satisfied or waived, or such other place, time and date as Xxxxxxx and
Concept may mutually select (the "Closing Date").
2.5 EFFECTIVE TIME. Simultaneously with the Closing, the Agreement
of Merger shall be filed in the office of the Secretary of State of the State of
California. The Merger shall become effective immediately upon the filing of
the Agreement of Merger with such office (the "Effective Time").
3. REPRESENTATIONS AND WARRANTIES OF CONCEPT. Except as otherwise set
forth in the "Concept Disclosure Schedule," referencing the appropriate section
and paragraph numbers, to be provided to Xxxxxxx prior to the Closing Date,
Concept represents and warrants to Xxxxxxx as set forth below. No fact or
circumstance disclosed to Xxxxxxx by Concept shall constitute an exception to
these representations and warranties unless such fact or circumstance is set
forth in the Concept Disclosure Schedule.
3.1 ORGANIZATION. Concept is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has corporate power and authority to carry on its business as
it is now being conducted and as it is proposed to be conducted. Concept is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or properties makes such
qualification or licensing necessary. The Concept Disclosure Schedule contains
a true and complete listing of the locations of all sales offices, manufacturing
facilities, and any other offices or facilities of Concept and a true and
complete list of all jurisdictions in which Concept maintains any employees.
The Concept Disclosure Schedule contains a true and complete list of all
jurisdictions in which Concept is duly qualified to transact business as a
foreign corporation. True and complete copies of Concept's charter documents as
in effect on the date hereof and as to be in effect immediately prior to the
Closing, have been provided to Xxxxxxx or its Representatives.
3.2 CAPITALIZATION.
(a) The authorized capital stock of Concept as of the date of
this Agreement consists of four hundred thousand (400,000) shares of Concept
Preferred Stock and of ten million (10,000,000) shares of Concept Common Stock;
and, as of the date of this Agreement, four hundred thousand (400,000) shares of
Concept Preferred Stock and two million, two hundred fifty-seven thousand, four
hundred forty-one (2,257,441) shares of Concept Common Stock are issued and
outstanding and held of record by Concept Shareholders as set forth and
identified in Section 3.2(a) of the Concept Disclosure Schedule.
(b) Except as set forth in Section 3.2(b) of the Concept
Disclosure Schedule, there are no outstanding options, warrants, rights,
commitments, conversion rights, rights of exchange, plans or other agreements of
any character providing for the purchase, issuance or sale of any shares of the
capital stock of Concept other than as contemplated by this
8
Agreement. There are no voting trust, buy-sell or other similar agreements
in place among the Concept Shareholders and Concept.
(c) All of the outstanding securities of Concept have been duly
authorized and are validly issued, fully paid and nonassessable. All securities
of Concept were issued in compliance with applicable securities laws. None of
Concept's outstanding securities were issued in consideration in whole or in
part for any contribution, transfer, assignment or any proprietary rights.
3.3 POWER, AUTHORITY AND VALIDITY. Concept has the corporate power
and authority to enter into this Agreement and the other Transaction Documents
to which it is a party and to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by the board of
directors of Concept, and no other corporate proceedings are necessary to
authorize this Agreement or the other Transaction Documents. Concept is not
subject to or obligated under any charter, bylaw or contract provision or any
license, franchise or permit, or subject to any order or decree, which would be
breached or violated by or in conflict with its executing and carrying out this
Agreement and the transactions contemplated hereunder and under the Transaction
Documents. This Agreement is, and each of the other Transaction Documents to
which Concept will be a party, when executed and delivered by Concept shall be,
the valid and binding obligation of Concept enforceable in accordance with their
respective terms, subject to (i) laws of general application relating to
bankruptcy, insolvency, and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.4 FINANCIAL STATEMENTS.
(a) Attached hereto as Schedule 3.4(a) of the Concept Disclosure
Schedule are the following: (i) Concept's audited consolidated balance sheet
and consolidated statements of income, shareholder's equity and changes in
financial condition for the fiscal years ended June 30, 1996 and 1997 and
(ii) Concept's consolidated unaudited balance sheet dated as of April 30, 1998
(the "Concept Balance Sheet") and consolidated statements of income,
shareholders' equity and changes in financial position for the period then ended
(the financial statements described in clauses (i) and (ii) collectively, the
"Concept Financial Statements").
(b) The Concept Financial Statements are complete and in
accordance with the books and records of Concept and present fairly in all
respects the financial position of Concept as of their historical dates. Except
and to the extent reflected or reserved against in the Concept Balance Sheet,
Concept does not have, as of the date of such balance sheet, any liabilities or
obligations (absolute or contingent) of a nature required or customarily
reflected in a balance sheet (or the notes thereto). The aggregate reserves, if
any, reflected on the Concept Financial Statements are adequate in light of the
contingencies with respect to which they are made. Concept makes no
representation with respect to either so-called slow moving inventory or with
respect to the value of components purchased for Concept's single wafer system
presently in development, which value depends in part on Xxxxxxx'x development
plans after the Effective Date.
9
(c) Concept does not have any debt, liability, or obligation of
any nature, whether accrued, absolute or contingent that is not reflected or
reserved against in the Concept Financial Statements, except that Concept has
not established any reserves with respect to the costs and fees associated with
this Agreement and the transactions contemplated hereby. All debts,
liabilities, and obligations incurred after the date of the Concept Financial
Statements, whether absolute or contingent, were incurred in the ordinary course
of business and are usual and normal in amount both individually and in the
aggregate.
3.5 TAX MATTERS.
(a) Concept has fully and timely, properly and accurately filed
all Tax returns and reports required to be filed by it (the "Concept Returns"),
including all federal, foreign, state and local returns and reports for
all years and periods for which any such returns or reports were due. The
Concept Returns and all other Tax returns and reports filed by Concept were
prepared in the manner required by applicable law. Except for any goods and
services income Tax due upon the filing of the Concept Returns, all income,
sales, use, occupation, property or other Taxes or assessments due from Concept
has been paid, and there are no pending assessments, asserted deficiencies or
claims for additional Taxes that have not been paid. The reserves for Taxes, if
any, reflected on the Concept Financial Statements are adequate and there are no
Tax liens on any property or assets of Concept. There have been no audits or
examinations of any Tax returns or reports by any applicable governmental
agency. No state of facts exists or has existed which would constitute grounds
for the assessment of any Material penalty or of any further Material Tax
liability beyond that shown on the respective Tax reports or returns. There are
no outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local income Tax return or report
for any period.
(b) All Taxes which Concept has been required to collect or
withhold have been duly withheld or collected and, to the extent required, have
been paid to the proper taxing authority.
(c) Concept is not a party to any tax-sharing agreement or
similar arrangement with any other party.
(d) At no time has Concept been included in the federal
consolidated income Tax return of any affiliated group of corporations.
(e) No payment which Concept is obliged to pay to any director,
officer, employee or independent contractor pursuant to the terms of an
employment agreement, severance agreement or otherwise will constitute an excess
parachute payment as defined in Section 280G of the Code.
(f) Concept will not be required to include any adjustment in
taxable income for any Tax period (or portion thereof) ending after the Closing
Date pursuant to Section 481(c) of the Code or any provision of the Tax laws of
any jurisdiction requiring Tax adjustments as a result of a change in method of
accounting implemented by Concept prior to the Closing Date for any Tax period
(or portion thereof) ending on or before the Closing Date or
10
pursuant to the provisions of any agreement entered into by Concept prior to
the Closing Date with any taxing authority with regard to the Tax liability
of Concept for any Tax period (or portion thereof) ending on or before the
Closing Date.
(g) Concept is not currently under any contractual obligation to
pay to any Governmental Body any Tax obligations of, or with respect to any
transaction relating to, any other person or to indemnify any other person with
respect to any Tax.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
Section 3.6 of the Concept Disclosure Schedule, from May 31, 1998, to the date
of this Agreement, Concept has not:
(a) suffered any Material adverse change in its financial
condition or in the operations of its business, nor any Material adverse change
in its balance sheet, including but not limited to cash distributions or
decreases in the net assets of Concept;
(b) suffered any physical damage, destruction or loss, whether
or not covered by insurance, in an aggregate amount in excess of Ten Thousand
Dollars ($10,000);
(c) granted or agreed to make any increase in the compensation
payable or to become payable by Concept to its officers or employees, except
those occurring in the ordinary course of business;
(d) declared, set aside or paid any dividend or made any other
distribution on or in respect of the shares of the capital stock of Concept or
declared any direct or indirect redemption, retirement, purchase or other
acquisition by Concept of such shares;
(e) issued any shares of capital stock of Concept or any
warrants, rights, options or entered into any commitment relating to the shares
of Concept;
(f) made any change in the accounting methods or practices it
followed, whether for general financial or Tax purposes, or any change in
depreciation or amortization policies or rates adopted therein;
(g) sold, leased, abandoned or otherwise disposed of any real
property or any machinery, equipment or other operating property other than in
the ordinary course of business;
(h) sold, assigned, transferred, licensed or otherwise disposed
of any patent, trademark, trade name, brand name, copyright (or pending
application for any patent, trademark or copyright), invention, work of
authorship, process, know-how, formula or trade secret or interest thereunder or
other intangible asset except for equipment sales in the ordinary course of
their business;
(i) suffered any dispute involving any employee that could have
a Material adverse effect on Concept;
11
(j) engaged in any activity or entered into any commitment or
transaction (including without limitation any borrowing or capital expenditure),
in either case, other than in the ordinary course of business;
(k) incurred any liabilities, absolute or contingent except for
(i) liabilities identified as such in the "liabilities" column of the Concept
Financial Statements; (ii) accounts payable or accrued salaries that have been
incurred by Concept since December 31, 1997, in the ordinary course of business
and consistent with Concept's past practices; and (iii) liabilities in
Section 3.6(k) of the Concept Disclosure Schedule;
(l) permitted or allowed any of its property or assets to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, other than any purchase money security interests
incurred in the ordinary course of business;
(m) made any capital expenditure or commitment for additions to
property, plant or equipment, in the aggregate, in excess of Ten Thousand
Dollars ($10,000);
(n) paid, loaned or advanced any amount to, or sold, transferred
or leased any properties or assets to, or entered into any agreement or
arrangement with any of its Affiliates, officers, directors or shareholders or
any Affiliate or associate of any of the foregoing;
(o) made any amendment to or terminated any agreement which, if
not so amended or terminated, would be required to be disclosed in the Concept
Disclosure Schedule;
(p) agreed to take any action described in this Section 3.6 or
outside of its ordinary course of business or which would constitute a breach of
any of the representations contained in this Agreement.
