U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): APRIL 30, 1997
---------------------------
ITI TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-24900 06-1340453
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2266 NORTH 2ND STREET
NORTH ST. PAUL, MINNESOTA 55109
(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (612) 777-2690
-------------------------
NOT APPLICABLE
(Former name or former address, if changed since last report.)
(The remainder of this page was intentionally left blank.)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective April 30, 1997 (the "Effective Date"), ITI Technologies, Inc.
(the "Company") acquired from Kenneth T. Lewis, Joe Hurst, James E. Stevens and
Kenneth Ryan Lewis (collectively, the "Shareholders") a total of 783 shares of
common stock, $1.00 per share par value (the "Shares"), of CADDX-CADDI Controls,
Inc., a Texas corporation ("CADDX"), pursuant to a Stock Purchase and Sale
Agreement dated April 4, 1997 by and among the Company, the Shareholders and
CADDX (the "Stock Agreement"). On May 1, 1997, the name of CADDX was changed to
CADDX Controls, Inc. The total purchase price of the Shares was $19.0 million,
or approximately $24,266 per Share. In addition, the Shareholders previously
promised two other individuals an equity position in CADDX, and, prior to April
30, 1997, CADDX paid to each of such individuals $190,000 in exchange for which
they released any and all claims to such equity position. The Shares constituted
all of the issued and outstanding shares of capital stock of CADDX. Thus, CADDX
has become a wholly-owned subsidiary of the Company. CADDX designs, manufactures
and markets advanced hardwire electronic security systems with headquarters and
a manufacturing facility located in Gladewater, Texas.
The purchase price for the Shares was paid by the Company in cash from
the Company's cash and cash equivalents. The purchase price was determined
through negotiation between the Company and the Shareholders based in part on
CADDX's historical and projected revenues and earnings.
Prior to the Effective Date, there was no material relationship between
any of the Shareholders or CADDX, on the one hand, and, on the other hand, the
Company, any of the Company's affiliates, any of its directors or officers, or
any associate of any officer or director. On the Effective Date, each of the
Shareholders executed an employment agreement and a non-competition agreement
whereby they became employees of the Company and/or CADDX. Joe Hurst will
continue to serve as President of CADDX and also has become an Executive Vice
President of the Company.
The summary description of the Stock Agreement herein is qualified in
its entirety by reference to the Stock Agreement, which is filed as Exhibit 2 to
this Current Report on Form 8-K. The exhibits to the Stock Agreement are not
being filed; however, the Company agrees to provide to the Securities and
Exchange Commission, upon its request, a copy of any of such exhibits.
This Current Report on Form 8-K contains forward-looking statements
that involve risks and uncertainties. Actual results may differ from the results
discussed in the forward-looking statements due to many factors including,
without limitation, risks associated with acquisitions, such as difficulties in
assimilating operations, systems and products of the acquired company; the
diversion of management's attention from other business concerns; and the risks
of entering new markets.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
The financial statements and pro forma financial information
required by Item 7 of the Current Report on Form 8-K are not being
filed herewith. However, in accordance with Item 7(a)(4) and Item
7(b)(2) of the Current Report on Form 8-K, such financial statements
and pro forma financial information will be filed on or before July 14,
1997.
(b) Pro forma financial information.
See the response to Item 7(a) above.
(c) Exhibits.
Exhibit 2. Stock Purchase and Sale Agreement dated
April 4, 1997 by and among the Company, the
Shareholders and CADDX.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ITI Technologies, Inc.
Date: May 13, 1997. By: /s/ Charles A. Durant
Charles A. Durant
Secretary
STOCK PURCHASE AND SALE AGREEMENT
THIS STOCK PURCHASE AND SALE AGREEMENT the ("AGREEMENT") is made this 4th day of
April, 1997, by and among KENNETH T. LEWIS, an individual resident in the State
of Texas, JOE HURST, an individual resident in the State of Texas, JAMES E.
STEVENS, an individual resident in the State of Texas, and KENNETH RYAN LEWIS,
an individual resident in the State of Texas (each a "SELLER," collectively, the
"SELLERS"), CADDX-CADDI CONTROLS, INC., a Texas corporation ("CADDX"), and ITI
TECHNOLOGIES, INC., a Delaware corporation (the "BUYER").
BACKGROUND
FIRST. Sellers are, collectively, the legal and beneficial owners of all right,
title and interest in and to all of the issued and outstanding shares of capital
stock of CADDX.
SECOND. CADDX is engaged in the business of manufacturing and selling electronic
security equipment for residential, commercial and institutional applications
(the "BUSINESS").
THIRD. Buyer wishes to acquire CADDX and the Business through the purchase of
all, but not less than all, of the issued and outstanding shares of capital
stock of CADDX.
FOURTH. Sellers are willing to sell such shares to Buyer.
NOW, THEREFORE, in consideration of the premises and the representations and
agreements herein contained, the parties mutually agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
At the Closing (as that term is defined in SECTION 1 of ARTICLE III below),
Sellers shall sell, transfer, assign and deliver to Buyer, and Buyer shall
purchase and accept, all right, title and interest in and to seven hundred
eighty-three (783) shares of Common Stock, $1.00 per share par value, of CADDX
(the "STOCK"), such purchase and sale being referred to herein as the
"TRANSACTION."
ARTICLE II
CONSIDERATION FOR TRANSFER
1. Purchase Price. The aggregate purchase price for the Stock (the "PURCHASE
PRICE") shall be Nineteen Million and no/100 Dollars ($19,000,000.00), which
shall be payable to Sellers in the following amounts: Kenneth T. Lewis -
Thirteen Million Eight Hundred Thirty-One Thousand Four Hundred Eighteen and
68/100 Dollars ($13,831,418.68); Joe Hurst - One Million Seven Hundred
Twenty-Two Thousand Eight Hundred Sixty and 44/100 Dollars ($1,722,860.44);
James E. Stevens - One Million Seven Hundred Twenty-Two Thousand Eight Hundred
Sixty and 44/100 Dollars ($1,722,860.44); and Kenneth Ryan Lewis - One Million
Seven Hundred Twenty-Two Thousand Eight Hundred Sixty and 44/100 Dollars
($1,722,860.44).
2. Payment of Purchase Price. The Purchase Price shall be payable at the Closing
in immediately available funds by wire transfer to each Seller in the amounts
set forth in ARTICLE II, SECTION 1 above and pursuant to wire transfer
instructions provided by each Seller at least five (5) business days prior to
the Closing.
ARTICLE III
THE CLOSING
1. Time and Place. Subject to satisfaction or waiver of all conditions to
Closing, the purchase and sale of the Stock contemplated by this Agreement (the
"CLOSING") shall occur at the offices of ITI Technologies, Inc., 2266 North
Second Street, North St. Paul, Minnesota 55109, at 10:00 a.m. (Central Standard
Time) on April 30, 1997, or at such other time and place as may be mutually
agreed upon by the parties to this Agreement (the "CLOSING DATE"). When the
Closing has occurred, such Closing shall be deemed to have occurred, and shall
be effective, as of the close of business (Central Standard Time) on the date of
Closing (the "EFFECTIVE TIME").
2. Pre-Closing. A pre-closing shall occur at the offices of ITI Technologies,
Inc., 2266 North Second Street, North St. Paul, Minnesota 55109, at 10:00 a.m.
(Central Standard Time) on the business day immediately preceding the Closing
Date or at such other time or place as may be mutually agreed upon by the
parties.
3. Deliveries by Sellers. At the Closing, Sellers shall deliver, or cause to be
delivered, to Buyer, the following:
(a) Certificates evidencing the Stock duly endorsed (or accompanied by
duly executed stock powers) by the applicable Seller for transfer to
Buyer.
(b) Certificate of the Secretary of CADDX certifying the original, or
true and correct copies, of the bylaws, minute book and stock record
book of CADDX and the resolutions adopted by the Board of Directors of
CADDX authorizing CADDX to enter into this Agreement.
(c) Articles of Incorporation of CADDX certified as of a recent date by
the Secretary of State of Texas.
(d) Certificate of Good Standing as of a recent date with respect to
CADDX from the Secretary of State of Texas and each state in which
CADDX is qualified to do business.
(e) Certificate of the Secretary of Caddi Controls, Inc., a U.S. Virgin
Islands corporation and wholly-owned subsidiary of CADDX
("INTERNATIONAL"), certifying the original, or true and correct copies,
of the bylaws, minute book and stock record book of International.
(f) Articles of Incorporation, or its equivalent, of International
certified as of a recent date by the appropriate jurisdiction.
(g) Certificate of Good Standing, or its equivalent, as of a recent
date with respect to International from the appropriate jurisdiction.
(h) Such resignations of officers and directors of CADDX and
International effective as of the Effective Time as are requested by
Buyer not less than five (5) days prior to Closing.
(i) Releases executed by each of Sellers in form and substance
substantially as set forth in EXHIBIT A attached hereto (the "SELLERS'
RELEASES").
