LOAN AGREEMENT
THIS LOAN AGREEMENT (the "Agreement") is dated and entered into as of
August 2, 1999, by and between FARO TECHNOLOGIES, INC., a Florida corporation
("Lender"), whose current mailing address is 125 Technology Park, Lake Mary,
Florida 32746, and WENDELIN KARL JOHANNES SCHARBACH, an individual resident of
the Federal Republic of Germany ("Borrower"), whose current mailing address is
Schwarzwaldstrasse 94, 68163 Mannheim, Germany.
In consideration of the Loan described below and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby,
Borrower and Lender agree as follows:
1. LOAN. Lender hereby agrees to make a loan (the "Loan") to Borrower
in an aggregate principal face amount of such number of United States Dollars
that is necessary to enable Borrower to satisfy his tax obligations to the
competent German tax authority as a result of Borrower's receipt of 458,334
shares of the issued and outstanding common stock of the Lender (which shares
Borrower received in connection with the May 15, 1998 transaction more fully
described in Section 4 below). To evidence his obligation to repay the Loan, and
to otherwise induce Lender to make the Loan, Borrower shall execute and deliver
to Lender a Promissory Note, Stock Pledge Agreement, Affidavit and Indemnity
Agreement, Stock Power and UCC-1 Financing Statement in the forms attached
hereto a EXHIBITS A, B, C, D and E, respectively (together, the "Loan
Documents"). Lender will be obligated to make the Loan to Borrower within three
(3) business days after Borrower presents written evidence to Lender that the
competent German tax authority has requested payment of the tax obligations
described in Section 4 of this Agreement.
2. LENDER'S COMMITMENT. Lender's obligation to extend the Loan to
Borrower is a valid, legal, irrevocable and binding corporate obligation which
shall not be rescinded or withdrawn in the event of a change of Lender's present
management or ownership.
3. TERMS AND CONDITIONS OF LOAN. The Loan shall be governed by the
following terms and conditions in addition to all terms and conditions set forth
in the Loan Documents.
A. PAYMENT.
i. Notwithstanding any contrary provision set forth herein or in
any document related hereto, Borrower shall be obligated to pay
all outstanding principal, together with all then accrued and
unpaid interest under the Loan, on or before the earlier of (a)
the end of the three year period that commences on the date the
Borrower executes and delivers the Loan Documents to Lender, or
(b) that date when the preceding five (5) trading days of the
Lender's common stock yields an average closing price of $11.34
per share (each such date hereinafter referred to as the
"Maturity Date"). On such Maturity Date as defined in Section
3A(i)(b), it shall be within Borrower's discretion to repay the
Loan either in cash, or, in lieu thereof, with shares of the
common stock of Lender at an agreed upon price of $11.34 per
share. For the purpose of repaying the Loan with shares of the
Lender's common stock as provided for in this Section 3A(i),
Borrower shall be required to utilize that portion of the
Collateral (as defined in Section 3E below) which is equal in
value to the Loan obligation being repaid.
ii. Notwithstanding the foregoing, in the event the Loan is still
outstanding at end of the three year period that commences on the
date Borrower executes and delivers the Loan Documents to the
Lender, Borrower shall have the option of either: (a) requiring
Lender to renew or extend the Loan for an additional term of
three (3) years or (b) canceling the Loan, effective as of the
three year anniversary date, by providing Lender with written
notice in accordance with the provisions of Section 10 below, and
in exchange for such cancellation Borrower shall irrevocably
authorize Lender to dispose of the Collateral in accordance with
the terms and conditions of Section 9 below. The parties hereby
agree that the three year anniversary date shall be the date
which coincides with the end of the three year period that
commences on the date Borrower executes and delivers the Loan
Documents to the Lender, and if Borrower elects to cancel the
loan effective as of such date, the date shall hereinafter be
referred to as the "Anniversary Cancellation Date." If on the
Anniversary Cancellation Date, the value of the Collateral is
less than the sum of: (i) the outstanding principal balance of
the Loan; (ii) any accrued but unpaid interest on the Loan; (iii)
any fees authorized and due and owing to Lender pursuant to the
Promissory Note; and (iv) any costs and expenses authorized and
due and owing to Lender pursuant to the Promissory Note, Borrower
shall not be required to pay to Lender the amount by which the
sum of items (i) through (iv) exceeds the value of the
Collateral. On the other hand, if on the Anniversary Cancellation
Date, the value of the Collateral exceeds the sum of items (i)
through (iv), Lender shall be required to release and return to
Borrower, free and clear of all liens and encumbrances, the
portion of the Collateral which exceeds the sum of items (i)
through (iv). For purposes of determining the value of the
Collateral on the Anniversary Cancellation Date, the parties
shall utilize the closing price of the shares of Lender's common
stock (as traded on the NASDAQ National Market) on that
particular date, or, if that date is not a trading day on the
NASDAQ National Market, the immediately preceding trading day.