3.7 TITLE AND RELATED MATTERS. Concept has good and marketable title
to all the properties, interests in properties and assets, real and personal,
reflected in the Concept Financial Statements or acquired after the date of the
Concept Financial Statements (except properties, interests in properties and
assets sold or otherwise disposed of since the date of the Concept Financial
Statements in the ordinary course of business), free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except the
lien of current Taxes not yet due and payable and except for liens which in the
aggregate do not secure more than Ten Thousand Dollars ($10,000) in liabilities.
Except as noted in Section 3.7 of the Concept Disclosure Schedule, the equipment
of Concept used in the operation of its business is in good operating condition
and repair, normal wear and tear excepted. All real or personal property leases
to which Concept is a party are valid, binding, enforceable and effective in
accordance with their respective terms, subject to (i) laws of general
application relating to bankruptcy, insolvency, and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies. There is not under any of such leases any existing default
by Concept or, any other event of default or event which, with notice or lapse
of time or both, would constitute a default by any other party to such leases.
Section 3.7 of the Concept Disclosure Schedule contains a description of all
real and personal property leased or owned by Concept, describing its interest
in said property and with respect to real property a description of each
12
parcel and a summary description of the buildings, structures and improvements
thereon. True and correct copies of Concept's leases have been provided to
Xxxxxxx or its Representatives.
3.8 PROPRIETARY RIGHTS AND WARRANTY CLAIMS.
(a) Section 3.8(a)(i) of the Disclosure Schedule sets forth,
with respect to each Proprietary Asset owned or used by Concept (each a "Concept
Proprietary Asset" and collectively, the "Concept Proprietary Assets")
registered with any Governmental Body or for which an application has been filed
with any Governmental Body, (i) a brief description of such Concept Proprietary
Asset, and (ii) the names of the jurisdictions covered by the applicable
registration or application. Section 3.8(a)(ii) of the Concept Disclosure
Schedule identifies and provides a brief description of all other Concept
Proprietary Assets. Section 3.8(a)(iii) of the Concept Disclosure Schedule
identifies and provides a brief description of each Proprietary Asset licensed
to Concept by any Person (except for any Proprietary Asset that is licensed to
Concept under any third party software license generally available to the public
at a cost of less than One Thousand Dollars ($1,000)), and identifies the
license agreement under which such Proprietary Asset is being licensed to
Concept. Except as set forth in Section 3.8(a)(iv) of the Concept Disclosure
Schedule, Concept has good, valid and marketable title to all Concept
Proprietary Assets identified in Sections 3.8(a)(i) and 3.8(a)(ii) of the
Concept Disclosure Schedule, free and clear of all liens and other encumbrances
and of all third party licensed technology, and has a valid right to use all
Proprietary Assets identified in Section 3.8(a)(iii) of the Concept Disclosure
Schedule. Except as set forth in Section 3.8(a)(v) of the Concept Disclosure
Schedule, Concept is not obligated to make any payment to any Person for the use
of any Proprietary Asset. Except as set forth in Section 3.8(a)(vi) of the
Concept Disclosure Schedule, Concept has not developed jointly with any other
Person any Proprietary Asset with respect to which such other Person has any
rights.
(b) Except as set forth in Section 3.8(b) of the Concept
Disclosure Schedule, Concept has taken reasonable and customary measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Concept Proprietary Assets (except Concept Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise to maintain and protect
the value of all Concept Proprietary Assets. Except as set forth in the Concept
Disclosure Schedule, Concept has not disclosed or delivered to any Person, or
permitted the disclosure or delivery to any Person of any of the Concept
Proprietary Assets used in or necessary for the conduct of business by Concept
as currently conducted by Concept.
(c) Concept is not infringing, misappropriating or making any
unlawful use of, and Concept has not at any time infringed, misappropriated or
made any unlawful use of, or received any notice or other communication (in
writing or otherwise) of any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any Proprietary Asset owned
or used by any other person ("Third Party Proprietary Asset"). No other person
is infringing, misappropriating or making any unlawful use of, and no Third
Party Proprietary Asset owned or used by any other person infringes or conflicts
with, any Concept Proprietary Asset.
(d) Except as set forth in Section 3.8(d) of the Concept
Disclosure Schedule: (i) each Concept Proprietary Asset conforms with any
specification, documentation,
13
performance standard, representation or statement made or provided with
respect thereto by or on behalf of Concept; and (ii) there has not been any
claim made against Concept by any customer or other person alleging that any
Concept Proprietary Asset (including each version thereof that has ever been
licensed or otherwise made available by Concept to any person) does not
conform with any specification, documentation, performance standard,
representation or statement made or provided by or on behalf of Concept, and
there is no basis for any such claim.
(e) Concept's Proprietary Assets constitute all the proprietary
assets necessary to enable Concept to conduct its business in the manner in
which such business has been and is being conducted. Except as set forth in
Section 3.8(e) of the Concept Disclosure Schedule, (i) Concept has not licensed
any of the Concept Proprietary Assets to any person on an exclusive basis, and
(ii) Concept has not entered into any covenant not to compete or contract
limiting its ability to exploit fully any of the Concept Proprietary Assets or
to transact business in any market or geographical area or with any person.
(f) Except as set forth in Section 3.8(f) of the Concept
Disclosure Schedule, (i) all current employees of Concept have executed and
delivered to Concept (containing no exceptions to or exclusions from the scope
of its coverage) the form of Employee Inventions and Proprietary Rights
Assignment Agreement provided by Xxxxxxx; (ii) all former employees of Concept
have executed and delivered to Concept (containing no exceptions to or
exclusions from the scope of its coverage) the form of Proprietary Information
and Non-Disclosure Agreement previously delivered to Xxxxxxx; (iii) all current
consultants and independent contractors to Concept have executed and delivered
to Concept (containing no exceptions to or exclusions from the scope of its
coverage) the form of Consultant Inventions and Proprietary Rights Assignment
Agreement provided by Xxxxxxx; and (iv) all former consultants and independent
contractors to Concept have executed and delivered to Concept (containing no
exceptions to or exclusions from the scope of its coverage) the form of
Consultant Proprietary Information and Non-Disclosure Agreement previously
delivered to Xxxxxxx.
3.9 EMPLOYEE BENEFIT PLANS.
(a) Section 3.9 (a)of Concept's Disclosure Schedule contains a
complete and accurate list of (i) all employee benefit plans (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended)
("ERISA"), (ii) all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar employee
benefit plans, and (iii) all unexpired severance agreements, written or
otherwise, for the benefit of, or relating to, any current or former employee of
Concept or any trade or business (whether or not incorporated) which is a member
or which is under common control with Concept within the meaning of Section 414
of the Code ("Concept's Controlled Group") (together, the "Concept Employee
Plans").
(b) With respect to each Concept Employee Plan, Concept has
provided to Xxxxxxx true and correct copies of (i) all documents embodying such
Concept Employee Plan, including all amendments thereto, (ii) all material
written agreements relating to such Concept Employee Plan, (iii) all employee
communications material to any Concept Employee Plan, and (iv) all standard
COBRA forms and related notices.
14
(c) With respect to the Concept Employee Plans, individually and
in the aggregate, no event has occurred, and to the best of Concept's knowledge,
there exists no condition or set of circumstances in connection with which
Concept could be subject to any material liability.
(d) With respect to the Concept Employee Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves on the
financial statements or books of Concept.
(e) Concept has performed in all material respects all
obligations required to be performed by it under, is not in material default or
violation of, and has no knowledge of any default or violation by any other
party to, each Concept Employee Plan, and each Concept Employee Plan has been
established and maintained in all material respects in accordance with its terms
and in compliance in all material respects with all applicable laws, statutes,
orders, rules and regulations, including but not limited to applicable
provisions of ERISA and the Code. Each Concept Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code has either received a favorable determination
letter from the IRS with respect to such plan as to its qualified status under
the Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a determination letter and make any amendments necessary to obtain a favorable
determination. No "prohibited transaction," within the meaning of Section 4975
of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any Concept Employee Plan.
There are no actions, suits or claims pending, or, to the knowledge of Concept,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Concept Employee Plan or against the assets of any Concept Employee
Plan. Each Concept Employee Plan can be amended, terminated or otherwise
discontinued in accordance with its terms, without liability to Xxxxxxx, the
Surviving Corporation, Concept or any of its affiliates (other than ordinary
administration expenses typically incurred in a termination event). There are
no audits, inquiries or proceedings pending or, to the knowledge of Concept,
threatened by the IRS or the U.S. Department of Labor with respect to any
Concept Employee Plan. Neither Concept nor any affiliate of Concept is subject
to any penalty or tax with respect to any Concept Employee Plan under Section
402(i) of ERISA or Sections 4975 through 4980 of the Code. Each Concept
Employee Plan which is a group health plan (within the meaning of Section
5000(b)(1) of the Code) and subject to the Consolidated Omnibus Reconciliation
Act of 1985, as amended ("COBRA"), has been maintained in all material respects
in compliance with its terms and conditions and has complied in all material
respects with the Code and ERISA, including the continuation coverage
requirements of COBRA, and such plan is not subject to any damages, penalties,
or excise taxes arising out of or in connection with COBRA. Neither Concept nor
any member of Concept's Controlled Group is or could be liable for an excise tax
under Section 4980 B of the Code in connection with any employee plan maintained
by a member of Concept's Controlled Group.
