1
STOCK PURCHASE AGREEMENT
Dated as of July 21, 1995
AMONG
ACUMEN, INC.
THE SHAREHOLDERS OF ACUMEN, INC.
AND
COGNEX CORPORATION
2
TABLE OF CONTENTS
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Preamble Page
ARTICLE I PURCHASE AND SALE OF SHARES
Section 1.1 Basic Transaction . . . . . . . . . . . . 2
Section 1.2 Consideration for Purchase of Shares . . 2
Section 1.3 Delivery of Buyer Common Stock. . . . . . 3
Section 1.4 Exchange of Option. . . . . . . . . . . . 3
Section 1.5 Time and Place of Closing . . . . . . . . 4
Section 1.6 Deliveries at the Closing . . . . . . . . 4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SELLING SHAREHOLDERS
Section 2.1 Authority; Validity; Ownership of Stock . 5
Section 2.2 Organization, Qualification and
Corporate Powers . . . . . . . . . . . . 6
Section 2.3 Capitalization. . . . . . . . . . . . . . 6
Section 2.4 Authorization of Transaction. . . . . . . 7
Section 2.5 Subsidiaries. . . . . . . . . . . . . . . 7
Section 2.6 Financial Statements. . . . . . . . . . . 7
Section 2.7 Interim Change. . . . . . . . . . . . . . 8
Section 2.8 Absence of Undisclosed Liabilities. . . . 8
Section 2.9 Title to Assets . . . . . . . . . . . . . 9
Section 2.10 Real Estate . . . . . . . . . . . . . . . 9
Section 2.11 Brokers . . . . . . . . . . . . . . . . . 9
Section 2.12 Intellectual Property . . . . . . . . . . 9
Section 2.13 Condition of Assets . . . . . . . . . . . 11
Section 2.14 Material Contracts. . . . . . . . . . . . 11
Section 2.15 Employees . . . . . . . . . . . . . . . . 12
Section 2.16 Employee Benefit Plans. . . . . . . . . . 13
Section 2.17 Taxes . . . . . . . . . . . . . . . . . . 13
Section 2.18 Insurance . . . . . . . . . . . . . . . . 15
Section 2.19 Bank Accounts . . . . . . . . . . . . . . 16
Section 2.20 Litigation; Pending Labor Disputes. . . . 16
Section 2.21 Compliance with Law . . . . . . . . . . . 16
Section 2.22 Books and Records . . . . . . . . . . . . 17
Section 2.23 Representations and Warranties
with Respect to Buyer Shares . . . . . . 17
Section 2.24 Legends on Certificates . . . . . . . . . 18
Section 2.25 Representations and Warranties . . . . . 19
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 3.1 Organization, Qualification and
Corporate Powers . . . . . . . . . . . . 19
Section 3.2 Authorization for Transaction . . . . . . 19
Section 3.3 Buyer Shares Issued to
McGarry and Accu-Fab . . . . . . . . . . 20
Section 3.4 Brokers . . . . . . . . . . . . . . . . . 20
ARTICLE IV COVENANTS OF THE COMPANY AND EACH
SELLING SHAREHOLDER
Section 4.1 Covenants of The Company . . . . . . . . 20
Section 4.2 Covenants of Each Selling Shareholder . . 22
Section 4.3 Covenants of Each Non-Management
Shareholder . . . . . . . . . . . . . . 23
ARTICLE V COVENANTS OF THE BUYER
Section 5.1 Confidentiality . . . . . . . . . . . . . 25
Section 5.2 Satisfaction of Conditions. . . . . . . . 25
Section 5.3 Put Right of McGarry . . . . . . . . . . 25
ARTICLE VI TERMINATION
Section 6.1 Termination of Agreement. . . . . . . . . 25
Section 6.2 Effect of Termination and
Right to Proceed . . . . . . . . . . . . 27
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE BUYER
Section 7.1 Accuracy of Warranties; Performance
of Covenants . . . . . . . . . . . . . . 27
Section 7.2 No Pending Action . . . . . . . . . . . . 28
Section 7.3 Corporate Documents . . . . . . . . . . . 28
Section 7.4 Resignations. . . . . . . . . . . . . . . 28
Section 7.5 Escrow Agreement. . . . . . . . . . . . . 28
Section 7.6 Stock Option Agreements . . . . . . . . . 28
Section 7.7 Opinion of Counsel to the Company
and Accu-Fab . . . . . . . . . . . . . . 28
Section 7.8 Non-Competition Agreements . . . . . . . 28
Section 7.9 Employment Agreement . . . . . . . . . . 29
Section 7.10 Consents Obtained; No Termination . . . . 29
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ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS
OF EACH SELLING SHAREHOLDER
Section 8.1 Accuracy of Warranties;
Performance of Covenants . . . . . . . . 29
Section 8.2 No Pending Action . . . . . . . . . . . . 30
Section 8.3 Corporate Documents . . . . . . . . . . . 30
Section 8.4 Opinion of Counsel to the Buyer . . . . . 30
Section 8.5 Registration Rights Agreement . . . . . . 30
Section 8.6 Stock Option Agreements . . . . . . . . . 30
Section 8.7 Non-Competition Agreements . . . . . . . 30
Section 8.8 Employment Agreement . . . . . . . . . . 30
ARTICLE IX SURVIVAL OF REPRESENTATIONS AND
WARRANTIES AND INDEMNIFICATION
Section 9.1 Survival of Representations and
Warranties . . . . . . . . . . . . . . 31
Section 9.2 Agreement to Indemnify . . . . . . . . . 31
Section 9.3 Notice and Opportunity to Defend . . . . 32
Section 9.4 Selling Shareholder Representative . . . 33
Section 9.5 Escrow . . . . . . . . . . . . . . . . . 34
Section 9.6 Lemelson Exclusion . . . . . . . . . . . 34
ARTICLE X GENERAL PROVISIONS
Section 10.1 Amendment and Waiver. . . . . . . . . . . 34
Section 10.2 Notices . . . . . . . . . . . . . . . . . 35
Section 10.3 Counterparts. . . . . . . . . . . . . . . 35
Section 10.4 Parties in Interest . . . . . . . . . . . 36
Section 10.5 Entire Agreement. . . . . . . . . . . . . 36
Section 10.6 Disclosure. . . . . . . . . . . . . . . . 36
Section 10.7 Governing Law . . . . . . . . . . . . . . 36
Section 10.8 Headings. . . . . . . . . . . . . . . . . 36
Section 10.9 Expenses. . . . . . . . . . . . . . . . . 36
Section 10.10 Publicity . . . . . . . . . . . . . . . . 36
Section 10.11 Attorneys' Fees . . . . . . . . . . . . . 37
Section 10.12 Minority Shareholders . . . . . . . . . . 37
EXHIBITS
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Exhibit A - Form of Escrow Agreement
Exhibit B - Stock Option Agreement
Exhibit B-1 - Stock Option Agreement
Exhibit C - Form of Opinion of Counsel to the Company and
Accu-Fab
Exhibit D - Form of Non-Competition Agreement for McGarry
Exhibit E - Form of Employment Agreement for McGarry
Exhibit F - Form of Termination and Non-Competition
Agreement for Gilmour
Exhibit G - Form of Opinion of Counsel to the Buyer
Exhibit H - Registration Rights Agreement
SCHEDULES
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STOCK PURCHASE AGREEMENT
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THIS STOCK PURCHASE AGREEMENT is made as of the day of
July, 1995 (the "Agreement"), among Cognex Corporation, a
Massachusetts corporation (the "Buyer"), Acumen Inc., an Oregon
corporation (the "Company"), E. John McGarry ("McGarry") and
Allen Gilmour ("Gilmour"), and the other shareholders of the
Company listed as Non-Management Shareholders on the signature
pages hereto (collectively, the "Non-Management Shareholders
and, together with McGarry and Gilmour, the "Selling
Shareholders").
RECITALS
WHEREAS, the Selling Shareholders own 81,984 shares of
common stock at no par value (the "Acumen Common Stock"), of
the Company (the "Shares"), constituting all of the issued and
outstanding shares of capital stock of the Company;
WHEREAS, McGarry owns an option to purchase 10,000 shares
of Acumen Common Stock at $14.01 per share pursuant to a Stock
Option Agreement dated as of May 11, 1994 between McGarry and
the Company (the "Acumen Option");
WHEREAS, McGarry possesses an intimate knowledge of the
business and technology of the Company and its procedures,
trade secrets, marketing plans, methods and personnel;
WHEREAS, the Buyer wishes to retain the services of McGarry
to develop, direct and implement the technology of Acumen, and,
but for McGarry's agreement of employment and agreement not to
compete during and following such employment, the Buyer would
not be willing to purchase the Shares;
WHEREAS, the Selling Shareholders desire to sell the Shares
to the Buyer and the Buyer desires to purchase the Shares from
the Selling Shareholders and McGarry desires to exchange the
Acumen Option for an option to acquire shares of common stock
of the Buyer, all on the terms and subject to the conditions
set forth in the Agreement; and
WHEREAS, the Buyer desires to enter into various agreements
with McGarry in connection with the purchase of the Shares
hereunder in order to ensure that McGarry will remain an
employee of the Company after the closing of the transaction.
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NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein
contained and subject to the provisions herein contained, the
parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
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1.1 BASIC TRANSACTION. On the basis of the
representations, warranties, covenants and agreements set forth
herein and subject to the satisfaction or waiver of the
conditions set forth herein, each Selling Shareholder agrees to
and will sell, transfer, assign and deliver to the Buyer at the
Closing (as defined herein) good and marketable title to, free
and clear of all liens, pledges, encumbrances, claims and
equities of every kind, and the Buyer agrees to and will
purchase and accept from each Selling Shareholder, the Shares
owned by such Selling Shareholder as set forth in Schedule 1.1
hereto, which will collectively constitute up to all of the
Shares issued and outstanding on the Closing Date (as defined
herein).
