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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of the earliest event reported) MAY 7, 1998
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FARO TECHNOLOGIES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Florida
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(State or Other Jurisdiction of Incorporation)
0-23081 59-3157093
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(Commission File Number) (IRS Employer Identification No.)
125 TECHNOLOGY PARK
LAKE MARY, FLORIDA 32746
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(Address of Principal Executive Offices) (Zip Code)
(407) 333-9911
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 7, 1998, pursuant to an Acquisition Agreement executed in the
United States dated as of May 7, 1998 (the "Agreement"), FARO Technologies Inc.
("FARO" or the "Company") acquired all of the assets of CATS Computer Aided
Technolgies, GmbH ("CATS") in exchange for $5 million in cash and 916,667
shares of FARO common stock. On May 15, 1998, the Agreement was executed in
Germany, in conformance with German law. Under the terms of the Agreement, the
transaction is to be accounted for utilizing the purchasing method of
accounting.
CATS, a corporation organized and existing under the laws of Germany,
develops software for 3-dimensional measurement, system level measurement,
quality control, and dimensional statistical process control. Wendelin
Scharbach and Siegfried Buss, co-founders of CATS will continue in management
roles with the Company.
There were no material relationships between FARO and CATS prior to
the Agreement. Neither Wendelin Scharbach nor Siegfried Buss owned any shares
of FARO's common stock prior to the execution of the Agreement. In addition,
none of the directors or executive officers of the Company owned any CATS stock
as of the date of the Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of business acquired:
It is impractical to provide the required financial statements
for CATS Computer Aided Technolgies, GmbH at the date of the filing of
this Form 8-K. The required financial statements will be provided as
soon as practicable but not later than sixty days after the date on
which this Form 8-K must be filed.
(b) Pro forma financial information:
It is impractical to provide the required pro forma financial
statements for CATS Computer Aided Technolgies, GmbH at the date of
the filing of this Form 8-K. The required pro forma financial
statements will be provided as soon as practicable but not later than
sixty days after the date on which this Form 8-K must be filed.
(c) Exhibits:
Exhibit No. Description
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2.1 Acquisition Agreement between CATS Computer Aided Technolgies,
GmbH and FARO Technologies, Inc. dated as of May 15, 1998
(without schedules or exhibits).(1)
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(1) FARO Technologies Inc. agrees to supplementally furnish a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission upon
request.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FARO TECHNOLOGIES, INC.
By: /s/ Gregory A. Fraser
---------------------------------
Gregory A. Fraser
Executive Vice President and CFO
Date: May 21, 1998
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FARO TECHNOLOGIES, INC.
FORM 8-K
DATE OF REPORT: MAY 7, 1998
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Acquisition Agreement between CATS Computer Aided Technolgies,
GmbH And FARO Technologies Inc. dated as of May 15, 1998
(without schedules or exhibits).(1)
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(1) FARO Technologies Inc. agrees to supplementally furnish a copy of any
omitted schedule or exhibit to the Securities and Exchange Commission
upon request.
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EXHIBIT 2.1
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (this "Agreement") is made and entered into
as of May 15, 1998, among the undersigned persons (collectively, the
"Sellers"), being the holders of all the outstanding capital interests of Cats
computer aided technologies, Computeranwendungen in der Fertigungssteuerung
GmbH, a limited liability company organized under the laws of the Federal
Republic of Germany (the "Company"), each such Seller being an individual
residing in, and a citizen of, the Federal Republic of Germany, TSP AURIGA
VERMoGENSVERWALTUNGS GMBH, a limited liability company organized and existing
under the laws of the Federal Republic of Germany ("Buyer"), and FARO
TECHNOLOGIES, INC., a corporation organized and existing under the laws of the
State of Florida ("FARO").
RECITALS
WHEREAS, the Sellers own all of the issued and outstanding capital
interests of the Company (the "Quotas");
WHEREAS, FARO owns all of the issued and outstanding capital interests
of Buyer; and
WHEREAS, the Sellers desire to sell, and Buyer desires to purchase,
the Quotas pursuant to the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements set forth herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION I.1 The terms defined in this Article shall have the following
respective meanings for all purposes of this Agreement:
"Affiliate" means, with respect to any Person, an officer, director or
beneficial owner of five percent (5%) or more of the issued and outstanding
shares of any class of capital stock or other equity of such Person.
"Business Day" means any day on which banks are open for business in
New York, New York.
"Buyer" means TSP Auriga Vermogensverwaltungs GmbH.
"Closing" means the consummation and effectuation of the transactions
contemplated herein pursuant to the terms and conditions of this Agreement.
"Closing Date" has the meaning set forth in Section 3.1 of this
Agreement.
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"Company" means Cats computer aided technologies, Computeranwendungen
in der Fertigungssteuerung GmbH, a limited liability company organized under
the laws of the Federal Republic of Germany.
"Contracts" shall have the meaning set forth in Section 4.15.
"Customers" shall have the meaning set forth in Section 4.15.
"Disclosure Schedule" means the disclosure schedules executed by
Sellers as of the date hereof and previously delivered to Buyer and FARO,
without any amendment thereto subsequent to the date hereof.
"Employee Benefit Plan" means any pension, retirement, profit sharing,
savings, thrift, stock bonus, stock option, stock purchase, restricted stock
purchase, stock ownership, stock appreciation right, phantom stock, deferred
compensation, supplemental retirement, deferred bonus, severance, change of
control, parachute, health, medical, dental, vision, drug, fitness, dependent
care, educational assistance, group legal services, life insurance, accidental
death, accidental dismemberment, sick pay, short-term or long-term disability,
supplemental unemployment income, training, apprenticeship, scholarship,
tuition reimbursement, employee assistance, employee discount, subsidized
cafeteria, fringe benefit, vacation, holiday, employer-sponsored recreational
facility, or other a pension benefit or welfare benefit plan, policy, contract,
or arrangement, or other similar fringe or employee benefit plan, program,
policy, contract, or arrangement, written or oral, qualified or nonqualified,
funded or unfunded, foreign or domestic.
"Escrow Agent" means Firstar Trust Company, or such other Person as
FARO and the Sellers shall mutually agree upon, in its capacity as escrow
agent.
"Escrow Agreement" means the Escrow Agreement dated on or about the
date of this Agreement among the Buyer, each Seller, and the Escrow Agent
relating to the distribution of the Escrow Shares, a copy of which is attached
as Exhibit "E" to this Agreement.
"Escrow Shares" means the 333,332 shares of FARO Common Stock to be
held in escrow pursuant to the terms of the Escrow Agreement.
"FARO" means FARO Technologies, Inc., a corporation organized and
existing under the laws of the State of Florida.
"FARO Filings" means the following filings made by FARO with the SEC:
the annual report on Form 10-K for the annual period ending December 31, 1997
and the proxy statement filed on Schedule 14A with respect to FARO's 1998
annual shareholders meeting.
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"FARO Common Stock" means FARO's common stock, $.001 par value per
share.
"Financial Statements" has the meaning set forth in Section 4.7.
"Form 10-K Balance Sheet" means FARO's audited balance sheet dated
December 31, 1997 (and any related notes thereto), a copy of which is included
as part of the FARO Filings.
"GGAAP" means generally accepted accounting principles as in effect in
the Federal Republic of Germany on December 31, 1997.
"Grants" means the governmental and other grants, subsidies,
guarantees, or loans provided to or for the benefit of the Company.
"Holdback Period" means the period beginning on the Closing Date and
ending 18-months following the Closing Date.
"Intellectual Property" means all intellectual property and
intellectual property rights, whether arising under the laws of the Federal
Republic of Germany or any other jurisdiction, including, without limitation,
(i) all patents, patent applications, continuations in part, divisions,
reissues, and patent disclosures, (ii) all copyrights, whether registered or
unregistered, and pending applications to register the same, (iii) anything
recognizable as a trademark, or service mark, whether registered or not, which
is used to identify the source and quality of goods or services or to
distinguish them from those of others, and all registrations and applications
for registration, including intent-to-use registrations and applications for
registration, (iv) all names used to identify a particular company, business,
subsidiary or division thereof, (v) all trade secrets, and (vi) all other forms
of proprietary information, and all rights to use such Intellectual Property.
"Interim Balance Sheet" means the unaudited consolidated balance sheet
of the Company dated as of the Interim Balance Sheet Date (and any related
notes thereto), a copy of which is included as a part of the Financial
Statements.
"Interim Balance Sheet Date" means December 31, 1997.
"Leased Real Property" means all real property and premises currently
leased to the Company.
"Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the business, operations, assets, prospects, or
condition (financial or otherwise) of such person.
"Person" means an individual, partnership, limited liability company,
corporation, trust, unincorporated organization, association, or joint venture
or a government, agency, political subdivision or instrumentality thereof.
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"Purchase Price" shall have the meaning set forth in Section 3.1.
"Purchase Price Shares" means the 916,668 shares of FARO Common Stock
to be issued to the Sellers in partial consideration of the transfer and
assignment of the Quotas pursuant to this Agreement.
"Quotas" means all of the issued and outstanding capital interests of
the Company.
"Registration Rights Agreement" means the Registration Rights
Agreement dated on or about the date of this Agreement between FARO and the
Sellers with respect to 343,750 shares of the Purchase Price Shares, a copy of
which is attached as Exhibit "F" to this Agreement.
"Related Agreements" means the Escrow Agreement, the Registration
Rights Agreement, and the agreements described in Section 6.10.
"SEC" means the United States Securities and Exchange Commission.
"Tax" means all taxes, assessments, and charges imposed by any
federal, state, local, or foreign taxing authority, including social security,
insurance and other state-sponsored pension funds, and all interest, penalties
and additions thereto.
"Tax Payment Registration Statement" has the meaning set forth in
Section 6.1.
"Transfer Agent" means Firstar Trust Company, or such other Person as
FARO and the Sellers shall mutually agree upon, in its capacity as escrow
agent.
"USGAAP" means generally accepted accounting principles as in effect
in the United States on December 31, 1997.
