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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated as of
February 29, 1996, among Cognex Corporation, a Massachusetts corporation
("Cognex"), Cognex Software Development, Inc., a Massachusetts corporation and a
wholly owned subsidiary of Cognex ("Merger Sub"), Isys Controls, Inc., a
Delaware corporation ("Isys"), and Xxxxxxx Xxxxxxx ("Xxxxxxx").
RECITALS
WHEREAS, the Board of Directors of Cognex, Merger Sub and Isys
each have determined that it is in the best interests of their respective
shareholders for Isys to merge with Merger Sub upon the terms and subject to the
conditions of this Agreement;
WHEREAS, for federal income tax purposes, it is intended that
the Merger (as hereinafter defined) shall qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, it is intended that the Merger shall be recorded for
accounting purposes as a pooling of interests; and
WHEREAS, Cognex, Merger Sub, Isys and Xxxxxxx desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, Cognex, Merger Sub, Isys
and Xxxxxxx hereby agree as follows:
ARTICLE I
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as hereinafter defined), Isys and Merger Sub
shall consummate a merger (the "Merger") in which (i) Merger Sub shall be merged
with and into Isys and the separate corporate existence of Merger Sub shall
thereupon cease, (ii) Isys shall be the successor or surviving corporation in
the Merger and shall continue to be governed by the laws of the State of
Delaware, and (iii) the separate corporate existence of Isys with all its
rights, privileges, immunities, powers and franchises shall continue unaffected
by the Merger. The corporation surviving the Merger is sometimes hereinafter
referred to as the "Surviving Corporation". The Merger shall have the
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effects specified in the Business Corporation Law of the Commonwealth of
Massachusetts (the "MBCL") and in the General Corporation Law of the State of
Delaware ("DGCL").
1.2 EFFECTIVE TIME. Cognex, Merger Sub and Isys will cause
Articles or Certificates of Merger (the "Certificates of Merger") in the form
attached to this Agreement as EXHIBIT 1.2 to be executed and filed on the date
of the Closing (or on such other date as Cognex and Isys may agree) (the
"Closing Date") with the Secretary of State of the Commonwealth of Massachusetts
and with the Secretary of State of the State of Delaware. The Merger shall
become effective at the later of the time at which the Certificates of Merger
shall have been filed with the Secretary of State of the Commonwealth of
Massachusetts or filed with the Secretary of State of Delaware or such later
time as Cognex and Isys may agree and specify in the Certificates of Merger in
accordance with Section 79 of Chapter 156B of the MBCL and with Section 252 of
the DGCL, and such time of effectiveness is hereinafter referred to as the
"Effective Time".
1.3 DELIVERY OF COGNEX STOCK. Subject to the terms and conditions
of this Agreement, and in reliance on the representations and warranties and
agreements of Isys and Xxxxxxx contained herein, at the Closing, Cognex shall
deliver to the Transfer Agent and to the Escrow Agent (each as defined below)
the aggregate number of Cognex Common Shares (as defined below) issuable
pursuant to this Agreement (the "Aggregate Cognex Common Shares") as follows:
(a) In the event the Closing Market Price, as defined
below, is less than $26.00 per Cognex Common Share:
(i) Ninety-five percent (95%) of the Aggregate
Cognex Common Shares shall be delivered to the Transfer
Agent and distributed to the Isys Shareholders pursuant
to Article IV of this Agreement; and
(ii) Five percent (5%) of the Aggregate Cognex
Common Shares shall be delivered to the Escrow Agent to
be held in the name of the Escrow Agent (in accordance
with and subject to the rights of the holders of common
stock of Isys (the "Isys Shareholders") set forth under
the terms and conditions of the Escrow Agreement, as
defined below) and distributed to the Isys Shareholders
or to Cognex pursuant to terms and conditions of the
Escrow Agreement.
(b) In the event the Closing Market Price is equal to
or greater than $26.00 per Cognex Common Share:
(i) Ninety percent (90%) of the Aggregate
Cognex Common Shares shall be delivered to the Transfer
Agent and distributed to the Isys Shareholders pursuant
to Article IV of this Agreement; and
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(ii) Ten percent (10%) of the Aggregate Cognex
Common Shares shall be delivered to the Escrow Agent to
be held in the name of the Escrow Agent (in accordance
with and subject to the rights of the Isys Shareholders
set forth under the terms and conditions of the Escrow
Agreement) and distributed to the Isys Shareholders or
to Cognex pursuant to terms and conditions of the
Escrow Agreement.
(c) Regardless of the percentage of the Aggregate
Cognex Common Shares delivered to the Transfer Agent and the Exchange
Agent, respectively, the Cognex Common Shares delivered to the Transfer
Agent shall be referred to as the "Exchange Shares" and the Cognex
Common Shares delivered to the Escrow Agent shall be referred to as the
"Escrow Shares".
1.4 EFFECT OF THE MERGER. At the Effective Time,
all of the rights, privileges, powers and franchises of Isys and Merger Sub and
all of their respective properties, real, personal and mixed, and all debts due
on whatever account to either of them, as well as all stock subscriptions and
other things in action belonging to either of them, shall be transferred to and
vested in the Surviving Corporation, and all other effects specified in the DGCL
shall result therefrom, without further act or deed, and all property rights,
privileges, powers and franchises and other interests shall be the property of
the Surviving Corporation, and the title to all real estate vested in either
Isys or Merger Sub shall not revert or be in any way impaired by reason of the
Merger, but shall be vested in the Surviving Corporation. The rights of
creditors of either Isys or Merger Sub shall not in any way be impaired. All
debts, liabilities and duties of either of Isys or Merger Sub shall thenceforth
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if said debts and liabilities had been incurred by it.
1.5 TAX CONSEQUENCES. It is intended that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Code and that this Agreement shall constitute a "plan of reorganization" for
the purposes of Section 368 of the Code.
1.6 CLOSING. The closing of the Merger (the
"Closing") shall take place (i) at the offices of Xxxxxxxx, Xxxxxxx & Xxxxxxx,
000 Xxxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, at 10:00 a.m. on the business day on
which all of the conditions set forth in Article VIII hereof shall be fulfilled
or waived in accordance with this Agreement or (ii) at such other place and/or
time and/or on such other date as Cognex and Isys may agree.
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ARTICLE II
CERTIFICATE OF INCORPORATION AND BY-LAWS
OF THE SURVIVING CORPORATION
2.1 THE CERTIFICATE OF INCORPORATION. The
Certificate of Incorporation of Isys as in effect immediately prior to the
Effective Time shall be the Certificate of Incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and of the
DGCL.
2.2 THE BY-LAWS. The By-Laws of Isys in effect
immediately prior to the Effective Time shall be the By-Laws of the Surviving
Corporation, until duly amended in accordance with the terms thereof, of the
Certificate of Incorporation of the Surviving Corporation and of the DGCL.
ARTICLE III
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
3.1 DIRECTORS. The directors of Isys at the
Effective Time shall, from and after the Effective Time, be the following
individuals: Xxxxxx X. Xxxxxxxx (Chairman), Xxxx X. Xxxxxx and Xxxxxxx Xxxxxxx,
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
3.2 OFFICERS. The officers of Isys at the
Effective Time shall, from and after the Effective Time, be the officers of the
Surviving Corporation, with the addition of Xxxxxx X. Xxxxxxxx as Chief
Executive Officer, Xxxx X. Xxxxxx as Treasurer, and Xxxxxxx X. Xxxxxxxx as
Secretary, until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
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ARTICLE IV
MERGER CONSIDERATION;
CONVERSION OR CANCELLATION
OF SHARES IN THE MERGER; ESCROW
4.1 CONSIDERATION FOR MERGER; CONVERSION OR
CANCELLATION OF SHARES IN MERGER. The manner of converting or canceling shares
of Isys and Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, each of the shares of common
stock, par value $.0001 per share, including any and all restricted
stock and vested stock options ("Option Shares"), of Isys (such common
stock and Isys Option Shares shall be collectively referred to as
"Shares") issued and outstanding immediately prior to the Effective Time
(other than Shares owned by Cognex or Merger Sub) shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into shares of common stock, par value $.002 per share or
Option Shares, respectively, of Cognex ("Cognex Common Shares"). The
Cognex Common Shares issued in connection with the Merger upon surrender
and exchange of Isys Shares granted under the Isys 1991 Long Term Equity
Incentive Plan ("Restricted Isys Shares") shall be subject to the same
restrictions to which the Restricted Isys Shares surrendered were
subject. The Aggregate Cognex Common Shares or "Share Consideration" for
the Merger payable to the Isys Shareholders shall be that number of
Cognex Common Shares with the aggregate stated value (as determined
below) as follows:
(i) in the event the Closing Market Price (as
defined below) is less than $26.00 per Cognex
Common Share, the Shares shall be converted
into 1,400,000 Cognex Common Shares with an
aggregated stated value of the Closing Market
Price multiplied by 1,400,000;
(ii) in the event the Closing Market Price is equal
to or greater than $26.00 and less than or
equal to $28.00 per Cognex Common Share,
Cognex Common Shares into which the Shares
shall convert shall have an aggregate stated
value equal to $36,400,000, rounded to the
nearest whole Cognex Common Share;
(iii) in the event the Closing Market Price is
greater than $28.00 and less than or equal to
$34.00 per Cognex Common Share, the Cognex
Common Shares into which the Shares shall be
converted shall have an aggregate stated value
equal to $19,600,000 PLUS the product of
$600,000 and the Closing Market Price, rounded
to the nearest whole Cognex common share; and
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(iv) in the event the Closing Market Price is
greater than $34.00 per Cognex Common Share,
the Cognex Common Shares into which the Shares
shall be converted shall have an aggregate
stated value equal to $40,000,000 rounded to
the nearest whole Cognex Common Share.
The aggregate stated value of the Cognex Common Shares
shall be based upon the Closing Market Price per Cognex Common Share,
where the term "Closing Market Price" shall mean the average of the
high and low sale prices for the Cognex Common Shares on the Nasdaq
Stock Market for each of the five trading days immediately preceding the
Effective Time. The ratio of the total number of Cognex Common Shares
into which the Shares shall be converted to the total number of Shares
shall be referred to as to "Exchange Ratio", which shall be expressed as
the fraction the numerator of which is equal to the total number of
Cognex Common Shares into which the Shares shall be converted and the
denominator of which shall be equal to the total number of Shares.