(j) Employment Agreements executed by Joe Hurst, James E. Stevens and
Kenneth Ryan Lewis, in form and substance substantially as set forth in
EXHIBIT B attached hereto (the "EMPLOYMENT AGREEMENTS") and an
Employment Agreement executed by Kenneth T. Lewis in a form mutually
acceptable to Kenneth T. Lewis and Buyer which provides, among other
things, that: (i) Kenneth T. Lewis shall be employed for a term
beginning on the date of Closing and ending one year thereafter; (ii)
Kenneth T. Lewis shall receive a salary of $36,000.00 during the term
thereof; (iii) Buyer shall provide Mr. And Mrs. Kenneth T. Lewis with
medical and health insurance equal to or comparable with Buyer's group
coverage effective as of the date of this Agreement from the date of
Closing through the date that is five(5) years from the date of
Closing; and (iv) upon reaching the age of sixty-five (65) Kenneth T.
Lewis shall take all reasonable actions necessary to qualify for
Medicare coverage; if he qualifies, Buyer shall purchase a policy, or
policies, of medical and health insurance to supplement the Medicare
coverage so that Kenneth T. Lewis shall have total medical and health
care coverage from and after the date on which he qualifies for
Medicare equal or comparable to Buyer's group coverage on the date of
this Agreement.
(k) Noncompetition Agreements executed by each of Sellers in form and
substance substantially as set forth in EXHIBIT C attached hereto (the
"NONCOMPETITION AGREEMENTS"); provided, however, section 4d of the
Noncompetition Agreement to be executed by Kenneth T. Lewis shall be
deleted.
(l) Release Agreement executed by both Scott Furlong and Frank Clark in
form and substance substantially as set forth in EXHIBIT D attached
hereto.
(m) Real Estate Purchase Agreement executed by the owner(s) of the
facilities currently occupied by CADDX in form and substance
substantially as set forth in EXHIBIT E attached hereto.
(n) Option Agreement executed by Kenneth Ryan Lewis granting a purchase
option to CADDX on the parcel adjacent to the CADDX manufacturing
facility in form and substance substantially as set forth in EXHIBIT F
hereto.
(o) Certificates executed by each Seller representing and warranting to
Buyer that each of Sellers' representations and warranties in this
Agreement was accurate in all respects as of the date of this Agreement
and is accurate in all respects as of the Closing Date as if made on
the Closing Date (giving full effect to any supplements to the
Disclosure Letter, as that term is defined in ARTICLE VII, SECTION 4
below, that were delivered by Sellers to Buyer prior to the Closing
Date in accordance with ARTICLE VII, SECTION 4 below).
4. Deliveries by Buyer. At the Closing, Buyer shall deliver, or cause to be
delivered, to Sellers the following:
(a) Payment of the Purchase Price, as provided in ARTICLE II above.
(b) Certified copy of the resolutions adopted by the Board of Directors
of Buyer authorizing the transactions contemplated by this Agreement.
(c) A certificate executed by Buyer to the effect that, except as
otherwise stated in such certificate, each of Buyer's representations
and warranties in this Agreement was accurate in all respects as of the
date of this Agreement and is accurate in all respects as of the
Closing Date as if made on the Closing Date.
5. Closing Agreements. At the Closing, the parties shall execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such other
instruments or documents as may be reasonably necessary to carry out the
transactions contemplated by this Agreement and to comply with the terms of this
Agreement.
ARTICLE IV
REPRESENTATIONS OF CADDX
CADDX hereby represents to Buyer as follows:
1. Organizational Status. CADDX is a validly existing corporation incorporated
pursuant to, and in good standing under, the laws of the State of Texas. CADDX
has full corporate power and authority to carry on the business in which it is
engaged and is duly qualified or licensed to do business in every state where,
by the nature of its business or the ownership of property, the failure to be so
qualified or licensed would have a material adverse effect upon its business or
assets or upon its ability to enforce any material rights.
2. Corporate Authority. CADDX has full legal right and corporate power, without
the consent of any other person, to execute and deliver this Agreement and to
perform its obligations, if any, hereunder.
3. Authorization of the Agreement. All corporate and other actions required to
be taken by CADDX to authorize the execution, delivery and performance of this
Agreement have been duly and properly taken. No consent, approval or
authorization of, or filing of any certificate, notice, application, report or
other document with, any governmental authority, is required on the part of
CADDX in connection with the valid execution and delivery of this Agreement, or
transfer of the Stock, or the consummation of any other transaction contemplated
hereby.
4. Validity. This Agreement has been duly executed and delivered by CADDX and is
the lawful, valid and legally binding obligation of CADDX, enforceable in
accordance with its terms and conditions, except to the extent limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
5. Noncontravention. The execution, delivery and performance of this Agreement
will not violate or conflict with any provision of, or result in a default under
or a breach of:
(a) CADDX's Articles of Incorporation or bylaws;
(b) any material contract, agreement or other instrument to which CADDX
or International is a party;
(c) any regulation, order, decree or judgment of any court or
governmental agency; or
(d) any law applicable to CADDX or International.
The consummation of the Transaction will not accelerate or allow any person to
accelerate, terminate, modify or cancel any material rights under any Instrument
(as that term is defined in SECTION 8 of this ARTICLE IV), or result in the
creation of any lien, claim, charge or encumbrance on the assets or properties
of CADDX or International under any Instrument.
6. Capitalization. CADDX's authorized stock consists of ten thousand (10,000)
shares of Common Stock, $1.00 per share par value, of which five hundred seventy
(570) shares are presently issued and outstanding and owned of record and
beneficially by Kenneth T. Lewis; seventy-one (71) shares are presently issued
and outstanding and owned of record and beneficially by Joe Hurst; seventy-one
(71) shares are presently issued and outstanding and owned of record and
beneficially by James E. Stevens; and seventy-one (71) shares are presently
issued and outstanding and owned of record and beneficially by Kenneth Ryan
Lewis; one thousand fifty (1,050) shares are held in the treasury; and eight
thousand one hundred sixty-seven (8,167) shares are authorized but not issued.
Notwithstanding any provision in this Agreement to the contrary, Scott Furlong
and Frank Clark may have, or claim to have, an equity ownership interest in
CADDX, which claims, if any, will be disposed of and released prior to Closing
after the payments to Scott Furlong and Frank Clark referenced in Article VII,
Section 2 are made, and after the releases referenced in said paragraph have
been executed and delivered by Messrs. Furlong and Clark. All of the issued and
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable. There are no outstanding options, rights, warrants,
conversion or exchange rights or other agreements or commitments to which CADDX
is a party or binding upon CADDX that:
(a) provide for the issuance or transfer by CADDX of additional shares
of stock; or
(b) require CADDX to repurchase, redeem or otherwise acquire shares of
stock.
7. Subsidiaries. CADDX does not, directly or indirectly, possess any ownership
interest in any corporation, association or business entity other than
International. International is a corporation, validly existing and in good
standing under the laws of the U.S. Virgin Islands, and is duly qualified or
licensed to do business in every state or other jurisdiction where, by the
nature of its business or the ownership of property, the failure to be so
licensed would have a material adverse effect upon its business or assets or
upon its ability to enforce any material rights. International has full
corporate power and authority to carry on the business in which it is engaged
and to own and use the properties owned or used by it. International's
authorized stock consists of ten thousand (10,000) shares of common stock, $1.00
per share par value, of which one thousand (1,000) shares are presently issued
and outstanding and all of which shares are owned beneficially and of record by
CADDX.
8. No Default. Neither CADDX nor International are in default under or in
violation of any provision of their respective charters or bylaws, or under any
of the agreements, indentures, contracts, leases, subleases, loan agreements,
notes, restrictions, obligations or liabilities listed on SCHEDULE 4.13 or
SCHEDULE 4.15 to this Agreement (collectively "INSTRUMENTS").
9. Financial Statements. CADDX has delivered to Buyer:
(a) an unaudited consolidated balance sheet of CADDX and International
as of August 31, 1996 (the "BALANCE SHEET"), and the related unaudited
consolidated statements of income, changes in stockholders' equity and
cash flow for the fiscal year then ended; and
(b) an unaudited consolidated balance sheet of CADDX and International
as of December 31, 1996 (the "INTERIM BALANCE SHEET"), and the related
unaudited, consolidated statements of income for the four (4) months
then ended.
Such financial statements fairly present the financial condition and the results
of operations, changes in stockholders' equity and cash flow of CADDX and
International as of the respective dates of and for periods referred to in such
financial statements, all in accordance with generally accepted accounting
principles, subject, in the case of the interim financial statements, to normal
recurring year-end adjustments (the effect of which will not, individually or in
the aggregate, be materially adverse); the financial statements referred to in
this ARTICLE IV, SECTION 9 reflect the consistent application of such accounting
principles throughout the periods involved, except as disclosed in the notes to
such financial statements. No financial statements of any person other than
CADDX and International are required by generally accepted accounting principles
to be included in the consolidated financial statements of CADDX.