ARTICLE II
PURCHASE AND SALE OF QUOTAS
SECTION II.1 PURCHASE AND SALE OF QUOTAS. Upon the terms and
subject to the conditions hereof, each Seller hereby sells to Buyer, and Buyer
hereby purchases from each Seller, all of such Seller's right, title, and
interest in and to the Quotas set forth below opposite the name of such Seller,
together with the right to receive dividends with respect to such Quotas as of
January 1, 1998, and the capital reserve, in consideration Purchase Price as
provided in Article III hereof.
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THE COMPANY
NAME SHARE CAPITAL PERCENTAGE INTEREST
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Siegfried Kurt Buss DM 25,000 50%
Wendelin Karl Johannes Scharbach DM 25,000 50%
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TOTAL DM 50,000 100%
SECTION II.2 ASSIGNMENT OF QUOTAS. Each Seller hereby assigns and
transfers to Buyer such Seller's Quotas as specified in Section 2.1 hereof,
together with the right to receive dividends with respect to such Quotas as of
January 1, 1998, and the capital reserve, and Buyer hereby accepts such
assignments. The Quotas shall be transferred upon delivery of checks or
receipt of a wire transfer in the amount of cash portion of the Purchase Price
and instructions to the Transfer Agent from the Buyer to issue and deliver the
Purchase Price Shares to Sellers and the Escrow Shares to the Escrow Agent.
Each Seller hereby consents to the sales, assignments, and transfers effected
herein and waives any preemptive rights or rights of first refusal he may have
under the Articles of Association or other governing documents of the Company
or pursuant to any other agreement or document.
ARTICLE III
CLOSING, PURCHASE PRICE, AND CLOSING DELIVERIES
SECTION III.1 CLOSING. The Closing shall take place at the offices
of Thummel, Schutze & Partner in Stuttgart, Germany, commencing at 11:00 A.M.
local time, on the date of this Agreement (the "Closing Date").
SECTION III.2 PURCHASE PRICE. The purchase price (the "Purchase
Price") payable for the Quotas shall be (a) Five Million U.S. Dollars (U.S.
$5,000,000); (b) the Purchase Price Shares; and (c) the Escrow Shares, as set
forth in Article III hereof. All payments to the Sellers of the Purchase Price
(whether at Closing or by the Escrow Agent under the Escrow Agreement) are to
be made pro rata among the Sellers in accordance with their respective
percentage ownership of the Quotas as set forth in Section 2.1 hereof.
SECTION III.3 PAYMENT OF PURCHASE PRICE. Buyer shall pay, at or
immediately subsequently to the Closing, the Purchase Price as follows:
(a) Cash to Sellers. Buyer shall pay to the Sellers the
aggregate amount of Five Million U.S. Dollars (U.S. $5,000,000.00), allocated
among the Sellers pro rata in accordance with their respective percentage
ownership of the Quotas as set forth in Section 2.1 hereof.
(b) Purchase Price Shares. Buyer shall deliver to each
Seller a certificate or certificates (or, at Buyer's option, an irrevocable
letter of instructions to the Transfer Agent for
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the issue and delivery of a certificate or certificates) issued in the name of
such Seller evidencing the number of shares of FARO Common Stock equal to the
product obtained by multiplying (i) the Purchase Price Shares, by (ii) such
Seller's respective percentage ownership of the Quotas as set forth in Section
2.1 hereof, rounded down to the nearest whole share.
(c) Escrow Shares. Buyer will deliver to the Escrow
Agent a certificate or certificates (or, at Buyer's option, an irrevocable
letter of instructions to the Transfer Agent for the issue and delivery of a
certificate or certificates) issued in the name of such Seller evidencing the
number of shares of FARO Common Stock equal to the product obtained by
multiplying (i) the Escrow Shares, by (ii) such Seller's respective percentage
ownership of the Quotas as set forth in Section 2.1 hereof.
SECTION III.4 FARO'S AND BUYER'S CLOSING DELIVERIES. Buyer and
FARO shall deliver, or cause to be delivered, to Sellers at or prior to the
Closing, each of the following:
(a) the Purchase Price, as provided in Section 3.3
hereof;
(b) the Registration Rights Agreement duly executed by
FARO;
(c) the Escrow Agreement duly executed by the Buyer and
the Escrow Agent.
SECTION III.5 SELLERS' CLOSING DELIVERIES. Sellers shall deliver,
or cause to be delivered, to Buyer and FARO at or prior to the Closing, each of
the following:
(a) valid and binding consents of all Persons whose
consent or approval is required to be set forth in Sections 4.5 and 4.6 of the
Disclosure Schedule;
(b) the Registration Rights Agreement duly executed by
each Seller;
(c) the Escrow Agreement duly executed by each Seller and
the Escrow Agent;
(d) a written opinion of Hasche Eschenlohr Peltzer
Riesenkampff Fischotter, counsel to the Sellers, dated as of the Closing Date,
addressed to Buyer and FARO, addressing the legal matters set forth in Sections
4.1, 4.2, 4.3, 4.5, and 4.21;
(e) Articles of Association for the Company certified by
the relevant German authority; and
(f) Commercial Register sheet for the Company dated on or
within 20 days of the Closing Date.
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SECTION III.6 DISTRIBUTION OF ESCROW SHARES. The Escrow Shares
shall be held in escrow and shall be distributed pursuant to the terms of the
Escrow Agreement.
ARTICLE IV
GUARANTEES OF SELLERS
The Sellers, jointly and severally, hereby guarantee to FARO and Buyer
by way of independent guaranty agreement as follows (the term guarantee shall
be translated as "selbstaendiges Garantieversprechen"; this, however, shall
mean that case law applying to the concept of "Gewaehrleistung" may be
insufficient in this case; by no means shall there be any other legal
consequences for a breach of a guarantee other than provided for in this
Agreement; any rescission of the Agreement is expressly excluded):
SECTION IV.1 CORPORATE ORGANIZATION. The Company is a limited
liability company duly organized and validly existing under the laws of the
Federal Republic of Germany and has the full right, power and authority to own,
lease and operate all of its properties and assets and to carry out its
business as it is presently conducted. The Company is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the ownership of property or the conduct of its business requires such
qualification or license. Except as set forth in Section 4.1 of the Disclosure
Schedule, there are no corporations, joint ventures, partnerships, or other
entities or arrangements in which the Company, directly or indirectly, owns any
capital stock or any equity interest.
SECTION IV.2 CAPITALIZATION. The aggregate stated share capital
of the Company consists of DM 50,000. The Quotas represent all issued and
outstanding share capital of the Company and have been duly authorized and
validly issued, are fully paid and nonassessable, were issued without violation
of any preemptive rights, and can be transferred to Buyer as provided herein
free of any preemptive rights. The Company has not repaid any stated share
capital to any of the Sellers, or to any prior holder of such Company's share
capital, or paid out any other equity capital. Except for this Agreement,
there are no options, warrants or other rights, nor any arrangements of any
kind, relating to the subscription for or the issuance, voting, acquisition,
sale, repurchase, transfer, or disposition of any Quotas or any share capital
of the Company.
SECTION IV.3 AUTHORITY; BINDING EFFECT. Each of the Sellers has
all requisite right, power, and authority to execute, deliver, and perform this
Agreement and the Related Agreements to which such Seller is a party. This
Agreement and the Related Agreements to which the Sellers are parties have been
duly and validly executed and delivered by the Sellers and constitute the
legal, valid, and binding obligations of each of the Sellers, enforceable
against each of the Sellers in accordance with their respective terms.
SECTION IV.4 OWNERSHIP OF QUOTAS; TITLE. Each of the Sellers owns
of record and
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beneficially the Quotas set forth beside such Seller's name in Section 2.1.
All issued share capital of the Company has been owned of record and
beneficially at all times exclusively by individual citizens of, or other
Persons organized and existing under the laws of, the Federal Republic of
Germany, holding quotas not less than 25% of the registered share capital of
the Company. Each of the Sellers has and will have, on the Closing Date, good,
marketable and valid title to the Quotas to be sold by such Seller hereunder,
free and clear of all liens, pledges, encumbrances, claims, security interests,
charges, voting trusts, voting agreements, other agreements, rights, options,
warrants or other restrictions of any kind, nature or description. The
execution, delivery, notarization, and performance of this Agreement will
convey to Buyer at the Closing good title to the Quotas free and clear of all
claims, liens, encumbrances, security interests, charges or restrictions on
transfer of any nature whatsoever, other than those contained in the Articles
of Association of the Company. No Seller is involved in any proceedings by or
against such Seller under any bankruptcy laws or under any other insolvency or
debtor's relief act.
SECTION IV.5 SELLERS' CONSENTS AND APPROVALS; NO VIOLATIONS. The
execution, delivery, and performance by each of the Sellers of this Agreement
and the Related Agreements to which he is a party will not (with or without the
giving of notice or the passage of time, or both) (a) violate any applicable
provision of law or any rule or regulation of any federal, state or local
administrative agency or governmental authority applicable to Sellers, or any
order, writ, injunction, judgment or decree of any court, administrative agency
or governmental authority applicable to Sellers, (b) violate or require any
consent, waiver or approval under (except for the matters referenced in Section
4.5 of the Disclosure Schedule), result in a breach, the modification or
termination of any provisions of, constitute a default under, affect the rights
under or enforceability of, or result in the imposition of any pledge, security
interest or other encumbrance upon any of the Quotas pursuant to, any
agreement, indenture, mortgage, deed of trust, lease, license, or other
instrument to which any Seller is a party or by which any of them is bound, or
any material license, permit or certificate held by any of them including
without limitation, those listed on the Disclosure Schedule, or (c) require any
material consent or approval by, notice to or registration with any
governmental authority or other Person. All consents of all Persons whose
consent or approval is required to be set forth in Section 4.5 of the
Disclosure Schedule have been obtained.
SECTION IV.6 COMPANY'S CONSENTS AND APPROVALS; NO VIOLATIONS.