15
(f) Concept does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any pension plan
within the meaning of Section 3(2) of ERISA which is subject to Title IV of
ERISA or Section 412 of the Code. At no time has Concept contributed to or been
requested to contribute to any multiemployer plan as defined in Section 3(37) of
ERISA.
(g) No Concept Employee Plan provides, or has any liability to
provide, retiree life insurance, retiree health or other retiree employee
welfare benefits to any person for any reason, except as may be required by
COBRA or other applicable statute, and Concept has never represented, promised
or contracted (whether in oral or written form) to any employee (either
individually or to employees as a group) or any other person that such
employee(s) or other person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the extent
required by statute.
(h) Except as set forth on Section 3.9 (h) of Concept's
Disclosure Schedules, the execution of this Agreement and the consummation of
the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Concept Employee Plan, employee agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee.
(i) No payment or benefit which will or may be made by Concept
or its affiliates with respect to any employee as a result of the transactions
contemplated by this Agreement will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(1) of the Code.
3.10 BANK ACCOUNTS AND RECEIVABLES. Section 3.10 of the Concept
Disclosure Schedule sets forth the names and locations of all banks, trusts,
companies, savings and loan associations, and other financial institutions at
which Concept maintains accounts of any nature and the names of all persons
authorized to draw thereon or make withdrawals therefrom. Section 3.10 of the
Concept Disclosure Schedule sets forth an accurate and complete breakdown and
aging of all accounts receivable, notes receivable, and other receivables of
Concept as of April 30, 1998. Except as set forth on the Concept Disclosure
Schedule all existing accounts receivable of Concept (including those accounts
receivable reflected on the Concept Financial Statements that have not yet been
collected and those accounts receivable that have arisen since April 30, 1998
and have not yet been collected) represent valid obligations of customers of
Concept arising from bona fide transactions entered into in the ordinary course
of business.
3.11 CONTRACTS.
(a) Section 3.11(a) of the Concept Disclosure Schedule
identifies each document or instrument to which Concept is a party and that
relates to the acquisition, transfer, use, development, sharing or licensing of
any technology or Concept Proprietary Asset.
16
(b) Except as set forth in Section 3.11(b) of the Concept
Disclosure Schedule,
(i) Concept has no agreements, contracts or commitments
that call for fixed and/or contingent payments or expenditures by or to Concept
of more than Ten Thousand Dollars ($10,000) over the life of any such agreement,
contract or commitment.
(ii) Concept has no purchase agreement, contract or
commitment that calls for fixed and/or contingent payments by Concept that are
in excess of the normal, ordinary and usual requirements of Concept's business.
(iii) There is no outstanding sales contract, commitment
or proposal (including, without limitation, development projects) of Concept
that Concept currently expects (or reasonably should expect) to result in any
loss to Concept upon completion or performance thereof.
(iv) Concept has no outstanding agreements, contracts or
commitments with officers, employees, agents, consultants, advisors, salesmen,
sales representatives, distributors or dealers that are not cancelable by it on
notice of not longer than thirty (30) days and without liability, penalty or
premium.
(v) Concept has no outstanding agreements, contracts or
commitments with sales representatives, OEM's, distributors or dealers.
(vi) Concept is not restricted by agreement from competing
with any person or from carrying on its business anywhere in the world.
(vii) Concept has not guaranteed any obligations of other
persons, including each other, or made any agreements to acquire or guarantee
any obligations of other persons, including each other.
(viii) Concept does not have any outstanding loan or
advance to any person; nor is it party to any line of credit, standby financing,
revolving credit or other similar financing arrangement of any sort which would
permit the borrowing by Concept of any sum not reflected in the Concept
Financial Statements.
(ix) All Material contracts, agreements and instruments
listed in the Concept Disclosure Schedule pursuant to Section 3.11 (a) and
(b) (the "Concept Material Contracts") are valid, binding, in full force and
effect, and enforceable by Concept in accordance with their respective terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies. No party to any Concept
Material Contract intends to cancel, withdraw, modify or amend such contract.
(c) Concept has delivered to Xxxxxxx accurate and complete
copies of all written Concept Material Contracts, including all amendments
thereto and any correspondence
17
regarding any dispute with respect thereto. Concept has not entered into any
Material oral contracts.
(d) Except as set forth in Section 3.11(d) of the Concept
Disclosure Schedule:
(i) Concept has not violated or breached, or committed
any default under, any Concept Material Contract, and no other person has
violated or breached, or committed any default under, any Concept Material
Contract;
(ii) No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time) will, or
could reasonably be expected to, (A) result in a violation or breach of any
of the provisions of any Concept Material Contract, (B) give any person the
right to declare default or exercise any remedy under any Concept Material
Contract, (C) give any person the right to accelerate the maturity or
performance of any Concept Material Contract; or (D) give any person the
right to cancel, terminate or modify any Concept Material Contract;
(iii) There are no unresolved claims between Concept and
any of its principal licensors, vendors, suppliers, distributors,
representatives or customers and none of such persons has advised Concept of its
intention to cease doing business with Concept, or with Xxxxxxx following the
Closing Date, whether as a result of the transactions contemplated hereunder.
3.12 COMPLIANCE WITH LAW. Concept is in compliance in all material
respects with all applicable laws and regulations. All licenses, franchises,
permits and other governmental authorizations held by Concept and which are
required for its business are valid and sufficient in all respects for the
businesses presently carried on by Concept and as set forth in the Concept
Disclosure Schedule.
3.13 LABOR DIFFICULTIES; NO DISCRIMINATION.
(a) Concept is not engaged in any unfair labor practice or in
violation of any applicable laws respecting employment and employment practices,
health and safety, human rights, terms and conditions of employment, and wages
and hours. Concept is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing.
(b) There is no unfair labor practice complaint against Concept
actually pending or threatened before a labor relations board.
(c) There is and has not been any claim made against Concept
based on actual or alleged wrongful termination or on actual or alleged race,
age, sex, disability or other harassment or discrimination, or similar tortious
conduct, nor is there any basis for any such claim. No work stoppage or labor
strike against Concept is pending, threatened or reasonably anticipated.
Concept does not know of any activities or proceedings of any labor union to
organize any Concept employees. Concept is not presently, nor has it been in
the past, a party to,
18
or bound by, any collective bargaining agreement or union contract with
respect to employees and no collective bargaining agreement is being
negotiated by Concept. To Concept's knowledge, no employee of Concept has
violated any employment contract, nondisclosure agreement or noncompetition
agreement by which such employee is bound.
(d) Concept is not aware of any Concept employee who intends to
terminate his or her employment with Concept as a result of the Merger or
otherwise.
3.14 INSIDER TRANSACTIONS. No Affiliate of Concept has any interest
in (i) any equipment or other property, real or personal, tangible or
intangible, including, without limitation, any Concept Proprietary Asset, used
in connection with or pertaining to the businesses of Concept, or (ii) any
creditor, supplier, customer, manufacturer, agent, representative, or
distributor of products of Concept; provided, however, that no such Affiliate or
other person shall be deemed to have such an interest solely by virtue of the
ownership of less than one percent (1%) of the outstanding stock or debt
securities of any publicly-held company whose stock or debt securities are
traded on a recognized U.S. stock exchange or quoted on the National Association
of Securities Dealers Automated Quotation System.
3.15 EMPLOYEES, INDEPENDENT CONTRACTORS AND CONSULTANTS. Section 3.15
of the Concept Disclosure Schedule lists and describes all currently effective
written and oral consulting, independent contractor and/or employment agreements
and other agreements concluded with individual employees, independent
contractors or consultants to which Concept is a party. True and correct copies
of all such written agreements have been provided to Xxxxxxx or its
Representatives. All salaries and wages paid by Concept are in compliance in
all respects with applicable federal, state and local laws. Section 3.15 of the
Concept Disclosure Schedule lists the names of all persons currently employed by
Concept as well as the salaries and other compensation arrangements (bonus,
deferred compensation, etc.) and the accrued vacation time for each such person.
3.16 INSURANCE. Section 3.16 of the Concept Disclosure Schedule
contains a list of the principal policies of fire, liability and other forms of
insurance held by Concept. Concept has done nothing, either by way of action or
inaction, that might invalidate such insurance policies in whole or in part.
3.17 LITIGATION. Except as set forth in Section 3.17 of the Concept
Disclosure Schedule, there is no suit, action or proceeding which has been
served upon or threatened against Concept (nor is there any reasonable basis
therefor), in each case other than immaterial matters, or which questions or
challenges the validity of this Agreement or the Transaction Documents. Except
as set forth in Section 3.17 of the Concept Disclosure Schedule, there is no
judgment, decree, injunction, or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against Concept.
3.18 SUBSIDIARIES. Except as set forth in Section 3.18 of the Concept
Disclosure Schedule, Concept has no subsidiaries. Except as set forth in
Section 3.18 of the Concept Disclosure Schedule, Concept does not own or control
(directly or indirectly) any capital stock, bonds or other securities of, and
does not have any proprietary interest in, any other
19
corporation, general or limited partnership, joint venture, firm, association
or business organization, entity or enterprise, and Concept does not control
(directly or indirectly) the management or policies of any other corporation,
partnership, firm, association or business organization, entity or enterprise.