(b) Each Isys Shareholder, other than Dissenting Shareholders, as
defined below, shall receive, in exchange for his or her Shares, his or
her Pro-Rata Share of the Exchange Shares and the right to receive his
or her Pro-Rata Share of the Escrow Shares, subject to the terms and
conditions of the Escrow Agreement. For the purposes hereof, the
"Pro-Rata Share" of each Isys Shareholder shall be a percentage equal to
the fraction, the numerator of which is the number of shares of common
stock of Isys held by such Isys Shareholder immediately prior to the
Effective Time and the denominator of which is the total number of
Shares outstanding immediately prior to the Merger.
(c) All Shares to be converted into Cognex Common Shares pursuant
to this Section 4.1 shall, by virtue of the Merger and without any
action on the part of the holders thereof, cease to be outstanding, be
canceled and retired and cease to exist, and each holder of a
certificate representing any such Shares shall thereafter cease to have
any rights with respect to such Shares, except the right to receive for
each of the Shares, upon the surrender of such certificate in accordance
with Section 4.2, the number of Cognex Common Shares specified above and
cash in lieu of fractional Cognex Common Shares as contemplated by
Section 4.4.
(d) Each share of common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective
Time shall by virtue of the Merger and without any action on the part of
the holder thereof, automatically be converted into one fully paid and
nonassessable share of common stock of the Surviving Corporation, as
such share of common stock is constituted immediately following the
Effective Time.
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4.2 PAYMENT FOR SHARES IN THE MERGER.
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(a) In accordance with Section 4.3, promptly after the Effective
Time, The First National Bank of Boston, transfer agent for the Cognex Common
Shares (the "Transfer Agent"), shall cancel all certificates which immediately
prior to the Effective Time represented outstanding Shares (the "Certificates"),
and the holder of such Certificates shall forthwith receive the Share
Consideration for the Shares represented by such Certificates. Notwithstanding
the foregoing, pursuant to the provisions of Section 4.6, a portion of the
aggregate Share Consideration which each of the Isys Shareholders would be
otherwise entitled to receive shall be held in escrow.
(b) The Isys Long Term Equity Incentive Plan (the "Incentive
Plan") shall continue in effect after the Merger; provided, however, that, upon
the Effective Date, all outstanding options to purchase shares of Isys Common
Stock thereunder shall automatically convert into options to purchase shares of
Cognex Common Stock ("Isys Options"). Each holder of an Isys Option granted
under the Incentive Plan shall be entitled, in accordance with the existing
terms of such Isys Option, to purchase after the Effective Time that number of
shares of Cognex Common Stock determined by multiplying the number of shares of
Common Stock of Isys subject to such Isys Option at the Effective Time by the
Exchange Ratio, and the exercise price per share for each such Isys Option will
equal the exercise price of the Isys Option immediately prior to the Effective
Time divided by the Exchange Ratio. If the foregoing calculation results in an
assumed option being exercisable for a fraction of a share, then the number of
shares of Cognex Common Stock subject to such option will be rounded down to the
nearest whole number with no cash being payable for such fractional share. The
continuous term of employment with Isys will be credited to each holder of an
Isys Option as if it were employment with Cognex for purposes of determining the
vesting and the number of shares subject to exercise after the Exercise Time.
The Isys Options shall vest and terminate on such dates, shall have the same
restrictions and shall be substantially similar, as nearly as may be, to the
options heretofore held by such individuals and converted as herein provided.
Cognex agrees to file a registration statement on Form S-8 with respect to the
shares issuable upon the exercise of the Isys Options. Payment of the exercise
price of Isys Options may be made by delivery of shares of Cognex Common Stock
owned by the exercising optionee having a fair market value equal in amount to
the exercise price of the Isys Options being exercised; provided, however, that
such payment by delivery of shares of Cognex Common Stock may be made only if
such payment does not result in a charge to earnings of Cognex for financial
accounting purposes.
(c) Each holder of outstanding Isys Options which were granted in tandem
with Restricted Isys Shares may, during the one year period from the date
hereof, exercise only up to (i) 95% of such holder's Isys Options in the event
the Closing Market Price is less than $26.00 per share or (ii) 90% of such
holder's Isys Options in the event the Closing Market Price is equal to or
greater than $26.00 per share.
4.3 EXCHANGE OF SHARES.
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(a) Subject to the terms and conditions of this Agreement, at
the Closing, Cognex will deposit with the Transfer Agent, for the benefit of the
Isys Shareholders, the Exchange Shares with instruction requiring the Transfer
Agent to promptly notify each Isys Shareholder of the consummation of the Merger
and to deliver to each Isys Shareholder, after the Effective Time and upon and
subject to surrender of the Certificates, a certificate or certificate
representing each Isys Shareholder's Pro-Rata Share of the Exchange Shares,
rounded down to the nearest whole share.
(b) As soon as practicable after the Effective Time, the
Transfer Agent shall mail to each holder of record (other than Isys or Cognex or
any subsidiary of Cognex or any Dissenting Shareholder) of Shares a form letter
of transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Shares shall pass, only upon delivery of the Certificates
to the Transfer Agent), and instructions for use in effecting the surrender of
the Certificates in exchange for certificates representing Cognex Common Shares.
Upon surrender of Certificates for exchange and cancellation to the Transfer
Agent, together with such letter of transmittal, duly executed, the holder of
such Shares shall be entitled to receive in exchange therefor a certificate or
certificates representing that number of Cognex Common Shares to which such
holder of Certificates shall have become entitled to pursuant to the provisions
of Section 4.1 and 4.2, and the Certificates so surrendered shall forthwith be
canceled. Lost Certificates must be properly canceled and reissued by Isys for
surrender to the Transfer Agent, and the Transfer Agent shall issue to each Isys
Shareholder a certificate or certificates representing Cognex Common Shares only
upon surrender of his or her Certificate or Certificates.
(c) No dividends or other distributions declared after the
Effective Time with respect to Cognex Common Stock and payable to the holders of
record thereof after the Effective Time shall be paid to the holder of any
unsurrendered Certificates until the holder thereof shall surrender such
Certificates. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of Certificates, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to
Cognex Common Shares. No holder of unsurrendered Certificates shall be entitled,
until the surrender of such Certificates, to vote the Cognex Common Shares into
which his Isys Shares shall have been converted.
(d) If any certificate representing Cognex Common Shares is to
be issued in a name other than that in which the Certificates surrendered in
exchange therefor are registered, it shall be a condition of the issuance
thereof that the Certificate or Certificates so surrendered shall be properly
endorsed for transfer (or accompanied by an appropriate instrument of transfer)
and otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Transfer Agent, in advance, any transfer or other
taxes required by reason thereof, or shall establish to the satisfaction of the
Transfer Agent that such taxes have been paid or are payable.
(e) After the Effective Time there shall be no transfers on the
stock transfer books of Isys of the Certificates which were outstanding
immediately prior to the Effective Time.
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If, after the Effective Time, Certificates are presented for transfer to the
Transfer Agent, they shall be canceled and exchanged for certificates
representing Cognex Common Shares as provided in this Article IV.
(f) No certificate or scrip representing fractional Cognex
Common Shares shall be issued upon the surrender for exchange of Shares, and no
person or entity shall have any rights or interests in fractional Cognex Common
Shares.
(g) Any certificates representing Cognex Common Stock deposited
with the Transfer Agent pursuant to Section 4.2(a) and not exchanged within
eighteen months after the Effective Time pursuant to this Section 4.3 shall be
returned by the Transfer Agent to Cognex, which shall thereafter act as the
Transfer Agent. Cognex shall not be liable to any person for such shares
delivered to public official pursuant to any applicable abandoned property,
escheat or similar law.
4.4 FRACTIONAL SHARES. No fractional Cognex Common Shares shall
be issued in the Merger. In lieu of any such fractional securities, each Isys
Shareholder who would otherwise have been entitled to a fraction of a share of
Cognex Common Stock will be paid an amount in cash (without interest) equal to
the Closing Market Price per Cognex Common Share determined pursuant to Section
4.1(a). Concurrently with distribution of the Share Consideration, Cognex shall
distribute cash in lieu of any fractional interests in accordance with this
Agreement to former shareholders of Isys.
4.5 NO TRANSFER OF SHARES. No transfer of Shares shall be made
on the stock transfer books of Isys after the date hereof.
4.6 ESCROW OF COGNEX COMMON SHARES. At the Effective Time, an
escrow ("Escrow") shall be established with State Street Bank and Trust Company
(the "Escrow Agent") for an aggregate of either five percent (5%) or ten percent
(10%) was determined by Section 1.3(a) hereof of the full number of Cognex
Common Shares (the "Escrow Shares") to be issued by Cognex in the Merger. The
Escrow shall be established pursuant to an agreement among Cognex, Xxxxxxx and
the Escrow Agent in the form attached hereto as EXHIBIT A (the "Escrow
Agreement"). At the Effective Time, by adoption of this Agreement, the Isys
Shareholders (other than Dissenting Shareholders) shall be deemed to have:
(i) ratified this Section 4.6 and directed Cognex to
deliver to the Escrow Agent a certificate or
certificates registered in the name of the Escrow Agent
for that number of Cognex Common Shares otherwise
distributable to the Isys Shareholders which represents
each Isys Shareholder's Pro-Rata Share proportionate
interest in the Escrow Shares; and
(ii) appointed the Transfer Agent as their agent to effect
the exchange of the Shares for Cognex Common Stock upon
the surrender of the Shares (the fees and expenses of
which Transfer Agent shall be borne by Cognex);
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(iii) appointed Xxxxxxx as their representative (the
"Representative") under the Escrow Agreement to
receive notice of, determine, accept service of
process, contest, settle or arbitrate all claims of
Cognex made pursuant to this Agreement upon the Escrow
Shares. The Representative shall not be liable for any
action taken or omitted to be taken by him in good
faith and believed by him to be authorized hereby or
within the rights or powers conferred upon him
hereunder, nor for any action taken or omitted to be
taken by him in good faith and in accordance with
advice of legal counsel (which counsel may be of the
Representative's own choosing), and shall not be liable
for any mistakes of fact or error of judgment or for
any acts or omissions of any kind unless caused by his
own willful misconduct or gross negligence. The
Representative shall have authority to employ legal
counsel to assist him in defense or settlement of any
claims of Cognex upon the Escrow Shares, and the
expenses of employing such counsel shall be borne by
all of the Isys Shareholders (other than Dissenting
Shareholders) in proportion to their stock ownership in
the Escrow Shares (which expenses may be paid out of
the escrow pursuant to the Escrow Agreement). In the
event of the death or resignation of the
Representative, a majority in interest of the Isys
Shareholders shall choose a substitute or substitutes,
and such successor or successors shall have all the
same powers and authority as the Representative
appointed under this Agreement. The Representative
shall be entitled to rely on any writing furnished to
him by Cognex or any other person reasonably deemed by
the Representative to have authority to act on Cognex's
behalf, and the Representative shall have no liability
in respect of any action taken in reliance upon such
writing.