Except as set forth on Section 4.6 of the Disclosure Schedule, the execution,
delivery, and performance by each of the Sellers of this Agreement and the
Related Agreements to which he is a party will not (with or without the giving
of notice or the passage of time, or both) (a) violate any applicable provision
of law or any rule or regulation of any federal, state or local administrative
agency or governmental authority applicable to the Company, or any order, writ,
injunction, judgment or decree of any court, administrative agency or
governmental authority applicable to the Company, (b) violate the
organizational documents of the Company, (c) violate or require any consent,
waiver or approval under, result in a breach, modification or termination of
any provisions of, constitute a default under, affect the rights under or
enforceability of, result in the imposition of
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any pledge, security interest or other encumbrance pursuant to, or give any
Person the right to terminate, modify or renegotiate any provision of, any
agreement, indenture, mortgage, deed of trust, lease, license, or other
instrument to which the Company is a party or by which it is bound, or any
material license, permit or certificate held by it including, without
limitation, those listed on the Disclosure Schedule, (d) require any material
consent or approval by, notice to or registration with any governmental
authority or other Person which is applicable to the Company, or (e) result in
the creation of any lien, claim, encumbrance or charge upon any property or
assets of the Company. All consents of all Persons whose consent or approval
is required to be set forth in Section 4.6 of the Disclosure Schedule have been
obtained.
SECTION IV.7 FINANCIAL STATEMENTS.
(a) Section 4.7(a) of the Disclosure Schedule contains
(i) the unaudited balance sheet of the Company as of December 31, 1995,
December 31, 1996, and December 31, 1997, and the unaudited income statements
for the Company for the years ended December 31, 1996 and 1997 (including any
related notes thereto) (collectively, the "Financial Statements").
(b) Except as set forth on Section 4.7(b) of the
Disclosure Schedule, the Financial Statements (i) are true, correct, and
complete in all material respects; (ii) are in accordance with the books and
records of the Company; (iii) have been prepared in accordance with principles
of orderly bookkeeping and GGAAP applied on a consistent basis throughout the
periods involved, respecting principles of prudence and continuity; (iv) fairly
present, in the case of each year-end balance sheet, the annual position of the
Company as of the respective dates thereof and, in the case of the related
income statements, the results of operations and earnings of the Company for
the respective periods indicated.
SECTION IV.8 UNDISCLOSED LIABILITIES. The Company does not have
any liabilities (absolute, accrued, contingent or otherwise) that are required
to be reflected in the Financial Statements under GGAAP, except (a) liabilities
reflected or reserved against in the Interim Balance Sheet, and (b) liabilities
incurred since the Interim Balance Sheet Date in the ordinary course of
business, and which, in the aggregate, do not and will not have a Material
Adverse Effect on the Company. The Company does not have knowledge of any
circumstances, conditions, happenings, events or arrangements, contractual or
otherwise, which may give rise to liabilities in excess of DM 20,000, except
commercial liabilities and obligations incurred in the ordinary course of the
Company's business and consistent with past practice.
SECTION IV.9 TAXES. Except as set forth in Section 4.9 of the
Disclosure Schedule, the Company has timely filed all material returns,
declarations, reports, information returns and statements required to be filed
by it (the "Returns") in respect of any Taxes and has paid all Taxes currently
due and payable by it. Except as set forth in Section 4.9 of the Disclosure
Schedule, the Returns accurately and completely reflect the facts regarding the
income, properties, operations, and status of any entity required to be shown
thereon; no notice of any material proposed deficiency, assessment, or levy in
respect of Taxes has been received by the
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Company; the Company is not currently and, during the past three years, has not
been the subject of an audit or in receipt of a notice that it is being or will
be audited by a relevant taxing authority, and has not agreed to any extension
of time of any applicable statute of limitations period; and the Company has
duly withheld from each payment from which such withholding is required by law,
the amount of all Taxes required to be withheld therefrom and has paid the same
(to the extent due) together with the employer's share of the same, if any, to
the proper tax receiving officers. Except as set forth in Section 4.9 of the
Disclosure Schedule, the charges, accruals, and reserves for Taxes due, or
accrued but not yet due, relating to the income, properties, or operations of
the Company for any period prior to or including the Closing Date as reflected
on the books of the Company are adequate in all material respects to cover such
Taxes, all Tax deficiencies that have been proposed or asserted against the
Company have been fully paid or finally settled, and no issue has been raised
in any examination which, by application of similar principles, can be expected
to result in the proposal or assertion of a Tax deficiency for any other year
not so examined, the Company has not received any Tax incentive, abatement, or
other credit with respect to its assets, business, employees, or otherwise that
contains provisions for the repayment of any Tax benefit, and the Company has
incurred liabilities for Taxes only in the ordinary course of its business. The
Company has never conducted business in the United States, has never had any
assets, employees, or shareholders located or resident in the United States,
and has never made any election with the United States Internal Revenue Service
regarding Taxes.
SECTION IV.10 TITLE TO PROPERTIES.
(a) The Company does not own, in whole or in part, any
real property.
(b) Except as set forth in Section 4.10(b) of the
Disclosure Schedule and the normal reservation of title of suppliers to the
extent not paid, the Company has good and marketable title to all the personal
property and assets (tangible and intangible) reflected as owned by it on the
Interim Balance Sheet or acquired since the Interim Balance Sheet Date (except
for properties and assets disposed of since such date in the ordinary course of
business and consistent with past practice) free and clear of all liens,
charges, security interests, or other encumbrances of any nature whatsoever.
(c) Except as set forth in Section 4.10(c) of the
Disclosure Schedule, all of the assets owned or utilized by the Company (i) are
now in the possession of the Company, (ii) are not subject to claims by any
other Person with a right to possession of all or any part of such assets,
(iii) are in good operating condition (ordinary wear and tear excepted), (iv)
are not, individually or in the aggregate, in need of any repairs which
individually or in the aggregate are reasonably likely to cost in excess of DM
20,000, and (y) are located on the Leased Real Property.
SECTION IV.11 ABSENCE OF CHANGES. Except as set forth in Section
4.11 of the Disclosure Schedule, since December 31, 1997, the Company has
operated only in the ordinary
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course of its business and there has not been with respect to the Company:
(a) any material change or changes in the business,
financial condition, properties, results of operations, or assets or
liabilities, or any development or event involving a prospective change;
(b) any damage or destruction, loss or other casualty,
however arising and whether or not covered by insurance, which, singularly or
in the aggregate, has had or will have a Material Adverse Effect;
(c) any labor dispute or any other event or condition
which, singularly or in the aggregate, has had or will have a Material Adverse
Effect;
(d) any indebtedness incurred for borrowed money other
than pursuant to the Company's existing lines of credit;
(e) any change in the accounting methods or in the
practices or depreciation or amortization policies or rates theretofore
adopted;
(f) any amendment or termination of any material
contract, lease, franchise or license;
(g) any amendment of the charter, Articles of
Association, or other organizational documents of the Company;
(h) any mortgage, pledge or other encumbering of any
material property or assets;
(i) any material liability or obligation incurred, except
current liabilities incurred in the ordinary course of business, or any
cancellation or compromise of any material debt or claim, or any waiver or
release of any right of substantial value to its business;
(j) any sale, transfer, lease, abandonment, or other
disposal of any machinery, equipment or real property, or, except in the
ordinary course of business, any sale, transfer, lease, abandonment or other
disposal of any material portion of any other properties or assets (real,
personal, tangible, or intangible);
(k) any transfer, disposal, or grant of any rights under
any Intellectual Property owned by the Company, or any disposal of or
disclosure to any Person other than representatives of Buyer or FARO of any
material trade secret, formula, process, or know-how not theretofore a matter
of public knowledge;
(l) any bonus or other increase in the compensation of
its officers, employees,
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or directors, or any agreement entered into with any officer, employee, or
director;
(m) any single capital expenditure made, or any
commitment to make, any capital expenditure, in excess of DM 20,000 for any
tangible or intangible capital assets, additions, or improvements;
(n) any declaration, payment, or reservation for payment
of any dividend or other distribution in respect of the Quotas or any other
securities, or any redemption, purchase, or other acquisition, directly or
indirectly, of any Quotas or other securities;
(o) any grant or extension of any guaranty in respect of
the obligation of any Person;
(p) any forward purchase commitments involving more than
DM 20,000 in the aggregate or any other purchase commitments that are not in
the ordinary course of business;
(q) the adoption of any ruling, law, ordinance, statute,
rule, regulation, code, or other requirement of any governmental authority
which has a Material Adverse Effect;
(r) any entry into any binding agreement, whether in
writing or otherwise, to take any action described in this Section 4.11;
(s) any change in the amount of issued share capital of
the Company or issue or create any option, warrant or any other security of the
Company;
(t) any contract or commitment calling for payment to or
by the Company of an aggregate amount of more than DM 50,000, which is not
terminable by the Company on less than thirty (30) days' notice without
penalty;
(u) any increase in the compensation payable or to become
payable to any officer, employee, or agent of the Company other than in the
ordinary course of the Business, or any bonus payment or arrangement to or with
any officer, employee, or agent of the Company other than in the ordinary
course of the Business; or
(v) any other event or condition not in the ordinary
course of business.
SECTION IV.12 INTELLECTUAL PROPERTY.
(a) Section 4.12(a) of the Disclosure Schedule contains a
complete and accurate list and description (including information with respect
to registration) of all Intellectual Property owned or used by the Company,
subdivided by type of Intellectual Property. The Company owns or has the right
to use all Intellectual Property used by it in the conduct of its business as
presently conducted. Except for the rights and licenses granted to the Company
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under software contracts, the Company owns all rights, title and interest in
the Intellectual Property required to be identified on Section 4.12(a) of the
Disclosure Schedule, free and clear of any encumbrance. The Company has not
granted, transferred, or assigned any right or interest in its Intellectual
Property to any Person.
(b) Except as disclosed in Section 4.12(b) of the
Disclosure Schedule, no fees or royalties are payable or will be payable under
any software contracts listed in Section 4.12(a) of the Disclosure Schedule as
a result of the continued use of licensed software by the Company in the
ordinary course of its business, other than fees or royalties due for upgrades
and fees or royalties that do not exceed DM 20,000 per year in the aggregate;
(c) Except as disclosed in Section 4.12(c) of the
Disclosure Schedule, (i) all registrations for Intellectual Property required
to be identified in Section 4.12(a) of the Disclosure Schedule as being owned
by the Company are valid and in force and applications to register any
unregistered Intellectual Property so identified are pending and in good
standing, all without challenge of any kind and, to the best knowledge of the
Sellers, there is no reasonable basis for any such challenge; and (ii) the
Company has the exclusive right to bring actions for infringement or
unauthorized use of the Intellectual Property identified as being owned by the
Company, and there is, to the best knowledge of the Sellers, no reasonable
basis for any such action.