3.19 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. Concept has obtained
all permits, licenses and other authorizations which are required under federal,
state and local laws applicable to Concept and relating to pollution or
protection of the environment, including laws or provisions relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials, substances, or wastes into air,
surface water, groundwater, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic materials,
substances, or wastes. Except as set forth in Section 3.19 of the Concept
Disclosure Schedule or in the environmental review being conducted by
Environmental Resources Management at Xxxxxxx'x request (the "Environmental
Review"), Concept is in compliance with all terms and conditions of the required
permits, licenses and authorizations. Except as set forth in Section 3.19 of
the Concept Disclosure Schedule, Concept is not aware of, nor has Concept
received written notice of, any conditions, circumstances, activities,
practices, incidents, or actions which may form the basis of any claim, action,
suit, proceeding, hearing, or investigation of, by, against or relating to
Concept, based on or related to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic substance, material or waste.
Except as disclosed in Section 3.19 of the Concept Disclosure Schedule or the
Environmental Review,
(a) No Environmental Activity has occurred in the business of
Concept or on or in relation to any premises currently or formerly used by
Concept which may cause Concept to incur expenses or costs for the elimination,
neutralization or amelioration of the results of the Environmental Activity or
become liable for compensation to any third party.
(b) Concept has held its assets, occupied its respective
premises, operated its respective businesses and conducted all other activities
in compliance with all Environmental Laws. Concept has not received any notice
of non-compliance with Environmental Laws from any person or governmental
authority and Concept does not know of any facts which could give rise to any
such notice.
(c) There are no underground storage tanks or surface
impoundments at, on, or under premises formerly or currently used by Concept.
(d) Concept has maintained all environmental and operating
documents and records substantially in the manner and for the time periods
required by any Environmental Laws. Section 3.19 of the Concept Disclosure
Schedule lists each environmental permit and each Environmental Audit conducted
with respect to Concept or its premises while occupied by either of them. An
"Environmental Audit" shall mean any evaluation, inspection, assessment, study
or
20
test performed at the request of or on behalf of a governmental authority,
including but not limited to, a public liaison committee, as well as a
self-evaluation, whether or not required by Environmental Law.
3.20 CORPORATE DOCUMENTS. Concept has furnished to Xxxxxxx for its
examination: (i) copies of its charter documents; (ii) its minute book
containing all records required to be set forth of all proceedings, consents,
actions, and meetings of the shareholders, the board of directors and any
committees thereof; (iii) all permits, orders, and consents issued by any
regulatory agency with respect to Concept, or any securities of Concept, and all
applications for such permits, orders, and consents; and (iv) the stock transfer
books of Concept setting forth all transfers of any capital stock. The
corporate minute books, stock certificate books, stock registers and other
corporate records of Concept are complete and, and the signatures appearing on
all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in such books and
records were duly and validly taken in compliance with the laws of the
applicable jurisdiction.
3.21 YEAR 2000 COMPLIANCE. Each product of Concept is, both
individually and in conjunction with all other systems or products with which it
is required or designed to interface, (i) able to receive, record, store,
process, calculate, manipulate and output dates from and after January 1, 2000,
time periods that include January 1, 2000 and information that is dependent on
or relates to such dates or time periods, in the same manner and with the same
accuracy, functionality, data integrity and performance as when dates or time
periods prior to January 1, 2000 are involved, (ii) able to store and output
date information in a manner that is unambiguous as to century and (iii) able to
respond to two-digit year input so as to accurately resolve any ambiguity as to
century in a disclosed, defined, pre-determined manner that is practicable and
efficient ("Year 2000 Compliant"). All internal computer systems that are
material to the business, finances or operations of Concept are, both
individually and in conjunction with all other systems or products with which
they are required or designed to interface, Year 2000 Compliant. To its
knowledge, Concept is not using the services of any third party whose systems
are not Year 2000 Compliant where such circumstance might have a material
adverse effect on Concept's business, financial condition or results of
operation.
3.22 ACCURACY OF INFORMATION IN INFORMATION STATEMENT OR PROXY
STATEMENT. The information furnished by Concept to the Concept Shareholders in
connection with the solicitation of shareholder consent or proxies for the
approval and adoption of this Agreement and the approval and adoption of the
Merger shall not, on the date the Information or Proxy Statement is first mailed
to the Concept Shareholders, on any date subsequent thereto and prior to the
Effective Time or at the Effective Time, contain any untrue statement of a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
false or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
consent or proxies which has become false or misleading.
3.23 SHAREHOLDER VOTING. Holders of more than 81% of the issued and
outstanding shares of Concept capital stock have agreed in writing to vote for
approval of the
21
Merger and the actions contemplated thereby pursuant to the form of Voting
Agreement and Irrevocable Proxy attached hereto as EXHIBIT B.
3.24 NO BROKERS. Neither Concept nor any shareholder, officer or
director of Concept is obligated for the payment of fees or expenses of any
broker or finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction contemplated hereby.
3.25 ACCURACY OF DOCUMENTS AND INFORMATION. The copies of all
instruments, agreements, other documents and written information set forth as,
or referenced in, the schedules or exhibits to this Agreement or specifically
required to be furnished pursuant to this Agreement to Xxxxxxx by Concept are
complete and correct. No representations or warranties made by Concept in this
Agreement, nor any document, written information, statement, financial
statement, certificate, schedule or exhibit furnished directly to Xxxxxxx
pursuant to this Agreement contains any untrue statement of a material fact, or
omits to state a material fact necessary to make the statements or facts
contained herein not misleading. There is no fact which materially and
adversely affects Concept known to Concept which has not been expressly and
fully set forth in this Agreement or the schedules and exhibits hereto.
4. REPRESENTATIONS AND WARRANTIES OF XXXXXXX AND SUB. Xxxxxxx represents
and warrants to Concept as set forth below.
4.1 ORGANIZATION. Xxxxxxx and Sub are corporations duly organized,
validly existing and in good standing under the laws of their jurisdictions and
have corporate power and authority to carry on their businesses as they are now
being conducted and as they are proposed to be conducted.
4.2 POWER, AUTHORITY AND VALIDITY. Xxxxxxx and Sub have the
corporate power and authority to enter into this Agreement and other Transaction
Documents to which they are a party and to carry out their obligations hereunder
and thereunder. The execution and delivery of this Agreement and the
Transaction Documents to which they are a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
board of directors of Xxxxxxx and Sub, and no other corporate proceedings are
necessary to authorize this Agreement or the other Transaction Documents.
Xxxxxxx and Sub are not subject to or obligated under any charter, bylaw or
contract provision or any license, franchise or permit or subject to any order
or decree, which would be breached or violated in a material manner by or in
material conflict with its executing and carrying out this Agreement and the
transactions contemplated hereunder and under the Transaction Documents. This
Agreement is, and the other Transaction Documents to which Xxxxxxx and Sub are a
party, when executed and delivered by Xxxxxxx and Sub shall be, the valid and
binding obligations of Xxxxxxx and Sub, enforceable in accordance with their
terms, subject to (i) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
4.3 COMMISSION DOCUMENTS; FINANCIAL STATEMENTS. Xxxxxxx has made
available to Concept a true and complete copy of each statement, report,
registration statement,
22
definitive proxy statement and other filings filed with the Commission by
Xxxxxxx since May 15, 1996; and, prior to the Effective Time, Xxxxxxx will
have made available to Concept any additional documents filed with the
Commission by Xxxxxxx prior to the Effective Time (collectively, the "Xxxxxxx
Commission Documents"). In addition, Xxxxxxx has made available to Concept
all exhibits to the Xxxxxxx Commission Documents filed prior to the date
hereof, and will promptly make available to Concept all exhibits to any
additional Xxxxxxx Commission Documents filed prior to the Effective Time.
All documents required to be filed as exhibits to the Xxxxxxx Commission
Documents have been so filed, and all material contracts so filed as exhibits
are in full force and effect, except those which have expired in accordance
with their terms, and neither Xxxxxxx nor any of its subsidiaries is in
default thereunder. As of their respective filing dates, the Xxxxxxx
Commission Documents compiled in all material respects with the requirements
of the Exchange Act and the Securities Act, and none of the Xxxxxxx
Commission Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which
they were made, not misleading, except to the extent corrected by a
subsequently filed Xxxxxxx Commission Document prior to the date hereof. The
financial statements of Xxxxxxx, including the notes thereto, included in the
Xxxxxxx Commission Documents (the "Xxxxxxx Financial Statements") were
complete and correct in all material respects as of their respective dates,
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the Commission
with respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q of the Commission. The Xxxxxxx Financial statements fairly present the
consolidated financial condition and operating results of Xxxxxxx and its
subsidiaries at the dates and during the periods indicated therein (subject,
in the case of unaudited statements, to normal, recurring year-end
adjustments). There has been no change in Xxxxxxx accounting policies except
as described in the notes to the Xxxxxxx Financial Statements. Xxxxxxx has
filed in a timely manner all reports required to be filed with the Securities
and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange
Act during the 12 calendar months prior to the date hereof.
4.4 ACCURACY OF DOCUMENTS AND INFORMATION. No representations or
warranties made by Xxxxxxx or Sub in this Agreement, nor any document, written
information, statement, financial statement, certificate, schedule or exhibit
furnished directly to Concept pursuant to this Agreement, taken as a whole,
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements or facts contained herein not misleading.
5. COVENANTS OF CONCEPT.
5.1 ADVICE OF CHANGES. Concept will promptly advise Xxxxxxx in
writing (i) of any event occurring subsequent to the date of this Agreement
which would render any representation or warranty of Concept contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (ii) of any material adverse
change in Concept's business, taken as a whole.