10. Interim Change. Since December 31, 1996, there has not been:
(a) any material change in the Business as a result of which:
(i) the ongoing cash flow from the Business is materially
reduced or is reasonably likely to be materially reduced; or
(ii) except as contemplated by this Agreement, the net worth
of CADDX and International taken as a whole has been or is
reasonably likely to be materially reduced (a "MATERIAL
ADVERSE CHANGE");
(b) any material damage, destruction or loss, whether or not covered by
insurance, of any assets material to CADDX and International taken as a
whole;
(c) any material forgiveness or cancellation of debts or claims, or
waiver of any rights, by CADDX or International other than in the
ordinary course of the Business;
(d) any increase in the compensation or benefits payable or to become
payable by CADDX to any of its employees, officers and directors other
than in the ordinary course of its Business, except for the payments to
Scott Furlong and Frank Clark contemplated by ARTICLE VII, SECTION 2
below;
(e) any work stoppage or labor dispute involving CADDX;
(f) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of CADDX;
(g) any repurchase, redemption or other acquisition by CADDX of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, CADDX;
(h) any amendment of any material term of any outstanding security of
CADDX;
(i) any incurrence, assumption or guarantee by CADDX of any
indebtedness for borrowed money;
(j) any creation or assumption by CADDX of any lien on any material
asset other than in the ordinary course of business consistent with
past practices;
(k) any making of any loan, advance or capital contributions to or
investment in any individual, corporation, partnership or other entity
other than to or in wholly-owned subsidiaries made in the ordinary
course of business consistent with past practices; or
(l) any change in any method of accounting, accounting practice or tax
policy by CADDX, except for any such accounting change after the date
hereof required by reason of a concurrent change in generally accepted
accounting principles.
11. Insurance. SCHEDULE 4.11 is a complete and correct list and summary
description (including the name of the carrier, coverage, premium and expiration
date) of all policies of insurance or fidelity bond maintained by CADDX. Such
policies are in full force and effect, and to the "KNOWLEDGE" (as that term is
defined in ARTICLE XI, SECTION 1 below) of CADDX, there has not been any
threatened termination of, or premium increase with respect to, any such
policies. All premiums payable under such policies have been paid or accrued,
and CADDX otherwise is in compliance with all material terms and conditions of
such policies.
12. Title to Assets. CADDX has valid title to all of the tangible assets
reflected on the Interim Balance Sheet, except for:
(a) assets not material to the conduct of the Business that were
disposed of in the ordinary course of business (consistent with past
practices) since such date;
(b) assets being leased under capitalized leases; and
(c) minor imperfections of title not materially detracting from the
value or not materially restricting the use of the property in
question.
None of the assets reflected on the Interim Balance Sheet are subject to any
security interest, mortgage, pledge, lien, charge or encumbrance except:
(a) minor liens and encumbrances that do not materially detract from
the value or interfere with the present use of such property; and
(b) as disclosed on SCHEDULE 4.12.
13. Real Estate. SCHEDULE 4.13 sets forth an identification of all real estate
owned, leased or subleased by CADDX or International and a list of agreements,
leases, subleases, options and commitments with respect to the real estate to
which CADDX or International is a party or by which CADDX or International or
any property of CADDX or International is bound.
14. Condition of Assets. The assets and properties utilized in and material to
the conduct of the Business, whether owned or leased, are in the aggregate in
good operating condition and repair (reasonable wear and tear excepted) and are
suitable for the purposes for which they are presently being used.
15. Material Contracts. All contracts, agreements, instruments and leases to
which CADDX or International is a party or is otherwise bound meeting any of the
descriptions set forth below (the "MATERIAL CONTRACTS") are listed on SCHEDULE
4.15 attached hereto:
(a) Any lease of machinery, equipment or other personal property
involving payment of aggregate annual rentals in excess of Ten Thousand
and no/100 Dollars ($10,000.00).
(b) Any agreement for the purchase of any equipment, materials,
services, supplies or other assets in excess of Ten Thousand and no/100
Dollars ($10,000.00).
(c) Any agreement with clients, customers, subcontractors and others
requiring performance of any services or sale or delivery of any
product or other assets by CADDX or International that involves payment
to CADDX or International of Ten Thousand and no/100 Dollars
($10,000.00) or more.
(d) In an individual amount in excess of Ten Thousand and no/100
Dollars ($10,000.00), any indebtedness, liability for borrowed money,
liability for the deferred purchase price of property (excluding normal
trade payables), any instrument guaranteeing any indebtedness,
obligation or liability, or any obligation to incur any indebtedness,
obligation or liability.
(e) Any joint venture, partnership or other arrangement involving a
sharing of profits.
(f) Any agency, dealer, sales representative, distribution or other
similar agreement.
(g) Any contract or other document that substantially limits the
freedom of CADDX or International to compete in any line of business,
or with any individual, corporation, partnership or other entity, or in
any area.
(h) Any other contract or commitment not made in the ordinary course of
business that is material to CADDX taken as a whole.
Each contract, agreement, instrument and lease listed in SCHEDULE 4.15 hereto or
required to be disclosed pursuant to this ARTICLE IV, SECTION 15 is a valid and
binding agreement of CADDX or International and is in full force and effect, and
to the Knowledge of CADDX, no other party thereto is in default in any material
respect under the terms of any such contract, agreement, instrument or lease.
16. Tax Definitions. The following terms, as used in this Agreement, have the
following meanings:
(a) "IRC" means the Internal Revenue Code of 1986 or any successor law,
and regulations issued by the IRS pursuant to the Internal Revenue Code
or any successor law.
(b) "IRS" means the United States Internal Revenue Service or any
successor agency and, to the extent relevant, the United States
Department of the Treasury.
(c) "LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multi-national or other administrative order,
constitution, law, ordinance, principle of common law, regulation,
statute or treaty.
(d) "TAX" means any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax or estate tax),
levy, assessment, tariff, duty (including any customs duty),
deficiency, or other fee, and any related charge or amount (including
any fine, penalty, interest or addition to tax), imposed, assessed or
collected by or under the authority of any governmental body or payable
pursuant to any tax-sharing agreement or any other contract relating to
the sharing or payment of any such tax, levy, assessment, tariff, duty,
deficiency or fee.
(e) "TAX RETURN" means any return (including any informational return),
report, statement, schedule, notice, form or other document or
information filed with or submitted to, or required to be filed with or
submitted to, any governmental body in connection with the
determination, assessment, collection or payment of any Tax, or in
connection with the administration, implementation or enforcement of or
compliance with any Legal Requirement relating to any Tax.
17. Tax Matters.
(a) CADDX and International have filed or caused to be filed (on a
timely basis) all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements. CADDX
has delivered to Buyer copies of all such Tax Returns filed since
December 31, 1989. CADDX and International have paid all Taxes that
have or may have become due pursuant to those Tax Returns or pursuant
to any assessment received by Sellers, except such Taxes, if any, that
are being contested in good faith and as to which adequate reserves
(determined in accordance with generally accepted accounting
principles) have been provided in the Balance Sheet and the Interim
Balance Sheet.
(b) The United States federal and state income Tax Returns of each of
CADDX and International have been audited by the IRS or relevant state
tax authorities or are closed by the applicable statute of limitations
for all taxable years through 1993. SCHEDULE 4.17 contains a complete
and accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have been
paid, reserved against, settled or, as described in SCHEDULE 4.17, are
being contested in good faith by appropriate proceedings. SCHEDULE 4.17
describes all adjustments to the United States federal income Tax
Returns filed by CADDX, International or any group of corporations,
including CADDX or International, for all taxable years since December
31, 1989, and the resulting deficiencies proposed by the IRS. Except as
described in SCHEDULE 4.17, no Seller, CADDX or International has given
or been requested to give waivers or extensions (or is or would be
subject to a waiver or extension given by any other person) of any
statutes of limitations relating to the payment of Taxes of CADDX or
International, or for which CADDX or International may be liable.
(c) CADDX has no Knowledge that the charges, accruals and reserves with
respect to Taxes on the respective books of CADDX and International are
inadequate (determined in accordance with generally accepted accounting
principles). CADDX has no Knowledge of the existence of any proposed
tax assessment against CADDX or International, except as disclosed in
the Balance Sheet or in SCHEDULE 4.17. To the Knowledge of CADDX, no
consent to the application of Section 341(f)(2) of the IRC has been
filed with respect to any property or assets held, acquired or to be
acquired by CADDX or International. All Taxes that CADDX or
International are or were required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent
required, have been paid to the proper governmental body or other
applicable person or entity.
(d) All Tax Returns filed by (or that include on a consolidated basis)
CADDX or International are true, correct and complete in all material
respects. There is no tax sharing agreement that will require any
payment by CADDX or International after the date of this Agreement.
Neither CADDX nor International is, or within the five- (5) year period
preceding the Closing Date has been, an "S" corporation.