1.2 Consideration for Purchase of Shares.
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(a) In exchange for the Shares, the Buyer shall pay
to the Selling Shareholders $146.7646 per share of Acumen
Common Stock, for an aggregate purchase price of $12,032,352
(the "Purchase Price"). Of the Purchase Price (i) up to
$9,390,589 will be paid to the participating Non-Management
Shareholders, consisting of (x) up to $5,688,208 which will be
paid by wire transfer on the Closing Date (as defined herein)
of immediately available funds to an account designated by the
participating Non-Management Shareholders, (y) $2,702,381 in
Buyer Common Stock, as defined in this Section 1.2, below, and
in the manner set forth in Section 1.3, below, and
(z) $1,000,000 shall be deposited on the Closing Date into an
escrow account (the "Escrow Fund") to be established with The
Bank of Boston, a Massachusetts corporation (the "Escrow
Agent") pursuant to an Escrow Agreement in the form of
Exhibit A hereto (the "Escrow Agreement"), which amount will be
disbursed to Accu-Fab Systems, Inc. ("Accu-Fab") on the first
anniversary of the Closing Date, subject to the terms and
conditions of the Escrow Agreement, (ii) $1,467,646 will be
paid to McGarry by delivery to McGarry of shares of Common
Stock, par value $.002 per share, of the Buyer (the "Buyer
Common Stock"), in the manner set forth in Section 1.3 below,
and (iii) up to $1,174,117 will be paid to Gilmour as set forth
in Schedule 1.2 attached hereto if he joins in this Agreement
and executes, complies with and otherwise does not breach the
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terms and conditions of a non-competition agreement
substantially in the form of Exhibit F.
(b) The Purchase Price shall be allocated between
the Selling Shareholders as set forth in SCHEDULE 1.2 hereto.
Each Selling Shareholder agrees with the Buyer, the Company and
the other Selling Shareholder that, upon the Closing, the
consideration set forth next to such Selling Shareholder's name
in SCHEDULE 1.2 constitutes the full, entire and correct
consideration payable to such Selling Shareholder for his
Shares.
1.3 DELIVERY OF BUYER COMMON STOCK. Subject to the
terms and conditions of this Agreement, at the Closing the
Buyer shall deliver to McGarry and Accu-Fab the aggregate
number of shares of Buyer Common Stock issuable pursuant to
this Section 1.3 (the "Buyer Shares"). The number of Buyer
Shares to be delivered to McGarry and Accu-Fab shall be equal
to the quotient obtained by dividing $4,170,027 by the Buyer
Closing Price. For purposes hereof, "Buyer Closing Price"
shall mean the average of the high and low sales price for
shares of Buyer Common Stock on the Nasdaq National Market for
each of the five (5) trading days immediately preceding the
Closing Date. The Purchase Price for the Shares being sold by
the Selling Shareholders shall be allocated between the Selling
Shareholders in the manner set forth in SCHEDULE 1.2.
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In addition, Accu-Fab will have the right to require the
Buyer to repurchase their allocation of the Buyer Shares, for
one year from the date of the Closing, at a price per share
equal to the Buyer Closing Price.
1.4 EXCHANGE OF OPTION. On the Closing Date,
McGarry shall exchange the Acumen Option for an option to
purchase shares of Buyer Common Stock, which option will be
granted under the Buyer's 1993 Stock Option Plan. On the
Closing Date, the Buyer shall issue to McGarry an option to
purchase the number of shares of Buyer Common Stock equal to
(i) the product obtained by multiplying the number of shares of
Acumen Common Stock subject to the Acumen Option by $146.7646,
DIVIDED BY (ii) the Buyer Closing Price (the "Buyer Option").
The exercise price per share of Buyer Common Stock subject to
the Buyer Option shall equal the aggregate exercise price for
the shares of Acumen Common Stock subject to the Acumen Option
divided by the number of shares of Buyer Common Stock subject
to the Buyer Option. The Buyer Option will be granted pursuant
to Stock Option Agreements in the form of Exhibit B and
Exhibit B-1 hereto. ---------
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1.5 TIME AND PLACE OF CLOSING. The closing of the
purchase and sale of the Shares (the "Closing") shall take
place at the offices of Hutchins, Wheeler & Dittmar,
101 Federal Street, Boston, Massachusetts at 10:00 a.m. local
time, on July , 1995, or at such other date as is mutually
acceptable to the parties; PROVIDED, HOWEVER, that if any of
the conditions to Closing set forth in this Agreement have not
been satisfied or waived by the party entitled to the benefit
of such condition, the Closing shall take place on the third
business day after such condition has been satisfied or
waived. The date and time of the Closing are herein referred
to as the "Closing Date." It is further agreed that to the
extent that a minimum of ninety (90) percent in interest of the
Shares held by the Selling Shareholders, the percentage of
which may be reduced or waived by the Buyer, execute and
deliver this Agreement and tender said minimum ninety (90)
percent of such Shares that the Closing may be effective with
said Selling Shareholders.
1.6 DELIVERIES AT THE CLOSING. At the Closing,
(i) the Buyer will deliver to the Selling Shareholders the
various certificates (including stock certificates),
instruments and documents referred to in Article VIII below and
the Purchase Price specified in Section 1.2 above, together
with the Buyer Shares issuable to McGarry and Accu-Fab and the
Buyer Option to be granted to McGarry, (ii) the Selling
Shareholders will deliver to the Buyer the various
certificates, instruments and documents referred to in Article
VII below, (iii) each of the Selling Shareholders will deliver
to the Buyer the stock certificates representing all of his
Shares, duly endorsed in blank or accompanied by duly executed
stock powers, and (iv) McGarry will deliver to the Buyer the
Acumen Option for cancellation in connection with the grant of
the Buyer Option. On or before the Closing Date, the Selling
Shareholders shall have paid, or caused to be paid, all stock
transfer and other similar taxes required to be paid in
connection with the sale and delivery to the Buyer of the
Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SELLING SHAREHOLDERS
----------------------------------------
The Company and the Selling Shareholders hereby represent
and warrant to the Buyer as set forth in this Article II. The
representations and warranties of the Company and the Selling
Shareholders set forth herein shall be deemed to be made
jointly and severally, except for those in Sections 2.1, 2.23,
and 2.24, which will be made by each Selling Shareholder only
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with respect to himself and the Shares owned by him, provided
that neither McGarry nor Gilmour shall have any personal
liability for any breach of the representations and warranties
contained in this Article II other than liability resulting
from breaches of the representations and warranties contained
in Sections 2.1, 2.23 and 2.24, which are made by McGarry with
respect to himself and the Shares owned by him, and as regards
Gilmour, Section 2.1 only, which are made by Gilmour with
respect to himself and the Shares owned by him.
2.1 Authority; Validity; Ownership of Stock.
----------------------------------------
(a) AUTHORITY. Each Selling Shareholder has full
legal capacity, legal right, power and authority, without the
consent of any other person, to execute and deliver this
Agreement, and to carry out the transactions contemplated
hereby. All actions required to be taken by any such Selling
Shareholder to authorize the execution, delivery and
performance of this Agreement and all transactions contemplated
hereby will have been duly and properly taken by the Closing.
(b) VALIDITY. This Agreement has been, and the
documents to be executed and delivered by the Selling
Shareholders at Closing will be, duly executed and delivered by
the Selling Shareholders and are the lawful, valid and legally
binding obligations of the Selling Shareholders enforceable in
accordance with its terms.
(c) NON-CONTRAVENTION. Neither the execution and
the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any statute,
regulation, rule, judgment, order, decree, stipulation,
injunction, or other restriction of any government,
governmental agency, or court to which the Selling Shareholder
is subject or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice or consent under, any
contract, lease, license, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of
indebtedness, security interest, or other arrangement to which
the Selling Shareholder is party or by which it is bound or to
which any of his Shares are subject. The Selling Shareholder
is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated hereby.
(d) OWNERSHIP OF STOCK AND WAIVER. The Selling
Shareholder holds of record and owns beneficially the number of
Shares set forth next to his name on SCHEDULE 1.1, free and
clear of any restrictions on transfer, liens, pledges,
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encumbrances, claims security interests, options, warrants,
rights and equities of every kind (collectively, the
"Encumbrances"), except in the case of any Selling Shareholder
(including, but not limited to, McGarry and Gilmour), who is
subject to a stock repurchase agreement with the Company, each
and any of which is hereby terminated by the Company on or
prior to the Closing, and the Selling Shareholder has the
absolute right, power and capacity to transfer and deliver such
Shares to the Buyer free and clear of any Encumbrances. The
Selling Shareholder is not a party to any option, warrant,
right, contract, call, put or other agreement or commitment
providing for the disposition or acquisition of any capital
stock of the Company (other than this Agreement and the Acumen
Option). The Selling Shareholder is not a party to any voting
trust, proxy, or other agreement or understanding with respect
to the voting of any capital stock of the Company. At the
Closing, the Selling Shareholder will deliver to the Buyer
good, valid and marketable title to his Shares, free and clear
of any Encumbrances. Each Selling Shareholder hereby declines
to exercise a right of rescission hereby offered in connection
with any issue and sale of Securities by Acumen not in
compliance or exempt from Federal and State Securities Laws.
2.2 ORGANIZATION, QUALIFICATION AND CORPORATE
POWERS. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Oregon. The Company has full corporate power and authority to
carry on the business in which it is engaged and to own and use
the properties owned and used by it. The Company is duly
qualified or licensed to do business as a foreign corporation
and in good standing in each jurisdiction where the nature of
its business or the ownership or leasing of its properties
requires such qualification or license.
2.3 CAPITALIZATION. The Company's entire authorized
capital stock consists of 100,000 shares of Acumen Common
Stock, of which 81,984 shares are outstanding and are held of
record and owned beneficially as set forth in SCHEDULE 1.1
hereto. All of the issued and outstanding shares of Company
Common Stock have been duly authorized and validly issued and
are fully paid and non-assessable and free of pre-emptive or
other rights that entitle or entitled any person to acquire
such shares upon the issuance or sale thereof by the Company.