(d) Except as disclosed in Section 4.12(d) of the
Disclosure Schedule, all trade secrets of the Company (i) have at all times
been maintained in confidence, and (ii) have not been disclosed to employees,
consultants, or other third parties except on a "need to know" basis in
connection with their respective performance of duties to the Company.
(e) Except as disclosed in Section 4.12(e) of the
Disclosure Schedule, no claims have been asserted by any Person against the
Company claiming ownership of or right to use any of the Intellectual Property
required to be disclosed on Section 4.12(a) of the Disclosure Schedule (other
than ownership of Intellectual Property licensed to the Company under the
software contracts listed on Section 4.12(a) of the Disclosure Schedule) nor,
to the best knowledge of the Sellers, is there any reasonable basis for any
such claim. The use of the Intellectual Property by the Company has not
infringed on the rights of any Person; and, except as disclosed in Section
4.12(e) of the Disclosure Schedule, no claim of infringement or any misuse or
misappropriation of any of the Intellectual Property of any other Person has
been made or asserted against the Company, nor is there, to the best knowledge
of the Sellers, any reasonable basis for any such claim.
SECTION IV.13 LEASES. Section 4.13 of the Disclosure Schedule
contains an accurate and complete list of all leases pursuant to which the
Company leases real or personal property. Except as set forth in Section 4.13
of the Disclosure Schedule, all such leases are in full force and effect and
are valid, binding and enforceable in accordance with their terms; there are no
existing defaults or events which, with the giving of notice or the lapse of
time or both, would constitute a default thereunder by the Company or any other
parties thereto. All leased items of personalty
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are in good operating condition, are in a state of good maintenance and repair
and are adequate and suitable for the purpose for which they were leased. Each
such lease contains terms and conditions obtained from independent third
parties and negotiated in good faith at arms-length. None of the rights of the
Company under each such lease is subject to termination or modification as a
result of the transactions contemplated hereby.
SECTION IV.14 POWERS OF ATTORNEY. The Company has not granted or
extended to any Person, and the Company is not otherwise subject to or bound
by, any power of attorney which remains in effect.
SECTION IV.15 MATERIAL CONTRACTS AND CUSTOMERS.
(a) Section 4.15(a) of the Disclosure Schedule contains a
complete and accurate list of all material contracts, agreements, or other
understandings or arrangements, written or oral, or commitments therefor,
relating to the Company (collectively, the "Contracts"). Except as set forth
in Section 4.15(a) of the Disclosure Schedule, the Company is not a party to,
or otherwise bound by, any material written or oral, formal or informal:
(i) purchase orders and other contracts, in each
case for the sale of goods or services, in excess of DM 50,000 individually or,
for any group of related purchase orders and contracts, in the aggregate;
(ii) contracts, agreements, or commitments for the
purchase of materials or services that are not required by the Company in the
current operation of its business in the ordinary course;
(iii) contracts involving the expenditure for the
purchase of material, supplies, equipment, or services of more than DM 50,000
per contract;
(iv) contracts not otherwise referenced involving
the expenditure of more than DM 50,000 (per contract) that are not cancelable
within thirty (30) days without penalty;
(v) contracts relating to the leasing (as lessor
or lessee) or the conditional purchase or sale by the Company of any property,
whether real or personal, in excess of DM 20,000 individually or, for any group
of such related contracts, in the aggregate;
(vi) contracts to which the Company is a party or
by which any of its assets are bound and that require consent by any other
Person in connection with the transaction contemplated hereby, either to
prevent a breach or continue the effectiveness thereof;
(vii) contracts or arrangements with any
governmental body, agency or authority;
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(viii) indentures, mortgages, promissory notes, loan
agreements, capital leases, security agreements, or other agreements or
commitments for the borrowing of money, or the deferred purchase price of
assets, or which create a lien or encumbrance on any assets of the Company;
(ix) guarantees of the obligations of third
parties or agreements to indemnify third parties (other than indemnification
provisions provided in the ordinary course to or for the benefit of the
customers of the Company);
(x) agreements which restrict the Company from
doing business in any geographic location;
(xi) policies of insurance in force and effect
with respect to the Company, its business, or its assets;
(xii) contracts or agreements not otherwise
referenced with any of the Sellers, their family members, or their Affiliates;
(xiii) license agreements (as licensee or licensor)
with third parties;
(xiv) employment or consulting agreements;
(xv) distributor, dealer, sales, advertising,
agency, manufacturer's representative, franchise, or similar contracts or any
contract relating to the payment of a commission, in excess of DM 20,000
individually or, for any group of such related contracts, in the aggregate;
(xvi) collective bargaining or other agreements
with labor unions;
(xvii) contracts or agreements for charitable
contributions by the Company, in excess of DM 20,000 individually or, for any
group of such related contracts, in the aggregate;
(xviii) any contract or agreement which could
reasonably be expected to have a Material Adverse Effect on the Company; or
(xix) other contracts outside the ordinary course
of the business of the Company not otherwise described in this subsection.
(b) True and complete copies of each of the Contracts
have been made available to FARO and Buyer. Each of the Contracts is in full
force and effect and there exists no default or event which, with the giving of
notice or lapse of time or both, would constitute a
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material default thereunder by the Company or by any other party thereto. The
Company has not violated any of the terms or conditions of any Contract in any
material respect and all of the covenants to be performed by any other party
thereto have been performed in all material respects. Except as referenced in
Section 4.6 of the Disclosure Schedule, none of the rights of the Company under
the Contracts is subject to termination or modification as a result of the
transactions contemplated hereby. No written notice of termination or
nonrenewal has been given under any Contract. All Contracts contain terms and
conditions are not less favorable to the Company than those that would be
obtained from independent third parties and which have been negotiated in good
faith at arms-length. None of the Contracts with suppliers of goods or services
to the Company requires the payment of any commission, royalty, fee, brokerage
fee, or other similar charge. For the purposes of Section 4.15(a), "material
contracts" means contracts described in Section 4.15(a)(i) through (xix). The
amounts set forth in this Section 4.15 with respect to the Contracts shall not
be deemed to represent any standard of materiality with respect to the
Contracts or otherwise for any other purpose and shall have no application to
any other section of this Agreement.
(c) Section 4.15(c) of the Disclosure Schedule identifies
the name and location of the ten largest customers (the "Customers") and the
ten largest suppliers of the Company in the aggregate, measured respectively by
revenues generated or amounts paid, as of the Interim Balance Sheet Date. The
relationships of the Company with its Customers and suppliers are good, and no
Seller is aware of any intention of any such customers or suppliers to
terminate or modify any of such relationships. The Company generally is not
required to provide bonding or any other security arrangements in connection
with any transactions with its customers or suppliers.
SECTION IV.16 RELATED TRANSACTIONS.
(a) Except as set forth in Section 4.16 of the Disclosure
Schedule, the Company does not have a contractual relationship with, or any
obligation or liability owed to, the Sellers, their family members, or any
entity of which one or more Sellers is an Affiliate. All such contractual
relationships are on terms that are no less favorable to the Company than would
be the case with independent third parties.
(b) Except as set forth in Section 4.16 of the Disclosure
Schedule, no Seller, no director or officer of the Company, and no Affiliate of
any Seller or director or officer of the Company has any material interest,
direct or indirect, in any Person which (i) is a material competitor, customer,
subcontractor, or supplier of the Company, or (ii) has an existing material
relationship with, or a material interest in, the Company, including but not
limited to lessors of real or personal property and Persons against which
rights or options are exercisable by the Company.
SECTION IV.17 INSURANCE. Section 4.17(a) of the Disclosure
Schedule contains an accurate and complete list of all policies of insurance
presently maintained with respect to the
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Company, including without limitation, "key man" insurance with respect to any
employee. Such list includes a description of coverage, the amount of
coverage, and the name of the insurer or an indication that the Company has
self-insured any particular aspect of the Business. All such policies are in
full force and effect and no notice of cancellation or termination has been
received with respect to any such policy and there is, and has been, no
material default by the Company with respect to their obligations under any
such policy. Except as set forth in Section 4.17(b) of the Disclosure
Schedule, Sellers and the Company have not received during the past two (2)
years any written notice or other written communication from any insurance
company declining to write insurance with respect to the business of the
Company, or canceling or materially amending any of the Company's insurance
policies or proposing to do so. Section 4.17(c) of the Disclosure Schedule
sets forth a summary of information pertaining to property damage, personal
injury, and products liability claims filed by the Company during the past five
(5) years which exceed DM 20,000 in any instance, all of which have been paid
or are being defended by the Company's insurance carriers and involve no
exposure to the Company. Section 4.17(d) of the Disclosure Schedule sets forth
a complete list of any claims that the Company has under any of its insurance
policies which have not been fully paid to the Company.
SECTION IV.18 LABOR MATTERS.
(a) Except to the extent set forth in Section 4.18(a) of
the Disclosure Schedule, (i) the Company is in compliance with all rulings,
laws, ordinances, statutes, rules, regulations, codes, and other requirements
of any governmental authority with respect to employment and employment
practices; (ii) there is no unfair labor practice charge or complaint against
the Company pending before or, to the best knowledge of Sellers, threatened to
be brought before any labor grievance board, authority or tribunal, nor has any
complaint been, to the best knowledge of the Sellers, threatened against the
Company; (iii) there is no labor strike, dispute, slowdown, or stoppage pending
against or affecting the Company; (iv) the Company is not a party to any
collective bargaining agreement with any labor union and no works council
exists with respect to employees of the Company; (v) the Company has not
experienced any material labor difficulty during the last three years; and (vi)
there are no other controversies pending between the Company and any of its
employees, including, without limitation, claims arising under any labor laws,
which controversies have had or may have a Material Adverse Effect on the
Company. There has not been any adverse change in relations with employees of
the Company as a result of any announcement or other disclosure of the
transactions contemplated by this Agreement.