18. Employee Benefits Definitions. The following terms, as used in this
Agreement, have the following meanings:
(a) "BENEFIT ARRANGEMENT" means any employment, severance or similar
contract, arrangement or policy, or any plan or arrangement (whether or
not written) providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, deferred compensation, profit-sharing,
bonus, stock options, stock appreciation rights or any form of
post-retirement insurance, compensation or benefits that:
(i) is not an ERISA Plan;
(ii) is entered into or maintained, as the case may be, by
CADDX or any of its ERISA Affiliates; and
(iii) covers any employee or former employee of CADDX or
International.
(b) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(c) "ERISA AFFILIATE" of any entity means any other entity that,
together with such entity, would be treated as a single employer under
Section 414 of the IRC.
(d) "ERISA PLAN" means an "employee benefit plan," as defined in
Section 3(3) of ERISA, that:
(i) is subject to any provision of ERISA;
(ii) is maintained, administered or contributed to by CADDX or
any of its ERISA Affiliates; and
(iii) covers any employee or former employee of CADDX or
International.
(e) "MULTI-EMPLOYER PLAN" means each ERISA Plan that is a
multi-employer plan, as defined in Section 3(37) of ERISA.
(f) "PBGC" means the Pension Benefit Guaranty Corporation.
(g) "PENSION PLAN" means an ERISA Plan that is a defined benefit plan
as defined in Section 3(35) of ERISA.
(h) "TITLE IV PLAN" means an ERISA Plan, other than any Multi-Employer
Plan, subject to Title IV of ERISA.
19. ERISA Matters.
(a) SCHEDULE 4.19 identifies each ERISA Plan.
(b) CADDX has furnished Buyer copies of such ERISA Plans (and, if
applicable, related trust agreements) and all amendments thereto and
written interpretations thereof together with:
(i) the three (3) most recent annual reports prepared in
connection with any such ERISA Plan (Form 5500 including, if
applicable, Schedule B thereto); and
(ii) the most recent actuarial valuation report, if any,
prepared in connection with any such ERISA Plan.
(c) SCHEDULE 4.19 identifies each ERISA Plan that is:
(i) a Pension Plan;
(ii) a Multi-Employer Plan;
(iii) a Title IV Plan; or
(iv) maintained in connection with any trust described in
Section 501(c)(9) of the IRC.
(d) With respect to any ERISA Plan or any other employee benefit plan
or arrangement covered by Title I of ERISA maintained by CADDX or any
of its ERISA Affiliates for the benefit of any employees or former
employees of CADDX or International:
(i) no "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the IRC, has occurred excluding
transactions effected pursuant to a statutory or
administrative exemption;
(ii) no "accumulated funding deficiency," as defined in
Section 412 of the IRC, has been incurred with respect to any
ERISA Plan subject to such Section 412, whether or not waived;
(iii) no "reportable event," within the meaning of Section
4043 of ERISA and regulations promulgated thereunder, other
than a "reportable event" that will not have a material
adverse effect on the condition (financial or otherwise),
business, assets or results of operations of CADDX and
International taken as a whole; and
(iv) no event described in Section 4062 or 4063 of ERISA has
occurred in connection with any ERISA Plan.
(e) No condition exists that could constitute grounds for termination
by the PBGC of any employee benefit plan subject to Title IV of ERISA
that is maintained by CADDX or any of its ERISA Affiliates or presents
a material risk of complete or partial withdrawal from any
Multi-Employer Plan under Title IV of ERISA.
(f) Neither CADDX nor any ERISA Affiliate of CADDX has:
(i) engaged in or is a successor or parent corporation to an
entity that has engaged in a transaction described in Section
4069 of ERISA; or
(ii) incurred, or reasonably expects to incur prior to the
Closing Date, any liability under Title IV of ERISA arising in
connection with the termination of, or complete or partial
withdrawal from, any plan covered or previously covered by
Title IV of ERISA that could become a liability of Buyer or
any of its ERISA Affiliates after the Closing Date.
(g) Neither CADDX nor International is a party to any Multi-Employer
Plan and neither CADDX nor International has suffered a complete or
partial withdrawal from any such Multi-Employer Plan so as to incur
withdrawal liability as defined in Section 4201 of ERISA.
(h) Each ERISA Plan that is intended to be qualified under Section
401(a) of the IRC is so qualified and has been so qualified during the
period from its adoption to date, and each trust created under any such
ERISA Plan is exempt from tax under Section 501(a) of the IRC and has
been so exempt during the period from creation to date. CADDX has
provided Buyer with the most recent determination letters of the IRS
relating to each such ERISA Plan. Each ERISA Plan that is not a
Multi-Employer Plan has been maintained in substantial compliance with
its terms and with the requirements prescribed by any and all
applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the IRC.
(i) SCHEDULE 4.19 identifies each Benefit Arrangement. CADDX has
furnished Buyer copies of each Benefit Arrangement. Each Benefit
Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all applicable
statutes, orders, rules and regulations.
(j) Neither CADDX nor any of its ERISA Affiliates has any current or
projected liability in respect of post-employment or post-retirement
welfare benefits for retired or former employees of CADDX or
International, except as required to avoid excise tax under Section
4980B of the IRC.
(k) Except as disclosed in writing to Buyer prior to the date hereof,
there has been no amendment to, written interpretation of or
announcement (whether or not written) by CADDX or any of its ERISA
Affiliates relating to, or change in employee participation or coverage
under, any ERISA Plan or Benefit Arrangement that would increase
materially the expense of maintaining such ERISA Plan or Benefit
Arrangement above the level of the expense incurred in respect thereof
for the fiscal year ended prior to the date hereof.
(l) There is no contract, agreement, plan or arrangement covering any
employee or former employee of CADDX or International that,
individually or collectively, could give rise to the payment by CADDX
or International of any amount that would not be deductible pursuant to
the terms of Section 280G of the IRC.
(m) No tax under Section 4980B of the IRC has been incurred in respect
of any ERISA Plan that is a group health plan, as defined in Section
5000(b)(l) of the IRC.
(n) The consummation of the Transaction will not result in the payment,
vesting or acceleration of any benefit.
20. Employment Agreements. Except for employment contracts described on SCHEDULE
4.20 (the "EXISTING EMPLOYMENT AGREEMENTS"), neither CADDX nor International has
any written employment agreements, or any oral employment agreements specifying
a specific term of employment, with officers, directors or employees of CADDX or
International. Except as provided in the Existing Employment Agreements, no
employee or former employee of CADDX or International, or any of their ERISA
Affiliates, will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhanced such benefit solely as a result of the
transaction contemplated hereby.
21. Labor Relations; Compliance. CADDX is not now, or has ever been, a party to
any collective bargaining or other labor contract. There has not been, there is
not presently pending or existing, and to the Knowledge of CADDX there is not
threatened (i) any strike, slowdown, picketing, work stoppage or employee
grievance process; (ii) any Proceeding (as that term is defined in ARTICLE IV,
SECTION 25 below) against CADDX or International relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters, including any charge or complaint filed by an employee or union with
the National Labor Relations Board, the Equal Employment Opportunity Commission
or any comparable governmental body, organizational activity or other labor or
employment dispute against or affecting CADDX or International or their
premises; or (iii) an application for certification of a collective bargaining
agent. To the Knowledge of CADDX, no event has occurred or circumstance exists
that could provide the basis for any work stoppage or other labor dispute. There
is no lockout of any employees by CADDX or International, and no such action is
contemplated by CADDX or International. Both CADDX and International have
complied in all material respects with all Legal Requirements relating to
employment, equal employment opportunity, non-discrimination, immigration,
wages, hours, benefits, collective bargaining, the payment of social security
and similar taxes, occupational safety and health and plant closing. Neither
CADDX nor International has Knowledge that either is liable for the payment of
any compensation, damages, taxes, fines, penalties or other amounts, however
designated, for failure to comply with any of the forgoing Legal Requirements.
22. Environmental Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "ENVIRONMENTAL LAWS" means any and all applicable federal, state,
local and foreign statutes, laws (including case law), regulations,
ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses,
agreements and governmental restrictions relating to human health, the
environment or to emissions, discharges or releases of pollutants,
contaminants, Hazardous Substances or wastes into the environment,
including without limitation ambient air, surface water, ground water
or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling
of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
(b) "ENVIRONMENTAL LIABILITIES" means all liabilities of CADDX and
International, whether contingent or fixed, actual or potential, known
or unknown, that:
(i) arise under or relate to matters covered by Environmental
Laws; and
(ii) relate to actions occurring or conditions existing on or
prior to the Closing Date.
(c) "HAZARDOUS SUBSTANCES" means any toxic, radioactive, caustic or
otherwise hazardous substance, including petroleum, its derivatives,
by-products and other hydrocarbons, or any substance having any
constituent elements displaying any of the foregoing characteristics,
including, without limitation, any substance regulated under
Environmental Laws.
(d) "REGULATED ACTIVITY" means any generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substance.