Except for the Acumen Option or as otherwise set forth on
SCHEDULE 2.3, there are no outstanding or authorized options,
warrants, rights, contracts, calls, puts, rights to subscribe,
conversion rights, or other agreements or commitments to which
the Company is a party or which are binding on the Company
providing for the issuance, disposition, or acquisition of any
of its capital stock, except for the right of the
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Non-Management Shareholders to require the Company to
repurchase the shares of Acumen Common Stock held by them,
which the Non-Management Shareholders hereby waive. There are
no outstanding or authorized stock appreciation, phantom stock,
or similar rights with respect to the Company.
2.4 AUTHORIZATION OF TRANSACTION. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and
approved by all requisite corporate action and the Company has
taken all action required by law, its Certificate of
Incorporation, By-Laws and otherwise to authorize all action to
be taken by the Company with respect to this Agreement and the
consummation of the transactions contemplated hereby. The
Company has full corporate power and authority to enter into
this Agreement and to perform its obligations hereunder. This
Agreement constitutes the lawful, valid and legally binding
obligation of the Company, enforceable in accordance with its
terms. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, or
other restriction of any government, governmental agency, or
court to which the Company is subject or any provision of the
Certificate of Incorporation or By-laws of the Company or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice or consent under, any contract, lease, license,
franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest,
or other arrangement to which the Company is party or by which
it is bound or to which any of its assets are subject. The
Company is not required to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated hereby.
2.5 SUBSIDIARIES. The Company does not own directly
or indirectly any interest or investment (whether equity or
debt) in any corporation, partnership, business trust, joint
venture or other legal entity.
2.6 Financial Statements. The Company has
previously delivered to the Buyer the unaudited financial
statements of the Company for the fiscal period September 1,
1994 through March 31, 1995, and the unaudited balance sheet of
the Company at March 31, 1995 (collectively, the "Financial
Statements"). The Financial Statements are in accordance with
the books and records of the Company and present fairly the
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financial condition and results of operations of the Company as
of the dates and for the period shown. The Financial
Statements have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent
with prior periods.
2.7 INTERIM CHANGE. Except as set forth in
SCHEDULE 2.7, since March 31, 1995, there has not been (a) any
material adverse change in the financial condition, results of
operations, assets, liabilities, business or prospects of the
Company; (b) any change in any of the assets, licenses, permits
or franchises which change is material and adverse to the
business, financial condition or results of operations of the
Company, or any change in the nature of the business, or manner
of conducting the business, of the Company, which has had or
insofar as the Company can reasonably foresee, will have a
material adverse effect on the business, financial condition,
results of operations, assets, licenses or permits of the
Company; (c) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the
Company or assets of the Company; (d) any forgiveness or
cancellation of debts or claims, or waiver of any rights, other
than in the ordinary course of business; (e) any increase in
the compensation or benefits payable or to become payable by
the Company to any of its employees over the levels in effect
at March 31, 1995, other than normal increases made in the
ordinary course of business consistent with past practices;
(f) any work stoppage or labor dispute involving the Company;
(g) any disposition by the Company of any assets outside the
ordinary course, (h) any employment, bonus, or deferred
compensation agreement entered into between the Company and any
of its directors, officers or other employees; (i) any
indebtedness incurred by the Company for or in respect of
borrowed money for itself or others, other than borrowings in
the normal course of business pursuant to existing commitments
at a level generally consistent with past practice; (j) any
declaration or payment or distribution to shareholders or
purchase or redemption of any shares of the Company's capital
stock or other securities; (k) any entering into, other than in
the ordinary course of business, amendment or termination of
any material contract, agreement, lease, franchise, permit or
license any of which commits the Company or has a value to the
Company of greater than $10,000, individually; or (l) any
incurrence of any other material liabilities, whether fixed or
contingent, except in the ordinary course of business.
2.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
and to the extent reflected or reserved against in the
March 31, 1995 balance sheet included in the Financial
Statements (the "March 31, 1995 Balance Sheet") or incurred
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thereafter in the ordinary course of business consistent with
past practices, the Company has no liabilities or obligations
of any nature, of a total aggregate amount in excess of
$25,000, whether absolute, accrued, contingent or otherwise,
whether written or oral, and whether due or to become due,
other than liabilities set forth in SCHEDULE 2.8.
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2.9 TITLE TO ASSETS. The Company has good and
marketable title to all of the assets of the Company reflected
in the March 31, 1995 Balance Sheet, except for (i) assets
disposed of in the ordinary course of business consistent with
past practices of the Company since such date and (ii) assets
being leased under capitalized leases. Except as set forth in
SCHEDULE 2.9, all such assets are free of any and all liens,
claims, encumbrances or security interests of third parties.
2.10 Real Estate.
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(a) SCHEDULE 2.10 hereto sets forth a description of
all interests in real property (including land, buildings,
fixtures and appurtenances thereto) used or leased by the
Company. The Company does not own any real property. Such
buildings and fixtures therein carried on the books of the
Company are sufficient to conduct the business of the Company
as it has been conducted since March 31, 1995 and as it is
currently being conducted.
(b) The Company has written leases and subleases
with respect to all real property listed in SCHEDULE 2.10 as
leased or subleased by it. No default or, to knowledge of the
Company and the Selling Shareholders, claimed default exists
under any such lease and neither the Company nor, to knowledge
of the Company and the Selling Shareholders, any other party to
such lease, has breached any provision of, or is in default in
any respect under, the terms of any such lease. Except as set
forth in SCHEDULE 2.10, the transactions contemplated by this
Agreement do not require the consent of any lessor under and
will not result in the termination or breach of any such lease.
2.11 BROKERS. Except as disclosed in SCHEDULE 2.11,
neither the Company nor the Selling Shareholders, nor anyone on
their behalf, has any liability to any broker, finder or agent
or has agreed to pay any brokerage fees, commissions, finder's
fees or other fees with respect to this Agreement or the
transactions contemplated hereby.
2.12 INTELLECTUAL PROPERTY. Set forth in
SCHEDULE 2.12 is a list and brief description, to the best of
knowledge with respect to the Non-Management Shareholders, of
all patents, patent rights, patent applications, trademarks,
- 9 -
14
trademark applications, service marks, service mark
applications, trade names and copyrights, and all applications
for such which are in the process of being prepared, owned by
or registered in the name of the Company, or of which the
Company is a licensor or licensee or in which the Company has
any right, and in each case a brief description of the nature
of such right. The Company, to the best of knowledge with
respect to the Non-Management Shareholders, owns or possesses
adequate licenses to use, free and clear of claims or rights of
any other person, all patents, patent applications, trademarks,
trademark applications, service marks, service mark
applications, trade names, copyrights, manufacturing processes,
programming processes and software, algorithms, formulae, trade
secrets and know-how (collectively, "Intellectual Property")
necessary to the conduct of its business as presently
conducted. All Intellectual Property that is used or
incorporated into the Company's products and which is unique or
proprietary to the Company, to the best of knowledge with
respect to the Non-Management Shareholders, was developed by or
for the Company by the employees or consultants of the Company
and is owned exclusively by the Company free and clear of
claims or rights of any other person. The Company is not aware
of any infringement by any other person of any rights of the
Company under any Intellectual Property. To the best knowledge
of the Company, no claim is pending or threatened against the
Company, nor has the Company received any notice from any third
parties, to the effect that any Intellectual Property owned or
licensed by the Company, or which the Company otherwise has the
right to use, or the operation or products or services of the
Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property. To the best
knowledge of the Company, no claim is pending or threatened
against the Company, nor has the Company received any notice
from any third parties to the effect that any Intellectual
Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by
the Company.
To the knowledge of the Selling Shareholders, all technical
information developed by or belonging to the Company and which
is material to the business of the Company which has not been
patented has been kept confidential. The Company, to the best
knowledge with respect to Non-Management Shareholders, is not
making unlawful use of any Intellectual Property of any other
person, including without limitation any former employer of any
past or present employees of the Company. Except as disclosed
in SCHEDULE 2.12, neither the Company nor, to the knowledge of
the Company, any of the Company's employees or consultants has
any agreements or arrangements with former employers of such
employees or consultants relating to any Intellectual Property
- 10 -
15
of such employers, which interfere or conflict with the
performance of such employee's or consultant's duties for the
Company or results in any former employers of such employees
and consultants having any rights in, or claims on, the
Company's Intellectual Property. To the knowledge of the
Company, the activities of the Company's employees and
consultants on behalf of the Company do not violate any
agreements or arrangements which any such employees have with
former employers. The Company has taken all reasonable steps
required to establish and preserve its ownership of all of the
Intellectual Property; each current employee of the Company
involved in development of any of the Intellectual Property,
has executed an agreement regarding confidentiality,
proprietary information, and assignment of inventions to the
Company, and, to the knowledge of the Company, all such
employees are not in violation of such agreements.
2.13 CONDITION OF ASSETS. The machinery, equipment
and other items of tangible personal property owned or used by
the Company are sufficient to conduct the business of the
Company as it has been conducted since March 31, 1995 and is
currently being conducted.
2.14 MATERIAL CONTRACTS. All contracts, agreements,
instruments, plans and leases to which the Company is a party
or is otherwise bound, meeting any of the descriptions set
forth below (the "Material Contracts"), are listed on
SCHEDULE 2.14 attached hereto:
- - -------------
(a) any lease of machinery, equipment or other
personal property involving payment of aggregate annual rentals
in excess of $25,000;
(b) any lease or sublease of real property and any
option to purchase, lease or sublease any real property;
(c) any contract or agreement for the purchase of
any equipment, materials, supplies or services in excess of
$25,000, whether for any one item or in the aggregate annually;
(d) any construction or other similar agreement,
contract or commitment for capital expenditures or the
acquisition of a fixed asset or group of fixed assets involving
any expenditure in excess of $25,000;
(e) any indebtedness, obligation or liability for
borrowed money, or liability for the deferred purchase price of
property (excluding normal trade payables), or any instrument
guaranteeing any indebtedness, obligation or liability, or any
obligation to incur any indebtedness, obligation or liability;
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16
(f) any license or franchise agreements, either as
licensor or licensee or as franchisee or franchisor;
(g) any joint venture or partnership agreements;
(h) any other contracts, not made in the ordinary
course of business (x) which are not cancelable on 90 days' or
less notice without any penalty or other financial obligation
or (y) if not so cancelable, involve aggregate annual payments
of $25,000 or more; or
(i) any other contract material (in excess of
$25,000) to the business of the Company.