For such purpose, each Isys Shareholder's "proportionate interest" shall
be that number of Cognex Common Shares that bears the same ratio to the Escrow
Shares as the number of Cognex Common Shares receivable by such Isys Shareholder
in the Merger bears to the total number of Cognex Common Shares receivable by
all Isys Shareholders in the Merger. The Cognex Common Shares so delivered to
the Escrow Agent and any other securities or other property or cash, and any
income earned with respect thereto, from time to time held by the Escrow Agent
pursuant to the terms of the Escrow Agreement is herein referred to as the
"Escrow Fund." Any shares or other securities from time to time held in the
Escrow Fund shall be registered in the name of the Escrow Agent or its nominee.
The Escrow Fund shall be held by the Escrow Agent in escrow subject to the terms
and conditions of the Escrow Agreement and shall apply to the indemnity of the
Isys Shareholders set forth in Article IX hereof.
4.7 DISSENTERS' RIGHTS.
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(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Isys Stock held by a shareholder of Isys not consenting
to the Merger (a "Dissenting Shareholder") shall not be converted into Cognex
Common Shares pursuant to Section 4.1, but
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such Dissenting Shareholder shall only be entitled to such payments as are
provided by the DGCL, which shall be paid by Cognex.
(b) Notwithstanding the provisions of Section 4.7(a), if any
Dissenting Shareholder shall effectively withdraw or lose (through failure to
perfect or otherwise) his right to appraisal, then, as of the later of the
Effective Time or the occurrence of such event, such Dissenting Shareholder's
shares of Company Stock shall automatically be converted into Cognex Common
Shares as provided in Section 4.1, without interest thereon.
(c) Isys shall give Cognex (i) prompt notice of any written
demands for appraisal of Shares, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by Isys and (ii) the
opportunity to discuss with Isys any negotiations and proceedings with respect
to demands for appraisals and will cooperate with Isys in those negotiations and
proceedings. Isys shall not, except with the prior written consent of Cognex,
voluntarily make any payment with respect to any demands for appraisal of Isys
Stock or offer to settle or settle any such demands unless such settlement does
not adversely affect the Merger or Cognex.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF ISYS AND XXXXXXX
In order to induce Cognex to purchase the Shares, Isys and Xxxxxxx,
acting jointly and severally, make the following representations and warranties
which shall be true, correct and complete on the date hereof and shall be true,
correct and complete as of the Closing (the parties acknowledging that any
information contained in any Schedule to any section or subsection of this
Article V shall qualify not only all of the representations and warranties of
Isys and Xxxxxxx made in such section or subsection, but also all of the other
representations and warranties of Isys and Xxxxxxx made in any other section or
subsection of this Article V):
5.1 ORGANIZATION AND CORPORATE POWER. Each of Isys and each Subsidiary,
as defined below, is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own its properties and to carry on
its business as presently conducted. Each of Isys and each Subsidiary is duly
licensed or qualified to do business as a foreign corporation in each
jurisdiction wherein the character of its property, or the nature of the
activities presently conducted by it, makes such qualification necessary and
where the failure to be so qualified would have a material adverse affect on the
business, condition or results of operations of Isys.
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Isys has furnished to special counsel to Cognex true and complete copies of its
Certificate of Incorporation and By-Laws, each as amended to date and presently
in effect.
5.2 AUTHORIZATION. Isys has all necessary corporate power and has taken
all necessary corporate action required for the due authorization, execution,
delivery and performance by Isys of this Agreement, and for the consummation of
the Merger. This Agreement will be a valid and binding obligation of Isys
enforceable in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
Except for the approval of the Isys Shareholders, no further corporate action is
necessary for the due authorization, delivery and performance of this Agreement
and for the consummation of the transactions contemplated hereby.
5.3 GOVERNMENT APPROVALS. Except for the filing of Certificates of
Merger, no consent, approval, license or authorization of, or designation,
declaration or filing with, any court or governmental authority is or will be
required on the part of Isys in connection with the execution, delivery and
performance by Isys of this Agreement, or in connection with the consummation of
the Merger.
5.4 AUTHORIZED AND OUTSTANDING STOCK. SCHEDULE 5.4 attached hereto
contains the name and address of each Isys Shareholder and the number of Shares
owned by each Isys Shareholder. The authorized capitalized stock of Isys is set
forth on SCHEDULE 5.4. All of the outstanding Shares have been duly authorized
and validly issued and are fully paid and nonassessable and free of preemptive
rights. Except as set forth on SCHEDULE 5.4, no Shares are held in the treasury
of Isys or reserved for issuance. Except as set forth on SCHEDULE 5.4, there are
not as of the date hereof and there will not be at the effective time any
outstanding or authorized options, warrants, call rights, commitments or any
other agreements of any character to which Isys is a party, or by which it is
bound, requiring it to issue, transfer, sell, purchase, redeem or acquire any
shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock or other securities of Isys. There are not as of the date hereof
and there will not be at the Effective Time any shareholder agreement, voting
trust or other agreements or understandings to which Isys or Xxxxxxx is bound
relating to the Shares. Each Isys Shareholder has good and valid title to the
shares specified on SCHEDULE 5.4 as being owned by him, free and clear of all
liens, charges, encumbrances, pledges, voting agreements and any other
encumbrances or restrictions on transfer. All issued and outstanding shares of
capital stock of the Isys were issued (i) in transactions exempt from the
registration provisions of the Securities Act of 1933, as amended (the "Act"),
and (ii) in compliance with or in transactions exempt from the registration
provisions of applicable state securities or blue-sky laws.
5.5 SUBSIDIARIES. Except for Isys Research, Inc. ("Research") and Isys
Controls International, Inc. ("Isys International", and together with Research,
the "Subsidiaries"), Isys has no subsidiaries and does not own or control,
directly or indirectly, any shares of capital stock of any other corporation or
any interest in any partnership, joint venture or other non-corporate
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business enterprise. Research is a California corporation which has no assets.
conducts no business and engages in no active operations. Isys International is
a foreign sales corporation.
5.6 FINANCIAL INFORMATION. Isys has previously delivered to Cognex (i)
Isys' statements of income and retained earnings and cash flows for the fiscal
year ended September 30, 1995 and (ii) balance sheet as of September 30, 1995,
accompanied by the audit report of Coopers & Xxxxxxx L.L.P. (the financial
statements in clauses (i) and (ii) of this Section 5.6 are collectively referred
to as the "Audited Financials"), and (iii) Isys' unaudited balance sheet and
statements of income and retained earnings and cash flows for and as of the
three months ended December 31, 1995 (the "Unaudited Statements" and, together
with the Audited Financials, the "Financial Statements"). The Financial
Statements are complete and correct and present fairly in accordance with
generally accepted accounting principles applied on a basis consistent with
prior periods the financial condition and results of operations of Isys as of
the dates and for the periods shown; provided, however, that the Unaudited
Statements are subject to year-end adjustments which will not be material, and
do not have all footnotes required in accordance with generally accepted
accounting principles. Isys has no liability, contingent or otherwise, which is
not adequately reflected in or reserved against in the Financial Statements that
could materially and adversely affect the financial condition of Isys. Since the
date of the Audited Financials for the year ended September 30, 1995, there has
been no change in the business, assets, liabilities, condition (financial or
otherwise) or operations of Isys except for changes in the ordinary course of
business which, individually or in the aggregate, have not been materially
adverse, and (ii) none of the business, prospects, condition (financial or
otherwise), operations, property or affairs of Isys has been materially
adversely affected by any occurrence or development, individually or in the
aggregate, whether or not insured against.
5.7 EVENTS SUBSEQUENT TO THE DATE OF THE AUDITED FINANCIAL STATEMENTS.
Since September 30, 1995, Isys has not (i) issued any stock, bond or other
corporate security (other than trade credits issued in the ordinary course of
business), (ii) borrowed any money, (iii) declared or made any payment or
distribution to stockholders or purchased or redeemed any shares of its capital
stock or other securities, (iv) made any loans to its employees, officers or
directors other than travel advances made in the ordinary course of business,
(v) increased the compensation of Isys' employees, officers or directors, or
(vi) sold, assigned or transferred any of its tangible assets except in the
ordinary course of business, or canceled any debt or claim, except in the
ordinary course of business.
5.8 LITIGATION. Except as otherwise set forth on SCHEDULE 5.8, there is
no litigation or governmental proceeding or investigation pending or, to the
knowledge of Isys and Xxxxxxx, threatened, against Isys or affecting any of its
properties or assets, or against Xxxxxxx or any officer or key employee of Isys
in his capacity as such, nor, to the knowledge of Isys and Xxxxxxx, has there
occurred any event or does there exist any condition on the basis of which
litigation, proceeding or investigation which could reasonably be expected to be
instituted. Neither Isys nor Xxxxxxx, nor any officer or key employee of Isys in
his capacity as such is, to the knowledge of Isys and Xxxxxxx, in default with
respect to any order, writ, injunction,
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decree, ruling or decision of any court, commission, board or other government
agency which may have a material adverse effect on the operations, conditions
(financial or otherwise) or prospects of Isys (a "Material Adverse Effect").
5.9 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Except as otherwise set
forth on SCHEDULE 5.9, Isys is in compliance with all of the provisions of this
Agreement and of its Certificate of Incorporation and By-laws, and with the
provisions of each mortgage, indenture, lease, license, other agreement or
instrument, judgment, decree, judicial order, statute, and regulation by which
it is bound or to which Isys or its properties are subject. Neither the
execution, delivery or performance of this Agreement and any agreements executed
in connection herewith ("Related Documents"), nor the Merger with or without the
giving of notice or passage of time, or both, will violate, or result in any
breach of, or constitute a default under, or result in the imposition of any
encumbrance upon any asset of Isys pursuant to any provision of its Certificate
of Incorporation or By-laws, or any statute, rule or regulation, contract,
lease, judgment, decree or other document or instrument by which Isys is bound
or to which Isys or its properties are subject, or, to the knowledge of Isys and
Xxxxxxx, will cause Isys to lose the benefit of any right or privilege it
presently enjoys or cause any person who is expected to normally do business
with Isys to discontinue to do so on the same basis, which in any such case
would have a Material Adverse Effect.