(e) "RELEASE" means any discharge, emission or release, including a
Release as defined in CERCLA at 42 U.S.C. ss. 9601(22). The term
"RELEASED" has a corresponding meaning.
23. Environmental Matters. Except as disclosed on SCHEDULE 4.23:
(a) no notice, notification, demand, request for information, citation,
summons, complaint or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is
pending, or to any Seller's or CADDX's Knowledge, threatened by any
governmental entity or other person with respect to any:
(i) alleged violation by CADDX or International of any
Environmental Law or liability thereunder;
(ii) alleged failure by CADDX or International to have any
permit, certificate, license, approval, registration or
authorization required under any Environmental Law in
connection with the conduct of its business;
(iii) Regulated Activity; or
(iv) Release of Hazardous Substances;
(b) no polychlorinated biphenyls, radioactive material, urea
fomaldehyde, lead, asbestos, asbestos-containing material or
underground storage tank (active or abandoned) is or has been present
at any property now or previously owned or leased by CADDX or
International;
(c) there are no Environmental Liabilities that have had or may
reasonably be expected to have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of
operations of CADDX and International taken as a whole; and
(d) Sellers, CADDX and International have no Knowledge of any
environmental investigation, study, audit, test, review or other
analysis conducted in relation to the current or prior business of
CADDX or International or any property or facility now or previously
owned or leased by CADDX or International that has not been delivered
to Buyer at least five (5) days prior to the date hereof.
24. Transactions with Affiliates. Except as disclosed in SCHEDULE 4.24, since
December 31, 1996, there has not been any payment by CADDX to any of the Sellers
or any Affiliate (as that term is defined below); any charge to CADDX by any of
the Sellers or any Affiliate; or any other transaction between CADDX and any of
the Sellers or any Affiliate, except in the ordinary course of business of CADDX
consistent with past practice. Except as disclosed in SCHEDULE 4.24, to the
Knowledge of CADDX, no Seller and no Affiliate:
(a) has any cause of action or other claim whatsoever against or owes
any amount in excess of Ten Thousand and no/100 Dollars ($10,000.00)
to, or is owed any amount in excess of Ten Thousand and no/100 Dollars
($10,000.00) by, CADDX or International;
(b) has any interest in or owns any property or right used in the
conduct of the Business;
(c) has outstanding any loan or advance from or to CADDX or
International, except expense account advances made in the ordinary
course of business consistent with past practices that are not
material, individually or in the aggregate; or
(d) provides any services to CADDX or International other than as an
employee.
The term "AFFILIATE" shall mean any member of the immediate family (including a
spouse, brother, sister, descendant, ancestor or in-law) of any of the Sellers
or any person who is, or during the past two years was, an officer or director
of CADDX or International, or any corporation, partnership, trust or other
entity in which any such person or any family member of such person has a
substantial interest or is a director, officer, partner or trustee.
25. Proceedings. Except as set forth on SCHEDULE 4.25, neither CADDX nor
International is a defendant (including by reason of any cross or counterclaim)
in any suit or a party to any other action, proceeding, investigation or legal,
administrative, arbitration or other method of settling disputes or
disagreements or governmental investigation by or before any federal, state or
local governmental or non-governmental court, department, commission, board,
bureau, agency or instrumentality ("PROCEEDINGS"), nor to the Knowledge of CADDX
has anyone asserted or threatened in writing to make CADDX or International a
party to any such Proceedings, in which a party specifically seeks Ten Thousand
and no/100 Dollars ($10,000.00) or more from CADDX or International or Fifty
Thousand and no/100 Dollars ($50,000.00) in the aggregate of such Proceedings or
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay the transactions contemplated hereby.
26. Compliance with Law. Each of CADDX and International and their respective
officers, directors, agents and employees have complied in all material respects
with all applicable laws and regulations of federal, state and local governments
and governmental agencies applicable to the Business and applicable to the
properties owned or leased and used by CADDX or International. Neither CADDX nor
International is aware of any claim of violation of any such laws and
regulations. CADDX and International each holds all permits, licenses,
certificates and other authorizations material to the conduct of the Business.
27. Brokers. Neither CADDX nor International nor anyone on their behalf has any
liability to any broker, finder or agent or has agreed to pay any brokerage
fees, commissions or finders fees with respect to this Agreement or the
transactions contemplated hereby.
28. Bank Accounts and Safe Deposit Boxes. SCHEDULE 4.28 lists the title of each
bank account of CADDX and International, the bank at which that account is
maintained, and the names of the persons authorized to draw against the account
or otherwise have access to it. SCHEDULE 4.28 also contains the same information
for each safe deposit box leased by CADDX and International.
29. Intellectual Property.
(a) SCHEDULE 4.29A lists all registered trade names, trademarks,
service marks and copyrights and their registrations (or applications
for registration), owned by CADDX or International or in which either
has any rights or licenses. CADDX has no Knowledge that it or
International has infringed, or is now infringing, on any trade name,
trademark, service mark or copyright belonging to any other person,
firm or corporation. Except as set forth in SCHEDULE 4.29A, neither
CADDX nor International is a party to any written license, agreement or
arrangement, whether as licensor, licensee or otherwise, with respect
to any trademarks, service marks, trade names, copyrights or
applications for any of the foregoing. To the Knowledge of CADDX, CADDX
and International each own, or hold, adequate licenses or other rights
to use, those trademarks, service marks, trade names and copyrights
necessary for their respective businesses as now conducted by them.
(b) SCHEDULE 4.29B lists all patents and any applications for patents
pending owned by CADDX. CADDX has no Knowledge that it or International
has infringed, or is now infringing, in any material manner, on any
patent or other right belonging to any person, firm or corporation. To
the Knowledge of CADDX, neither CADDX nor International is party to any
license, agreement or arrangement, whether as licensee, licensor or
otherwise, with respect to any patent, application for patent,
invention, design, model, process, trade secret or formula. CADDX has
no Knowledge that it or International does not have the right and
authority to use such inventions, trade secrets, processes, models,
designs and formulas as are necessary to enable them to conduct and to
continue to conduct the Business as in the manner presently conducted
by them.
30. Undisclosed Material Liabilities. Except as disclosed on SCHEDULE 4.30
hereto, CADDX has no Knowledge that it or International has any liabilities of
any kind that would be material to the financial condition of CADDX or
International taken as a whole, other than:
(a) liabilities disclosed or provided for in the Interim Balance Sheet;
(b) liabilities incurred since December 31, 1996, in the ordinary
course of business consistent with past practice that in the aggregate
are not material to CADDX, taken as a whole; and
(c) liabilities not required under generally accepted accounting
principles to be shown on the Interim Balance Sheet for reasons other
than the contingent nature thereof or the difficulty of determining the
amount thereof.
31. Products Manufactured by CADDX Prior to Closing. CADDX has no Knowledge of
any defect in design or manufacture, or otherwise, in any product manufactured
by CADDX prior to the Closing that will result in a product recall, warranty
claims outside of the ordinary course, product liability or similar claims.
ARTICLE V
REPRESENTATIONS OF SELLERS
As an inducement to Buyer to enter into this Agreement, each Seller hereby
represents to Buyer as follows:
1. Representations of CADDX.
(a) To the Knowledge of Sellers, each of the representations of CADDX
set forth in SECTIONS 1, 2, 3, 4, 5, 7, 8, 10, 11, 12, 13, 14, 15, 19,
20, 21, 23, 24, 25, 26, 27, 28, 29, 30 and 31 of ARTICLE IV of this
Agreement is true and correct in all material respects.
(b) Each of the representations of CADDX set forth in SECTION 6
(Capitalization), SECTION 9 (Financial Statements) and SECTION 17 (Tax
Matters) of ARTICLE IV of this Agreement is true and correct in all
material respects.
2. Authority. Sellers have full legal right, without the consent of any other
person, to execute and deliver this Agreement, to perform their obligations
hereunder, and to consummate the transactions contemplated hereby.
3. Consents. No consent, approval or authorization of, or filing of any
certificate, notice, application, report or other document with, any
governmental authority, is required on the part of Sellers in connection with
the valid execution and delivery of this Agreement, or transfer of the Stock, or
the consummation of any other transaction contemplated hereby.
4. Validity. This Agreement has been, and the documents to be delivered at
Closing will be, duly executed and delivered by Sellers and are the lawful,
valid and legally binding obligations of Sellers, enforceable in accordance with
their respective terms and conditions, except to the extent limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general equitable principles.
5. Noncontravention. The execution and delivery of this Agreement, performance
hereunder and the consummation of the transactions contemplated hereby are not
prohibited by, do not violate or conflict with any provision of, and do not
result in a default under or a breach of:
(a) any material contract, agreement or other instrument to which any
Seller is a party;
(b) any regulation, order, decree or judgment of any court or
governmental agency of which any Seller has Knowledge; or
(c) any law applicable to Sellers of which any Seller has Knowledge.