23
5.2 CONDUCT OF BUSINESS. Until the Closing, Concept will continue to
conduct its business and maintain its business relationships in the ordinary and
usual course and will not, without the prior written consent of Xxxxxxx:
(a) borrow any money which borrowings exceed in the aggregate
Ten Thousand Dollars ($10,000);
(b) incur any liability other than in the ordinary and usual
course of business or in connection with the performance or consummation of this
Agreement;
(c) encumber or permit to be encumbered any of its assets except
in the ordinary course of its business;
(d) dispose of any of its assets, except inventory in the
regular and ordinary course of business;
(e) enter into any lease or contract for the purchase or sale of
any property, real or personal except for inventory purchased in the ordinary
course of business;
(f) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained up to
the date of this Agreement, subject only to ordinary wear and tear;
(g) pay or authorize any bonus, increased salary, or special
remuneration to any officer or employee, including any amounts for accrued but
unpaid salary or bonuses;
(h) adopt or change any accounting methods;
(i) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital, or redeem or otherwise acquire any of
its capital stock;
(j) amend or terminate any contract, agreement or license to
which it is a party except non-Material agreements in the ordinary course of
business;
(k) enter into any Material contract;
(l) loan any Material amount to any person or entity, or
guaranty or act as a surety for any obligation;
(m) waive or release any Material right or claim, except in the
ordinary course of business;
(n) issue or sell any shares of its capital stock of any class
or any other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, or other commitments to issue
shares of capital stock or amend the terms of any agreement regarding the
foregoing;
24
(o) split or combine the outstanding shares of its capital stock
of any class or enter into any recapitalization affecting the number of
outstanding shares of its capital stock of any class or affecting any other of
its securities;
(p) merge, consolidate or reorganize with any entity;
(q) amend its Articles of Incorporation or Bylaws;
(r) make or change any election, change any annual accounting
period, file any tax return or amended tax return, enter into any closing
agreement, settle any tax claim or assessment relating to Concept, surrender any
right to claim refund of taxes, consent to any extension or waiver of the
limitation period applicable to any tax claim or assessment relating to Concept,
or take any other action or omit to take any action, if any such election,
adoption, change, amendment, agreement, settlement, surrender, consent or other
action or omission would have the effect of increasing the tax liability of
Concept or Xxxxxxx; or
(s) agree to do any of the things described in the preceding
clauses of this Section 5.2.
5.3 RISK OF LOSS. Until the Closing and subject to the
confidentiality and nonuse provisions hereof, all risk of loss, damage or
destruction to Concept's assets shall be borne by Concept, and the Merger terms
described in Section 2 shall, in case of any such loss, damage or destruction,
be revised as the parties may agree, or this Agreement shall be terminated in
accordance with Section 11.
5.4 ACCESS TO INFORMATION. Until the Closing and subject to the
confidentiality and nonuse provisions hereof, Concept shall allow Xxxxxxx and
its Representatives free access upon reasonable notice and during normal working
hours to its files, books, records, and offices, including, without limitation,
any and all information relating to taxes, commitments, contracts, leases,
licenses, and personal property and financial condition. Until the Closing,
Concept shall cause its accountants to cooperate with Xxxxxxx and its
Representatives in making available all financial information requested,
including without limitation the right to examine all working papers pertaining
to all financial statements prepared or audited by such accountants.
5.5 REGULATORY APPROVALS. Prior to the Closing, Concept shall
execute and file, or join in the execution and filing, of any application or
other document which may be necessary in order to obtain the authorization,
approval or consent of any Governmental Body, federal, state or local, which may
be reasonably required, or which Xxxxxxx may reasonably request, in connection
with the consummation of the transactions contemplated by this Agreement Concept
shall use its best efforts to obtain all such authorizations, approvals and
consents.
5.6 SATISFACTION OF CONDITIONS PRECEDENT. Concept will use its best
efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Section 9, and Concept will use its best efforts to cause the
transactions contemplated by this Agreement to be consummated on or before
July 1, 1998, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all
25
notices to, third parties which may be necessary or reasonably required on
its part in order to effect the transactions contemplated hereby.
5.7 EQUITY COMPENSATION ARRANGEMENTS. Prior to the Closing, any
obligation of Concept to issue stock, warrants or options which have been
offered or promised to the employees of Concept shall have been fulfilled or
been terminated to the satisfaction of Xxxxxxx.
5.8 SHAREHOLDER CONSENT. Prior to the Closing, whether by special
meeting or written consent of its shareholders, Concept will submit this
Agreement, the Agreement of Merger and related matters to its shareholders for
consideration and approval, and the Board of Directors of Concept will recommend
such approval to the Concept Shareholders.
5.9 VOTING AGREEMENTS AND IRREVOCABLE PROXIES. Concept shall use its
best efforts, on behalf of Xxxxxxx and pursuant to the request of Xxxxxxx, to
cause holders of at least 81% of the shares of Concept capital stock issued and
outstanding prior to the Closing to execute and deliver to Xxxxxxx a Voting
Agreement and Irrevocable Proxy substantially in the form of EXHIBIT B attached
hereto concurrently with the execution of this Agreement.
5.10 NONACCREDITED INVESTORS. Prior to the Closing, (i) Concept shall
not take any action, including the granting of employee stock options, that
could cause the number of Concept Shareholders who are not "accredited
investors" pursuant to Regulation D promulgated under the Securities Act to
increase to more than 35 prior to the Closing; and (ii) Concept shall arrange
for the appointment of an investor representative meeting the requirements of
Regulation D under the Securities Act.
6. COVENANTS OF XXXXXXX AND SUB.
6.1 ADVICE OF CHANGES. Xxxxxxx and Sub will promptly advise Concept
in writing of any event occurring subsequent to the date of this Agreement which
would render any representation or warranty of Xxxxxxx or Sub contained in this
Agreement, if made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect.
6.2 REGULATORY APPROVALS. Prior to the Closing, Xxxxxxx and Sub
shall execute and file, or join in the execution and filing, of any application
or other document which may be necessary in order to obtain the authorization,
approval or consent of any Governmental Body, federal, state or local, which may
be reasonably required, or which Concept may reasonably request, in connection
with the consummation of the transactions contemplated by this Agreement. Such
persons and entities shall use their best efforts to obtain all such
authorizations, approvals and consents.
6.3 SATISFACTION OF CONDITIONS PRECEDENT. Xxxxxxx will use its best
efforts to satisfy or cause to be satisfied all the conditions precedent which
are set forth in Section 10, and Xxxxxxx will use its best efforts to cause the
transactions contemplated by this Agreement to be consummated on or before
July 1, 1998, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all
26
notices to, third parties which may be necessary or reasonably required on
its part in order to effect the transactions contemplated hereby.
6.4 REGISTRATION RIGHTS. Xxxxxxx will file a registration statement
for the Xxxxxxx Shares issued to the Concept Shareholders not later than
ninety (90) days of the Closing Date and will use its best efforts to have said
registration statement declared effective by the Commission.
6.5 LISTING OF ADDITIONAL SHARES. Upon registration of the Xxxxxxx
Shares with the Commission, Xxxxxxx shall file with the Nasdaq National Market a
Notification Form for Listing of Additional Shares with respect to the Xxxxxxx
Shares and with respect to the shares of Xxxxxxx Common Stock issuable upon
exercise of options to purchase Xxxxxxx Common Stock issuable in connection with
the Merger.
6.6 TREATMENT OF CONCEPT OPTIONS.
(a) Each Concept Optionee who will not continue as an employee
of the Surviving Corporation shall be given the opportunity by Concept prior to
the Effective Time to (i) exercise their existing Concept Options based upon the
number of shares vested as of the Closing Date (including all accelerated
vesting upon a change of control) and original exercise price for the Concept
Options or (ii) have the Concept Option canceled in consideration of a payment
of $1.00 per Concept Share subject to such vested Concept Option (the "Non-
Continuing Employee Election").
(b) Each Concept Optionee who will continue as an employee of
the Surviving Corporation shall be given the opportunity by Concept prior to the
Effective Time to (i) exercise their existing Concept Options based upon the
number of shares vested as of the Closing Date (including all accelerated
vesting upon a change of control) and original exercise price for the Concept
Options; (ii) have the Concept Option canceled in consideration of a payment of
$1.00 per Concept Share subject to such vested Concept Option; or (iii) have
their Concept Option replaced with an option to purchase Xxxxxxx Common Stock
exercisable for that number of whole shares of Xxxxxxx Common Stock equal to the
product of the number of shares of Concept Common Stock that were issuable upon
exercise of such option immediately prior to the Effective Time multiplied by
the Exchange Ratio and rounded down to the nearest whole number of shares of
Xxxxxxx Common Stock, and the per share exercise price for the shares of Xxxxxxx
Common Stock issuable upon exercise of such option will be equal to the quotient
determined by dividing the exercise price per share of Concept Common Stock at
which such option was exercisable immediately prior to the Effective Time by the
Exchange Ratio, rounded up to the nearest whole cent (the "Continuing Employee
Election").
6.7 ISSUANCE OF OPTIONS. Xxxxxxx shall, promptly after the Closing
Date, grant options to purchase an aggregate of 100,000 shares of its common
stock to Concept employees who continue as employees of the Surviving
Corporation in accordance with Xxxxxxx'x standard practices of issuing options
to Xxxxxxx employees.
27
7. MUTUAL COVENANTS.
7.1 CONFIDENTIALITY. Each party acknowledges that in the course of
the performance of this Agreement, it may obtain the Confidential Information of
the other party. The Receiving Party (as defined in Section 1.5 ) shall, at all
times, both during the term of this Agreement and thereafter, keep in confidence
and trust all of the Disclosing Party's (as defined in Section 1.5 )
Confidential Information received by it. The Receiving Party shall not use the
Confidential Information of the Disclosing Party other than as expressly
permitted under the terms of this Agreement or by a separate written agreement.