5.10 TAXES.
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(a) Isys has filed all Tax Returns (as defined below) it was
required to file, and all such Tax Returns were correct and complete in all
material respects. Notwithstanding the above, Isys has not filed a tax return
for the fiscal year ended September 30, 1995, but has filed all required
extensions and notices and made required payments so as not to be in default and
subject to penalties. Isys has paid all Taxes (as defined below) owed by it,
whether or not shown to be due on any such Tax Returns. The unpaid Taxes of Isys
for Tax periods through December 31, 1995 do not exceed the accruals and
reserves for Taxes set forth in the Unaudited Statements and will not exceed the
reserve adjusted for the passage of time through the Closing Date in accordance
with past custom and practice of Isys in filing its Tax Returns. Isys has no
actual or potential liability for any Tax obligation of any taxpayer (including
without limitation any affiliated group of corporations or other entities that
included Isys during a prior period) other than Isys. All Taxes that Isys is or
was required by law to withhold or collect have been duly withheld or collected
and, to the extent required, have been paid to the proper governmental entity.
For purposes of this Agreement, "Taxes" means all taxes, charges, fees, levies,
or other similar assessments or liabilities, including, without limitation,
income, gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, transfer gains, withholding,
employment, payroll, unemployment insurance, social security, business license,
occupation, business organization, stamp, environmental, and franchise taxes
imposed by the United States of America or any state, local, or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments,
or additions to Tax resulting from, attributable to, or incurred in connection
with any Tax or any
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contest or dispute thereof. For purposes of this Agreement, "Tax Returns" means
all reports, returns, declarations, statements, or other information required to
be supplied to a taxing authority in connection with Taxes.
(b) Isys and Xxxxxxx have delivered to Cognex correct and complete
copies of all federal income Tax Returns of Isys, examination reports, and
statements of deficiencies assessed against or agreed to by Isys since September
30, 1990. The federal income Tax Returns of Isys have been audited by the
Internal Revenue Service or are closed by the applicable statute of limitations
for all taxable years through September 30, 1991. No examination or audit of any
Tax Returns of Isys by any governmental entity is currently in progress or, to
the knowledge of Isys and Xxxxxxx, threatened or contemplated.
(c) Isys is not a "consenting corporation" within the meaning of Section
341(f) of the Code, and none of the assets of Isys are subject to an election
under Section 341(f) of the Code. Isys has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Isys is not a party to any Tax allocation or sharing agreement or any Tax
indemnity agreement. Isys has not waived any statute of limitations with respect
to Taxes or agreed to an extension of time with respect to a Tax assessment or
deficiency. Isys has never been a member of an affiliated group of corporations,
within the meaning of Section 1504 of the Code. Isys has not agreed to make, nor
is it required to make, any adjustments under Section 481(a) of the Code by
reason of a change in accounting method or otherwise. Isys has not participated
in, nor will participate in, an international boycott within the meaning of
Section 999 of the Code. Isys is not a party to any agreement, contract,
arrangement, or plan that has resulted, or would result, separately or in the
aggregate, in the payment of any excess "parachute payments" within the meaning
of Section 28OG of the Code.
5.11 OWNED REAL PROPERTY. SCHEDULE 5.11 lists and describes
briefly all real property that Isys owns. With respect to each parcel of such
real property:
(a) the identified owner has good and clear record and marketable title
to such parcel, insurable by a recognized national title insurance company at
standard rates, free and clear of any security interest, easement, covenant or
other restriction, except for recorded easements, covenants and other
restrictions which do not impair the intended uses, occupancy or value of such
parcel (the "Intended Uses");
(b) there are no (i) pending or, to the knowledge of Isys and Xxxxxxx,
threatened condemnation proceedings relating to such parcel, (ii) pending or, to
the knowledge of Isys and Xxxxxxx, threatened litigation or administrative
actions relating to such parcel, or (iii) other matters affecting adversely the
Intended Uses, occupancy or value thereof;
(c) the legal description for such parcel contained in the deed thereof
describes such parcel fully and adequately; the buildings and improvements may
be used as of right under applicable zoning and land use laws for the Intended
Uses, and such buildings and
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improvements are located within the boundary lines of the described parcels of
land, are not in violation of current setback requirements, zoning laws and
ordinances and do not encroach on any easement which may burden the land; the
land does not serve any adjoining property for any purpose inconsistent with the
use of the land; and such parcel is not located within any flood plain or
subject to any similar type restriction for which any permits or licenses
necessary to the use thereof have not been obtained;
(d) there are no leases, subleases, licenses or agreements, written or
oral, granting to any party or parties (other than Isys, and those tenants under
leases disclosed in SCHEDULE 5.11) the right of use or occupancy of any portion
of such parcel.
(e) there are no outstanding options or rights of first refusal to
purchase such parcel, or any portion thereof or interest therein;
(f) all facilities located on such parcel are supplied with utilities
and other services necessary for the operation of such facilities, all of which
services are adequate for the Intended Uses and in accordance with all
applicable laws, ordinances, rules and regulations and are provided via public
roads or via permanent, irrevocable, appurtenant easements benefiting such
parcel;
(g) Isys has not received notice of, and to the best of Isys'
knowledge, there is no proposed or pending proceeding to change or redefine the
zoning classification of all or any portion of the parcels;
(h) the improvements constructed on the parcels are in good condition
and proper order, free of roof leaks, insect infestation, and material
construction defects, and all mechanical and utility systems servicing such
improvements are in good condition and proper working order, free of material
defects; and
(i) each parcel is an independent unit which does not rely on any
facilities (other than the facilities of public utility and water companies)
located on any other property (A) to fulfill any zoning, building code, or other
municipal or governmental requirement, (B) for structural support or the
furnishing of any essential building systems or utilities, including, but not
limited to electric, plumbing, mechanical, heating, ventilating, and air
conditioning systems, or (C) to fulfill the requirements of any lease. No
building or other improvement not included in the parcels relies on any part of
the parcels to fulfill any zoning, building code, or other municipal or
governmental requirement or for structural support or the furnishing of any
essential building systems or utilities. Each of the parcels is assessed by
local property assessors as a tax parcel or parcels separate from all other tax
parcels.
5.12 REAL PROPERTY LEASES. SCHEDULE 5.12 lists and describes briefly all
real property leased or subleased to Isys and lists the term of such lease, any
extension and expansion
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options, and the rent payable thereunder. With respect to each lease and
sublease listed on SCHEDULE 5.12:
(a) the lease or sublease is legal, valid, binding, enforceable and in
full force and effect;
(b) the lease or sublease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect prior to the Closing;
(c) no party to the lease or sublease is in breach or default, and no
event has occurred which, with notice or lapse of time, would constitute a
breach or default or permit termination, modification, or acceleration
thereunder;
(d) there are no disputes, oral agreements or forbearance programs in
effect as to the lease or sublease;
(e) Isys has not assigned, transferred, conveyed, mortgaged, deeded in
trust or encumbered any interest in the leasehold or subleasehold;
(f) all facilities leased or subleased thereunder are supplied with
utilities and other services necessary for the operation of said facilities;
(g) to the knowledge of Isys and Xxxxxxx, the owner of the facility
leased or subleased has good and clear record and marketable title to the parcel
of real property, free and clear of any security interest, easement, covenant or
other restriction, except for recorded easements, covenants, and other
restrictions which do not impair the Intended Uses, occupancy or value of the
property subject thereto; and
(h) Isys has obtained non-disturbance agreements from the holder of each
superior security interest and ground lease in connection with each such lease
or sublease (each of which is listed in SCHEDULE 5.12); and the representations
and warranties set forth in clauses (a) through (d) of this Section 5.12 with
respect to leases and subleases are true and correct with respect to such
nondisturbance agreements.
5.13 PERSONAL PROPERTY. Except as set forth on SCHEDULE 5.13 and except
for property sold or otherwise disposed of in the ordinary course of business
since December 31, 1995, Isys owns free and clear of any liens or encumbrances,
all of the personal property reflected as owned by Isys in the balance sheet
contained in the Unaudited Statements, and all other material items of personal
property acquired by Isys through the date hereof. All material items of such
personal property are in normal operating condition, normal wear and tear
excepted.
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5.14 PATENTS, TRADEMARKS, ETC. Set forth on SCHEDULE 5.14 is a list and
brief description of all patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service xxxx applications,
trade names and copyrights, and all applications for such that are in the
process of being prepared, owned by or registered in the name of Isys, or of
which Isys is a licensor or licensee or in which Isys has any right (other than
business application software which is licensed by Isys in the ordinary course
of business), and in each case a brief description of the nature of such right.
Isys owns or possesses adequate licenses or other rights to use all patents,
patent applications, trademarks, trademark applications, service marks, service
xxxx applications, trade names, copyrights, manufacturing processes, formulae,
trade secrets and know how (collectively, "Intellectual Property") necessary to
the conduct of its business as conducted and as proposed to be conducted, and
except as otherwise set forth on SCHEDULE 5.14 or SCHEDULE 5.8, no claim is
pending or threatened to the effect that the operations of Isys infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and there is no known basis for any such claim (whether or not pending
or threatened). Except as otherwise set forth on SCHEDULE 5.14 or SCHEDULE 5.8,
no claim is pending or, to the knowledge of Isys and Xxxxxxx, threatened to the
effect that any such Intellectual Property owned or licensed by Isys, or which
Isys otherwise has the right to use, is invalid or unenforceable by Isys, and
there is no known basis for any such claim (whether or not pending or
threatened).
Xxxxxxx further represents that he has assigned to Isys any "Inventions
and Discoveries" as defined in the Employment Agreement of even date herewith
between Isys and Xxxxxxx and that such Inventions and Discoveries are the sole
property of Isys.
5.15 AGREEMENTS OF DIRECTORS, OFFICERS AND EMPLOYEES. To the knowledge
of Isys and Xxxxxxx, no director, officer or employee of or consultant to Isys
is in violation of any terms of any employment contract, non-competition
agreement, non-disclosure agreement, patent disclosure or assignment agreement
or other contract or agreement containing restrictive covenants relating to the
right of any such director, officer, employee or consultant to be employed or
engaged by Isys because of the nature of the business conducted or proposed to
be conducted by Isys, or relating to the use of trade secrets or proprietary
information of Isys.
5.16 GOVERNMENTAL AND INDUSTRIAL APPROVALS. Isys has all the material
permits, licenses, orders, franchises and other rights and privileges of all
federal, state, local or foreign governmental or regulatory bodies necessary for
the conduct of its business as presently conducted. All such material permits,
licenses, orders, franchises and other rights and privileges are in full force
and effect and, to the knowledge of Isys and Xxxxxxx, no suspension or
cancellation of any of them is threatened, and none of such permits, licenses,
orders, franchises or other rights and privileges will be affected by the
consummation of the transactions contemplated herein.