Each of the contracts listed in SCHEDULE 2.14 is valid, binding
and in full force and effect; the Company is not, and to the
knowledge of the Company and the Selling Shareholders, no other
party thereto is, in default in any material respect under the
terms thereof and, except as disclosed in SCHEDULE 2.14,
neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby, nor
compliance with the terms and provisions hereof, will require
the consent of any person or entity pursuant to, or will result
in the termination of, any such contract.
2.15 Employees.
----------
(a) SCHEDULE 2.15 lists all officers and employees
of the Company whose total compensation for the year ended
December 31, 1994 exceeded $40,000, and also lists any and all
compensation, pension or benefit arrangements or other
financial obligations or understandings (other than those
included within Section 2.16 and the accompanying
SCHEDULE 2.16), whether written or oral, between the Company
and its officers and employees.
(b) Except as disclosed in SCHEDULE 2.15, no
director or officer of the Company, and no member of the
immediate family of any such director or officer (i) owns 5% or
more of the stock or other securities of, or has any other
direct or indirect interest in, any person, firm, corporation
or entity which has a material business relationship (as
creditor, lessor, lessee, supplier, dealer, distributor,
franchisee, customer or otherwise) with the Company, (ii) owns,
or has any other direct or indirect interest in, any invention,
process, know-how, formula, trade secret, patent, trademark,
trade name, service mark, service name, copyright or other
right, property or asset which is used in or which may be
required in the ownership or operation by the Company or its
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17
properties and assets, or to otherwise carry on and conduct its
business and affairs, or (iii) has, directly or indirectly, any
contractual relationship with the Company other than as an
employee.
2.16 EMPLOYEE BENEFIT PLANS. SCHEDULE 2.16
identifies each employee benefit plan (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and any stock purchase, option, or
bonus plan, deferred compensation, severance pay, incentive,
vacation, sick pay, or fringe benefit plan, which the Company
maintains, or for which the Company has any liability or
contingent liability (each a "Plan" and collectively, the
"Plans"). Except as set forth in SCHEDULE 2.16, none of the
Plans is or has been intended to be "qualified" within the
meaning of Section 401(a) of the Code or is or has been subject
to Title IV of ERISA. Each Plan complies and has been
administered in form and in operation with all the requirements
of law and regulation applicable thereto. All Company
contributions required with respect to each Plan for all
periods ending prior to the Closing (including periods from the
first day of the current plan year to the Closing) will be
timely made prior to the Closing by the Company or its
affiliates. All required reports and descriptions of each Plan
(including IRS Form 5500 Annual Reports, summary annual
reports, and summary plan descriptions) have been timely filed
and distributed. No Plan provides benefits, including without
limitation death, medical, or severance benefits, with respect
to current or former officers, employees, or directors (or
their beneficiaries) beyond their retirement or other
termination of service other than (1) coverage for benefits
mandated by applicable law, (2) deferred compensation benefits
properly accrued as liabilities on the Financial Statements, or
(3) benefits the full cost of which is borne by the current or
former officer, employee, director, or beneficiary. Except as
provided in Schedule 2.16, the consummation of this transaction
will not entitle any current or former officer, employee, or
director to any severance, plant closing, bonus, or similar
payment.
2.17 TAXES. The Company (a) has filed substantially
all Tax Returns (as defined in this Section 2.17, below) that
it was required to file since its inception, (b) has provided
to the Buyer the March 31, 1995 balance sheet of the Company
and of which fairly represents all Tax liabilities as of that
date, (c) has or will set up adequate liabilities for the
payment of all Taxes anticipated to be payable for any Tax
Return since it was last filed, (d) is not delinquent in the
payment of any Tax, (e) except as set forth in SCHEDULE 2.17,
has not requested any extension of time within which to file
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18
any Tax Return which has not since been filed, and (f) has not
proposed, asserted or assessed against it any deficiency had
for any Tax, assessment or governmental charge, (g) has not
made any election under Section 341(f) of the Internal Revenue
Code, as amended (the "Code"), and (h) has withheld proper and
adequate amounts from its employees and others for all periods
in compliance with the Tax, social security, unemployment,
employment and other withholding provisions of all federal,
state and local laws. Except as set forth in SCHEDULE 2.17,
the Tax Returns of the Company have never been audited by the
Internal Revenue Service ("IRS") and comparable state, local
and foreign agencies. There are no open or contested items
with respect to any audit listed in SCHEDULE 2.17. The Company
has not waived the statute of limitations in respect of Taxes
or agreed to any extension of time with respect to a Tax
assessment or deficiency. To the knowledge of the Selling
Shareholders, there are no liens or other security interests on
any assets of the Company in respect of Taxes. To the
knowledge of the Selling Shareholders, no claim has ever been
made by an authority in a jurisdiction where the Company does
not file a Tax Return that it is or may be subject to Tax in
that jurisdiction. Except for the period January 1, 1991
through August 31, 1994 and as described in SCHEDULE 2.17, the
Company is not a party to and has no outstanding obligations
under any Tax sharing or allocation agreement. Except as
disclosed in SCHEDULE 2.17 relating to Accu-Fab and its
affiliates, the Company has not been a member of any affiliated
group of corporations with the meaning of Section 1504 of the
Code filing a consolidated federal income Tax return and has no
liability for Taxes of any person under Treasury Regulations
Section 1.1502.6 (or any similar provisions of state, local or
foreign law), as a transferee or successor, by contract, or
otherwise. The Company has not been a United States real
property holding corporation within the meaning of Section 897
of the Code.
With respect to Tax periods for which the Company was
included in the federal consolidated income Tax Return or state
consolidated, combined or other similar income, franchise or
other Tax Return of Accu-Fab, each of Accu-Fab and its
affiliated corporations within the meaning of Section 1504 of
the Code and any similar provision under state law (a) has
filed substantially all Tax Returns that it was required to
file, (b) has timely paid or set up adequate liabilities for
the payment of all Taxes whether or not shown as due and
payable on such Tax Returns, (c) is not delinquent in the
payment of any Tax, and (d) has not requested any extension of
time within which to file any Tax Return which has not since
been filed. Accu-Fab will allow the Company and its counsel to
participate in any audits of Accu-Fab consolidated federal
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19
income Tax Returns and any similar state consolidated or
combined income, franchise or other Tax Returns to the extent
such Tax Returns relate to the Company. Accu-Fab will not
settle any such audit in a manner that would adversely affect
the Company without the Company's written consent which will
not be unreasonably withheld. Accu-Fab will immediately pay to
the Company any Tax refund (or reduction in Tax liability)
resulting from carryback of a post-acquisition Tax attribute of
the Company into the Accu-Fab consolidated Tax Return or
similar state Tax Return once such refund or reduction is
realized by Accu-Fab or any of its affiliates. Accu-Fab will
cooperate with the Company in obtaining such refunds (or
reduction in Tax liability), including through the filing of
amended Tax Returns or refund claims, subject to an agreement
by the Buyer to imdemnify Accu-Fab from any adverse Tax
consequences resulting from the amendment of such Tax Returns.
Accu-Fab did not elect to retain any net operating loss
carryovers or capital loss carryovers of the Company under
proposed Treasury Regulation Section 1.1502-20(g). Accu-Fab
had not undergone an ownership change within the meaning of
Section 382 of the Code during such time that the Company was a
member of the same federal consolidated income Tax group.
For purposes of this Agreement, "Tax" means any of the
Taxes, and "Taxes" includes all net income, gross income, gross
receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll, employment, excise, severance,
occupation, property, value-added taxes, alternative or add-on
minimum taxes, customs duties or other taxes, fees, assessments
or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts,
imposed by any taxing authority (domestic or foreign) upon the
Company for any period or portion thereof ending on or before
the Closing Date.
For purposes of this Agreement, "Tax Return" means any
return, declaration, report, claim for refund, or information
return or statement relating to taxes, including any schedule
or attachment thereto, and including any amendment thereof.
2.18 INSURANCE. SCHEDULE 2.18 is a complete and
correct list (including the name of the carrier, summary
description of coverage, premium, deductible and expiration
date) of all policies of insurance or fidelity bonds maintained
by the Company. Such policies are in full force and effect and
all premiums due and payable that are necessary to maintain
such policies in full force and effect have been paid. There
are no pending or, to the knowledge of the Company and the
Selling Shareholders, threatened terminations with respect to
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20
any of such policies and the Company is in compliance in all
material respects with all conditions contained therein.
All policies, however, which the Company jointly
maintains with other companies, including those with Accu-Fab,
will cease to be enforceable as respects the Company upon and
after the Closing.
2.19 BANK ACCOUNTS. SCHEDULE 2.19 contains a
complete and accurate list of all bank accounts, safe deposit
boxes and lock boxes maintained by the Company, together with a
list of all authorized signatories thereto.
2.20 LITIGATION; PENDING LABOR DISPUTES. Except as
disclosed in SCHEDULE 2.20:
(a) there are (i) no private or governmental
actions, suits or proceedings against the Company relating to
the business of the Company pending or, to the knowledge of the
Company and the Selling Shareholders, threatened, and (ii) no
judgments, decrees or orders binding upon or enjoining the
Company in respect of, or the effect of which is to prohibit,
any business practice;
(b) no labor dispute, strike, work stoppage or
organizational activity which affects or could affect the
results of operations of the Company has occurred and is
continuing, or, to the knowledge of the Company and the Selling
Shareholders, is threatened, and no material labor grievance or
union representation questions exist in respect of the
employees of the Company employed in the business of the
Company;
(c) there are no charges of unfair labor practices
pending or, to the knowledge of the Company and the Selling
Shareholders, threatened before any government or regulatory
agency or authority involving or affecting employees of the
Company employed in the business of the Company; and
(d) there are no charges of discrimination (relating
to sex, age, race, national origin, handicap or veteran status)
or unfair labor practices pending or, to the knowledge of the
Company and the Selling Shareholders, threatened before any
governmental or regulatory agency or authority relating to
employees of the Company.