6. Ownership of Stock. After the payments to Scott Furlong and Frank Clark
referenced in Article VII, Section 2 are made, and after the Release Agreements
referenced in Article III, Section 3(1) have been executed and delivered by
Messrs. Furlong and Clark, Sellers will be, collectively, the record and
beneficial owners of all of the Stock and at Closing will have, collectively,
the absolute right, power and capacity to sell, assign, transfer and deliver the
Stock to Buyer free and clear of any liens, encumbrances, pledges, security
interests, restrictive agreements, transfer restrictions, voting trust
arrangements or claims of any nature whatsoever and, upon delivering and payment
for such shares pursuant hereto, Buyer will acquire good and valid title to such
shares of Stock, free and clear of all liens, encumbrances or equities except
for liens, encumbrances or equities that may be imposed by Buyer or on account
of the conduct of Buyer.
7. Brokers' Fees. Sellers are not obligated to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which Buyer or CADDX could become liable or obligated.
ARTICLE VI
REPRESENTATIONS OF BUYER
As an inducement to Sellers to enter into this Agreement, Buyer hereby
represents to Sellers as follows:
1. Organizational Status. Buyer is a validly existing corporation incorporated
pursuant to, and in good standing under, the laws of the state of its
incorporation, with full power and authority to own its properties and to carry
on, and to use the properties that it uses to carry on the business in which it
is engaged.
2. Corporate Authority. Buyer has full legal right and corporate power, without
the consent of any other person, to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the transactions
contemplated hereby.
3. Authorization of the Transaction. All corporate and other actions required to
be taken by Buyer to authorize the execution, delivery and performance of this
Agreement and all transactions contemplated hereby have been duly and properly
taken, no consent, approval or authorization of, or filing of any certificate,
notice, application, report or other document with, any governmental authority,
is required on the part of Buyer in connection with the valid execution and
delivery of this Agreement, or transfer of the Stock or the consummation of any
other transaction contemplated hereby.
4. Validity. This Agreement has been, and the documents to be delivered at
Closing will be, duly executed and delivered by Buyer and are the lawful, valid
and legally binding obligations of Buyer, enforceable in accordance with their
respective terms and conditions, except to the extent limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally or by general equitable principles.
5. Noncontravention. The execution and delivery of this Agreement, performance
hereunder, and the consummation of the transactions contemplated hereby are not
prohibited by, do not violate or conflict with any provision of, and do not
result in a default under or a breach of:
(a) Buyer's Certificate of Incorporation or bylaws;
(b) any material contract, agreement or other instrument to which Buyer
is a party;
(c) any regulation, order, decree or judgment of any court or
governmental agency of which Buyer has Knowledge; or
(d) any law applicable to Buyer of which Buyer has Knowledge.
6. Investment Representation. Buyer is purchasing the Stock for investment, for
its own account and not with a view to distribution of the Stock within the
meaning of applicable securities laws.
7. Brokers' Fees. Buyer has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement for which any Seller could become liable or
obligated.
ARTICLE VII
COVENANTS OF SELLERS AND CADDX
Sellers each hereby agree to, and to cause CADDX to, keep, perform and fully
discharge the following covenants and agreements:
1. Interim Conduct of Business. From the date hereof until the Closing, CADDX
and International shall operate the Business as a going concern consistent with
prior practice and in the ordinary course of business (except as may be
authorized pursuant to this Agreement) and shall refrain from entering into any
new line of business. Without limiting the generality of the foregoing, from the
date hereof until the Closing, except for transactions contemplated by this
Agreement or approved in writing by Buyer, CADDX and International shall:
(a) maintain the properties and assets of CADDX and International in
accordance with past practice, reasonable wear and tear excepted;
(b) use all reasonable efforts to maintain and keep in full force and
effect all insurance on assets and property or for the benefit of
employees of CADDX and International, all liability and other casualty
insurance, and all bonds on personnel, presently carried;
(c) use all reasonable efforts to preserve intact the organization of
the Business and to keep available the services of the present
executives, employees and agents of the Business and to preserve the
good will of suppliers, customers and others having business
relationships with the Business;
(d) maintain its books, accounts and records in the usual, regular and
ordinary manner on a basis consistent with prior years;
(e) except as provided in ARTICLE VII, SECTION 2 below, not grant or
agree to grant any increase inconsistent with prior increases in the
wages, salary, bonus or other compensation, remuneration or benefits of
any employee, or become a party to any employment agreement or any
consulting arrangement, which arrangement is not in the ordinary course
of business, or become a party to any contract or arrangement providing
for payment of bonuses, profit shares, stock benefits, severance
payments not in the ordinary course of business or retirement benefits,
except as required by contract or as expressly contemplated by this
Agreement;
(f) not enter into or agree to enter into any lease, contract, purchase
or sale order, or other commitment other than in the ordinary course of
business and consistent with prior practice;
(g) not extend credit, other than in the ordinary course of business
and consistent with prior practice;
(h) not purchase, lease or otherwise acquire any real estate except
renewals of current leases on terms consistent with past practices;
(i) not declare, set aside or pay any dividend or make any other
distribution with respect to the capital stock of CADDX or
International;
(j) not merge or consolidate with or agree to merge or consolidate
with, nor purchase or agree to purchase a material amount of the assets
of, nor otherwise acquire any corporation, partnership or other
business organization;
(k) not sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of any of its assets, properties, rights or claims,
except in the ordinary course of business consistent with past
practice;
(l) not authorize for issuance, issue, sell or deliver any additional
shares of CADDX or International stock or any securities or obligations
convertible into shares of stock, or issue or grant any option,
warrant, conversion rights or other right to purchase any shares of
stock;
(m) not split, combine or reclassify any shares of CADDX or
International capital stock of any class or redeem or otherwise
acquire, directly or indirectly, any shares of CADDX or International
capital stock;
(n) not incur nor agree to incur nor agree to become subject to any
debt or liability, except liabilities arising in the ordinary course of
business not agree to guarantee the debts or liabilities of any other
person or entity;
(o) comply in all material respects with the provisions of all laws,
regulations, judicial decrees and orders applicable to it or to the
conduct of its Business where the failure to comply would have a
material affect on CADDX or International;
(p) refrain from terminating, modifying or amending any lease, license,
permit, contract or other agreement, except in the ordinary course of
business and not involving a material increase in liability or
reduction in revenue;
(q) not make any additional capital expenditures, other than pursuant
to existing commitments set forth on SCHEDULE 4.15 hereto, in excess of
Ten Thousand and no/100 Dollars ($10,000.00);
(r) not take any action looking toward amendment of any of the Articles
of Incorporation or bylaws of CADDX or International;
(s) not make any loan or advance to any person who is an officer,
director, employee or shareholder of CADDX or International, other than
routine advances for travel, moving and relocation expenses;
(t) except as provided in ARTICLE VII, SECTION 2 below, not prepay any
liability other than current liabilities coming due in the ordinary
course of business; and
(u) not mortgage, pledge or subject to any lien, charge or encumbrance
any assets, tangible or intangible.
2. Certain Pre-Closing Payments. Buyer acknowledges and agrees that,
notwithstanding anything to the contrary contained in this Agreement, CADDX
will, prior to Closing (i) pay to Scott Furlong and Frank Clark each the amount
of One Hundred Ninety Thousand and no/100 Dollars ($190,000.00) in cash in
exchange for a release from such individuals of any claims to equity ownership
in CADDX, direct or indirect, and any compensation for past performance; and
(ii) pay off all shareholder loans disclosed in the Interim Balance Sheet in
cash in an amount not to exceed Six Hundred Forty-Eight Thousand and no/100
Dollars ($648,000.00) in aggregate.
3. Access. Sellers and CADDX shall give Buyer and its representatives reasonable
access to all properties, books, contracts, commitments and records (including
work papers) and all officers, authorized representatives, consultants and
auditors during reasonable business hours and shall furnish Buyer with all
financial and operating data and other information as to the Business and the
properties and assets of CADDX and International as Buyer may from time to time
request; provided, however, that Buyer will not be permitted to make copies of
any such documents unless prior request is made to CADDX and such request is
approved by the President of CADDX, which approval will not be unreasonably
withheld. The fact that such representatives have had such access to such
persons, documents and properties shall not of itself relieve CADDX or any
Seller of their obligations under the representations in ARTICLE IV or ARTICLE V
of this Agreement, except as to particular documents specifically delivered to,
or information conveyed to or discovered by, Buyer prior to Closing.
4. Notification. Concurrently with the execution and delivery of this Agreement,
Sellers shall deliver to Buyer a disclosure letter setting forth all of the
schedules to this Agreement (the "DISCLOSURE LETTER"). Between the date of this
Agreement and the Closing Date, each Seller will promptly notify Buyer in
writing if such Seller, CADDX or International becomes aware of any fact or
condition that causes any of Sellers' or CADDX's representations or warranties
to be inaccurate as of the date of this Agreement, or if such Seller, CADDX or
International becomes aware of the occurrence after the date of this Agreement
of any fact or condition that would (except as expressly contemplated by this
Agreement) cause any such representation or warranty to be inaccurate had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Should any such fact or condition require any change
in the Disclosure Letter if the Disclosure Letter were dated the date of the
occurrence or discovery of any such fact or condition, Sellers will promptly
deliver to Buyer a supplement to the Disclosure Letter specifying such change.