5.17 FEDERAL RESERVE REGULATIONS. Isys has not engaged in the business
of extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation G of the Board of Governors of the Federal
Reserve System), and no part of the
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proceeds of the sale of the Shares will be used to purchase or carry any margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin security or in any other manner which would involve a violation of
any of the regulations of the Board of Governors of the Federal Reserve System.
5.18 MATERIAL CONTRACTS AND OBLIGATIONS. SCHEDULE 5.18 sets forth a list
of all material agreements or commitments of any nature to which Isys is a party
or by which it is bound ("Material Contracts"), including without limitation (a)
each agreement which requires future expenditures by Isys in excess of $25,000
or which might result in payments to Isys in excess of $25,000, (b) all
employment and consulting agreements, employee benefit, bonus, pension,
profit-sharing, stock option, stock purchase and similar plans and arrangements,
distributor and sales representative agreements, and purchase orders, (c) any
agreement with any stockholder, officer or director of Isys, or any "affiliate"
or "associate" of such persons (as such terms are defined in the rules and
regulations promulgated under the Act), including without limitation any
agreement or other arrangement providing for the furnishing of services by,
rental of real or personal property from, or otherwise requiring payments to,
any such person or entity and (d) any agreement relating to the Intellectual
Property. Isys has delivered to counsel to Cognex copies of such of the
foregoing agreements as such counsel has requested. All of such agreements and
contracts are valid, binding and in full force and effect.
5.19 SECURITIES ACT. Isys has complied and will comply with all
applicable federal or state securities laws in connection with the issuance and
sale of the Shares. Neither Isys nor anyone acting on its behalf has offered any
of the Shares, or similar securities, or solicited any offers to purchase any of
such securities, in violation of the Act.
5.20 INSURANCE COVERAGE. SCHEDULE 5.20 hereto contains an accurate
summary of the insurance policies of Isys. Except as described on SCHEDULE 5.20,
there are currently no claims pending against Isys under any insurance policies
currently in effect and covering the property, business or employees of Isys,
and all premiums due and payable with respect to the policies maintained by Isys
have been paid to date.
5.21 EMPLOYEES. SCHEDULE 5.21 contains a list of all employees of Isys,
along with the position and the annual rate of compensation of each such person.
To the knowledge of Isys and Xxxxxxx, no key employee or group of employees has
any plans to terminate employment with Isys. Isys is not a party to or bound by
any collective bargaining agreement, nor has it experienced any strikes,
grievances, claims of unfair labor practices or other collective bargaining
disputes. Isys and Xxxxxxx have no knowledge of any organizational effort made
or threatened, either currently or within the past two years, by or on behalf of
any labor union with respect to employees of Isys.
5.22 EMPLOYEE BENEFITS.
-----------------
(a) SCHEDULE 5.22 contains a complete and accurate list of all Employee
Benefit Plans (as defined below) maintained, or contributed to, by Isys or any
ERISA Affiliate (as
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defined below). For purposes of this Agreement, "Employee Benefit Plan" means
any "employee pension benefit plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), any "employee
welfare benefit plan" (as defined in Section 3(l) of ERISA), and any other
written or oral plan, agreement or arrangement involving direct or indirect
compensation, including without limitation insurance coverage, severance
benefits, disability benefits, deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation or postretirement compensation. For purposes of this Agreement,
ERISA Affiliate" means any entity which is a member of (i) a controlled group of
corporations (as defined in Section 414(b) of the Code), (ii) a group of trades
or businesses under common control (as defined in Section 414(c) of the Code),
or (iii) an affiliated service group (as defined under Section 414(m) of the
Code or the regulations under Section 414(o) of the Code), any of which includes
Isys. Complete and accurate copies of (i) all Employee Benefit Plans which have
been reduced to writing, (ii) written summaries of all unwritten Employee
Benefit Plans, (iii) all related trust agreements, insurance contracts and
summary plan descriptions, and (iv) all annual reports filed on IRS Form 5500,
5500C or 550OR for the last five plan years for each Employee Benefit Plan, have
been delivered to counsel to Cognex. Each Employee Benefit Plan has been
administered in all material respects in accordance with its terms and each of
Isys and the ERISA Affiliates has in all material respects met its obligations
with respect to such Employee Benefit Plan and has made all required
contributions thereto. Isys and all Employee Benefit Plans are in compliance in
all material respects with the currently applicable provisions of ERISA and the
Code and the regulations thereunder.
(b) There are no investigations by any governmental entity, termination
proceedings or other claims (except claims for benefits payable in the normal
operation of the Employee Benefit Plans and proceedings with respect to
qualified domestic relations orders), suits or proceedings against or involving
any Employee Benefit Plan or asserting any rights or claims to benefits under
any Employee Benefit Plan that could give rise to any material liability.
(c) All the Employee Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Employee Benefit Plans are
qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended since the date of
its most recent determination letter or application therefor in any respect, and
no act or omission has occurred, that would adversely affect its qualification
or materially increase its cost.
(d) Neither Isys nor any ERISA Affiliate has ever maintained an Employee
Benefit Plan subject to Section 412 of the Code or Title IV of ERISA.
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(e) At no time has Isys or any ERISA Affiliate been obligated to
contribute to any "multi-employer plan" (as defined in Section 4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Employee Benefit Plan
providing benefits after termination of employment to any employee of Isys (or
to any beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code and insurance
conversion privileges under state law.
(g) No act or omission has occurred and no condition exists with respect
to any Employee Benefit Plan maintained by Isys or any ERISA Affiliate that
would subject Isys or any ERISA Affiliate to any material fine, penalty, tax or
liability of any kind imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated with, or related
to a "voluntary employee's beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or agreement, summary
plan description or other written communication distributed generally to
employees by its terms prohibits Isys from amending or terminating any such
Employee Benefit Plan.
(j) SCHEDULE 5.22(J) discloses each: (i) agreement with any director,
executive officer or other key employee of Isys (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Isys of the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
compensation guarantee or (C) providing severance benefits or other benefits
after the termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may receive
payments from Isys that may be subject to the tax imposed by Section 4999 of the
Code or included in the determination of such person's "parachute payment" under
Section 28OG of the Code; and (iii) agreement or plan binding Isys, including
without limitation any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan, or any
Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
5.23 ENVIRONMENTAL MATTERS.
---------------------
(a) Isys has complied with all applicable Environmental Laws (as defined
below). There is no pending or, to the knowledge of Isys and Xxxxxxx, threatened
civil or criminal litigation, written notice of violation, formal administrative
proceeding, or investigation, inquiry or information request by any governmental
entity, relating to any Environmental Law
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involving Isys. For purposes of this Agreement, "Environmental Law" means
any federal, state or local law, rule or regulation or the common law relating
to the environment or occupational health and safety, including without
limitation any statute, regulation or order pertaining to (i) treatment,
storage, disposal, generation and transportation of industrial, toxic or
hazardous substances or solid or hazardous waste; (ii) air, water and noise
pollution; (iii) groundwater and soil contamination; (iv) the release or
threatened release into the environment of industrial, toxic or hazardous
substances, or solid or hazardous waste, including without limitation emissions,
discharges, injections, spills, escapes or dumping of pollutants, contaminants
or chemicals; (v) the protection of wild life, marine sanctuaries and wetlands,
including without limitation all endangered and threatened species; (vi) storage
tanks, vessels and containers; (vii) underground and other storage tanks or
vessels, abandoned, disposed or discarded barrels, containers and other closed
receptacles; (viii) health and safety of employees and other persons; and (ix)
manufacture, processing, use, distribution, treatment, storage, disposal,
transportation or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or oil or petroleum products or solid or hazardous
waste. As used above, the terms "release" and "environment" shall have the
meaning set forth in the federal Comprehensive Environmental Compensation,
Liability and Response Act of 1980 ("CERCLA") .
(b) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment at any parcel of real property
or any facility formerly or currently owned, operated or controlled by Isys.
With respect to any such releases of Material of Environmental Concern, Isys has
given all required notices to governmental entities (copies of which have been
provided to counsel to Cognex). Neither Isys nor Xxxxxxx is aware of any
releases of Materials of Environmental Concern at parcels of real property or
facilities other than those owned, operated or controlled by Isys that could
reasonably be expected to have an impact on the real property or facilities
owned, operated or controlled by Isys. For purposes of this Agreement,"Materials
of Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the federal Resources
Conservation and Recovery Act), toxic materials, oil or petroleum and petroleum
products, or any other material subject to regulation under any Environmental
Law.
(c) Set forth on SCHEDULE 5.23 is a list of all environmental reports,
investigations and audits relating to premises currently or previously owned or
operated by Isys (whether conducted by or on behalf of Isys or a third party,
and whether done at the initiative of Isys or directed by a governmental entity
or other third party) which Isys has possession of or access to. Complete and
accurate copies of each such report, or the results of each such investigation
or audit, have been provided to the special counsel to Cognex.
(d) Set forth on SCHEDULE 5.23 is a list of all of the solid and
hazardous waste transporters and treatment, storage and disposal facilities that
have been utilized by Isys. Neither Isys nor any Management Shareholder is aware
of any material environmental liability of any such transporter or facility.
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5.24 ACCOUNTS RECEIVABLE. All accounts receivable of Isys reflected in
the Unaudited Statements are valid receivables subject to no setoffs or
counterclaims and are current and collectible (within 90 days after the date on
which it first became due and payable), net of the applicable reserve for bad
debts in the Unaudited Statements. All accounts receivable reflected in the
financial or accounting records of Isys that have arisen since December 31, 1995
are valid receivables subject to no setoffs or counterclaims and are
collectible, net of a reserve for bad debts in an amount proportionate to the
reserve shown in the Unaudited Statements.
5.25 PERCENTAGE-OF-COMPLETION ACCOUNTING. Revenue reflected in the
Financial Statements have been determined using the percentage-of-completion
method of accounting. All accounts have been calculated, and the use of the
percentage-of-completion method has been applied in accordance with Generally
Accepted Accounting Principles ("GAAP"). Costs and estimated earnings in excess
of xxxxxxxx reflected in the December 31, 1995 balance sheet have been
calculated in accordance with GAAP and include no amounts that are billable more
than 120 days from December 31, 1995. In addition, such billable amounts are
covered in full, by valid purchase orders or other firm commitment to pay for
such xxxxxxxx as they become due.
5.26 INVENTORY. SCHEDULE 5.26 attached hereto is a complete and accurate
list of all inventory of Isys, including inventory (a) reflected in the
Unaudited Statements as of December 31, 1995, (b) held on consignment by Isys
for which Isys has received payment, and (c) held at customer sites for which
Isys has not received payment. All inventory of Isys is accurately reflected in
the Unaudited Statements in accordance with GAAP and consists of a quality and
quantity usable and saleable in the ordinary course of business, except for
obsolete items and items of below-standard quality, all of which have been
written-off or written-down to net realizable value on the Unaudited Statements.