The Receiving Party shall take all reasonable steps to prevent unauthorized
disclosure or use of the Disclosing Party's Confidential Information and to
prevent it from falling into the public domain or into the possession of
unauthorized persons. The Receiving Party shall not disclose Confidential
Information of the Disclosing Party to any person or entity other than its
officers, employees, consultants and permitted sublicensees who need access to
such Confidential Information in order to effect the intent of this Agreement
and who have entered into confidentiality agreements with such person's employer
which protects the Confidential Information of the Disclosing Party. The
Receiving Party shall promptly give notice to the Disclosing Party of any
unauthorized use or disclosure of Disclosing Party's Confidential Information.
The Receiving Party agrees to assist the Disclosing Party to remedy such
unauthorized use or disclosure of its Confidential Information, which remedies
shall include injunctive relief without the necessity of posting a bond or
proving damages. These obligations shall not apply to the extent that
Confidential Information includes information which:
(a) is already known to the Receiving Party at the time of
disclosure, which knowledge the Receiving Party shall have the burden of
proving;
(b) is, or, through no act or failure to act of the Receiving
Party, becomes publicly known;
(c) is received by the Receiving Party from a third party
without restriction on disclosure;
(d) is independently developed by the Receiving Party without
reference to the Confidential Information of the Disclosing Party, which
independent development the Receiving Party will have the burden of proving;
(e) is approved for release by written authorization of the
Disclosing Party; or
(f) is required to be disclosed by a government agency to
further the objectives of this Agreement or by a proper order of a court of
competent jurisdiction; provided, however that the Receiving Party will use its
best efforts to minimize such disclosure and will consult with and assist the
Disclosing Party in obtaining a protective order prior to such disclosure.
28
7.2 EXCLUSIVITY. Until the earlier of the Closing Date and July 20,
1998, Concept agrees that it will not (and that it will use best efforts to
assure that its employees, agents and affiliates do not on its behalf) discuss
or enter into any agreement concerning the sale or acquisition of Concept, its
stock (including by means of any public offering thereof, but excluding issuance
of stock and options to employees in the ordinary course of business consistent
with past practices) or a substantial part of its assets with any party other
than Xxxxxxx, and that any such discussions presently in progress will be
terminated or suspended during that period. Concept represents and warrants
that it has the legal right to terminate or suspend any such pending
negotiations and agrees to indemnify Xxxxxxx, its representatives and agents
from and against any claims by any party to such negotiations based upon or
arising out of the discussion or any consummation of the Merger.
7.3 FURTHER ASSURANCES. Each party agrees to cooperate fully with
the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
7.4 TAX-FREE REORGANIZATION. Each party shall each use its best
efforts to cause the Merger to be treated as a reorganization within the meaning
of Section 368(a) of the Code.
8. THE CLOSING.
8.1 MERGER. On the date of the Closing, but not prior to the
Closing, the Agreement of Merger shall be filed with the office of the Secretary
of State of the State of California and the merger of Sub with and into Concept
shall be consummated.
8.2 ADDITIONAL DOCUMENTS.
(a) At any time and from time to time at or after the Closing,
the parties shall at the request of the other party execute and deliver or cause
to be executed and delivered all such assignments, consents and other documents
and take or cause to be taken all such other actions as either party may
reasonably deem necessary or desirable, in order to more fully and effectively
carry out the intents and purposes of this Agreement.
(b) Concept shall execute and deliver to Xxxxxxx a statement
meeting the requirements of Treasury Regulation Section 1.897-2(h)(2) stating
that interests in Concept are not United States real property interests.
9. CONDITIONS TO CONCEPT'S OBLIGATIONS.
Concept's obligations hereunder are subject to the fulfillment or
satisfaction on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Concept, but only in a writing signed by
Concept):
29
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Xxxxxxx and Sub set forth in Section 4 shall be true on and as
of the Closing with the same force and effect as if they had been made at the
Closing and the conditions to Concept's obligations set forth under
Sections 9.1, 9.2, 9.3 and 9.4 shall have been satisfied. Concept shall receive
a certificate to such effect from an executive officer of Xxxxxxx.
9.2 COVENANTS. Xxxxxxx and Sub shall have performed and complied
with all of their covenants contained in Sections 6 and 7 to be performed on or
before the Closing.
9.3 NO LITIGATION. No litigation or proceeding shall be threatened
or pending against Xxxxxxx or Sub with the purpose or with the probable effect
of enjoining or preventing the consummation of any of the transactions
contemplated by this Agreement.
9.4 AUTHORIZATIONS. Concept shall have received from Xxxxxxx and Sub
written evidence that the execution, delivery and performance of Xxxxxxx and
Sub's obligations under this Agreement and the Agreement of Merger have been
duly and validly approved and authorized by the Board of Directors of Xxxxxxx
and Sub, respectively, and the shareholder of Sub.
9.5 GOVERNMENT CONSENTS. There shall have been obtained at or prior
to the date of Closing such permits or authorizations, and there shall have been
taken such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken, including, but not limited to, compliance with applicable
state and federal securities laws.
9.6 REGISTRATION RIGHTS AGREEMENT. Xxxxxxx and the Shareholder
Representatives (as defined in Section 12.6) on behalf of the Concept
Shareholders shall have entered into a Registration Rights Agreement in the form
attached hereto as EXHIBIT C.
9.7 REPAYMENT OF INDEBTEDNESS TO YOKAGAWA ELECTRIC. Xxxxxxx shall
have tendered to Yokagawa Electric the amount necessary for the repayment of
Concept's $4,000,000 outstanding indebtedness to Yokagawa Electric including all
accrued interest thereon.
10. CONDITIONS TO XXXXXXX AND SUB'S OBLIGATIONS.
Xxxxxxx'x and Sub's obligations hereunder are subject to the
fulfillment or satisfaction on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Xxxxxxx, but only in a
writing signed by Xxxxxxx):
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Concept contained in Section 3 shall be true on and as of the
Closing with the same force and effect as if they had been made at the Closing
and the conditions to Xxxxxxx'x and Sub's obligations set forth under
Sections 10.1, 10.2, 10.3 and 10.4 shall have been satisfied. Xxxxxxx shall
receive a certificate to such effect from an executive officer of Concept.
10.2 COVENANTS. Concept shall have performed and complied with all of
its covenants contained in Sections 5 and 7 on or before the Closing.
30
10.3 NO LITIGATION. On and as of the Closing, no litigation or
proceeding shall be threatened or pending against Concept for the purpose or
with the probable effect of enjoining or preventing the consummation of any of
the transactions contemplated by this Agreement, or which would have a material
adverse effect on the business, liabilities, income, property, operations or
prospects of Concept subsequent to the Closing.
10.4 AUTHORIZATIONS. Xxxxxxx shall have received from Concept written
evidence that (i) the execution, delivery and performance of this Agreement and
the Agreement of Merger have been duly and validly approved and authorized by
its Board of Directors and (ii) Concept Shareholders of at least 81% of the
Concept Shares have approved this Agreement, the Merger and the transactions
contemplated hereby and thereby.
10.5 NO ADVERSE DEVELOPMENT. There shall be no order, decree, or
ruling by any court or Governmental Body or threat thereof or any other fact
or circumstance, which might prohibit or render illegal or have a Material
adverse effect on the business, prospects, liabilities, income, property,
assets or operations of Concept subsequent to the Closing. Concept shall not
have sustained a loss, whether or not insured, by reason of physical damage
caused by fire, flood or earthquake, accident or other calamity which
materially affects the Concept Balance Sheet or its ability to carry on its
business as proposed to be conducted, and which, in the judgment of Xxxxxxx,
renders it inadvisable to proceed with the Closing. There shall have been no
other event which, in the reasonable judgment of Xxxxxxx, has a material and
adverse effect on Concept's assets, business, liabilities, income, property,
assets, prospects or operations subsequent to the Closing.
10.6 REQUIRED CONSENTS. Xxxxxxx shall have received all written
consents, assignments, waivers, authorizations or other certificates reasonably
deemed necessary by Xxxxxxx'x legal counsel to provide for the continuation in
full force and effect of any and all contracts and leases of Concept.
10.7 OPINION OF CONCEPT'S COUNSEL. Xxxxxxx shall have received from
Xxxxxx Xxxx & Priest, counsel to Concept, an opinion substantially in the form
attached hereto as EXHIBIT D.
10.8 EMPLOYMENT WITH XXXXXXX. Xxxxxxx shall be reasonably satisfied
that substantially all current employees of Concept offered employment by
Xxxxxxx have accepted or will accept employment with the Surviving Corporation.
10.9 GOVERNMENT CONSENTS. There shall have been obtained at or prior
to the Closing Date such permits or authorizations and there shall have been
taken such other action, as may be required by any regulatory authority having
jurisdiction over the parties and the subject matter and the actions herein
proposed to be taken, including, but not limited to, compliance with applicable
state and federal securities laws.
10.10 DUE DILIGENCE AND ENVIRONMENTAL REVIEW. There shall have
been prior to the Closing Date satisfactory completion of the Environmental
Review and a review by Xxxxxxx and its Representatives of Concept's business,
financial, technical and legal affairs.
31
10.11 CONVERSION OF CONCEPT PREFERRED STOCK. Subject to Section
10.12 below, there shall have been on or prior to the Closing Date the
conversion of all outstanding Concept Preferred Stock into Concept Common
Stock.
10.12 REPAYMENT OF INDEBTEDNESS TO YOKAGAWA ELECTRIC. Xxxxxxx
shall have tendered to Yokagawa Electric Corporation ("Yokagawa") the amount
necessary for the repayment of Concept's $4,000,000 outstanding indebtedness
to Yokagawa including all accrued interest thereon.
10.13 ELECTION BY CONCEPT OPTIONEES. Prior to the Closing, (i) each
Concept Optionee who will not continue as an employee of the Surviving
Corporation shall have confirmed the Non-Continuing Employee Election in the
form of a written agreement with Xxxxxxx and (ii) each Concept Optionee who
will continue as an employee of the Surviving Corporation shall have
confirmed the Continuing Employee Election in the form of a written agreement
with Xxxxxxx.