2.21 Compliance with Law.
--------------------
(a) The Company has all licenses, permits,
approvals, accreditations, written waivers and other
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21
authorizations as are necessary in order to enable it to own
and conduct its business as currently conducted and occupy and
use its real and personal properties without incurring any
material liability. No registration, filing, application,
notice, transfer, consent, approval, order, qualification,
waiver or other action of any kind is required by virtue of the
execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to avoid the loss of any
rights pertaining to any material permit, material license or
other material governmental, regulatory or administrative
authorization. The Company is in material compliance with the
terms and conditions of all such permits, licenses, franchises,
orders or approvals.
(b) The Company has conducted and is conducting its
business in material compliance with applicable federal, state,
local or foreign or other laws, regulations or orders or other
requirements of any governmental, regulatory or administrative
agency or authority or court or other tribunal relating to it
(including, but not limited to, any law, regulation, order or
requirement relating to securities, properties, business,
products, advertising, sales or employment practices, terms and
conditions of employment, wages and hours, safety, occupational
safety, health or welfare conditions relating to premises
occupied, environmental protection, product safety and
liability or civil rights). The Company is not now charged
with, and to the knowledge of the Company and the Selling
Shareholders, is not now under investigation with respect to,
any possible material violation of any applicable law,
regulation, order or requirement relating to any of the
foregoing in connection with the business of the Company, and
the Company has filed all material reports required to be filed
with any governmental, regulatory or administrative agency or
authority. The Company shall promptly inform the Buyer of any
notice relating to the foregoing received after the date hereof
and on or prior to the Closing Date.
2.22 BOOKS AND RECORDS. The books and records of the
Company have been maintained in accordance with good business
practices and substantially in accordance with all laws,
regulations and other requirements applicable to the business
operations of the Company.
2.23 Representations and Warranties with Respect to
----------------------------------------------
Buyer Shares.
- - --------------
(a) Each Selling Shareholder is acquiring the Buyer
Shares being issued to it hereunder for its own account for
investment purposes and not with the view to, or for resale
in connection with, any distribution or public offering
- 17 -
22
thereof within the meaning of the Securities Act of 1933,
as amended (the "Act"). Each Selling Shareholder
understands that the Buyer Shares have not been registered
under the Act or any applicable state laws by reason of
their issuance or contemplated issuance in a transaction
exempt from the registration and prospectus delivery
requirements of the Act and such laws, and that the
reliance of the Buyer upon this exemption is predicated in
part upon this representation and warranty. The Selling
Shareholders further understand that the Buyer Shares may
not be transferred or resold without (A) registration under
the Act and any applicable state securities laws, or (B) an
exemption from the requirements of the Act and applicable
state securities laws.
(b) The Selling Shareholders understand that an
exemption from such registration is not presently available
pursuant to Rule 144 promulgated under the Act and that in
any event no Selling Shareholder may sell any securities
pursuant to Rule 144 prior to the expiration of a two-year
period after such Selling Shareholder has acquired the
securities. The Selling Shareholders understand that any
sales pursuant to Rule 144 may only be made in full
compliance with the provisions of Rule 144.
(c) Each Selling Shareholder has such knowledge and
experience in financial and business matters that, with the
assistance of his advisors, he is capable of evaluating the
merits and risks of the investment in Buyer Shares to be
made by him hereunder. Each Selling Shareholder has and
has had access to all of the Buyer's material books and
records, and access to its executive officers has been
provided to the Selling Shareholders.
2.24 LEGENDS ON CERTIFICATES. Each Selling
Shareholder is aware that certificates representing the Buyer
Common Stock will bear a legend under the Act in addition to
any legend required by any particular state's securities laws,
or include language substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAW AND THEREFORE SUCH SHARES MAY NOT
BE RESOLD, TRANSFERRED OR HYPOTHECATED WITHOUT
(A) THE REGISTRATION OF SUCH SECURITIES UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS OR (B) AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT
THAT SUCH REGISTRATION IS NOT NECESSARY.
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23
2.25 REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained in this Agreement
(including the Schedules and Exhibits hereto) and in the
certificates and other writings delivered or to be delivered by
the Company or the Selling Shareholders pursuant hereto at the
Closing do not contain any untrue statement of a material
fact. There is no fact or circumstance known to McGarry nor
Gilmour which has not been disclosed to the Buyer and which
could reasonably be anticipated to materially and adversely
affect the business, financial condition, operating results,
assets or prospects of the Company, or the Company's
relationship with its customers or employees. To the extent
that any portion of the representations and warranties made
herein were made to the knowledge of the Company and the
Selling Shareholders, the Company and the Selling Shareholders
hereby represent that they have made due and reasonable inquiry
with respect thereto, including inquiry directed to McGarry and
Gilmour, upon whom, and whose representations to the inquiry,
the Non-Management Shareholders shall be entitled to rely.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE BUYER
-----------------
The Buyer represents and warrants to the Selling
Shareholders as follows:
3.1 ORGANIZATION, QUALIFICATION AND CORPORATE
POWERS. The Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the
Commonwealth of Massachusetts. The Buyer has full corporate
power and authority to carry on the business in which it is
engaged and to own and use the properties owned and used by
it. The Buyer is duly qualified or licensed to do business as
a foreign corporation and in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing
of its properties requires such qualification or license.
3.2 AUTHORIZATION OF TRANSACTION. The execution and
delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized and
approved by all requisite corporate action and the Buyer has
taken all action required by law, its Articles of Organization,
By-laws and otherwise to authorize all action to be taken by
the Buyer with respect to this Agreement and the consummation
of the transactions contemplated hereby. The Buyer has full
corporate power and authority to enter into this Agreement and
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24
to perform its obligations hereunder. This Agreement
constitutes the lawful, valid and legally binding obligations
of the Buyer, enforceable against it in accordance with its
terms. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any statute, regulation,
rule, judgment, order, decree, stipulation, injunction, or
other restriction of any government, governmental agency, or
court to which the Buyer is subject or any provision of the
Articles of Organization or By-laws of the Buyer or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice or consent, under any contract, lease, license,
franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, security interest,
or other arrangement to which the Buyer is party or by which it
is bound or to which any of its assets are subject. The Buyer
is not required to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the
transactions contemplated hereby.
3.3 BUYER SHARES ISSUED TO MCGARRY AND ACCU-FAB.
The shares of Buyer Common Stock to be issued to McGarry and
Accu-Fab when issued in accordance with the terms of this
Agreement will be duly and validly issued and fully paid and
non-assessable and free of any Encumbrances, other than the
restrictions imposed by Federal and state securities laws and
those resulting from the acts of McGarry and Accu-Fab. The
shares of Buyer Common Stock issuable upon exercise of the
Buyer Option have been registered pursuant to a Registration
Statement on Form S-8 and such Registration Statement is
effective on the date hereof.
3.4 BROKERS. Neither the Buyer nor anyone on its
behalf has any liability to any broker, finder or agent or has
agreed to pay any brokerage fees, commissions or finder's fees
with respect to this Agreement or the transactions contemplated
hereby.
ARTICLE IV
COVENANTS OF THE COMPANY AND EACH SELLING SHAREHOLDER
-----------------------------------------------------
4.1 COVENANTS OF THE COMPANY. The Company hereby
covenants to keep, perform and fully discharge the following
covenants and agreements:
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25
(A) INTERIM CONDUCT OF BUSINESS. From the date
hereof until the Closing, the Company shall operate its
business as a going concern consistent with prior practice and
in the ordinary course of business (except as may be authorized
pursuant to this Agreement). Without limiting the generality
of the foregoing, from the date hereof until the Closing,
except for transactions contemplated by this Agreement or
expressly approved in writing by the Buyer, the Company shall
not:
(i) enter into or amend any employment,
bonus, severance or retirement contract or arrangement,
nor increase any salary or other form of compensation
payable or to become payable to any executives or
employees other than in the ordinary course of business
consistent with prior practice;
(ii) purchase, lease or otherwise acquire any
real estate or any interest therein;
(iii) declare, set aside or pay any dividend or
make any other distribution with respect to its capital
stock.
(iv) merge or consolidate with or agree to
merge or consolidate with, or purchase or agree to
purchase all or substantially all of the assets of, or
otherwise acquire any corporation, partnership, or
other business organization;
(v) sell, lease or otherwise dispose of or
agree to sell, lease or otherwise dispose of any of its
assets, properties, rights or claims, except in the
ordinary course of business consistent with prior
practice;
(vi) authorize for issuance, issue, sell or
deliver any additional shares of its capital stock or
any securities or obligations convertible into shares
of its capital stock or issue or grant any option,
warrant or other right to purchase any shares of its
capital stock or amend or modify any of the terms of
the Acumen Option;
(vii) split, combine or reclassify any shares
of its capital stock of any class or redeem or
otherwise acquire, directly or indirectly any shares of
its capital stock;
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26
(viii) incur any liability, guarantee or
obligation (fixed or contingent) other than in the
ordinary course of business consistent with prior
practice;
(ix) mortgage, pledge or subject to lien or
security interest any of its assets or properties,
other than statutory liens arising in the ordinary
course of business;
(x) make any amendments to its certificate of
incorporation or by-laws;
(xi) make any investment in excess of $25,000,
whether singly or in the aggregate, in property, plant
and equipment and other items of capital expenditure;
(xii) accelerate receivables or delay payables,
except in the ordinary course of business consistent
with prior practices; and
(xiii) abandon any part of its business.
(b) ACCESS. The Company shall, upon reasonable
notice, give the Buyer and their representatives full and free
access to all properties, books, contracts, commitments and
records of the Company during reasonable business hours.