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iii. All Shares used by Borrower to repay the Loan pursuant to
the provisions of Section 3A(i) above, as well as all Shares
comprising the Collateral used by Borrower to compensate Lender
for the cancellation of the Loan pursuant to the provisions of
Section 3A(ii) above, shall be subject to sale by Lender on
Borrower's behalf in accordance with the terms and conditions of
Section 9 below, and Borrower shall cooperate with Lender in
effecting any such sale.
B. INTEREST.
i. Except as otherwise provided in Section 5 of the Promissory
Note, interest shall accrue on the outstanding principal balance
of the Loan at a rate that is equal to the sum of (a) the EURIBOR
rate that is in effect at 10:00 A.M. on the date of this
Agreement (and which is applicable to loans with a maturity date
of one year); and (b) 1.57%. Interest on the outstanding
principal balance of the Loan shall be paid annually, on the last
business day in December of each year, until the entire principal
is paid.
ii. Interest shall be calculated on the basis of a 360 day year
based upon the actual number of days elapsed. No interest shall
accrue after the Maturity Date (as defined in Section 3A(i)
above), the Anniversary Cancellation Date (as defined in Section
3A(ii) above), or the Cancellation Date (as defined in Section 8
below).
iii. The total liability of Borrower under the Loan for payment
of interest shall not exceed any limitations imposed on the
payment of interest by applicable usury laws. If any interest is
received or charged in excess of that amount, Borrower shall be
entitled to a refund of the excess.
iv. Upon the occurrence of an Event of Default under the
Promissory Note, interest shall accrue at the Default Rate
thereunder set forth notwithstanding the provisions of this
section.
C. PREPAYMENT. The Borrower shall be entitled to prepay the Loan
in whole or in part at any time without penalty.
D. APPLICATION OF PAYMENTS. All payments under the Promissory
Note shall be applied first to the Lender's costs and expenses, then to fees
authorized thereunder, then to interest and then to principal.
E. GRANT OF SECURITY INTEREST. To secure the due and punctual
payment of the Loan and all of his other liabilities to Lender arising in
connection with the Loan, and all reasonable costs and expenses incurred by
Lender in connection with enforcement or collection of the Loan or any liability
of Borrower in connection therewith (including reasonable legal fees and
expenses incurred in trial, appellate, bankruptcy, and judgment-execution
proceedings) and all reasonable costs and expenses incurred in connection with
realizing on the value of the Collateral (including appraisal fees,
broker-dealer fees, and legal fees incurred in trial, appellate, bankruptcy, and
judgment-execution proceedings), Borrower shall pledge, hypothecate, assign,
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convey and grant to Lender a first lien and security interest (collectively, the
"Security Interest") in the following:
i. Such number of shares (the "Shares") of the issued and
outstanding common stock of FARO Technologies, Inc., a Florida
corporation, which is arrived at as a result of dividing (i) the
original principal sum of the Note (stated in US dollars) by (ii)
US $6.375; the denominator of US $6.375 being the closing price
of each share of Lender's common stock (as traded on the NASDAQ
National Market) on March 31, 1999.
ii. All dividends, additional shares or other property or
securities that are receivable or otherwise distributable at any
time and from time to time in respect of, or in exchange or
substitution for, the Shares and all profits therefrom; and
iii. All proceeds of the foregoing.
As used herein, the term "Collateral" refers to all the property
described in this Section 3E, as well as any portion or any interest in it.