(b) Section 4.18(b) of the Disclosure Schedule sets forth
the names of all employees, consultants, officers, and directors of the Company
as of the date hereof, including length of employment and date of birth. The
Sellers have delivered to FARO (i) copies of all written employment agreements
to which the Company is a party with any of its employees, (ii) written
summaries of the terms of all oral employment agreements that are other than
at-will, and (iii) a schedule of compensation for all employees of the Company.
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SECTION IV.19 EMPLOYEE BENEFIT PLANS.
(a) Set forth in Section 4.19 of the Disclosure Schedule
is an accurate and complete list of each Employee Benefit Plan maintained or
contributed to by the Company.
(b) Except as set forth in Section 4.19 of the Disclosure
Schedule, all amounts that the Company is required to have contributed to any
Employee Benefit Plan have been contributed within the time prescribed by
applicable law and all benefits, expenses, and other amounts due and payable
and all transfers or payments required to be made with respect to any Employee
Benefit Plan have been paid within the time prescribed by the applicable
documents and governing law.
(c) Except as set forth in Section 4.19 of the Disclosure
Schedule, there are no material claims (other than routine claims for
benefits) or lawsuits pending with respect to any Employee Benefit Plan.
(d) Except as set forth in Section 4.19 of the Disclosure
Schedule, Sellers have previously delivered or made available to FARO true and
complete copies of the plan documents for each Employee Benefit Plan identified
in Section 4.19 of the Disclosure Schedule.
SECTION IV.20 LITIGATION. Except as set forth in Section 4.20 of
the Disclosure Schedule, there are no material claims, actions, suits, or
proceedings pending or, to the best knowledge of Sellers, threatened against
the Company relating to this Agreement or the transactions contemplated hereby
or to the business or the properties of the Company at law or in equity or
before any federal, state, local, or foreign court or other governmental
department, commission, board, agency, instrumentality, or authority, nor any
arbitration proceeding, in each case including, without limitation, any claims
relating to environmental matters. The Company is not subject to any adverse
judgment, order, writ, injunction, or decree of any court or governmental body.
SECTION IV.21 COMPLIANCE WITH LAWS. Except as set forth in Section
4.21 of the Disclosure Schedule, the Company has conducted its business so as
to comply with, and is not in violation of, nor has it received any written
notice claiming it is in violation of, any order, law, ordinance, statute,
rule, or regulation applicable to it or its business or any of the property or
assets of the Company including, without limitation, any environmental or
worker safety and protection laws and regulations. The Company has all
material licenses, permits, certificates of occupancy, and authorizations
necessary to conduct its business.
SECTION IV.22 BOOKS AND RECORDS. The books, accounts, and records
of the Company (a) are located at the headquarters of the Company, (b) are
complete and accurate in all material respects, (c) have been maintained in
accordance with law and good business practice, and (d) constitute all the
books, accounts, and records necessary to carry on the businesses of the
Company in the manner in which they are currently being conducted and have,
over the
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preceding 12 months, been carried on. The copies of the organizational
documents and of the minutes of all Quota holder and director meetings of the
Company hereto delivered by the Sellers to Buyer and FARO are complete and
correct.
SECTION IV.23 COPIES OF DOCUMENTS. The Company has delivered or
specifically made available to Buyer and FARO, true, complete, and accurate
copies of all documents referred to in this Agreement or in any section of the
Disclosure Schedule with the understanding and intention that the Buyer and
FARO may and will rely upon the completeness and accuracy thereof.
SECTION IV.24 ADEQUACY OF ASSETS. Except as set forth in Section
4.24 of the Disclosure Schedule, the assets of the Company and the facilities,
assets, and services to which the Company has a contractual right of use
include all rights, properties, assets, facilities, and services necessary for
the carrying on of the business of the Company in a manner in which it is
currently being and has, over the immediately preceding 12 months, been carried
on, and the Company does not depend in any material respect upon the use of
assets owned by, or facilities or services provided by, Sellers, or any family
member or Affiliate of the Sellers.
SECTION IV.25 GRANTS.
(a) Section 4.25(a) of the Disclosure Schedule sets forth
a true, accurate, and complete description of all Grants received by the
Company during the past five years, including (i) all amounts paid to the
Company to date, (ii) all amounts to be paid to the Company during the next
five years, and (iii) all conditions to the receipt of payments by the Company
with respect to such Grants.
(b) The consummation of the transactions contemplated
hereby will not affect the Company's right to retain the Grants received by it.
Except as set forth in Section 4.25(b) of the Disclosure Schedule, no Seller is
aware of any facts or circumstances that could, directly or indirectly, (i)
cause or contribute to the revocation of any of the Grants, (ii) cause or
contribute to an obligation by the Company to repay any Grants, or (iii)
otherwise cause or contribute to the failure of the Company to receive the full
amounts of the Grants.
SECTION IV.26 ACCOUNTS RECEIVABLE. Section 4.26 of the Disclosure
Schedule sets forth a true, complete, and accurate list and aging of all unpaid
accounts receivable owing to the Company as of the Interim Balance Sheet Date.
The accounts receivable of the Company including, without limitation, those
reflected in Section 4.26 of the Disclosure Schedule, constitute or will
constitute as of the respective dates thereof, legal, valid, binding, and
enforceable claims arising from bona fide transactions in the ordinary course
of the business and, except to the extent reserved against on the Interim
Balance Sheet, are or will be, as of the respective dates thereof, collectible
in the ordinary course of business and are not subject to any known
counterclaims or set-offs.
SECTION IV.27 BROKERS AND FINDERS. No agent, broker, investment
banker, person, or
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firm acting on behalf of the Company, the Sellers, or any Affiliate of any of
them is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee directly or indirectly from any of the parties hereto
in connection with the transactions contemplated hereby.
SECTION IV.28 INVESTMENT INTENT.
(a) Each Seller acknowledges that the Purchase Price
Shares and the Escrow Shares to be received by such Seller will be acquired for
such Seller's own account and without any view to the distribution of any part
thereof without registration under applicable United States federal and state
securities laws, or the delivery to FARO of an opinion of counsel that
registration is not required in accordance with Section 4.28(e) hereof. Each
Seller represents that such Seller does not have any agreements or arrangements
to sell, transfer or grant participation with respect to the Purchase Price
Shares and the Escrow Shares to be received by such Seller.
(b) Each Seller understands that the Purchase Price
Shares and the Escrow Shares are not registered under the United States federal
or state securities laws in part on the grounds that the transactions
contemplated hereby are exempt from registration under the Securities Act of
1933 (the "1933 Act") pursuant to Section 4(2) thereof, and that Buyer's and
FARO's reliance on such exemption is predicated on each Seller's
representations set forth herein.
(c) Each Seller represents that such Seller has such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of its investment in the Purchase Price Shares,
and has the ability to bear the economic risks of such investment. Each Seller
further represents that such Seller has had (i) access, prior to the Closing
Date, to the FARO Filings, (ii) the opportunity to ask questions of, and
receive answers from, FARO and the Buyer concerning FARO, the Buyer, the
Purchase Price Shares, and the Escrow Shares, and (iii) the opportunity to
obtain additional information (to the extent FARO possessed such information or
could acquire it without unreasonable expense) necessary to verify the accuracy
of any information received or to which such Seller had access.
(d) Each Seller understands and agrees that the Purchase
Price Shares and the Escrow Shares may not be sold, transferred or otherwise
disposed of without registration under the 1933 Act and applicable state laws,
unless exemptions from registration under those laws are available, and that in
the absence of an effective registration statement covering the Purchase Price
Shares and the Escrow Shares or an available exemption from applicable
registration requirements, the Purchase Price Shares and the Escrow Shares must
be held indefinitely. In particular, the Purchase Price Shares and the Escrow
Shares may not be sold pursuant to Rule 144 promulgated under the 1933 Act
unless all of the conditions of such rule are met.
(e) Each Seller agrees that such Seller will not offer,
sell, mortgage, pledge, or otherwise dispose of any of the Purchase Price
Shares or the Escrow Shares to be received by such Seller (other than pursuant
to an effective registration statement under the 1933 Act) unless
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and until such Seller delivers an opinion of counsel satisfactory to FARO, or
FARO delivers to Sellers an opinion of counsel, that registration under
applicable United States federal or state securities laws is not required.
(f) Each Seller acknowledges that all certificates for
Purchase Price Shares and the Escrow Shares shall bear a legend in
substantially the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act") or under the securities laws of any jurisdiction and
may not be sold, transferred, or otherwise disposed of without
(i) registration under the Act and state securities laws or
(ii) delivery of an opinion of counsel satisfactory to the
issuer that registration under federal and state securities
laws is not required.
The securities represented by this certificate are subject to
certain transfer restrictions set forth in an Acquisition
Agreement dated as of May 15, 1998 (a copy of which may be
obtained from the company at its principal executive office)
and may not be sold, assigned, pledged, encumbered or
otherwise transferred except in compliance with the terms and
conditions of such agreement.
SECTION IV.29 RESTRICTIVE COVENANTS. Except as disclosed in
Section 4.29 of the Disclosure Schedule, the Company is not subject to, or a
party to, any mortgage, lien, lease, license, permit, agreement, contract,
instrument, law, rule, ordinance, regulation, order, judgment or decree, or any
other restriction of any kind or character, which has a Material Adverse Effect
on the Company, which restricts the ability of the Company to acquire any
property or conduct its business in any area or which would prevent
consummation of the transactions contemplated by this Agreement.
SECTION IV.30 PRODUCT LIABILITIES AND WARRANTIES. There are no
express or implied warranties applicable to products or services sold or
provided by the Company, except as provided by law or disclosed on Section 4.30
of the Disclosure Schedule and except for standard warranties contained in
purchase contracts of the Company's customers. Except as disclosed on Section
4.30 of the Disclosure Schedule, there is no action, suit, proceeding or claim
pending or, to the best knowledge of the Sellers, threatened against the
Company under any warranty, express or implied, and there is no reasonable
basis upon which any claim could be made. Section 4.30 of the Disclosure
Schedule also summarizes all product liability claims that have been asserted
against the Company during the five (5) years preceding the date of this
Agreement.