All inventories not written-off have been priced at the lower of average cost or
market on an average cost basis. The quantities of each type of inventory,
whether raw materials, work-in-process or finished goods, are not excessive in
the present circumstances of Isys.
5.27 NO BROKERS OR FINDERS. No person has or will have, as a result of
the transactions contemplated by this Agreement, any right, interest or claim
against or upon Isys for any commission, fee or other compensation as a finder
or broker because of any act or omission by Isys.
5.28 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 5.28,
there are no loans, leases or other continuing transactions between Isys on the
one hand, and any officer or director of Isys or any person owning five percent
(5%) or more of the Common Stock of Isys or any respective immediate family
member or affiliate of such officer, director or stockholder on the other hand.
5.29 ASSUMPTIONS, GUARANTEES, ETC. OF INDEBTEDNESS OF OTHER PERSONS.
Isys has not assumed, guaranteed, endorsed or otherwise become directly or
contingently liable on or for any indebtedness for borrowed money of any other
person or entity, except guarantees by
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endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
5.30 BOOKS AND RECORDS. The minute books of Isys contain complete and
accurate records of all meetings and other corporate actions of its stockholders
and its Board of Directors and committees thereof. The stock ledger of Isys is
complete and reflects all issuances, transfers, repurchases and cancellations of
shares of capital stock of Isys.
5.31 BANK ACCOUNTS. SCHEDULE 5.31 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which Isys maintains safe deposit boxes or accounts of any
nature, the names of all persons authorized to draw thereon, make withdrawals
therefrom or have access thereto and the numbers of all such safe deposit boxes
or accounts.
5.32 CUSTOMERS AND SUPPLIERS.
-----------------------
(a) SCHEDULE 5.32(A) sets forth a list of the ten largest
customers of Isys in terms of sales during the fiscal year ended December 31,
1995, showing the approximate total sales by Isys to each such customer during
the fiscal year ended December 31, 1995.
(b) SCHEDULE 5.32(B) sets forth a list of the ten largest
suppliers of Isys in terms of purchases during the fiscal year ended December
31, 1995, showing the approximate total purchases by Isys from each supplier
during the fiscal year ended December 31, 1995.
(c) To the knowledge of Isys and Xxxxxxx there has not been any
material adverse change in the business relationship of Isys with any customer
or supplier named in SCHEDULE 5.32(A) or SCHEDULE 5.32(B). Except for the
customers or suppliers named in SCHEDULE 5.32(A) or SCHEDULE 5.32(B),
respectively, Isys has not had any customer who accounted for more than 5% of
Isys's sales in any fiscal year during the period from January 1, 1993 to
December 31, 1995; or any supplier from whom it purchased more than 5% of the
goods or services which it purchased during the period January 1, 1993 to
December 31, 1995.
5.33 DISCLOSURES. This Agreement, the Schedules to this Agreement, the
Related Documents, the Financial Statements, the Unaudited Statements and the
other agreements, documents and written statements made by Isys or Xxxxxxx and
furnished by Isys or Xxxxxxx to Cognex or Cognex's counsel in connection with
the transactions contemplated hereby, taken as a whole, do not contain any
untrue statement of material fact or omit to any material fact necessary, in the
light of the circumstances under which it was or will be made, to make the
statements contained herein or therein not misleading.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF COGNEX AND MERGER SUB
Cognex and Merger Sub each represents and warrants to Isys and Xxxxxxx
that:
6.1 CORPORATE ORGANIZATION. Each of Cognex and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts. True and correct copies of the Articles of
Organization and By-Laws of Cognex and Merger Sub in effect as of the date of
this Agreement have been provided to Isys.
6.2 QUALIFICATION TO DO BUSINESS. Each of Cognex and the Merger Sub is
duly qualified or licensed to do business as a foreign corporation in each
jurisdiction wherein the nature of its activities or of its properties owned or
leased makes such qualification necessary and failure to be so qualified or
licensed would have a material adverse effect.
6.3 CORPORATE POWER. Each of Cognex and Merger Sub has the requisite
power and authority (corporate or otherwise) to own and operate its properties,
to carry on its business as now being conducted, to execute, deliver and perform
its obligation under this Agreement and to consummate the transactions
contemplated hereby.
6.4 CORPORATE AUTHORITY. The execution, delivery and performance of this
Agreement by Cognex and Merger Sub, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate action
on the part of Cognex and Merger Sub. This Agreement and all other instruments
required hereby to be executed and delivered by Cognex or Merger Sub have been,
or will be, duly executed and delivered by authorized officers of Cognex or
Merger Sub, as the case may be, and are, or when delivered will be, legal, valid
and binding obligations of Cognex and Merger Sub, enforceable against Cognex and
Merger Sub in accordance with their terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general principles of equity.
6.5 AUTHORIZATION FOR COGNEX COMMON SHARES AND OPTIONS. Cognex has taken
all necessary action to permit it to issue the number of Cognex Common Shares
required to be issued pursuant to Article IV and to assume the Isys Options. The
Cognex Common Shares issued pursuant to Article IV and the Cognex Common Shares
issuable upon exercise of Isys Options will, when issued, be validly issued,
fully paid and nonassessable and no shareholder of Cognex will have any
preemptive right of subscription or purchase in respect thereof.
6.6 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution nor
delivery of this Agreement nor the consummation by Cognex and Merger Sub of the
transactions contemplated hereby will (i) conflict with or result in any breach
of any provision of the Charter or By-Laws of Cognex and Merger Sub; (ii)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental authority, except (A) filings by Cognex,
pursuant
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to the applicable requirements of the Securities Exchange Act and under the
Securities Act and applicable state securities laws, and (B) the filings of
Certificates of Merger pursuant to the MBCL and the DGCL and appropriate
documents with the relevant authorities of other states in which Isys is
authorized to do business; (iii) result in a violation of breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration of lien or
other charge or encumbrance) under any of the terms, conditions or provisions of
any note, license agreement or other instrument or obligation to which Cognex or
Merger Sub or any of their assets may be bound, except for such violations,
breaches and defaults (or rights of termination, cancellation or acceleration or
lien or other charge or encumbrance) as to which requisite waivers or consents
have been obtained; or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Cognex or Merger Sub or to any of
their respective assets.
6.7 SEC REPORTS. Since January 1, 1995, Cognex has filed all forms,
reports and documents with the Securities and Exchange Commission (the "SEC")
required to be filed by it pursuant to the federal securities laws and the SEC
rules and regulations thereunder, all of which complied in all material respects
with all applicable requirements of the Securities Exchange Act (collectively,
the "Cognex SEC Reports"). None of the Cognex SEC Reports, including without
limitation any financial statements or schedules included therein, at the time
filed contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Cognex is eligible for use of Form S-3 to register the sale of
the Cognex Common Shares by the Isys Shareholders.
6.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Cognex SEC Reports and except for the transactions contemplated hereby, since
December 31, 1995, the business of Cognex has been carried on only in the
ordinary and usual course, and there has been no material adverse change in the
financial condition, operations, results of operations, management or business
of the Cognex since December 31, 1995.
6.9 FULL DISCLOSURE. Cognex has not knowingly withheld from Isys and
Xxxxxxx any material facts relating to Cognex. No representation or warranty by
Cognex contained in this Agreement or in any Related Document contains any
untrue statement of a material fact, or omits to state any material fact
necessary to make the representations and warranties herein contained not
misleading.
6.10 PRIVATE PLACEMENT. The issuance of the Cognex Common Shares to
the Isys Shareholders in the Merger is intended to qualify as a private
placement under Section 4(2) of the Act.
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ARTICLE VII
CERTAIN COVENANTS
7.1 CONDUCT OF ISYS' BUSINESS PENDING THE MERGER.
Isys and Xxxxxxx agree that, from the date hereof to the Effective Time, except
to the extent that Cognex shall otherwise consent in writing:
(a) Isys shall operate its business substantially as
presently planned or operated and only in the ordinary, usual and
customary manner, and, consistent with such operation, will use its best
efforts to preserve intact its present business organization and its
relationships with persons having business relationships with it.
(b) No amendment shall be made to the Certificate of
Incorporation or the By-laws of Isys.
(c) Except for the exercise of fully vested outstanding
options, warrants or convertible securities, all of which are set forth
on SCHEDULE 5.4, there shall be no changes in the number of shares, par
value or class of authorized or issued capital stock of Isys. In
addition, Isys shall not grant any option, warrant, convertible security,
or other right to acquire any shares of capital stock of Isys.
(d) There shall not be any declaration or payment of
any dividend or other distribution in respect to the capital stock of
Isys.
(e) Isys shall not (i) enter into any employment contract
or consulting agreement or make any offer of employment to any persons or
offer to engage any person as a consultant, or (ii) increase the wages,
salary, fees or other compensation of any person(s) presently employed or
rendering any service(s) to Isys.
(f) Except in the ordinary course of business, Isys shall
not enter into, materially amend or renew, or waive or release any rights
of material value under, any Material Contract.
(g) Neither Isys nor Xxxxxxx shall take any action,
directly or indirectly, to negotiate or discuss with any person or
entity, or solicit from any person or entity, any offer or indication of
interest regarding (i) any merger or consolidation of Isys with any
person other than Cognex or Merger Sub, (ii) any sale of a material
portion of the assets of Isys or any license of any intellectual property
or technology of Isys, (iii) any equity or debt investment in Isys by any
person other than Cognex or Merger Sub, or (iv) any sale or transfer by
Xxxxxxx of any Shares other than to Cognex or Merger Sub.
7.2 BOOKS AND RECORDS; ACCESS AND INFORMATION.
From the date of this Agreement until the Effective Time, Isys shall give to
Cognex, its officers and representatives
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reasonable access to the premises, books and records of Isys, and provide Cognex
with such financial and operating data and other information with respect to its
business and properties as it shall from time to time reasonably request,
including, without limitation, all interim financial data as soon as it becomes
available; provided, however, that any such investigation shall be conducted in
such manner as not to interfere unreasonably with the operation of the business
of Isys.