10.14 SUITABILITY OF CONCEPT SHAREHOLDERS. Each of the Concept
Shareholders shall have confirmed in writing his or her suitability to receive
the Xxxxxxx Shares by means of an Investor Representation Letter in the form
attached hereto as EXHIBIT E.
10.15 TERMINATION OF YOKAGAWA BASIC ALLIANCE AGREEMENT. Concept
shall have terminated the Basic Alliance Agreement between Concept and Yokagawa
dated as of October 28, 1996, as amended.
10.16 REPAYMENT OF INDEBTEDNESS TO INNOTECH CORPORATION AND
TERMINATION OF INTERNATIONAL DISTRIBUTION AGREEMENT. Xxxxxxx shall have
tendered to Innotech Corporation ("Innotech") the amount necessary for the
repayment of Concept's $1,600,000 outstanding indebtedness to Innotech including
all accrued interest thereon and Concept shall have terminated the International
Distribution Agreement between Concept and Innotech dated January 30, 1997, as
amended.
10.17 CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT.
All current employees of Concept shall have signed a Confidential Information
and Invention Assignment Agreement assigning over to Concept any and all
inventions of the employees created while employed by and in the performance of
their duties for Concept.
10.18 401K PLAN. Concept shall take all steps necessary to terminate
the Concept 401K Plan prior to the Closing.
11. TERMINATION OF AGREEMENT.
11.1 MUTUAL AGREEMENT. This Agreement may be terminated at any time
prior to the Closing by the mutual written consent of each of the parties
hereto.
11.2 FAILURE TO FULFILL CONDITIONS. Either Xxxxxxx or Concept may
terminate this Agreement if the Merger has not been consummated by July 31, 1998
(provided that the right to terminate this Agreement under this Section 11.2
shall not be available to any party whose
32
failure to fulfill any obligation under this Agreement has been the cause of
or resulted in the failure of the Merger to occur on or before such date).
Any termination of this Agreement under this Section 11.2 shall be effective
by the delivery of notice of the terminating party to the other parties
hereto.
11.3 NO LIABILITY. Any termination of this Agreement pursuant to this
Section 11 shall be without further obligation or liability upon any party in
favor of any other party hereto.
11.4 EFFECT OF TERMINATION. The termination of the Agreement pursuant
to this Section 11 shall terminate all sections hereof other than Section 7.1.
12. INDEMNIFICATION AND ESCROW.
12.1 SURVIVAL OF REPRESENTATIONS.
(a) The representations and warranties made by Concept under
Section 3 hereof and the representations and warranties set forth in any
certificate delivered by Concept in connection with this Agreement shall survive
the Closing and shall remain in full force and effect and shall survive until
the end of the Indemnification Period and shall survive thereafter only with
respect to any claims made prior to the end of the Indemnification Period.
(b) The representations, warranties, covenants and obligations
of Concept, and the rights and remedies that may be exercised by the Indemnitees
(as defined herein), shall not be limited or otherwise affected by or as a
result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives.
(c) For purposes of this Agreement, each statement or other
item of information set forth in the Concept Disclosure Schedule shall be
deemed to be a representation and warranty made by Concept in this Agreement.
12.2 INDEMNIFICATION BY CONCEPT SHAREHOLDERS.
(a) From and after the Closing Date, the Concept Shareholders,
to the extent of and for the purpose of the Indemnity Escrow (as defined below
in Section 12.5) only, shall be jointly and severally liable for and shall hold
harmless and indemnify Xxxxxxx and the Surviving Corporation (each an
"Indemnitee") from and against, and shall compensate and reimburse each of the
Indemnitees for, any Damages which are directly or indirectly suffered or
incurred by any of the Indemnitees or to which any of the Indemnitees may
otherwise become subject (regardless of whether or not such Damages relate to
any third-party claim) and which arise from or as a result of, or are directly
or indirectly connected with: (i) any inaccuracy in or breach of any
representation or warranty set forth in Section 3 hereunder or in any
certificate delivered by Concept in connection with this Agreement; (ii) any
breach of any covenant or obligation of Concept hereunder; or (iii) any Legal
Proceeding relating to any inaccuracy, breach or expense of the type referred to
in clause "(i)" or "(ii)" above (including any Legal Proceeding
33
commenced by any Indemnitee for the purpose of enforcing any of its rights
under this Section 12 if such Indemnitee is the prevailing party in any such
Legal Proceeding).
(b) If the Surviving Corporation suffers, incurs or otherwise
becomes subject to any Damages as a result of or in connection with any
inaccuracy in or breach of any representation, warranty, covenant or obligation,
then (without limiting any of the rights of the Surviving Corporation as an
Indemnitee) Xxxxxxx shall also be deemed, by virtue of its ownership of the
stock of the Surviving Corporation, to have incurred Damages as a result of and
in connection with such inaccuracy or breach.
(c) No Indemnitee shall have the right to be indemnified
pursuant to this Section 12 unless and until the Indemnitees together shall have
incurred on a cumulative basis from and after the Closing Date aggregate Damages
in an amount not less than $50,000 whereupon the Concept Shareholders shall be
obligated to indemnify against all Damages.
12.3 NO CONTRIBUTION. The Concept Shareholders acknowledge and agree
that they shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation which they have in their
capacity as shareholders in connection with any indemnification obligation or
any other liability to which it may become subject under or in connection with
this Agreement or any certificate delivered by Concept in connection with this
Agreement.
12.4 DEFENSE OF THIRD PARTY CLAIMS. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against Xxxxxxx or against any other Person) with respect
to which the Concept Shareholders may become obligated to hold harmless,
indemnify, compensate or reimburse any Indemnitee pursuant to this Section 12,
the procedure set forth below shall be followed.
(a) NOTICE. Xxxxxxx shall give prompt written notice of the
commencement of any such Legal Proceeding against Xxxxxxx or the Surviving
Corporation for which indemnity may be sought under Section 12; provided,
however, that any failure on the part of Xxxxxxx to so notify Concept shall not
limit any of the obligations of Concept under this Section 12 unless the ability
to defend such claim is materially prejudiced by such failure or delay. The
Indemnification Period shall be tolled solely with respect to a particular claim
for the period beginning on the date the Concept Shareholders receive written
notice of that claim until the final resolution of such claim so long as such
claim is made within the Indemnification Period.
(b) DEFENSE OF CLAIM. The Indemnitee shall have the right to be
represented by counsel of its choice and to defend or otherwise control the
handling of any claim, or Legal Proceeding for which indemnity is sought. If
the Indemnitee so proceeds with the defense of any such claim or Legal
Proceeding:
(i) all expenses relating to the defense of such claim
or Legal Proceeding (whether or not incurred by the Indemnitee) shall be
borne and paid exclusively by the Concept Shareholders should a third party
prevail on any such claim or Legal Proceeding;
34
(ii) the Concept Shareholders shall make available to
the Indemnitee any non-privileged documents and materials in the possession
or control of the Concept Shareholders that may be necessary to the defense
of such claim or Legal Proceeding except for documents or materials which are
sealed by a court order or are subject to a nondisclosure agreement
prohibiting disclosure by the Concept Shareholders;
(iii) the Indemnitee shall keep the Concept Shareholders
informed of all material developments and events relating to such claim or
Legal Proceeding; and
(iv) the Concept Shareholders shall have the right to
participate in the defense of such claim or legal proceeding at their sole
cost and expense; and
(v) the Indemnitee shall have the right to settle,
adjust or compromise such claim or Legal Proceeding with the written consent
of the Concept Shareholders; provided, however, that the Concept Shareholders
shall not unreasonably withhold such consent.
12.5 INDEMNITY ESCROW. As soon as practicable after the Effective
Time, Xxxxxxx shall deposit into an escrow account (the "Indemnity Escrow") with
IBJ Xxxxxxxx Bank & Trust Company as escrow agent (the "Indemnity Escrow
Agent"), (i) ten percent (10%) of the Xxxxxxx Shares, (ii) the Revenue
Contingent Share Pool and (iii) the Additional Share Pool (collectively, the
"Indemnity Escrow Holdback"). The Indemnity Escrow Holdback shall be withheld
on a pro rata basis from the Concept Shareholders who otherwise are entitled to
such amounts at the Effective Time or at the end of the Measurement Period and
shall be governed by the terms set forth herein and in an escrow agreement (the
"Indemnity Escrow Agreement") in substantially the form attached hereto as
EXHIBIT F. The Indemnity Escrow (but only up to a maximum of the total
aggregate value of the Indemnity Escrow Holdback) shall be available to
compensate the Indemnitees for any loss, to the extent of the amount of Damages
that such Indemnitee has incurred by reason of the breach by Concept of any
representation, warranty, covenant or agreement of Concept contained herein, or
by reason of any misrepresentation by Concept made in or pursuant to Section 3
of this Agreement or in any certificate delivered by Concept pursuant to this
Agreement; provided, however, that any claim or Legal Proceeding for which
indemnity is sought shall be satisfied from the Indemnity Escrow Holdback in the
following priority: (i) from the ten percent (10%) of the Xxxxxxx Shares
deposited in escrow, (ii) from the Revenue Contingent Share Pool (so long as
indemnity is sought prior to the end of the Indemnification Period) and (iii)
from the Additional Share Pool (so long as indemnity is sought prior to the end
of the Indemnification Period). No shareholder of Concept shall have any
personal obligation to indemnify Indemnitee hereunder, such obligation shall
extend only to such shareholders interest in the Indemnity Escrow Holdback.