SECTION IV.31 YEAR 2000 COMPLIANCE. The computer source codes,
programs, and other software of the Company (including machine readable code,
printed listings of code, databases, documentation, and related property and
information of the Company used or under development for use) (collectively,
"Software") accurately determines chronological dates and
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accurately performs all calculations, data manipulations, sorting, and
transmission of date data regardless of whether the date represents or
references different centuries (e.g., when the actual date changes from
December 31, 1999, to January 1, 2000, the Software will accurately determine
that January 1, 2000 is the new date); (b) the Software provides that all date
related user interface functionalities and data fields permit the entry of a
four digit year (i.e., the years 1965, 2065, and 3065 could all be entered by
the user without the need of a manual override) and such date data will result
in accurate calculations, data manipulations, sorting, and transmission of all
data, including the date data; (c) the entry of a date equal to or greater than
January 1, 2000 into the Software will not affect any calculation that produces
or uses time spans such that the results of the calculation are incorrect
(e.g., an interest calculation); and (d) the integrity of calculations
performed utilizing the Software will not be affected by date data for dates on
or after January 1, 2000, and calculations using previously generated data (on
or before December 31, 1999) also will maintain calculation integrity.
SECTION IV.32 SYSTEMS PERFORMANCE. The Software and related
systems owned or used by the Company perform in accordance with the written
specifications thereof. The Software and related system components are capable
of interconnecting or interfacing with each other, and they deliver the
functionality needed to satisfy the information system requirements of the
business of the Company as it is presently conducted. Neither Seller is aware
of any device, method, or means that will cause the interruption of the
operations of, or accessibility to, the Software or related systems, including
without limitation any "virus," "lockup," "time bomb," or "key lock" device or
program or disabling code, which has the potential or capability of causing any
unplanned interruption of the operations of, or accessibility of, the Software
or related systems owned or used by the Company.
SECTION IV.33 DISCLOSURE. None of the representations or
warranties by the Sellers herein, no statement contained in any certificate,
list, or other writing furnished to Buyer or FARO pursuant hereto, and no
statement contained in any section of the Disclosure Schedule, taken as a
whole, contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to the Sellers which has or
could have a Material Adverse Effect on the Company that has not been set forth
in this Agreement or in a section of the Disclosure Schedule. Any disclosure
that is contained in the Disclosure Schedule or the attachment thereto shall be
regarded as having been made for all purposes of this Agreement regardless of
whether this has been done in the pertinent section.
SECTION IV.34 CONSENT OF SPOUSE. Mr. Scharbach's spouse is not
required to consent to this Agreement because they have agreed on a separation
of assets pursuant to a prenuptial agreement. The consent by Mrs. Buss is
attached Exhibit "G."
SECTION IV.35 RIGHT TO USE CATS NAME. CATS has full right and
title in the use of the name "CATS" in the trade of its products and services.
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SECTION IV.36 PERSONAL LIABILITIES. The aggregate amount of Mr.
Scharbach's personal liabilities do not exceed DM 1,500,000, and the aggregate
amount of Mr. Buss' personal liabilities do not exceed DM 50,000.
ARTICLE V
GUARANTEES OF FARO AND BUYER
FARO and Buyer, jointly and severally, hereby guarantee to the Sellers
by way of independent guaranty agreement as follows:
SECTION V.1 CORPORATE ORGANIZATION. Each of Buyer and FARO is a
corporation or limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and has the full right, power and authority to own, lease and
operate all of its properties and assets and to carry out its business as it is
presently conducted.
SECTION V.2 CAPITALIZATION OF BUYER. Upon issuance, the Purchase
Price Shares will be duly authorized and validly issued, fully paid and
nonassessable. The issuance of the Purchase Price Shares is not subject to any
preemptive right or right of first refusal that has not or will not be
satisfied or waived.
SECTION V.3 AUTHORIZATION. Each Buyer and FARO has all requisite
right, power and authority to execute, deliver and perform this Agreement. The
execution, delivery, and performance of this Agreement and the Related
Agreements by Buyer and FARO have been duly and validly authorized and approved
by all necessary corporate action. This Agreement has been duly and validly
executed and delivered by Buyer and FARO and, assuming this Agreement has been
duly authorized, executed and delivered by Sellers, constitutes the legal,
valid and binding obligation of Buyer and FARO, enforceable against them in
accordance with its terms.
SECTION V.4 CONSENTS AND APPROVALS; NO VIOLATIONS. The
execution, delivery and performance of this Agreement by Buyer and FARO will
not (with or without the giving of notice or the passage of time, or both), (a)
violate in any material respect any applicable provision of law or any rule or
regulation of any administrative agency or governmental authority applicable to
Buyer or FARO, or any order, writ, injunction, judgment or decree of any court,
administrative agency or governmental authority applicable to Buyer or FARO,
(b) violate the organizational documents of Buyer or the Articles of
Incorporation or Bylaws of FARO, (c) violate or require any consent, waiver or
approval under, result in a breach, modification or termination of any of any
provisions of, constitute a default under, affect the rights under or
enforceability of, result in the imposition of any pledge, security interest,
or other encumbrance pursuant to, give any Person the right to terminate,
modify or renegotiate any material agreement, indenture, mortgage, deed of
trust, lease, license, or any other instrument to which
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Buyer or FARO is a party or by which Buyer or FARO is bound, or any material
license, permit or certificate held by Buyer or FARO, or (d) require any
consent or approval by, notice to, or registration with any governmental
authority.
SECTION V.5 LITIGATION. There are no claims, actions, suits, or
proceedings pending or, to the best knowledge of Buyer and FARO, threatened,
against Buyer or FARO relating to this Agreement or the transactions
contemplated hereby or to the business or property of Buyer or FARO, at law or
in equity or before or by any federal, state, local, or other governmental
department, commission, board, agency, instrumentality or any arbitration
proceeding which are likely to have a Material Adverse Effect on FARO or Buyer.
Neither Buyer nor FARO is subject to any judgment, order, writ, injunction or
decree of any governmental body.
SECTION V.6 BROKERS AND FINDERS. No agent, broker, investment
banker, person or firm acting on behalf of Buyer, FARO or any entity affiliated
with either of them is or will be entitled to any brokers' or finders' fee or
any other commission or similar fee directly or indirectly from any of the
parties hereto in connection with the transactions contemplated hereby.
SECTION V.7 FARO INFORMATION. FARO has delivered or made
available to Sellers true and complete copies of the FARO Filings. At the date
hereof, the FARO Filings, taken as a whole, do not contain any untrue statement
of a material fact or omit any material fact necessary to make the statements
contained herein, in light of the circumstances in which they were made, not
misleading.
SECTION V.8 NO MATERIAL ADVERSE CHANGE. Since the date of FARO's
10-K Balance Sheet, FARO has not suffered any Material Adverse Effect.
SECTION V.9 UNDISCLOSED LIABILITIES. FARO has no liabilities
(absolute, accrued, contingent or otherwise) required by USGAAP to be reflected
or reserved against in the consolidated statement of assets and liabilities of
FARO except (a) liabilities reflected or reserved against in the Form 10-Q
Balance Sheet, and (b) liabilities incurred since March 30, 1997 in the
ordinary course of business, and which, in the aggregate, do not have a
Material Adverse Effect.
SECTION V.10 COMPLIANCE WITH LAWS. Each of Buyer and FARO has
conducted its business so as to comply with, and is not in violation of, nor
has it received any written notice claiming it is in violation of, any order,
law, ordinance, statute, rule or regulation applicable to it, or to its
business or any of its property or assets including, without limitation, any
environmental or worker safety and protection laws and regulations, except to
the extent that such non-compliance would not have a Material Adverse Effect.
Each of Buyer and FARO has all material licenses, permits, certificates of
occupancy and authorizations necessary to conduct its business.
SECTION V.11 GUARANTEE BY FARO. FARO guarantees all obligations
of Buyer under this Agreement and its exhibits.
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ARTICLE VI
FURTHER COVENANTS AND AGREEMENTS
SECTION VI.1 THE TAX REGISTRATION STATEMENT. Following the
Closing, FARO shall file with the SEC a registration statement (the "Tax
Registration Statement") with respect to 343,750 shares of the Purchase Price
Shares in accordance with the Registration Rights Agreement.
SECTION VI.2 TAX LOAN. Following the Closing, FARO or the Buyer
will make a loan (the "Tax Loan") to a Seller if the German taxing authorities
assess taxes on the sale of such Seller's Quotas pursuant to this Agreement
before the Tax Registration Statement is declared effective by the SEC. The
principal amount of a Tax Loan to a Seller will be the amount of taxes due and
payable to the German taxing authorities by such Seller as a result of the sale
of such Seller's Quotas pursuant to this Agreement, up to a maximum of U.S.
$2,062,500 to each Seller. A Tax Loan to a Seller shall be secured by a pledge
to FARO or the Buyer of the number of such Seller's shares of FARO Common Stock
equal to the amount of such Tax Loan divided by the assumed per share price of
$12 for FARO Common Stock. Each Tax Loan shall be evidenced by a Promissory
Note in the form attached as Exhibit "A" and a Pledge Agreement attached as
Exhibit "B." Such Seller shall repay all principal and accrued interest the
Tax Loan in full within 30 days of the date that the SEC declares the Tax
Registration Statement effective (or the date that the shares subject to the
Tax Registration Statement can be sold under the United States Securities Act
of 1933, as amended, without registration with the SEC, if earlier). In the
discretion of such Seller, he may repay a Tax Loan either in cash or, in lieu
of cash, with shares of FARO Common Stock at an agreed upon price of $12 per
share (regardless of the market price of FARO Common Stock on the date of
payment). Interest on the Tax Loan will be calculated on the outstanding
principal balance of the Tax Loan, from time to time, at the applicable federal
rate promulgated by the United States Internal Revenue Service. Interest on
the Tax Loan will commence on the date the Tax Loan is made to a Seller and
continue until the Tax Loan is repaid in full.
SECTION VI.3 RELEASE OF GUARANTEES. With respect to any
indebtedness of the Company reflected or reserved against in the Interim
Balance Sheet that is personally guaranteed by a Seller, the Company, following
the Closing, will attempt to obtain the release of such guarantees, and if such
releases cannot be obtained, then FARO or the Buyer shall repay the
indebtedness.