7.3 NOTIFICATION OF CERTAIN MATTERS. Subsequent
to the date of this Agreement and on or prior to the Effective Time, Isys and
Cognex shall each promptly notify the other of:
(i) the receipt of any notice of, or other
communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, under any material
agreement to which it is a party or to which it or any of its respective
material properties or assets may be subject or bound;
(ii) the receipt of any notice or other
communication from any third party whose consent or approval is or may
be required in connection with the transactions contemplated by this
Agreement, denying such consent or approval;
(iii) the receipt of any notice or other
communication from any governmental regulatory agency or authority in
connection with the transactions contemplated hereby;
(iv) any material adverse change in its
consolidated business, consolidated financial condition, operating
results, assets, management, employee relations or customer relations; or
(v) any condition or fact which would not
permit it to satisfy a condition to the other's obligation to effect the
transactions contemplated hereby, including the Merger.
7.4 CONFIDENTIALITY. Each of the parties hereto
agrees that it shall, and shall cause its subsidiaries and the officers,
employees and authorized representatives of each of them to hold in strict
confidence all data and information obtained by them from the other parties
hereto (unless such information is or becomes readily ascertainable from public
or published information) and shall not, and shall ensure that such
subsidiaries, directors, officers, employees and authorized representatives do
not, disclose such information to others without the prior written consent of
the party from which such data or information was obtained. In the event of the
termination of this Agreement, each of the parties will return or destroy all
documents, work papers and other materials (including all copies made thereof)
obtained pursuant hereto.
7.5 POOLING. Each of Cognex, Isys, and Xxxxxxx
hereby covenant and agree to take all steps reasonably necessary in order to
permit Cognex to determine, based on the
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advice of Coopers & Xxxxxxx L.L.P. and such other advice as Cognex may deem
relevant, that consummation of the Merger would be accounted for as a pooling of
interests in accordance with generally accepted accounting principles. Without
limiting the generality of the foregoing, by the adoption hereof, each of the
officers, directors and principal shareholders of Isys who may be deemed to be
affiliates of Isys agrees that he will not sell or in any other way reduce such
Isys Shareholder's risk relative to any Cognex Common Shares received in the
Merger (within the meaning of the SEC's Financial Reporting Release No. 1,
"Codification of Financing Reporting Policies," ss. 201.01 [47 F.R. 21030]
(April 15, 1982)), until such time as financial results (including combined
sales and net income) covering at least 30 days of post-merger operations have
been published, except as permitted by Staff Accounting Bulletin No. 76 issued
by the SEC.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 CONDITIONS TO OBLIGATION OF COGNEX AND MERGER
SUB TO CLOSE. The obligation of Cognex and Merger Sub to effect the closing of
the transactions contemplated by this Agreement is subject to the satisfaction
prior to or at the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Isys and Xxxxxxx under this Agreement shall be true and
correct in all material respects as of the Closing Date with the same
effect as though made on and as of the Closing Date.
(b) OBSERVANCE AND PERFORMANCE. Isys and Xxxxxxx shall
have performed and complied with all covenants and agreements required by
this Agreement to be performed and complied with by them prior to or as
of the Closing Date.
(c) NO ADVERSE CHANGE. There shall have occurred no
material adverse change in the business, condition (financial or
otherwise), management, prospects or results of operations of Isys
since December 31, 1995.
(d) OFFICER'S CERTIFICATE. Isys shall have delivered to
Cognex a certificate, dated the Closing Date, executed by the President
of Isys and certifying to the satisfaction of the conditions specified in
Sections 8.1(a), (b) and (c) hereof, insofar as they relate to Isys.
(e) CERTIFICATE OF XXXXXXX. Xxxxxxx shall have delivered
to Cognex a certificate or certificates, dated the Closing Date, executed
by Xxxxxxx, and certifying to the satisfaction of the conditions
specified in Sections 8.1(a), (b) and (c) hereof, insofar as they relate
to Xxxxxxx.
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(f) CONSENTS OF THIRD PARTIES. Cognex shall have
received duly executed copies of all consents and agreements necessary
for Isys and Xxxxxxx to effect the transactions contemplated hereby.
Cognex hereby agrees to use its reasonable efforts to assist Isys in
obtaining such consents and agreements;
(g) LEGAL OPINION. Cognex shall have received an
opinion, dated the Closing Date, from Fenwick & West, counsel to Isys
and Xxxxxxx, in the form attached hereto as EXHIBIT B.
(h) SHAREHOLDER CONSENT. Isys Shareholders holding
greater than ninety percent (90%) in interest of the Isys Shares shall
have consented to the Merger.
(i) POOLING LETTER. Coopers & Xxxxxxx L.L.P. shall
have issued to Cognex a letter to the effect that the Merger will
qualify as a "pooling of interests" for accounting purposes.
(j) DUE DILIGENCE. Cognex shall have satisfactorily
completed its due diligence review of Isys.
(k) CLOSING DOCUMENTS. Cognex shall have received
such further instruments and documents as may be reasonably required
for Isys and Xxxxxxx to consummate the transactions contemplated hereby.
(l) ESCROW AGREEMENT. The Escrow Agreement shall have
been executed and delivered by all parties thereto.
(m) EMPLOYMENT AGREEMENT. Xxxxxxx shall have entered
into an Employment Agreement with Isys substantially in the form
attached hereto as EXHIBIT C.
(n) NON-COMPETITION AND NON-DISCLOSURE AGREEMENTS. The
employees of Isys listed on SCHEDULE 5.21 who are also Isys Shareholders
shall have executed Non-Competition and Non-Disclosure Agreements
substantially in the form attached hereto as EXHIBIT D.
(o) NO LEGAL ACTIONS. No court or governmental authority
of competent jurisdiction shall have issued an order not subsequently
vacated, restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement, and no person, firm,
corporation or governmental agency shall have instituted an action or
proceeding which shall not have been previously dismissed seeking to
restrain, enjoin or prohibit the consummation of the transactions
contemplated by this Agreement or seeking damages with respect thereto.
(p) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings and actions taken in connection with the transactions
contemplated hereby and all
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certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be satisfactory in
form and substance to Cognex and its counsel.
(q) FAIRNESS OPINION. Cognex shall have received
a fairness opinion concerning the Merger of an investment banking firm
retained by Cognex, which opinion shall be acceptable to Cognex in
its sole discretion.
(r) AFFILIATE AGREEMENTS. Cognex shall have received
from each Isys affiliate listed on SCHEDULE 8.1(R) an Affiliate
Agreement in the form of EXHIBIT E attached hereto.
8.2 CONDITIONS TO OBLIGATIONS OF ISYS AND MANAGEMENT
SHAREHOLDERS TO CLOSE. The obligation of Isys and Xxxxxxx to effect closing of
the transactions contemplated by this Agreement is subject to the satisfaction
prior to or at the Closing of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Cognex and the Merger Sub under this Agreement shall be
true and correct in all material respects as of the Closing Date with the
same effect as though made on and as of the Closing Date.
(b) OBSERVANCE AND PERFORMANCE. Cognex and Merger Sub shall
have performed and complied with all covenants and agreements required by
this Agreement to be performed and complied with by them prior to or as
of the Closing Date.
(c) ABSENCE OF MATERIAL ADVERSE CHANGE. There shall not
have been, in the reasonable judgment of the Board of Directors of Isys,
any material adverse change in the business or financial condition of
Cognex since December 31, 1995.
(d) OFFICER'S CERTIFICATE. Cognex shall have delivered to
Isys and Xxxxxxx a certificate, dated the Closing Date, executed by the
appropriate officer of Cognex and certifying to the satisfaction of the
conditions specified in Sections 8.2 (a), (b) and (c) hereof.
(e) LEGAL OPINION. Isys and Xxxxxxx shall have received an
opinion, dated the Closing Date, from Xxxxxxxx, Xxxxxxx & Xxxxxxx,
counsel to Cognex and Merger Sub, in the form attached hereto as EXHIBIT
F.
(f) ESCROW AGREEMENT. The Escrow Agreement shall have been
executed and delivered by all parties thereto.
(g) NO LEGAL ACTIONS. No court or governmental authority of
competent jurisdiction shall have issued an order, not subsequently
vacated, restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement, and no person, firm,
corporation or governmental agency shall have instituted
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an action or proceeding which shall not have been previously dismissed
seeking to restrain, enjoin or prohibit the consummation of the
transactions contemplated by this Agreement or seeking damages with
respect thereto.
(h) CLOSING DOCUMENTS. Isys and Xxxxxxx shall have
received such further instruments and documents as may be reasonably
required for Cognex and Isys to consummate the transactions
contemplated hereby.
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION BY ISYS SHAREHOLDERS. Subject to the
limitations set forth in the Escrow Agreement and Section 12.2 hereof, each of
the Isys Shareholders, by adoption of this Agreement, severally agrees to
indemnify and hold harmless Cognex from and after the Effective Time against and
with respect to:
(a) Any and all loss, injury, damage or deficiency resulting
from any misrepresentation or breach of warranty on the part of Isys or
such Isys Shareholder under this Agreement;
(b) Any and all loss, injury, damage or deficiency resulting
from any non-fulfillment of any covenant or agreement on the part of Isys
or such Isys Shareholder under this Agreement; and
(c) Any and all demands, claims, actions, suits or
proceedings, assessments, judgments, costs and legal and other expenses
incident to any of the foregoing.
9.2 INDEMNIFICATION BY COGNEX. Cognex hereby agrees to
indemnify and hold harmless each of the Isys Shareholders at all times form and
after the Effective Time against and with respect to:
(a) Any and all loss, injury, damages or deficiency resulting
from any misrepresentation or breach of warranty on the part of Cognex or
Merger Sub under this Agreement;
(b) Any and all loss, injury, damage or deficiency resulting
from any non-fulfillment of any covenant or agreement on the part of
Cognex or Merger Sub under this Agreement; and
(c) Any and all demands, claims, actions, suits or
proceedings, assessments, judgments, costs and legal and other expenses
incident to any of the foregoing.
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9.3 PROCEDURES FOR INDEMNIFICATION. Promptly after receipt
by an indemnified party pursuant to the provisions of Section 9.1 or 9.2 of
notice of the commencement of any action involving the subject matter of the
foregoing indemnity provisions, such indemnified party shall, if a claim thereof
is to be made against an indemnifying party pursuant to the provisions of
Section 9.1 or 9.2, promptly notify such indemnifying party of the commencement
thereof; but the omission to so notify such indemnifying party will not relieve
it from any liability which it may have to the indemnified party otherwise than
hereunder. In case such action is brought against an indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, to assume the defense thereof, with counsel satisfactory to such
indemnified party; provided, however, if the defendants in any action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to it
which are different from or additional to those available to the indemnifying
party, or if there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the indemnified
party shall have the right to select separate counsel to participate in the
defense of such action on behalf of such indemnified party. After notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to the
indemnified party pursuant to the provisions of such Section 9.1 or 9.2 for any
legal or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (a) the indemnified party shall have employed counsel in
accordance with the proviso of the preceding sentence, (b) the indemnifying
party shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the notice of the
commencement of the action, or (c) the indemnifying party has authorized the
employment of counsel for the indemnified party at the expense of the
indemnifying party. No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each indemnified party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the release from all liability in repsect to such
claim or litigation.