4. PURPOSE OF LOAN. The purpose of the Loan will be to enable Borrower
to timely satisfy his obligation to pay certain taxes in the Federal Republic of
Germany in connection with Borrower's sale on May 15, 1998 of all of his right,
title and interest in and to the "Quotas" (defined to mean all of the then
issued and outstanding capital stock of Cats computer aided technologies,
Computeranwendungen in der Fertigungssteuerung GmbH, a limited liability company
organized under the laws of the Federal Republic of Germany). The parties hereby
acknowledge that, as part of the consideration (the "Consideration") paid to
Borrower in connection with his sale on May 15, 1998 of all of his right, title
and interest in and to the Quotas, Borrower received 458,334 shares of the
issued and outstanding common stock of Lender at or immediately subsequently to
the closing of that stock sale transaction. Lender will make a loan (the "Loan")
to Borrower in an aggregate principal amount of such number of United States
Dollars that is equal to the amount of taxes that Borrower is required to pay to
the competent German tax authority in connection with and as a result of the
458,334 shares of Lender's common stock received by Borrower at or immediately
subsequently to the closing of the stock sale transaction. Lender will be
obligated to make the Loan to Borrower within three (3) business days after
Borrower presents written evidence to Lender that the competent German tax
authority has requested payment of the tax obligations.
5. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to lender as follows:
A. AUTHORITY AND COMPLIANCE. Borrower has full power and
authority to execute and deliver this Agreement and the Loan Documents and to
incur and perform the obligations provided for therein. No consent or approval
of any public authority or other third party is required as a condition to the
validity of this Agreement or any of the Loan Documents, and Borrower is in
compliance with all laws and regulatory requirements to which they are subject.
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B. BINDING AGREEMENT. This Agreement and the Loan Documents
executed by Borrower constitute valid and legally binding obligations of
Borrower, enforceable in accordance with their terms.
C. LITIGATION. There is no proceeding involving Borrower pending
or, to the knowledge of Borrower, threatened before any court or governmental
authority, agency or arbitration authority, except as disclosed to Lender in
writing and acknowledged by Lender prior to the date of this Agreement.
D. NO CONFLICTING AGREEMENTS. There is no charter, bylaw, stock
provision, partnership agreement or other document pertaining to the power or
authority of Borrower and no provision of any existing agreement, mortgage,
indenture or contract binding on Borrower or affecting his property, which would
conflict with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the Loan Documents.
E. OWNERSHIP OF COLLATERAL. Borrower has good title to the
collateral that will secure the loan, and the collateral is, and will be kept,
free and clear of liens, except those to be granted to Lender pursuant to the
Stock Pledge Agreement attached hereto in the form of EXHIBIT B.
6. DEFAULT. Borrower shall be in default under this Agreement and under
each of the Loan Documents if he shall default in the payment of any amounts due
and owing to Lender pursuant to the Loan Documents or should he fail to timely
and properly observe, keep or perform any term, covenant, agreement or condition
in any Loan Document or in any other loan agreement, promissory note, security
agreement, deed of trust, deed to secure debt, mortgage, assignment or other
contract securing or evidencing payment of any indebtedness of Borrower to
Lender or any affiliate or subsidiary of Lender.
7. REMEDIES UPON DEFAULT. If an event of default shall occur, Lender
shall have all rights, powers and remedies available under each of the Loan
Documents as well as all rights and remedies available at law or in equity.
8. BORROWER'S OPTION TO CANCEL LOAN. Notwithstanding anything to the
contrary in any document or agreement between Borrower and Lender, Borrower
shall have the option, in his sole discretion, at anytime, to cancel the Loan,
and in exchange for such cancellation Borrower shall irrevocably authorize
Lender to dispose of the Collateral in accordance with the terms and conditions
of Section 9 below. For purposes of this Section 8, the "Date of Cancellation"
shall be the date on which Lender receives a written notice from Borrower to
cancel the Loan. The written notice shall be furnished in accordance with the
notice provisions of Section 10 below. PROVIDED, HOWEVER, that if on the Date of
Cancellation, the value of the Collateral is less than the sum of (i) the
outstanding principal balance of the Loan; (ii) any accrued but unpaid interest
on the Loan; (iii) any fees authorized and due and owing to Lender pursuant to
the Promissory Note; and (iv) any costs and expenses authorized and due and
owing to Lender pursuant to the Promissory Note, Borrower shall be required to
pay to Lender the amount by which the sum of items (i) through (iv) listed in
this Section 8 exceeds the value of the Collateral. Borrower shall have the
option of making the payment herein provided for to
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Lender in either additional cash or additional shares of Lender's issued and
outstanding common stock. If on the Date of Cancellation, the value of the
Collateral exceeds the sum of items (i) through (iv) listed in this Section 8,
Lender shall be required to release and return to Borrower, free and clear of
all liens and encumbrances, the portion of the Collateral which exceeds the sum
of items (i) through (iv) of this Section 8. For purposes of determining the
value of the Collateral and additional shares on the Date of Cancellation, the
parties shall utilize the closing price of the shares of Lender's common stock
(as traded on the NASDAQ National Market) on the Date of Cancellation. Any
Shares used by Borrower to compensate Lender in consideration for the
cancellation of the Loan pursuant to the provisions of this Section 8 shall be
subject to sale by Lender on Borrower's behalf pursuant to the terms and
conditions of Section 9 below, and Borrower shall cooperate with Lender in
effecting any such sale.