During the same period, each Seller will promptly notify Buyer of the occurrence
of any breach of any covenant of Sellers or CADDX under this Agreement or of the
occurrence of any event that may make the satisfaction of the conditions in
ARTICLE IX of this Agreement impossible or unlikely. No representation or
warranty of Sellers or CADDX in this Agreement and no statement in the
Disclosure Letter omits to state a material fact, of which Sellers or CADDX have
Knowledge, necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading. No notice subsequently
given pursuant to this ARTICLE VIII, SECTION 4 will contain any untrue statement
or omit to state a material fact, of which Sellers or CADDX have Knowledge,
necessary to make the statements therein or in this Agreement, in light of the
circumstances in which they were made, not misleading.
5. No Negotiation. Until such time, if any, as this Agreement is terminated
pursuant to ARTICLE X below, Sellers will not, and will cause CADDX and
International and each of their representatives not to, directly or indirectly,
solicit, initiate or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquires or proposals from, any person or entity (other than
Buyer) relating to any transaction involving the sale of the business or assets
(other than in the ordinary course of business) of CADDX or International, or
any of the capital stock of CADDX or International, or any merger,
consolidation, business combination or similar transaction involving CADDX or
International.
6. Cooperation. Sellers shall cooperate with Buyer as reasonably requested in
connection with obtaining audited financials of CADDX as required under
applicable securities laws and regulations.
7. Resignations. At the Closing, Sellers will deliver to Buyer such resignations
of officers and directors of CADDX and International effective as of the
Effective Time as are requested by Buyer not less than five (5) days prior to
the Closing.
8. Undertakings. Each of Sellers and CADDX shall use their respective best
efforts to facilitate the consummation of the transactions contemplated by this
Agreement so as to permit the Closing to take place on the date provided herein.
Each of Sellers and CADDX shall cooperate with Buyer (to the extent not
unreasonably burdensome to Sellers and CADDX) in connection with Buyer's efforts
to satisfy the conditions to Closing set forth in ARTICLE IX, SECTION 2.
ARTICLE VIII
COVENANTS OF BUYER
Buyer hereby agrees to keep, perform and fully discharge the following covenants
and agreements:
1. Confidentiality. In addition to complying with all of the provisions of that
certain Mutual Nondisclosure Agreement dated December 30, 1996, by and between
CADDX and Buyer (the "NONDISCLOSURE AGREEMENT"), which Nondisclosure Agreement
is incorporated herein by reference for all purposes, prior to the Closing,
Buyer will use its best efforts to cause all information regarding the Business
obtained in connection with the negotiation and performance of this Agreement to
be treated as confidential and will not use, and will not permit others to use,
any such information in a manner detrimental to Sellers, CADDX or International;
provided, however, that the foregoing shall not apply to information that:
(a) was known by Buyer when received;
(b) is or hereafter becomes lawfully obtainable from other sources;
(c) is necessary or appropriate to disclose to any regulatory authority
having jurisdiction over Sellers, CADDX, International or Buyer or any
affiliate thereof or as otherwise required by law; or
(d) is reasonably necessary to disclose to those persons with a need to
know such information in order to confirm the representations and
warranties contained herein.
If the transactions contemplated by this Agreement are not consummated, Buyer
will continue to hold all such information in confidence and will return to
CADDX all documents (and all copies thereof) containing such information.
2. Undertakings. Buyer shall use its best efforts to facilitate the consummation
of the transactions contemplated by this Agreement so as to permit the Closing
to take place on the date provided herein. Buyer shall cooperate with Sellers
(to the extent not unreasonably burdensome to Buyer) in connection with Sellers'
efforts to satisfy the conditions to Closing set forth in ARTICLE IX, SECTION 1
below.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS TO CLOSE
1. Conditions Precedent to Obligation of Buyer. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) The representations of CADDX set forth in ARTICLE IV and of Sellers
set forth in ARTICLE V shall have been true and correct in all material
respects at and as of the date of this Agreement, and must be accurate
in all material respects as of the Closing Date as if made on the
Closing Date, without giving effect to any supplement to the Disclosure
Letter.
(b) Each Seller and CADDX shall have performed and complied with all of
their covenants hereunder in all material respects through the Closing.
(c) CADDX shall have delivered to Buyer a certificate signed by an
executive officer of CADDX, and each Seller shall have delivered to
Buyer a certificate, each such certificate to the effect that each of
the conditions specified in SUBSECTIONS 1(a) and 1(b) of this ARTICLE
IX is satisfied.
(d) There shall not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation by Buyer of the
Transaction
(e) Buyer shall have received all other authorizations, consents and
approvals of governments and governmental agencies as may be required
for the lawful consummation by Buyer of the Transaction.
(f) Buyer shall have received from counsel to Sellers an opinion with
respect to the matters set forth in EXHIBIT G attached hereto,
addressed to Buyer and dated as of the Closing Date.
(g) All actions to be taken by Sellers in connection with consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the Transaction
will be reasonably satisfactory in form and substance to Buyer.
(h) Buyer shall have received a Phase I Environmental Site Assessment
on CADDX's current manufacturing facilities from an environmental
engineering consulting firm of Buyer's choosing, which shall be
obtained at Buyer's sole cost and expense, and which shall reveal no
recommendations for clean-up or any other remedial action.
Buyer may waive any condition specified in this ARTICLE IX, SECTION 1 if Buyer
executes a writing so stating at or prior to the Closing.
2. Conditions Precedent to obligation of Sellers. The obligation of Sellers to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) The representations of Buyer set forth in ARTICLE VI shall have
been true and correct in all material respects at and as of the date of
this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date.
(b) Buyer shall have performed and complied with all of its covenants
hereunder in all materials respects through the Closing.
(c) Buyer shall have delivered to Sellers a certificate signed by an
executive officer of Buyer to the effect that each of the conditions
specified in SUBSECTIONS 2(a) and 2(b) of this ARTICLE IX is satisfied.
(d) There shall not be any judgment, order, decree, stipulation,
injunction or charge in effect preventing consummation by Sellers of
the Transaction.
(e) Sellers shall have received all other authorizations, consents and
approvals of governments and governmental agencies as may be required
for the lawful consummation by Sellers of the Transaction.
(f) Sellers shall have received from Buyer's General Counsel an opinion
with respect to the matters set forth in EXHIBIT H attached hereto,
addressed to Sellers and dated as of the Closing Date.
(g) All actions to be taken by Buyer in connection with consummation of
the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and
substance to Sellers.
(h) Sellers shall have received a copy of the Phase I Environmental
Site Assessment referenced in ARTICLE IX, SECTION 1(h) above.
Sellers may waive any condition specified in this ARTICLE IX, SECTION 2 if each
executes a writing so stating at or prior to the Closing.
ARTICLE X
TERMINATION
1. Termination of Agreement. Certain of the parties may terminate this Agreement
as provided below:
(a) Buyer and Sellers may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written notice to each
Seller in the event that:
(i) the senior lender, that has (or the agent or a co-agent
for the senior lenders that have) agreed to provide senior
financing to Buyer in connection with the Transaction (which
agreement is set forth in writing in a binding "commitment"
letter or other similar documentation issued by the lender or
agent), notifies Buyer in writing, such notice in writing upon
verification shall be PRIMA FACIE evidence of Buyer's right to
terminate pursuant to this SUBSECTION 1(b)(i), that it will
not provide such committed financing because the "no material
adverse change" condition contained in its "commitment" letter
to Buyer has not been satisfied and specifying the material
adverse change that it believes shall have occurred;
(ii) CADDX is discovered to have materially misrepresented a
material fact with respect to the matters set forth in ARTICLE
IV;
(iii) any Seller is discovered to have materially
misrepresented a material fact with respect to any matters set
forth in ARTICLE V;
(iv) any Seller or CADDX materially breaches a material
covenant contained in this Agreement and does not cure such
breach prior to the Closing Date; or
(v) the Closing shall not have occurred on or before May 22,
1997, by reason of the failure of any condition precedent
under ARTICLE IX, SECTION 1 hereof (unless the failure results
primarily from Buyer itself materially breaching any
representation or covenant contained in this Agreement); and
(c) Sellers may terminate this Agreement by giving written notice to
Buyer prior to the Closing in the event that:
(i) Buyer is in breach in any material respect of any material
representation contained in this Agreement;
(ii) Buyer materially breaches a material covenant contained
in this Agreement and does not cure such breach prior to the
Closing Date; or
(iii) the Closing shall not have occurred on or before May 22,
1997, by reason of the failure of any condition precedent
under ARTICLE IX, SECTION 2 hereof (unless the failure results
primarily from any Seller or CADDX themselves materially
breaching any representation or covenant contained in this
Agreement).