(c) SATISFACTION OF CONDITIONS. The Company agrees
to use its best efforts to accomplish the satisfaction of the
conditions precedent to Closing contained in Article VII herein
on or prior to the Closing Date.
(d) CONFIDENTIALLY, ETC. The Company agrees that,
prior to the termination of this Agreement pursuant to
Article VI hereof, it shall comply with the covenants contained
in Section 4.2(c) hereof.
4.2 COVENANTS OF EACH SELLING SHAREHOLDER. Each
Selling Shareholder, severally and not jointly, agrees to keep,
perform and fully discharge the following covenants and
agreements:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
Selling Shareholders will not take any action from the date
hereof to the Closing Date, whether as officers, directors or
stockholders of the Company, that would cause the
representations and warranties contained in Article II to
become untrue or cause the breach of any agreements hereof or
covenants contained in Article IV, except in such case as the
- 22 -
27
Buyer may otherwise expressly consent in writing. The Selling
Shareholders will promptly bring to the attention of the Buyer
any facts which come to their attention that would cause any of
the representations and warranties of any of the Selling
Shareholders to be untrue.
(b) SATISFACTION OF CONDITIONS. The Selling
Shareholders agree to use their best efforts to accomplish the
satisfaction of the conditions precedent to Closing contained
in Article VII herein on or prior to the Closing Date.
(c) NO SOLICITATION, CONFIDENTIALITY, ETC. The
Selling Shareholders agree that, prior to the termination of
this Agreement pursuant to Article VI hereof, the Selling
Shareholders will not, (i) solicit or negotiate with respect to
any inquiries or proposals relating to (x) the possible direct
or indirect acquisition of the capital stock of the Company or
of all or a portion of the assets or business of the Company or
(y) any business combination with the Company, or (ii) discuss
or disclose either this Agreement or other confidential
information pertaining to the Company (except as may be
required by law or except as may be required in connection with
the transaction to affiliates, officers, directors, employees,
agents and other professional consultants of the Company and
the Selling Shareholders), with any corporation, firm,
government agency, association or other person without the
prior written approval of the Buyer.
4.3 COVENANTS OF EACH NON-MANAGEMENT SHAREHOLDER.
Each Non-Management Shareholder, severally and not jointly,
agrees to perform the following covenants after the Closing:
(a) CONFIDENTIAL INFORMATION. Each Non-Management
Shareholder hereby acknowledges that the trade secrets,
designs, software algorithms, know-how, and other intellectual
property which are owned by the Buyer and the Company prior to
the Closing are of a confidential and secret character, of
great value and proprietary to the Buyer and the Company. Each
Non-Management Shareholder agrees that neither it nor any of
its directors, officers, employees or agents (collectively,
"Representatives") shall at any time after the Closing divulge
to anyone or use to its benefit any of the foregoing categories
of confidential and proprietary information (collectively, the
"Confidential Information"), unless such Confidential
Information shall be in the public domain through no fault of
the Non-Management Shareholder or its Representatives. Each
Non-Management Shareholder further agrees to take all
reasonable precautions to protect from loss or disclosure all
documents supplied to it by the Buyer and the Company and all
documents, materials and other data relating to any work
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conducted by it relating to the Confidential Information. Each
Non-Management Shareholder shall be responsible for any breach
of this Agreement by any of its directors and officers; and,
such Shareholders shall use their best efforts to ensure
compliance hereto by any of its employees and agents, inter
alia, by providing written notification to all such employees
and agents that have had access to any of the Confidential
Information.
(b) Each Non-Management Shareholder hereby covenants
and agrees for a period of two (2) years after the Closing it
will not directly or indirectly, for itself or on behalf of any
other person or entity, design, develop, or manufacture any
machine vision products for sale to customers in competition
with the Buyer or the Company nor will such Shareholders engage
in any of the following acts:
(i) Call upon, or cause or encourage anyone or any
entity to call upon, any persons who are employees or
consultants of the Company for the purpose of diverting or
taking them away from their employment or consultancy with
the Buyer or the Company.
(ii) Request or cause any of customers or clients of
the Buyer or the Company, or prospective customers and
clients, to cancel or terminate or refuse to enter into any
business relationship with the Buyer or the Company.
The Non-Management Shareholders expressly agree that the breach
of the foregoing would result in irreparable harm to the Buyer
and the Company and that upon breach of this provision, the
Buyer and/or the Company, in addition to all other available
remedies, shall be entitled to injunctive relief in any court
of competent jurisdiction without the necessity of proving the
actual damage to the Buyer or the Company.
ARTICLE V
COVENANTS OF THE BUYER
----------------------
The Buyer hereby agrees to keep, perform and fully
discharge the following covenants and agreements:
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5.1 CONFIDENTIALITY. The Buyer agrees to hold, and
to cause their respective officers, directors, employees,
representatives, advisors, consultants and shareholders to
hold, all information heretofore or hereafter obtained from the
Company or its advisors in strict confidence and to use the
information so obtained only for the purpose of evaluating the
purchase of the Company; provided however, that the Buyer shall
also be entitled to share such information with any person with
whom they are discussing the possibility of providing funds to
finance the transactions contemplated hereby. The Buyer shall
promptly return all such information to the Company in the
event the Closing is not consummated. Any information relating
to Accu-Fab or its parent corporation received by the Buyer
shall be kept in strict confidence unless disclosure is
required by law.
5.2 SATISFACTION OF CONDITIONS. The Buyer agrees to
use its best efforts to accomplish the satisfaction of the
conditions precedent to Closing contained in Article VIII
herein on or prior to the Closing Date.
5.3 PUT RIGHT OF MCGARRY. At any time prior to the
fifth anniversary of the Closing Date (the "Put Termination
Date"), McGarry shall have the right to require the Buyer to
repurchase, and which is payable in cash, the Buyer Shares
issuable to McGarry under Section 1.3 hereof (the "Put Shares")
at a price per share equal to the Buyer Closing Price. If
McGarry elects to exercise his repurchase rights under this
Section 5.3, he shall provide the Buyer with an irrevocable
written notice of election (the "Election Notice"). Upon the
receipt of the Election Notice, the Buyer will have thirty days
to repurchase the Put Shares subject to the Election Notice.
In no event will McGarry be entitled to exercise the repurchase
rights under this Section 5.3 on more than one occasion in any
period of twelve months. If McGarry shall fail to exercise the
repurchase right by the Put Termination Date, then McGarry's
rights under this Section 5.3 shall terminate and be of no
further force or effect.
ARTICLE VI
TERMINATION
-----------
6.1 TERMINATION OF AGREEMENT. This Agreement and
the transactions contemplated hereby may (at the option of the
party having the right to do so) be terminated at any time on
or prior to the Closing Date:
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(a) MUTUAL CONSENT. By mutual written consent of
the Buyer and the Selling Shareholders;
(b) COURT ORDER. By the Buyer or the Selling
Shareholders if any court of competent jurisdiction shall have
issued an order pursuant to the request of a third party
restraining, enjoining or otherwise prohibiting the
consummation of the transactions as contemplated by this
Agreement;
(c) FAILURE TO CLOSE BY JULY 31, 1995. By the Buyer
or the Selling Shareholders if the transactions contemplated
hereby shall not have been consummated on or before July 31,
1995, provided, however, that such right to terminate this
Agreement shall not be available to any party whose failure to
fulfill any obligation of this Agreement has been the cause of,
or resulted in, the failure of the consummation of the
transactions contemplated hereby to have occurred on or before
the aforesaid date;
(d) TERMINATION BY SELLING SHAREHOLDERS. By the
Selling Shareholders upon notice to the Buyer at any time prior
to July 31, 1995, if (i) a condition to the performance of the
Selling Shareholders set forth in Article VIII hereunder shall
not be fulfilled at the time specified for the fulfillment
thereof, or (ii) a material default under or a material breach
of this Agreement shall be made by the Buyer, or (iii) any
representation set forth in this Agreement or in any instrument
delivered by the Buyer pursuant hereto shall be materially
false or misleading;
(e) TERMINATION BY THE BUYER. By the Buyer by
notice to the Company and the Selling Shareholders at any time
prior to July 31, 1995, if (i) a condition to the performance
of the Buyer set forth in Article VII hereunder shall not be
fulfilled at the time specified for the fulfillment thereof, or
(ii) a material default under or a material breach of this
Agreement shall be made by the Company or the Selling
Shareholders or (iii) any representation set forth in this
Agreement or in any instrument delivered by the Company or the
Selling Shareholders pursuant hereto shall be materially false
or misleading; or
(f) MATERIAL ADVERSE CHANGE. By the Buyer if the
business, assets, prospects or results of operations of the
Company have been materially adversely affected since March 31,
1995, whether by reason of changes or developments in
operations in the ordinary course of business or otherwise.
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6.2 EFFECT OF TERMINATION AND RIGHT TO PROCEED. In
the event that this Agreement shall be terminated pursuant to
this Article VI, except as provided below, all further
obligations of the Buyer, the Company and the Selling
Shareholders under this Agreement shall terminate without
further liability of the Buyer or any affiliate thereof to the
Selling Shareholders or the Company or of the Selling
Shareholders or the Company to the Buyer or any affiliate
thereof, except with respect to the obligations set forth in
Sections 5.1 and 10.10, and except, in the case of termination
pursuant to Section 6.1(d) or Section 6.1(e), as to liability
for misrepresentation, breach or default in connection with any
warranty, representation, covenant or obligation given,
occurring or arising to the date of termination. In addition,
anything in this Agreement to the contrary notwithstanding, if
any of conditions to obligations specified in Article VII
hereof have not been satisfied, the Buyer, in addition to any
other rights which may be available to it, shall have the right
to waive its rights to have such conditions satisfied and shall
have the right to proceed with the transactions contemplated
hereby and, if any of the conditions to the obligations of the
Selling Shareholders specified in Article VIII hereof have not
been satisfied, the Selling Shareholders, if all of them so
elect, in addition to any other rights which may be available
to them, shall have the right to waive their rights to have
such conditions satisfied and shall have the right to proceed
with the transactions contemplated hereby.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE BUYER
------------------------------------------------
Each and all of the obligations of the Buyer to
consummate the transactions contemplated by this Agreement are
subject to fulfillment prior to or at the Closing of the
following conditions:
7.1 ACCURACY OF WARRANTIES; PERFORMANCE OF
COVENANTS. The representations and warranties of each Selling
Shareholder and the Company contained herein shall be accurate
in all material respects as if made on the Closing Date, as
well as on the date when made. The Company and each Selling
Shareholder shall have performed in all material respects all
of its or his respective obligations and complied in all
material respects with each and all of its or his respective
covenants required to be performed or complied with on or prior
to the Closing, including without limitation, the execution and
delivery of the agreements and undertakings provided for in
this Agreement. The Buyer shall have received certificates
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32
dated as of the Closing Date from the Company and each Selling
Shareholder certifying as to the continued accuracy of the
representations and warranties made by it or him and compliance
with conditions precedent to the Closing.