9. MECHANISM FOR SALE OF SHARES. The Shares to be pledged by Borrower
to Lender pursuant to the Stock Pledge Agreement will, in part, consist of a
portion of the 343,750 shares of Lender common stock registered with the United
States Securities and Exchange Commission (the "SEC") pursuant to that certain
S-1 Registration Statement dated and filed with the SEC on June 22, 1998 (the
"Registered Shares"). The balance of the Shares to be pledged to Lender by
Borrower pursuant to the Stock Pledge Agreement shall consist of shares of
Lender's common stock that have not been registered with the SEC (the
"Non-registered Shares"). It is also contemplated that if Borrower is required
to utilize additional shares to compensate Lender pursuant to the provisions of
Section 8 above or under any of the Loan Documents, Borrower will utilize
Registered Shares and/or Non-registered Shares. If, in order to satisfy any of
Borrower's obligations or commitments pursuant to any Loan Document, a sale must
be made of any or all of the Registered Shares or Non-registered Shares pledged
or otherwise delivered by Borrower to Lender, Borrower shall authorize Lender to
make such sale as an agent of Borrower and on Borrower's behalf. Any sale of
Registered Shares as provided for in this Section 9 shall be made pursuant to
the S-1 Registration Statement, and shall be deemed to be a sale by Borrower
through his duly appointed and authorized agent. Any sale of Non-Registered
Shares as provided for in this Section 9 shall be made pursuant to and in
satisfaction of the requirements of Rule 144 promulgated by the SEC under the
Securities Act of 1933, as amended, and shall be deemed to be a sale by Borrower
through his duly appointed and authorized agent. Lender shall have the right to
keep and maintain custody of any and all proceeds of any sale of Registered
Shares or Non-registered Shares in satisfaction of any sum due and owing to
Lender pursuant to the Loan transaction. Borrower's appointment of Lender as his
agent for purposes of this Section 9, and the authorization to be granted to
Lender to sell Registered Shares and/or Non-registered Shares on behalf of
Borrower, shall be set forth in the Promissory Note, Stock Pledge Agreement and
Stock Power delivered to Lender along with the pledged Shares (and in the Stock
Power alone, in the case of any additional shares delivered to Borrower).
Further, Borrower shall covenant and agree to make all such reasonable
arrangements, do and perform all such reasonable acts and things, execute and
deliver all such certificates, documents and other instruments, and to take such
further reasonable actions as Lender may deem necessary or advisable to effect
the sale of Registered Shares pursuant to the S-1 Registration Statement, or
Non-registered Shares in compliance with the requirements of Rule 144, as the
case may be, as Borrower's agent and on Borrower's behalf.
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10. NOTICES. All notices, requests or demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing, and may be by means of facsimile transmission,
delivered to the other party at the following address:
If to Lender:
FARO Technologies, Inc.
125 Technology Park
Lake Mary, Florida 32746
Telecopy: (407) 333-4181
Attention: Gregory A. Fraser
With a copy to:
Foley & Lardner
100 North Tampa St., Suite 2700
Tampa, Florida 33602
Telecopy: (813) 221-4210
Attention: Martin A. Traber
If to Borrower:
Wendelin Karl Johannes Scharbach
Schwarzwaldstrasse 94
68163 Mannheim
Germany
Telecopy: 011 49 711 2222 444
With a copy to:
Hasche Eschenlohr Peltzer Riesenkampff Fischotter
Neidenau 68
60325 Frankfurt/Main
Germany
Telecopy: 011-49-69-71-701-230
Attention: Thomas Link
or to such other address as any party may designate by written notice to the
other party. Each such notice, request and demand shall be deemed given or made
as follows: (i) if sent by mail, upon the earlier of the date of receipt or five
(5) days after deposit in the U.S. Mail, first class postage prepaid; (ii) if
electronically transmitted, the next business day after transmission (and
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the sender shall bear the burden of proof of delivery), or (iii) if sent by any
other means, upon delivery.
11. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to Lender
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees) incurred by Lender
in connection with Lender's enforcement of its rights hereunder or under the
Loan Documents.