9.4 INDEMNITY ESCROW FUND. The Escrow Fund established
pursuant to the terms of the Escrow Agreement shall be available to Cognex,
subject to the terms thereof, as its sole and exclusive source to satisfy the
obligations of the Isys Shareholders under this Article IX. The Shares otherwise
issuable to Xxxxxxx but deposited into the Escrow Fund shall constitute the
total liability of Xxxxxxx under this Agreement.
ARTICLE X
REGISTRATION RIGHTS
10.1 REQUIRED REGISTRATION. Within ten (10) days after the
Closing, Cognex shall prepare and file a registration statement on Form S-3
under the Act covering the Cognex Common Shares issued in the Merger and shall
use its best efforts to cause such registration
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statement to become effective by such time as Cognex releases financial
statements containing at least 30 days of combined operations of Cognex and
Isys. Cognex shall be obligated to prepare, file and use best efforts to cause
to become effective only one registration statement (on Form S-3 or any
successor form promulgated by the SEC ("Form S-3")) pursuant to this Section
10.1, and to pay the expenses associated with such registration statement,
provided, however, that if an effective registration statement ceases to be
effective for any reason other than any action or inaction on the part of the
Isys Shareholders, Cognex shall prepare, file and cause to become effective
another registration statement and to pay the expenses associated therewith.
Without the written consent of the holders of a majority of the Cognex
Common Shares for which registration has been effected pursuant to this Section
10.1, neither Cognex nor any other holder of securities of Cognex may include
securities in such registration.
10.2 REGISTRATION PROCEDURE. In connection with the
registration of Cognex Common Shares under the Securities Act, Cognex will:
(a) prepare and file with the SEC a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective for the earlier of
two years from the Effective Time or until such time as all the Cognex
Common Shares issued in the Merger are sold;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement effective
for such period as may be reasonably necessary to effect the sale of such
securities, not to exceed the earlier of two years from the Effective
Time or until such time as all the Cognex Common Shares issued in the
Merger are sold;
(c) furnish to the security holders participating in such
registration such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such security holders may reasonably request in order to
facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing, except that Cognex shall not
for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof of the time
when such registration statement has become effective or a supplement to
any prospectus forming a part of such registration statement has been
filed;
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(f) notify such holders promptly of any such request by SEC
for the amending or supplementing of such registration statement or
prospectus or for additional information;
(g) prepare and file with the SEC, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders
(and concurred in by counsel for Cognex), is required under the
Securities Act or the rules and regulations thereunder in connection with
the distribution of the Cognex Common Shares by such holder;
(h) prepare and promptly file with the SEC and promptly
notify such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct
any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities
Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an
untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by
the SEC suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order
or to obtain its withdrawal if such stop order should be issued.
10.3 EXPENSES. Cognex shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for Cognex, all internal Cognex
expenses, and all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified. Fees and
disbursements of counsel and accountants for the selling security holders,
underwriting discounts and commissions and transfer taxes and any other expenses
incurred by the selling security holders not expressly included above, shall be
borne by the selling security holders.
10.4 INDEMNIFICATION. With respect to such registration:
(a) Cognex will indemnify and hold harmless each holder of
Cognex Common Shares which are included in a registration statement
pursuant to the provisions of this Article X, its directors and officers,
and any underwriter (as defined in the Securities Act) for such holder
and each person, if any, who controls such holder or such underwriter
within the meaning of the Securities Act, from and against, and will
reimburse such holder and each such underwriter and controlling person
with respect to, any and all loss, damage, liability, cost and expense to
which such holder or any such underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue
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statement contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that Cognex will not be liable
in any such case to the extent that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such holder, such underwriter
or such controlling person in writing specifically for use in the
preparation thereof.
(b) Each holder of Cognex Common Shares which are included
in a registration pursuant to the provisions of this Article X will
indemnify and hold harmless Cognex, its directors and officers, any
controlling person and any underwriter from and against, and will
reimburse Cognex, its directors and officers, any controlling person and
nay underwriter with respect to, any and all loss, damage, liability,
cost or expense to which Cognex or any controlling person and/or any
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by such holder
specifically for use in the preparation thereof, provided, however, that
the total amounts payable in indemnity by an Isys Shareholder shall not
exceed the net proceeds received by such Isys Shareholder in the
registered offering out of which the indemnity arises.
(c) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 10.5 of notice
of the commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (a) or (b), promptly notify the indemnifying
party of the commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than hereunder. In case such
action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party, provided, however, if the defendants in any action include both
the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the
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indemnifying party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the right
to select separate counsel to participate in the defense of such action
on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party pursuant to the provisions of said paragraph (a)
or (b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
10.5 S-8 REGISTRATION STATEMENT. As soon as practicable
after the Effective Date, but in no event more than fifteen (15) days
thereafter, Cognex shall prepare and file with the SEC a registration statement
on Form S-8 covering the Cognex Common Shares issuable upon exercise of Isys
Options.
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated and the
Merger abandoned at any time prior to the Effective Time, whether before or
after approval of the Merger by the shareholders of Isys:
(a) by mutual consent of the Boards of Directors of Cognex
and Isys;
(b) by either Cognex or Isys if (i) any of the conditions to
their respective obligations specified in Article VIII hereof have not
been satisfied or waived prior to February 29, 1996, or (ii) the Merger
shall not have been consummated on or before February 29, 1996; provided,
however, that the right to terminate this Agreement pursuant to this
Section 11.1 shall not be available to any party whose failure to fulfill
any obligation under this Agreement shall have been the cause of, or
resulted in, the failure of any of the conditions specified in Article
VIII that are required to have been satisfied prior to the Merger.
11.2 EFFECT OF TERMINATION. In the event of the termination
of this Agreement by either Cognex or Isys, as provided above, this Agreement
shall thereafter become void and there shall be no liability on the part of any
party hereto or their respective directors, officers, shareholders or agents,
except as provided in Sections 7.4 hereof and except that any such
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termination shall be without prejudice to the rights of any party hereto arising
out of the willful breach by any other party of any covenant or agreement
contained in this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 EMPLOYMENT AND NON-COMPETITION AGREEMENTS. Xxxxxxx
recognizes that his willingness to enter into the restrictive covenants
contained in the Employment, Non-Competition and Non-Disclosure Agreements
referred to in Sections 8.1(m) and 8.1(n) was a critical condition precedent to
the willingness of Cognex and Merger Sub to enter into and perform their
respective obligations under the Merger Agreement. Xxxxxxx also acknowledges
that the restrictions contained in such agreements will not materially or
unreasonably interfere with his ability to earn a living.
12.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The representations, warranties, covenants and agreements of Cognex,
Isys and Xxxxxxx in this Agreement shall survive the Effective Time for a period
of one year.
12.3 EXPENSES. Whether or not the Merger is consummated, all
costs and expenses (including without limitation the fees and expenses of
investment bankers, attorneys and accountants) incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by Cognex, in
the case of costs and expenses incurred by Cognex or Merger Sub; by Isys, in the
case of costs and expenses incurred by Isys; and by Xxxxxxx, in the case of
costs and expenses incurred by Xxxxxxx.
12.4 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given, if given) by hand delivery, transmitted by
telegram, telex or telecopy or mailed by registered or certified mail, postage
prepaid, return receipt requested, as follows:
(a) If to Cognex or Merger Sub to:
Cognex Corporation
Xxx Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
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00
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Xx.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to Isys or Xxxxxxx to:
Isys Controls, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Fenwick & Xxxx
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(c) If to the Escrow Agent to:
State Street Bank and Trust Company
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to such other address as the person to whom notice is given has previously
furnished to the other parties in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
12.5 AMENDMENTS. This Agreement may be amended by all the
parties hereto by action taken by their respective Boards of Directors at any
time before or after approval thereof by the shareholders of Isys, but, after
such approval, no amendment shall be made which in any way adversely affects any
of the Isys Shareholders without further approval of the Isys Shareholders. This
Agreement may not be amended, modified or supplemented except by written
agreement of the parties hereto.
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12.6 WAIVER. At any time prior to the Effective Time, Cognex or Isys
may (i) extend the time for the performance of any of the obligations or other
acts of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
obligations of the other party or any of the conditions to its own obligations
contained herein to the extent permitted by law. Any agreement on the part of
Cognex and Isys to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of Cognex and Isys. Any such
agreement on the part of Isys shall also be binding upon Xxxxxxx.
12.7 BROKERS. Isys and Xxxxxxx, on the one hand, and Cognex and Merger
Sub on the other, each represent and warrant to the others that no broker,
finder or investment banker engaged by them is entitled to any brokerage,
finder's or other fee or commission, in connection with the transactions
contemplated hereby.
12.8 PUBLICITY. No party other than Cognex shall make any public
announcement or issue any press release concerning the transactions
contemplated by this Agreement, and any public announcement or press release by
Cognex shall require the prior approval of Isys both as to the making of such
announcement or release and as to the form and content thereof, except to the
extent that Cognex is advised by counsel, in good faith, that such announcement
or release is required as a matter of law and full opportunity for prior
consultation is afforded to Isys to the extent practicable.
12.9 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.10 NONASSIGNABILITY. This Agreement shall not be assigned by
operation of law or otherwise.
12.11 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of the parties hereto and their successors and
permitted assigns, and nothing in this Agreement, expressed or implied, is
intended to confer upon any other person any rights or remedies of any nature
under or by reason of this Agreement.
12.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to constitute an original and shall
become effective when one or more counterparts have been signed by each of the
parties hereto.
12.13 GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the Commonwealth of Massachusetts,
without regard to its conflicts of law rules.
12.14 SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in
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full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
12.15 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
among the parties hereto (except the Related Documents) and supersedes all prior
agreements and understandings oral or written, among the parties hereto with
respect to the subject matter hereof and thereof.
* * * * * *
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officers of Cognex, Merger Sub and Isys and by Xxxxxxx on
the date first above written.
COGNEX CORPORATION
By:
------------------------------
Name:
Title:
COGNEX SOFTWARE DEVELOPMENT, INC.
By:
------------------------------
Name:
Title:
ISYS CONTROLS, INC.
By:
------------------------------
Name:
Title:
----------------------------
Name: Xxxxxxx Xxxxxxx
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