7.2 NO PENDING ACTION. No injunctive action or
proceeding before any court or governmental body will be
pending wherein an unfavorable judgment, decree or order would
prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such
transactions to be rescinded.
7.3 CORPORATE DOCUMENTS. The Buyer shall have
received:
(a) Certificates of the Secretary of the Company
certifying the incumbency of officers and genuineness of
signatures of all officers of the Company executing any
document delivered by the Company at Closing, copies of the
By-laws, minute books and stock record books of the Company and
the Certificate of Incorporation, as amended, of the Company
certified as of a recent date by the Secretary of State of
Oregon; and
(b) Certificates of corporate existence of the
Company as of a recent date from the Secretary of the State of
Oregon.
7.4 RESIGNATIONS. The Buyer shall have received
written resignations of all directors of the Company set forth
on SCHEDULE 7.4 effective as of the Closing.
7.5 ESCROW AGREEMENT. The Escrow Agreement in the
form of EXHIBIT A hereto shall have been executed and delivered
by the Buyer, the Escrow Agent, and Accu-Fab Systems, Inc.
7.6 STOCK OPTION AGREEMENTS. The Stock Option
Agreements in the form of Exhibit B and Exhibit B-1 shall have
been executed and delivered by the Buyer and McGarry.
7.7 OPINION OF COUNSEL TO THE COMPANY AND ACCU-FAB.
The Buyer shall have received favorable opinions of Gleaves
Swearingen Larsen Potter Scott & Smith, counsel to the Company
and Accu-Fab, dated the Closing Date and satisfactory to the
Buyer and their counsel in substantially the form attached
hereto as EXHIBIT D.
7.8 NON-COMPETITION AGREEMENTS. McGarry and Gilmour
(in the event Gilmour joins the Agreement as a participating
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33
Selling Shareholder) shall have executed and delivered to the
Buyer non-competition and non-disclosure agreements in
substantially the forms of EXHIBIT D (for McGarry) and EXHIBIT
F (for Gilmour) hereto.
7.9 EMPLOYMENT AGREEMENT. The Company and McGarry
shall have entered into an Employment Agreement in
substantially the form attached hereto as Exhibit F.
7.10 CONSENTS OBTAINED; NO TERMINATION. Written
consents to and any required notices of the acquisition of the
Shares by the Buyer shall have been obtained pursuant to this
Agreement from the appropriate party to or issuer of any
contract, agreement, plan, policy, lease, permit, license and
other document or instrument specified in this Agreement or in
any Schedule or Exhibit hereto as requiring such consent,
without change in any financial or other material terms
thereof. No terminations or defaults shall occur, by reason of
this Agreement or the transactions contemplated hereby,
pursuant to any material contract, agreement, plan, policy,
lease, permit, license or any other document or instrument
specified in any Schedule or Exhibit attached hereto. The
Selling Shareholders shall have transmitted to the Buyer copies
of all such written consents.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH
SELLING SHAREHOLDER
-------------------------------------------
Each and all of the obligations of each Selling
Shareholder to consummate the transactions contemplated by this
Agreement are subject to fulfillment prior to or at the Closing
of the following conditions:
8.1 ACCURACY OF WARRANTIES; PERFORMANCE OF
COVENANTS. The representations and warranties of the Buyer
contained herein shall be accurate in all material respects as
if made on and as of the Closing Date, as well as on the date
when made. The Buyer shall have performed in all material
respects all of the obligations and complied in all material
respects with each and all of the covenants required to be
performed or complied with on or prior to the Closing,
including without limitation, the execution and delivery of the
agreements and undertakings provided for in this Agreement.
The Selling Shareholders shall have received a certificate of
the Buyer certifying as to the continued accuracy of
representations and warranties of the Buyer and compliance with
conditions precedent to the Closing.
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8.2 NO PENDING ACTION. No injunctive action or
proceeding before any court or governmental body will be
pending wherein an unfavorable judgment, decree or order would
prevent the carrying out of this Agreement or any of the
transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement or cause such
transactions to be rescinded.
8.3 CORPORATE DOCUMENTS. The Selling Shareholders
shall have received:
(a) Certificates of the Secretary of the Buyer
certifying the incumbency of officers and genuineness of
signatures of all officers of the Buyer executing any document
delivered by the Buyer, as the case may be, at Closing, and
copies of the By-laws of the Buyer and the Articles of
Organization, as amended, of the Buyer certified as of a recent
date by the Secretary of State of Massachusetts; and
(b) Certificates of corporate good standing and
legal existence of Buyer as of a recent date from the Secretary
of State of Massachusetts.
8.4 OPINION OF COUNSEL TO THE BUYER. The Selling
Shareholders shall have received an opinion of Hutchins,
Wheeler & Dittmar, counsel to the Buyer, dated the Closing Date
and satisfactory to Selling Shareholders, in substantially the
form attached hereto as EXHIBIT G.
8.5 REGISTRATION RIGHTS AGREEMENT. The Registration
Rights Agreement in the form of Exhibit H shall have been
executed and delivered by the Buyer.
8.6 STOCK OPTION AGREEMENTS. The Stock Option
Agreements in the form of EXHIBIT B and EXHIBIT B-1 shall have
been executed and delivered by the Buyer and McGarry.
8.7 NON-COMPETITION AGREEMENTS. McGarry and Gilmour
(in the event Gilmour joins the Agreement as a participating
Selling Shareholder) shall have executed and delivered to the
Buyer non-competition and non-disclosure agreements in
substantially the form of EXHIBIT D (for McGarry) EXHIBIT F
(for Gilmour) hereto.
8.8 EMPLOYMENT AGREEMENT. The Company, and McGarry
shall have entered into an Employment Agreement in
substantially the form attached hereto as EXHIBIT F.
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ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
AND INDEMNIFICATION
------------------------------------------
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
parties hereto agree to shorten the applicable period of
limitation of claims made under representations and warranties,
and for the purpose each and every such representation and
warranty set forth in this Agreement and the representations
and warranties deemed made as provided by Sections 7.1 and 8.1
hereof, shall survive until the first anniversary of the
Closing Date, except with respect to (i) the representations
and warranties set forth in Sections 2.1, 2.3, 2.11, 2.23 and
3.4, which shall survive the Closing without limitation; and
(ii) any liability arising out of Section 9.2(a)(i)(z) which
shall survive the closing without limitation. From and after
the applicable period of survival with respect to such
respective representations and warranties of the parties
hereto, none of the Buyer or the Selling Shareholders or any of
their respective affiliates shall be under any liability
whatsoever with respect to any such representation or warranty,
except for breaches as to which any party shall have notified
the other party prior to such date in accordance with
Section 9.3 below. This Section 9.1 shall have no effect upon
any other obligation of the parties hereto, whether to be
performed before or after the Closing Date.
9.2 Agreement to Indemnify.
----------------------
(a) From and after the Closing Date, upon the terms
and subject to the conditions of this Article IX, (i) the
Non-Management Shareholders hereby agree, jointly and
severally, to indemnify, defend and hold harmless the Buyer and
its affiliates, officers, directors, employees and agents,
including the Company (collectively, the "Buyer Group"), from
and against any and all loss, liability, damage or deficiency
(including interest, penalties and reasonable attorneys' fees)
that the Buyer Group may suffer, sustain, incur, or become
subject based upon, arising out of, or resulting from (x) any
breach by the Company or the Non-Management Shareholders of any
representation or warranty contained in this Agreement or in
any closing document delivered to the Buyer in connection
herewith; (y) the failure of the Company or the Non-Management
Shareholders to perform their covenants, undertakings and
obligations under this Agreement, and (z) any liability of the
Company, not attributable to the Company, for Taxes of any
person under Treasury Regulation Section 1.1502.6 (or any
similar provision of state, local or foreign law) as transferor
or successor, by contract or otherwise, and (ii) McGarry hereby
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36
agrees to indemnify and hold harmless the Buyer Group from and
against any and all loss, liability, damage or deficiency
(including interest, penalties and reasonable attorneys' fees)
that the Buyer Group may suffer, sustain, incur, or become
subject based upon, arising out of, or resulting from any
breach by him of any representation or warranty contained in
Sections 2.1, 2.11 and 2.23 of this Agreement, provided that in
the case of any breach of the representations and warranties,
no such indemnification right shall give rise to liability
until the aggregate amount of all claims for indemnification as
a result of breaches of the representations and warranties by
all Selling Shareholders shall exceed $100,000.
(b) From and after the Closing Date, upon the terms
and subject to the conditions of this Article IX, the Buyer,
jointly and severally, hereby agrees to indemnify, defend and
hold harmless the Selling Shareholders from and against any and
all loss, liability, damage or deficiency (including interest,
penalties and reasonably attorneys' fees) that the Selling
Shareholders may suffer, sustain, incur or become subject based
upon, arising out of, or resulting from (i) any breach by the
Buyer of any representation or warranty contained in this
Agreement or in any closing document delivered to the Selling
Shareholders in connection herewith; and (ii) the failure of
the Buyer to perform their respective covenants, undertakings
and obligations under this Agreement.