12.6 SHAREHOLDER REPRESENTATIVES.
(a) By virtue of their approval of this Agreement, the Concept
Shareholders will be deemed to have irrevocably constituted and appointed,
effective as of the Effective Time, Xxxxx Xxx and Xxx Xxxxx (together with their
permitted successors, the "Shareholder Representatives"), as their true and
lawful agent and attorney-in-fact to enter into
35
any agreement in connection with the transactions contemplated by this
Agreement or the Indemnity Escrow Agreement, to exercise all or any of the
powers, authority and discretion conferred on him under any such agreement,
to waive any terms and conditions of any such agreement (other than the
payment of the Indemnity Escrow Holdback), to give and receive notices and
communications, to authorize delivery to Xxxxxxx of the Indemnity Escrow
Holdback or other property from the Indemnity Escrow in satisfaction of
claims by Xxxxxxx, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and demand arbitration and comply
with orders of courts and awards of arbitrators with respect to such claims,
and to take all actions necessary or appropriate in the judgment of the
Shareholder Representatives for the accomplishment of the foregoing. Such
agency may be changed by the holders of a majority in interest of the
Indemnity Escrow from time to time upon not less than ten (10) days' prior
written notice to Xxxxxxx. The Shareholder Representatives shall receive no
compensation for their services. Notices or communications to or from the
Shareholder Representatives shall constitute notice to or from each of the
Concept Shareholders. This power of attorney is coupled with an interest and
is irrevocable.
(b) The Shareholder Representatives shall not be liable for any
act done or omitted hereunder as Shareholder Representatives while acting in
good faith and not in a manner constituting gross negligence, and any act done
or omitted pursuant to the advice of counsel shall be conclusive evidence of
such good faith. The Concept Shareholders shall severally indemnify each of the
Shareholder Representatives and hold each harmless against any loss, liability
or expense incurred without gross negligence or bad faith on the part of such
Shareholder Representative and arising out of or in connection with the
acceptance or administration of his duties hereunder.
13. MISCELLANEOUS.
13.1 GOVERNING LAWS. It is the intention of the parties hereto that
the internal laws of the State of California (irrespective of its choice of law
principles) shall 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. The parties hereby agree that any suit to enforce any provision
of this Agreement or arising out of or based upon this Agreement or the business
relationship between any of the parties hereto shall be brought in the United
States District Court for the Northern District of California or the Superior or
Municipal Court in and for the County of Santa Clara, California. Each party
hereby agrees that such courts, as applicable, shall have IN PERSONAM
jurisdiction with respect to such party, and such party hereby submits to the
personal jurisdiction of such courts.
13.2 BINDING UPON SUCCESSORS AND ASSIGNS. Subject to, and unless
otherwise provided in, this Agreement, each and all of the covenants, terms,
provisions, and agreements contained herein shall be binding upon, and inure to
the benefit of, the permitted successors, executors, heirs, representatives,
administrators and assigns of the parties hereto.
13.3 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason and to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall be
36
interpreted so as best to reasonably effect the intent of the parties hereto.
The parties further agree to replace such void or unenforceable provision of
this Agreement with a valid and enforceable provision which will achieve, to
the extent possible, the economic, business and other purposes of the void or
unenforceable provision.
13.4 ENTIRE AGREEMENT. This Agreement, the exhibits and schedules
hereto, the documents referenced herein, and the exhibits and schedules thereto,
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and thereof and supersede all prior and
contemporaneous agreements or understandings, inducements or conditions, express
or implied, written or oral, between the parties with respect hereto and
thereto. The express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of the terms hereof.
13.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the parties reflected hereon as signatories.
13.6 EXPENSES. Except as provided to the contrary herein, each party
shall pay all of its own costs and expenses incurred with respect to the
negotiation, execution and delivery of this Agreement and the exhibits hereto.
In the event the Merger is consummated, all legal and accounting fees incurred
by Concept and the Concept Shareholders in connection with the Merger up to
$80,000 shall be payable by Xxxxxxx upon presentation of an adequate and
appropriate xxxx. Any expenses in excess of such amount shall be deemed to be
expenses of the Concept Shareholders, shall be borne by the Concept Shareholders
and shall not become obligations of Concept, Xxxxxxx or the Surviving
Corporation. The Concept Shareholders shall make arrangements satisfactory to
Xxxxxxx at or prior to the Closing for the satisfaction of such amounts.
13.7 OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party shall be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy shall not preclude the exercise of any other.
13.8 AMENDMENT AND WAIVERS. Any term or provision of this Agreement
may be amended, and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof for default in payment of any amount due
hereunder or default in the performance hereof shall not be deemed to constitute
a waiver of any other default or any succeeding breach or default.
13.9 SURVIVAL OF AGREEMENTS. Subject to Section 12.1(a), all
covenants, agreements, representations and warranties made herein shall survive
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby notwithstanding any investigation of the
parties hereto.
37
13.10 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
13.11 ATTORNEYS' FEES. Should suit be brought to enforce or
interpret any part of this Agreement, the prevailing party shall be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party shall be the party
entitled to recover its costs of suit, regardless of whether such suit proceeds
to final judgment. A party not entitled to recover its costs shall not be
entitled to recover attorneys' fees. No sum for attorneys' fees shall be
counted in calculating the amount of a judgment for purposes of determining if a
party is entitled to recover costs or attorneys' fees.
13.12 NOTICES. Any notice provided for or permitted under this
Agreement will be treated as having been received (a) when delivered personally,
(b) when sent by confirmed telex or telecopy, (c) one (1) day following when
sent by commercial overnight courier with written verification of receipt, or
(d) three (3) days following when mailed postage prepaid by certified or
registered mail, return receipt requested, to the party to be notified, at the
address set forth below, or at such other place of which the other party has
been notified in accordance with the provisions of this Section 13.12.
Concept: Concept Systems Design, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxx
With copy to: Xxxxxx Xxxx & Priest
000 X. Xxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx Xxxxxxxxx, Esq.
Xxxxxxx or Sub: Xxxxxxx Technology, Inc.
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
With copy to: Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxx, Esq.
38
Shareholder Xxxxx Xxx and Xxx Xxxxx
Representatives: c/o Concept Systems Design, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxx
With copy to: Xxxxxx Xxxx & Priest
000 X. Xxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx Xxxxxxxxx, Esq.
13.13 TIME. Time is of the essence of this Agreement.
13.14 CONSTRUCTION OF AGREEMENT. This Agreement has been
negotiated by the respective parties hereto and their attorneys and the language
hereof shall not be construed for or against any party. The titles and headings
herein are for reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a whole.
13.15 NO JOINT VENTURE. Nothing contained in this Agreement shall
be deemed or construed as creating a joint venture or partnership between any of
the parties hereto. No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party. No party shall have
the power to control the activities and operations of any other and their status
is, and at all times, will continue to be, that of independent contractors with
respect to each other. No party shall have any power or authority to bind or
commit any other. No party shall hold itself out as having any authority or
relationship in contravention of this Section 13.15.
13.16 PRONOUNS. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the person, persons, entity or entities may require.
13.17 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances, as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
13.18 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provisions of
this Agreement are intended, nor shall be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, shareholder, partner of any party hereto or any other
person or entity unless specifically provided otherwise herein, and, except as
so provided, all provisions hereof shall be personal solely between the parties
to this Agreement.
39
13.19 ARBITRATION. Each party agrees that any dispute arising out
of or relating to this Agreement shall be settled by (i) agreement of the
Concept Shareholders and Xxxxxxx or (ii) arbitration in Fremont, California and,
except as herein specifically stated, in accordance with the commercial
arbitration rules of the American Arbitration Association ("AAA Rules") then in
effect. However, in all events, these arbitration provisions shall govern over
any conflicting rules which may now or hereafter be contained in the AAA Rules.
Any judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction over the subject matter thereof. The arbitrator shall
have the authority to grant any equitable and legal remedies that would be
available in any judicial proceeding instituted to resolve such dispute.
(a) COMPENSATION OF ARBITRATOR. Any such arbitration shall be
conducted before a single arbitrator who shall be compensated for his or her
services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
(b) SELECTION OF ARBITRATOR. The AAA Rules for the selection of
the arbitrator shall be followed by Xxxxxxx and the Concept Shareholders.
(c) PAYMENT OF COSTS. Xxxxxxx and the Concept Shareholders
shall each pay fifty percent (50%) of the initial compensation to be paid to the
arbitrator in any such arbitration and fifty percent (50%) of the costs of
transcripts and other normal and regular expenses of the arbitration
proceedings; provided, however, that the prevailing party in any arbitration
shall be entitled to an award of attorneys' fees and costs, and all costs of
arbitration, other than those provided for above, will be paid by the losing
party.
(d) DISCOVERY. The parties shall be entitled to conduct
discovery proceedings in accordance with the provisions of the Federal Rules of
Civil Procedure, only to the extent the arbitrator considers necessary to a full
and fair exploration of the issues in dispute.
(e) BURDEN OF PROOF. For any claim submitted to arbitration,
the burden of proof shall be as it would be if the claim were litigated in a
judicial proceeding.
(f) JUDGMENT. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator shall render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached by him and shall deliver such documents to each party to
this Agreement along with a signed copy of the award.
(g) TERMS OF ARBITRATION. The arbitrator chosen in accordance
with these provisions shall not have the power to alter, amend or otherwise
affect the terms of these arbitration provisions or the provisions of this
Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
40
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
XXXXXXX TECHNOLOGY, INC. CONCEPT SYSTEMS DESIGN, INC.
By: /s/ Xxxx Xxxxxxx By: /s/ Xxxxx Xxxxxxx
---------------- -----------------
Title: Chief Executive Officer Title: Chief Financial Officer
----------------------- -----------------------
CONCEPT ACQUISITION CORPORATION SHAREHOLDER REPRESENTATIVES:
By: /s/ Xxxxxxx Xxxx /s/ Xxxxx Xxx
---------------- -------------
Xxxxx Xxx
Title: Chief Financial Offier
----------------------
/s/ Xxxxxx X. Xxxxx
-------------------
Xxx Xxxxx