12. MISCELLANEOUS. Borrower and Lender further covenant and agree as
follows, without limiting any requirement of any of the Loan Documents:
A. CUMULATIVE RIGHTS AND NO WAIVER. Each and every right granted
to Lender under any Loan Document, or allowed it by law or equity shall be
cumulative of each other and may be exercised in addition to any and all other
rights of Lender, and no delay in exercising any right shall operate as a waiver
thereof, nor shall any single or partial exercise by Lender of any right
preclude any other or future exercise thereof or the exercise of any other
right. Borrower expressly waives any presentment, demand, protest or other
notice of any kind, including but not limited to notice of intent to accelerate
and notice of acceleration. No notice to or demand on Borrower in any case
shall, of itself, entitle Borrower to any other or future notice or demand in
similar or other circumstances.
B. LEGAL MATTERS. The validity, construction, enforcement, and
interpretation of this Agreement shall be governed by the laws of the State of
Florida and the United States of America, without regard to principles of
conflict of laws. Each party to this Agreement (a) consents to the personal
jurisdiction of the state and federal courts having jurisdiction in Seminole
County, Florida, (b) stipulates that the proper, exclusive, and convenient venue
for any legal proceeding arising out of this Agreement is Seminole County,
Florida, for state court proceedings, and the Middle District of Florida,
Orlando Division, for federal district court proceedings, and (c) waives any
defense, whether asserted by a motion or pleading, that Seminole County,
Florida, or the Middle District of Florida, Orlando Division, is an improper or
inconvenient venue. In any mediation, arbitration, or legal proceeding arising
out of this Agreement, the losing party shall reimburse the prevailing party, on
demand, for all costs incurred by the prevailing party in enforcing, defending,
or prosecuting any claim arising out of this Agreement, including all fees,
costs, and expenses of experts, attorneys, witnesses, collection agents, and
supersedeas bonds, whether incurred before or after demand or commencement of
legal proceedings, and whether incurred pursuant to trial, appellate, mediation,
arbitration, bankruptcy, administrative, or judgment-execution proceedings.
C. LOAN TO BE DEEMED REPAID. The Loan shall be deemed to have
been repaid effective as of the earliest of: (i) the date on which Borrower
prepays the Loan (as allowed under Section 3C above); (ii) the Maturity Date (as
defined in Section 3A(i) above); (iii) the Anniversary Cancellation Date (as
defined in Section 3A(ii) above); or (iv) the Cancellation Date (as defined in
Section 8 above), so long as by the particular date Lender has received from
Borrower any combination of cash and/or shares of Lender's stock sufficient to
cover the then outstanding Loan obligations in accordance with the provisions of
this Agreement. From and after the repayment date, Borrower shall have no
obligations to Lender pursuant to or under this
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Agreement or the Loan Documents, except for Borrower's obligation to cooperate
with lender in disposing of the Collateral Shares (and any additional shares
delivered to Lender) pursuant to the provisions of Section 9 above.
D. AMENDMENT. No modification, consent, amendment or waiver of
any provision of this Agreement, nor consent to any departure by Borrower
therefrom, shall be effective unless the same shall be in writing and signed by
an officer of Lender, and then shall be effective only in the specified instance
and for the purpose for which given. This Agreement is binding upon Borrower,
his heirs, successors and assigns, and inures to the benefit of Lender, its
successors and assigns; however, no assignment or other transfer of Borrower's
rights or obligations hereunder shall be made or be effective without Lender's
prior written consent, nor shall it relieve Borrower of any obligations
hereunder. There is no third party beneficiary of this Agreement.
E. PARTIAL INVALIDITY. The unenforceability or invalidity of any
provision of this Agreement shall not affect the enforceability or validity of
any other provision herein and the invalidity or unenforceability of any
provision of any Loan Document to any person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
persons or circumstances.
13. NO ORAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
To the extent permitted by law, the Borrower agrees to and does hereby
waive trial by jury in any action, proceeding, or counterclaim brought by either
the Borrower or the Lender on any matters whatsoever arising out of or in any
way connected with this Agreement or any claim of damage resulting from any act
or omission of the Borrower or Lender or either of them in any way connected
with this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal by their duly authorized representatives as of the date
first above written.
LENDER
FARO Technologies, Inc.
/s/ SIMON RAAB
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Simon Raab
President
BORROWER
/s/ WENDELIN KARL JOHANNES SCHARBACH
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Wendelin Karl Johannes Scharbach