9.3 NOTICE AND OPPORTUNITY TO DEFEND. If there
occurs an event which either party asserts is an indemnifiable
event pursuant to Section 9.2, the party seeking
indemnification shall notify the other party obligated to
provide indemnification (the "Indemnifying Party") promptly.
If such event involves (i) any claim or (ii) the commencement
of any action or proceeding by a third person, the party
seeking indemnification will give such Indemnifying Party
prompt written notice of such claim or the commencement of such
action or proceeding. Such notice shall be a condition
precedent to any liability of the Indemnifying Party hereunder;
PROVIDED that the failure to provide prompt notice as provided
herein will relieve the Indemnifying Party of its obligations
hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action shall be
brought against any party seeking indemnification and it shall
notify the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall be entitled to participate therein
and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such party
seeking indemnification and, after notice from the Indemnifying
Party to such party seeking indemnification of such election so
to assume the defense thereof, the Indemnifying Party shall not
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37
be liable to the party seeking indemnification hereunder for
any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such party, in connection
with the defense thereof other than reasonable costs of
investigation. The party seeking indemnification agrees to
cooperate fully with the Indemnifying Party and its counsel in
the defense against any such asserted liability. In any event,
the party seeking indemnification shall have the right to
participate at its own expense in the defense of such asserted
liability. Any compromise of such asserted liability by the
Indemnifying Party shall require the prior written consent of
the party seeking indemnification. If, however, the party
seeking indemnification refuses its consent to a BONA FIDE
offer of settlement which the Indemnifying Party wishes to
accept (which must include the unconditional release of the
parties seeking indemnification from all liability with respect
to the claim at issue), the party seeking indemnification may
continue to pursue such matter, free of any participation by
the Indemnifying Party, at the sole expense of the party
seeking indemnification. In such event, the obligation of the
Indemnifying Party to the party seeking indemnification shall
be equal to the lesser of (i) the amount of the offer or
settlement which the party seeking indemnification refused to
accept plus the costs and expenses of such party prior to the
date the Indemnifying Party notifies the party seeking
indemnification of the offer of settlement and (ii) the actual
out-of-pocket amount the party seeking indemnification is
obligated to pay as a result of such party's continuing to
pursue such matter.
9.4 Selling Shareholder Representative.
-----------------------------------
(a) THE SELLING SHAREHOLDER REPRESENTATIVE. Each
Non-Management Shareholder hereby designates and appoints
Accu-Fab (the "Representative") as representative for each such
Non-Management Shareholder to perform all such acts as are
required, authorized or contemplated by this Article IX to be
performed by any such person and hereby acknowledges that the
Representative shall be the only person authorized to take any
action so required, authorized or contemplated by this
Article IX by such person. Each such person further
acknowledges that the foregoing appointment and designation
shall be deemed to be coupled with an interest and shall
survive the death or incapacity of such person. Such person
hereby authorizes the other parties hereto to disregard any
notice or other action taken by such person pursuant to this
Article IX except for the Representative. The other parties
hereto are and will be entitled to rely on any action so taken
or any notice given by the the Representative and are and will
be entitled and authorized to give notices only to the the
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Representative for any notice contemplated by this Article IX
to be given to any such person. In the event the
Representative is unable to serve, a successor to the
Representative may be chosen by a majority in interest of the
Non-Management Shareholders based upon the number of Shares
being sold hereunder, provided that notice thereof is given by
the new Representative to the Buyer.
(b) LIMITATION OF LIABILITY. It is agreed that the
Non-Management Shareholders, other than Accu-Fab shall not be
subject to liability with regard to the foregoing, except for
breaches under Section 2.1 and 1.6 to the extent they relate to
the individual Non-Management Shareholders. The Non-Management
Shareholders agree that the Representative shall not have any
liability arising out of or in connection with the exercise of
his powers or the discharge of his duties hereunder while
acting as Representative under this Agreement, except that such
Representative shall be subject to liability for his gross
negligence or willful misconduct. The Representative shall not
in any event be liable with respect to any action taken or
omitted to be taken by him in good faith or in accordance with
and in reliance upon the opinion of counsel or independent
auditors or upon information obtained by either of them from
any governmental authority or other specialist.
9.5 ESCROW. The Buyer, in behalf of Accu-Fab, will
deposit $1,000,000 in escrow with the Escrow Agent pursuant to
the Escrow Agreement. The retention of the Escrow Fund in
accordance with the terms of the Escrow Agreement shall be the
exclusive remedy available to the Buyer for satisfaction of the
obligations of the Non-Management Shareholders under this
Article IX, except for obligations arising under
Section 9.2(a)(i)(z) which shall not be subject to any
limitation.
9.6 LEMELSON EXCLUSION. It is agreed that any
liability or claim of infringement on the Lemelson Machine
Vision Patents is specifically excluded from this Agreement.
ARTICLE X
GENERAL PROVISIONS
10.1 AMENDMENT AND WAIVER. No amendment or waiver of
any provision of this Agreement shall in any event be
effective, unless the same shall be in writing and signed by
the parties hereto, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given.
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39
10.2 NOTICES. All notices, requests, demands and
other communications hereunder shall be in writing and shall be
sent by personal delivery, telecopier or registered or
certified mail, postage prepaid, as follows:
(a) If to the Company:
Acumen, Inc.
7352 S.W. Durham Road
Portland, Oregon 97224
Attn: John McGarry
With a copy to:
Gleaves Swearingen Larsen
Potter Scott & Smith
975 Oak Street
Eugene, Oregon 97401
Attn: Arlen Swearingen
(b) If to the Selling Shareholder:
To the address set forth in
SCHEDULE 1.1 hereto
(c) If to the Buyer:
Cognex Corporation
One Vision Drive
Natick Massachusetts 01760
Attn: Dr. Robert J. Shillman
With a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attn: Anthony J. Medaglia, Jr.
Any party may change its address for receiving notice by
written notice given to the others named above. All such
notices shall be effective when delivered by personal delivery
or if mailed, when deposited in the mail addressed as set forth
above.
10.3 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts by telecopier, each
of which shall be deemed an original, but all of which together
shall constitute one and the same Agreement.
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10.4 PARTIES IN INTEREST. This Agreement shall bind
and inure to the benefit of the parties named herein and their
respective heirs, successors and assigns. This Agreement is
not assignable by any party hereto.
10.5 ENTIRE AGREEMENT. This Agreement, including the
Exhibits attached hereto and the documents delivered pursuant
hereto, constitutes the entire agreement among the parties with
respect to the transactions contemplated hereby and supersedes
all other agreements and understandings among the parties,
previously executed Confidentiality Agreements shall remain in
effect until this Agreement is effective.
10.6 DISCLOSURE. The disclosure in any provision of
this Agreement, or in any Schedule or Exhibit to this
Agreement, of any event, transaction, claim, liability,
agreement, plan, or document relating to the Company shall be
deemed to constitute and shall operate as a disclosure of such
item for the purposes of all other provisions of and Schedules
and Exhibits to this Agreement without the necessity of being
expressly repeated in any such provision, Schedule, or Exhibit.
10.7 GOVERNING LAW. This Agreement shall be governed
by and construed in accordance with the laws of the
Commonwealth of Massachusetts. Each of the parties hereto
agrees to submit to the jurisdiction of the courts of the
Commonwealth of Massachusetts in any action or proceeding
arising out of or relating to this Agreement.
10.8 HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement.
10.9 EXPENSES. Each of the parties shall bear its or
his own expenses in connection with the transactions
contemplated by this Agreement, except that if the Closing
shall occur, the Buyer will pay (i) up to $14,000 of the legal
fees incurred by Accu-Fab and the Company in connection with
the transactions contemplated by this Agreement, (ii) up to an
amount of $1,500 of the legal fees for, and incurred by, each
Non-Management Shareholder (other than Accu-Fab) in connection
with the transactions contemplated by this Agreement, and
(iii) up to $6,000 of the legal fees incurred by McGarry and
Gilmour in the aggregate in connection with the transactions
contemplated by this Agreement.
10.10 PUBLICITY. Any publicity relating to this
transaction and the method of its release shall be approved by
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each of Buyer, Accu-Fab and McGarry, which approval shall not
be unreasonably withheld.
10.11 ATTORNEYS' FEES. In the event that any action
is brought to enforce any of the provisions of this Agreement,
or to obtain money damages for the breach thereof, and such
action results in the award of a judgment for money damages or
in the granting of any injunction in favor of one of the
parties to this Agreement, all expenses, including reasonable
attorneys' fees, shall be paid by the non-prevailing party.
10.12 MINORITY SHAREHOLDERS: The Company, Buyer,
McGarry, and Accu-Fab agree that this Agreement may be executed
only by themselves, without Gilmour and with each of the
Non-Management Shareholders other than Accu-Fab, (the "Minority
Shareholders"), executing a "Non-Management Shareholder's
Certification and Release" in lieu of this Agreement; provided
further, that this Agreement shall be valid and binding upon
the signatories, and the Closing shall occur, whether or not
any such Minority Shareholders execute and deliver such
Non-Management Shareholder's Certification and Releases. It is
further agreed that Buyer may waive the requirement stated in
Section 1.6 to this Agreement that a minimum of 90% in
interest of the Shares held by the Selling Shareholders execute
and deliver this Agreement and tender said minimum 90% of such
Shares.
* * *
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be duly executed as an instrument under SEAL all
as of the date first written above.
COGNEX CORPORATION
By:/s/ Robert J. Shillman
---------------------------
Name: Robert J. Shillman
Title: President
ACUMEN INC.
By:/s/ E. John McGarry
---------------------------
Name: E. John McGarry
Title: President
/s/ E. John McGarry
------------------------------
John McGarry
/s/ Allen Gilmour
------------------------------
Allen Gilmour
NON-MANAGEMENT SHAREHOLDERS:
ACCU-FAB SYSTEMS, INC.
By:/s/ Richard A. Carone
------------------------------ ------------------------------
Name: Richard A. Carone
Title: Vice President ------------------------------
------------------------------
------------------------------
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