SECTION VI.4 FILINGS. Promptly after the execution of this
Agreement, each of the parties hereto shall prepare and make or cause to be
made any required filings, submissions and notifications under the laws of any
domestic or foreign jurisdictions to the extent that such filings are necessary
to consummate the transactions contemplated hereby and will use its reasonable
efforts to take all other actions necessary to consummate the transactions
contemplated hereby in a manner consistent with applicable law. Each of the
parties hereto will furnish to the other party
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such necessary information and reasonable assistance as such other party may
reasonably request in connection with the foregoing.
SECTION VI.5 EFFECTIVE TIME OF CLOSING AND TRANSFER. The Closing
shall be effective for all purposes as of the close of business on the
Closing Date.
SECTION VI.6 ANNOUNCEMENTS. Except as expressly contemplated by
this Agreement, the parties will mutually agree as to the time, form and
content before issuing any press releases or otherwise making any public
statements or statements to third parties with respect to transactions
contemplated hereby and shall not issue any press release or, except as
necessary to perform their respective obligations hereunder, discuss the
transactions contemplated hereby with any third party prior to reaching mutual
agreement with respect thereto, except as may be required by law.
Notwithstanding the foregoing, in the event that FARO is required by law or the
rules of the NASDAQ Stock Market, Inc. to make a statement with respect to the
transactions contemplated herein, FARO may make such a statement and shall
notify in writing the Sellers as to the time, form and content of such
statement.
SECTION VI.7 COSTS AND EXPENSES. Whether or not the transactions
contemplated by this Agreement are consummated, each party hereto shall pay its
own costs and expenses (including legal fees and expenses) incurred in
connection with due diligence reviews, the preparation, negotiation and
execution of this Agreement and all other agreements, certificates, instruments
and documents delivered hereunder, and all other matters relating to the
transactions contemplated hereby. All German transfer and intangible taxes, if
any, arising in connection with the sale and assignment of the Quotas hereunder
shall be paid by the Sellers. All transfer and intangible taxes, if any,
arising in connection with the sale and delivery of the Purchase Price Shares
hereunder shall be paid by FARO. All fees and charges arising from notary
requirements applicable to the sale and assignment of Quotas shall be paid by
the Buyer. In addition, at the Closing, the Sellers shall repay any loans made
by FARO to the Company and guaranteed by the Sellers to finance the expenses of
the Company's professionals in connection with the transaction contemplated
herein.
SECTION VI.8 FURTHER ASSURANCE.
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use its reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
If at any time after the Closing Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the parties hereto shall
take or cause to be taken all necessary action, including, without limitation,
the execution and delivery of such further purposes or otherwise to consummate
and give to the transactions contemplated hereby. If any consent or approval
required for the consummation of the transactions contemplated hereby is not
obtained prior to the Closing, Sellers shall cooperate with FARO and Buyer, and
attempt in good faith, to obtain
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such consent or approval during the one year period immediately following the
Closing.
(b) From and after the Closing Date, the Buyer or FARO
shall promptly inform the Sellers of any tax audit of the Company by the German
tax authority and to give the Sellers the opportunity to participate in such a
tax audit.
SECTION VI.9 LOCK-UP. For a period of six months following the
date of this Agreement, the Sellers will not, and will instruct its Affiliates
not to, acquire, agree to acquire, or make any proposal to acquire any shares
of FARO Common Stock.
SECTION VI.10 EMPLOYMENT AGREEMENTS. On or promptly following the
Closing Date, each Seller shall enter into a employment agreements with FARO in
the form of attached Exhibits "C" and "D", respectively.
SECTION VI.11 STOCK OPTIONS.
(a) Following the Closing Date, the Buyer shall establish
a stock option plan, similar to FARO's 1997 Employee Stock Option Plan but
modified to comply with the requirements of German law, for the Company (or the
Company's successor following the Closing), under which (i) options to purchase
5% of the total amount of outstanding capital interests of the Company or its
successor will be granted to the Sellers (2.5% to each of Messrs. Buss and
Scharbach), and (ii) the exercise price of such options, in the aggregate,
shall be U.S.$1,000,000, and the exercise price per option will be determined
based on the total number of outstanding shares of capital interests of the
Company.
(b) Following the Closing, FARO will grant options to
purchase 200,000 shares of FARO Common Stock in the aggregate under FARO's 1997
Employee Stock Option Plan to the employees of the Company listed on section
6.11 of the Disclosure Schedule.
SECTION VI.12 POST-CLOSING OBLIGATIONS OF SELLERS. Within 90 days
following the Closing, the Sellers will dispose of all of their respective
interests in Argusq GmbH, and Sellers shall pay, or cause to be paid, the net
amount of debt owed by Argusq GmbH to the Company in full at or before such
dispossession. Sellers agree to transfer to Buyer all of their respective
interests in Antares LDA in consideration for DM 1,000.
ARTICLE VII
INDEMNIFICATION
SECTION VII.1 INDEMNIFICATION BY SELLERS. Each Seller, jointly and
severally, shall indemnify, defend, reimburse, and hold FARO, the Buyer, and
the Company (but any payment for an indemnity claim shall only be made once)
harmless from and against any and all demands, claims, actions, suits,
liabilities, damages, losses, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees) relating to, resulting from or arising
out of:
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(i) any breach or inaccuracy (or material alleged breach
or material alleged inaccuracy resulting from a third party claim) of any
guaranty made hereunder by Sellers pursuant to this Agreement or any Related
Agreement;
(ii) any breach or failure by the Sellers to perform any
covenant, agreement, or obligation required by this Agreement or any Related
Agreement;
(iii) any claim (including a claim for reimbursement)
arising out of any Grants paid to the Company prior to the Closing;
(iv) any claims by or liabilities with respect to any
employee of the Company with respect to his or her employment or termination of
employment on or prior to the Closing Date;
(v) the conduct of the Company or operations of the
Company prior to the Closing; and
(vi) any personal liabilities of a Seller directed
against the Buyer or FARO based on Section 419 of the German Civil Code.
SECTION VII.2 INDEMNIFICATION BY BUYER AND FARO. Buyer and FARO
shall indemnify, defend, reimburse, and hold each Seller harmless from and
against any and all demands, claims, actions, suits, liabilities, damages,
losses, judgments, costs and expenses (including, without limitation,
reasonable attorneys' fees) relating to, resulting from or arising out of:
(i) any breach or inaccuracy (or material alleged breach
or material alleged inaccuracy resulting from a third party claim) of any
guaranty made hereunder by Buyer or FARO pursuant to this Agreement or any
Related Agreement; and
(ii) any breach or failure by Buyer or FARO to perform any
covenant, agreement, or obligation required by this Agreement or any Related
Agreement;
SECTION VII.3 LIMITATION OF LIABILITY.
(a) Notwithstanding any other provision in this
Agreement, the maximum amount of the Sellers' aggregate indemnification
obligations pursuant to Sections 7.1 (i) - (v) (including the obligation dealt
with in Section 7.3(c) hereof) (other than indemnification claims with respect
to any breach or inaccuracy of any guaranty in Sections 4.4 and 4.9 hereof)
shall be the Escrow Shares and any indemnification pursuant to this section
shall be provided by the Escrow Shares (except that indemnification claims with
respect to any breach or inaccuracy of any guaranty in Sections 4.4 and 4.9
hereof are not limited to the Escrow Shares). For purposes of any
indemnification claim under Section 7.1, the Escrow Shares shall be valued at
U.S. $12
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per share notwithstanding the market price of the FARO Common Stock at the time
of the indemnification claim. There is no limit to Sellers' aggregate
indemnification obligations for indemnification claims with respect to any
breach or inaccuracy of any guaranty in Section 4.4 hereof.
(b) Notwithstanding any other provision in this
Agreement, the maximum amount of the Buyer's and FARO's aggregate
indemnification obligations pursuant to Section 7.2 shall be Four Million U.S.
Dollars (US $4,000,000).
(c) With respect to any indemnification obligations
Sellers for any breach or inaccuracy of any guaranty in Section 4.9 hereof as
evidenced by the findings of a Tax audit or otherwise, the Sellers shall be
liable to indemnify FARO and the Buyer for claims on account of Taxes only to
the extent that any additional Taxes are not compensated by reduced tax burdens
in subsequent taxable years resulting from such additional Taxes. If such
additional Taxes are linked to Tax benefits arising in subsequent years
(because, for example, a Tax audit requires additional capitalization to the
basis of a depreciable asset bringing about greater depreciation in a
subsequent year), the liability of Sellers attributable to the additional Taxes
shall be reduced by the discounted cash value of the additional Tax benefit
discounted at a rate of 8% per year. The principal of "compensation of
advantages to compensate damages" (Vorteilsausgleich) shall apply.
SECTION VII.4 SURVIVAL OF GUARANTIES. Except for the guaranties
set forth in Sections 4.4 and 4.9 hereof, the guaranties made pursuant to this
Agreement including, without limitation, all guaranties made in any exhibit or
schedule or certificate delivered thereunder, shall survive the execution of
this Agreement and the Closing Date until and shall survive and continue for a
period of 18 months following the Closing Date, at which time such guaranties
shall expire. The guaranties set forth in Section 4.4 hereof shall survive for
30 years. The guaranties set forth in Section 4.9 hereof shall expire six
months after a tax order by the tax authority is delivered to the Buyer after
the tax authorities completed an official audit of the Company and has become
final and indisputable.
SECTION VII.5 INDEMNIFICATION CLAIMS PROCEDURES. All claims for
indemnification by any party seeking indemnification (the "Indemnified Party")
from another party (the "Indemnifying Party") under Sections 7.1 or 7.2 shall
be asserted and resolved as follows:
(a) In the event that any claim or demand for which the
Indemnifying Party would be liable to any Indemnified Party hereunder is
asserted against or sought to be collected from any Indemnified Party by a
third party, the Indemnified Party shall promptly notify the Indemnifying Party
in reasonable detail of such claim or demand and the amount or the estimated
amount thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such claim and demand) (the "Claim Notice").
The Indemnifying Party shall have thirty (30) days from the personal delivery
or mailing of the Claim Notice (the "Notice Period") to notify the Indemnified
Party whether or not the Indemnifying Party desires to defend the
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Indemnified Party against such claim or demand. All costs and expenses incurred
by the Indemnifying in defending such claim or demand shall be a liability of,
and shall be paid by, the Indemnifying Party. In the event that the
Indemnifying Party notifies the Indemnified Party within the Notice Period that
it desires to defend the Indemnified Party against such claim or demand and
except as hereinafter provided, the Indemnifying Party shall have the right to
shall have the right to defend the Indemnified Party by counsel of the
Indemnifying Party's own choosing, either in Indemnifying Party's name, or the
Indemnified Party's name by appropriate proceedings. If any Indemnified party
desires to participate in, but not control, any such defense or settlement, it
may do so at its sole cost and expense and, in any event, the Indemnified Party
shall cooperate with the Indemnifying Party and such counsel. To the extent the
Indemnifying Party shall control or participate in the defense or settlement of
any third party claim or demand, the Indemnified Party shall give to the
Indemnifying Party and its counsel access to, during normal business hours, the
relevant business records and other documents, and shall permit them to consult
with the employees and counsel of the Indemnified Party, to the extent
consistent with the application of relevant evidentiary privileges. The
Indemnifying Party shall keep the Indemnified Party reasonably apprised of the
course of any negotiations or proceedings and the Indemnifying Party shall not
settle any claim or demand without the consent of the affected Indemnified
Party, which consent shall not be unreasonably withheld or unduly delayed. As
soon as reasonably practicable after the Indemnifying Party has reached a final
decision as to whether or not all or any portion of the obligations related to
such claim or demand are obligations for which the Indemnifying Party is
required to indemnify such Indemnified Party hereunder and, in any event, prior
to entering into any such settlement or other final resolution of any claim or
demand, the Indemnifying Party shall notify the Indemnified Party in writing of
its position as to whether or not all or any portion of the obligations related
to such claim or demand are obligations for which the Indemnifying Party is
required to indemnify such Indemnified Party in accordance with this Article X.
(b) If the Indemnifying Party elects or is deemed to have
elected not to take over the defense of any such claim or demand, the
Indemnified Party shall have the right to defend, compromise and settle such
claim or demand on such terms as the Indemnified Party in their discretion may
determine, subject to the prior consent of the Indemnifying Party, which
consent shall not be unreasonably withheld or unduly delayed, and the
Indemnifying Party shall continue to be bound to indemnify the Indemnified
Party in accordance with and to the extent provided under the terms of this
Article VII. The Indemnified Party shall or shall direct in writing its counsel
to deliver to the Indemnifying Party copies of all correspondence and other
matters relating to such claim or demand. Notwithstanding the foregoing, to
the extent that the claim or demand involves or could result in claims against,
or potential liability of, the Indemnifying Party the extent or nature of which
were not known by the Indemnifying Party as of the date the Indemnifying Party
elects or is deemed to have elected not to take over the defense of such claim
or demand, the Indemnifying Party shall, by written notice to the Indemnified
Party, be entitled to take over the defense of such claim or demand.
(c) in the event an Indemnified Party should have a claim
against the
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Indemnifying Party hereunder which does not involve a claim or demand being
asserted against or sought to be collected from it by a third party, the
Indemnified Party shall promptly send a Claim Notice with respect to such claim
to the Indemnifying Party.
(d) the Indemnified Party's failure to give reasonably
prompt notice to the Indemnifying Party of any actual, threatened or possible
claim or demand which may give rise to a right of indemnification hereunder
shall not relieve the Indemnifying Party of any liability which it may have to
an Indemnified Party except to the extent the failure to give such notice
prejudiced the Indemnifying Party.
SECTION VII.6 RIGHT OF SET-OFF. In addition to any other remedy
available in equity or at law, the Indemnified Party shall be entitled to set
off the amount of any obligation for which it is entitled to be indemnified
under this Article VII against any amounts payable to the Indemnifying Party
hereunder, under any Related Agreement other agreement contemplated hereby, or
any other agreement between the Indemnified Party and the Indemnifying Party.
ARTICLE VIII
MISCELLANEOUS
SECTION VIII.1 LEGAL MATTERS. The validity, construction,
enforcement, and interpretation of this Agreement are governed by the laws of
the Federal Republic of Germany. Any disputes arising with respect to this
Agreement will be resolved in accordance with the provisions of the Arbitration
Agreement attached as Exhibit "H." In any mediation, arbitration, or legal
proceeding arising out of this Agreement, the losing party shall reimburse the
prevailing party, on demand, for all costs incurred by the prevailing party in
enforcing, defending, or prosecuting any claim arising out of this Agreement,
including all fees, costs, and expenses of experts, attorneys, witnesses,
collection agents, and supersedeas bonds, whether incurred before or after
demand or commencement of legal proceedings, and whether incurred pursuant to
trial, appellate, mediation, arbitration, bankruptcy, administrative, or
judgment-execution proceedings. The obligation of the losing party, however,
shall not exceed the fees that could be charged on the basis of the German
statutory schedule for attorney fees (BRAGO) on the basis of first instance
fees.
SECTION VIII.2 ENTIRE UNDERSTANDING; WAIVER. This Agreement and the
Related Agreements record the final, complete, and exclusive understanding
among the parties regarding the subjects addressed in them and supersede any
prior or contemporaneous agreement, understanding, or representation, oral or
written, by any of them. The provisions hereof may not be changed, modified,
waived, or altered except by an agreement in writing signed by the party
entitled to the benefit of the provision to be waived hereto. A waiver by any
party of any of the terms or conditions of this Agreement, or of any breach
thereof, shall not be deemed a waiver of such term or condition for the future,
or of any other term or condition hereof, or of any subsequent breach thereof.
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SECTION VIII.3 SEVERABILITY. Whenever possible, each provision of
this Agreement should be construed and interpreted to so that it is valid and
enforceable under applicable law. If a provision of this Agreement is held to
be invalid or unenforceable under applicable law, however, that provision will
be deemed separable from the remaining provisions of this Agreement and will
not affect the validity or interpretation of the other provisions of this
Agreement or the application of that provision to other circumstances in which
it is valid and enforceable.
SECTION VIII.4 NOTICES. Each demand, notice, consent, approval, and
other communication required or permitted by this Agreement will be valid only
if it is (a) in writing (whether or not this Agreement expressly states that it
must be in writing) (b) delivered personally or sent by telecopy, commercial
courier, or first class, postage prepaid, United States mail (whether or not
certified or registered, and regardless of whether a return receipt is
requested or received by the sender), and (c) addressed by the sender to the
intended recipient as follows:
If to Buyer or FARO:
FARO Technologies, Inc.
125 Technology Park
Lake Mary, Florida 32746
Telecopy: (407) 333-4181
Attention: Gregory A. Fraser
With a copy to:
Foley & Lardner
100 North Tampa St., Suite 2700
Tampa, Florida 33602
Telecopy: (813) 225-4102
Attention: Martin A. Traber
If to the Sellers:
Erbprinzenstr. 31
Karlsruhe, Deutschland 76133
With a copy to:
Hasche Eschenlohr Peltzer Riesenkampff Fischoetter,
60325 Frankfurt
Niedenau 68
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Frankfurt, Germany
Telecopy: 011-49-69-71-701-220
Attention: Martin Peltzer
or to any other address as Buyer, FARO, or the Sellers designate by written
notice to the other parties. A validly given consent, demand, notice,
approval, or other communication required or permitted by this Agreement will
be effective (i) on its receipt, if delivered personally if sent on a Business
Day during the hours of 9:00 a.m. and 6:00 p.m. at the location of the party
receiving the notice, but if not, then immediately upon the beginning of the
first Business Day after being sent; (ii) if by Federal Express or any other
reputable overnight delivery service, two Business Days after being placed in
the exclusive custody and control of said courier; and if mailed by certified
mail, return receipt requested, seven Business Days after mailing.
Notwithstanding the foregoing, with respect to any Notice given or made by
telecopier or similar device, such notice shall not be effective unless and
until (i) the telecopier or similar device being used prints a written
confirmation of the successful completion of such communication by the party
sending the notice, and (ii) a copy of such notice is deposited in first class
mail to the appropriate address for the party to whom the notice is sent. Each
party promptly shall notify the other of any change in the party's mailing
address.
SECTION VIII.5 CAPTIONS. The captions herein are for convenience
only and shall not be considered a part of this Agreement for any purpose,
including, without limitation, the construction or interpretation of any
provision hereof.
SECTION VIII.6 ASSIGNS; PARTIES IN INTEREST. Neither this Agreement
nor any of the rights or obligations arising hereunder shall be assignable
without the prior written consent of the parties hereto. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Nothing in this Agreement,
express or implied, shall confer upon any Person, other than the parties
hereto, and their successors and permitted assigns, any rights or remedies
under or by reason of this Agreement.
SECTION VIII.7 EFFECTIVENESS. This Agreement will become effective
with respect to the original parties to it, as of its stated execution date,
when each of those parties has executed and delivered to the others a
counterpart of this Agreement.
SECTION VIII.8 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which, together, shall constitute one and the same instrument.
SECTION VIII.9 CONSTRUCTION OF TERMS. Any reference herein to the
masculine or neuter shall include the masculine, the feminine, and the neuter,
and any reference herein to the singular or plural shall include the opposite
thereof. The parties to this Agreement acknowledge that each party and counsel
to each party has participated in the drafting of this Agreement and agree that
this Agreement shall not be interpreted against one party or the other based
upon who drafted it.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
FARO TECHNOLOGIES, INC.
By: /s/ Simon Raab
----------------------------------
Name: Simon Raab
Title: President
TSP AURIGA VERMoGENSVERWALTUNGS GMBH
By: /s/ Simon Raab
----------------------------------
Name: Simon Raab
Title: Managing Director
/s/ Siegfried Kurt Buss
-------------------------------------
SIEGFRIED KURT BUSS
/s/ Wendelin Karl Johannes Scharbach
-------------------------------------
WENDELIN KARL JOHANNES SCHARBACH
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EXHIBITS
A - Promissory Note
B - Stock Pledge Agreement
C - Employment Agreement for Siegfried Buss
D - Employment Agreement for Wendelin Scharbach
E - Escrow Agreement
F - Registration Rights Agreement
G - Consent of Mrs. Buss
H - Arbitration Agreement
35