2. Effect of Termination. If any party terminates this Agreement pursuant to
ARTICLE X, SECTION 1 above, all obligations of the parties hereunder shall
terminate without any liability of any party to any other party (except for any
liability of any party then in breach); provided, however, that the
confidentiality provisions contained in ARTICLE VIII, SECTION 1 hereof and the
provisions of ARTICLE XII, SECTION 10 (Expenses) hereof shall survive
termination.
3. Liquidated Damages. If Sellers fail to convey the Stock to Buyer at Closing
in accordance with the terms of this Agreement, Sellers agree, jointly and
severally, to pay an aggregate of Two Million and no/100 Dollars ($2,000,000.00)
to Buyer as liquidated damages, and not as a penalty, to compensate Buyer for,
and in full settlement of all claims of Buyer for, damages and expenses incurred
by Buyer as a result of any such breach or failure to perform by Sellers.
ARTICLE XI
INDEMNIFICATION; REMEDIES
1. Survival; Definition of Knowledge. All representations, warranties, covenants
and obligations in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the certificate delivered pursuant to ARTICLE III, SECTION
3(o) hereof, and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. For purposes of this Agreement, an
individual will be deemed to have "KNOWLEDGE" of a particular fact or other
matter if:
(a) such individual is actually aware of such fact or other matter; or
(b) a prudent individual should have discovered or otherwise become
aware of such fact or other matter under the same circumstances.
For purposes of this Agreement, a person or entity (other than an individual)
will be deemed to have "KNOWLEDGE" of a particular fact or other matter if any
individual who is serving, or who has served at any time within the past six (6)
years, as a director, officer, partner, executor or trustee of such person or
entity (or in any similar capacity) has, or at any time had, Knowledge of such
fact or other matter.
2. Indemnification and Payment of Damages by Sellers. Subject to the other terms
and conditions of this Agreement, Sellers, jointly and severally, will indemnify
and hold harmless Buyer, CADDX, International and their respective employees,
officers, directors, agents, representatives, stockholders, controlling persons
and affiliates (collectively, the "LNDEMNIFIED PERSONS") for, and will pay to
the Indemnified Persons the amount of, any loss, liability, damage (including
incidental and consequential damages), or reasonable expense (including costs of
investigation and defense and reasonable attorneys' fees), whether or not
involving a third-party claim (collectively, "DAMAGES"), arising from or in
connection with:
(a) any breach of any representation or warranty made by such Seller in
this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, or any other certificate or document delivered by
such Seller pursuant to this Agreement;
(b) any breach of any representation or warranty made by such Seller in
this Agreement as if such representation or warranty were made on and
as of the Closing Date, other than any such breach that is disclosed in
a supplement to the Disclosure Letter and is expressly identified in
the certificate delivered pursuant to ARTICLE III, SECTION 3(o) hereof
as having caused the condition specified in ARTICLE IX, SECTION 1 not
to be satisfied;
(c) any breach by any Seller of any covenant or obligation of such
Seller in this Agreement; or
(d) any claim by any person or entity for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such person with any
Seller, CADDX or International (or any person or entity acting on their
behalf) in connection with the Transaction.
Notwithstanding anything contained in this Agreement to the contrary, Sellers
shall not be jointly and severally liable to Buyer for indemnification
obligations under ARTICLE XI of this Agreement for any Damages directly relating
to any Seller's liability to CADDX pursuant to Amendment No. 1 to the bylaws of
CADDX, but rather any indemnification liability under ARTICLE XI of this
Agreement in such instance shall be the sole obligation of the Seller(s) who is
liable to CADDX under Amendment No. 1 to the bylaws of CADDX.
The remedies provided in this ARTICLE XI, SECTION 2 will not be exclusive of or
limit any other remedies that may be available to Buyer or the other Indemnified
Persons.
3. Indemnification and Payment of Damages by Sellers; Environmental Matters. In
addition to the provisions of ARTICLE XI, SECTION 2, Sellers, jointly and
severally, will indemnify and hold harmless the Indemnified Persons for, and
will pay to the Indemnified Persons the amount of any Damages arising from or in
connection with:
(a) any Environmental Liabilities that arise out of or relate to (i)
the ownership, operation by CADDX or International, at any time on or
prior to the Closing Date, but after the date on which CADDX or
International first owned or operated such Facilities (as that term is
defined below), of any real property, leaseholds or other interest
currently owned or operated by CADDX or International and any
buildings, plants, structures or equipment (including motor vehicles,
tank cars and rolling stock) currently owned or operated by CADDX or
International (collectively, the "FACILITIES"); or (ii) the condition
of any Facilities currently owned or operated by CADDX or International
at any time prior to the Closing Date, but after the time on which
CADDX or International first owned or operated the Facilities in
question; or (iii) any Hazardous Substances that were present on the
Facilities at any time on or prior to the Closing Date, but after the
date on which CADDX or International first owned or operated the
Facilities in question; or (iv) any Hazardous Substances or other
contaminants, wherever located, that were generated, transported,
stored, treated, Released or otherwise handled by Sellers, CADDX,
International or by any other person or entity for whose conduct they
are held responsible at any time on or prior to the Closing Date; or
(v) any Regulated Activities that were conducted by Sellers, CADDX,
International or by any other person or entity for whose conduct they
are held responsible; or
(b) any bodily injury (including illness, disability and death),
personal injury, property damage (including trespass, nuisance,
wrongful eviction and deprivation of the use of real property), or
other damage of or to any person or entity, including any employee or
former employee of Sellers, CADDX, International or any other person or
entity for whose conduct they are held responsible to the extent
arising from any Regulated Activity conducted at the Facilities, or
from Hazardous Substances that were (i) present on or before the
Closing Date, but after the date on which CADDX or International first
owned or operated the Facilities in question on or at the Facilities
(or present on any other property, if such Hazardous Substances
emanated from any of the Facilities and were present on any of the
Facilities on or prior to the Closing Date, but after the date on which
CADDX or International first owned or operated the Facilities in
question); or (ii) Released by Sellers, CADDX, International or any
other person or entity for whose conduct they are held responsible, at
any time on or prior to the Closing Date.
Except as may otherwise be provided in ARTICLE XI, SECTION 8, Buyer will be
entitled to control any clean-up or other remedial action, any related
Proceeding and, except as provided in the following sentence, any other
Proceeding with respect to which indemnity may be sought under this ARTICLE XI,
SECTION 3. The procedure described in ARTICLE XI, SECTION 8 will apply to any
claim solely for monetary damages relating to a matter covered by this ARTICLE
XI, SECTION 3.
4. Indemnification and Payment of Damages by Buyer. Buyer will indemnify and
hold harmless Sellers, and will pay to Sellers the amount of any Damages arising
from or in connection with (i) any breach of any representation or warranty made
by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to
this Agreement; (ii) any breach by Buyer of any covenant or obligation of Buyer
in this Agreement; or (iii) any claim by any person or entity for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such person or entity with Buyer (or
any person or entity acting on its behalf) in connection with the Transaction.
5. Time Limitations. If the Closing occurs, Sellers will have no liability (for
indemnification or otherwise) with respect to any representation or warranty, or
covenant or obligation to be performed and complied with prior to the Closing
Date, other than those in SECTION 6 (Capitalization) and SECTION 17 (Tax
Matters) of ARTICLE IV, all as incorporated by ARTICLE V, SECTION 1, and ARTICLE
V, SECTION 6 (Ownership of Stock), unless on or before April 18, 1999, Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer; a claim with respect to
SECTION 17 (Tax Matters) of ARTICLE IV, as incorporated by ARTICLE V, SECTION 1,
may be made at any time prior to such claim being closed by the applicable
statute of limitations; a claim with respect to SECTION 6 (Capitalization) of
ARTICLE IV, as incorporated by ARTICLE V, SECTION 1 and ARTICLE V, SECTION 6
(Ownership of Stock), or a claim for indemnification or reimbursement not based
upon any representation or warranty or any covenant or obligation to be
performed and complied with prior to the Closing Date, may be made at any time.
If the Closing occurs, Buyer will have no liability (for indemnification or
otherwise) with respect to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless
on or before April 18, 1999, Sellers notify Buyer of a claim specifying the
factual basis of that claim in reasonable detail to the extent then known by
Sellers.
6. Limitations on Amount - Sellers. Sellers will have no liability (for
indemnification or otherwise) with respect to the matters described in
SUBSECTIONS 2(a) or 2(b) of this ARTICLE XI or, to the extent relating to any
failure to perform or comply prior to the Closing Date, SUBSECTION 2(c) of this
ARTICLE XI until the total of all Damages with respect to such matters exceeds
Twenty-Five Thousand and no/100 Dollars ($25,000.00), and then only for the
amount by which such Damages exceed Twenty-Five Thousand and no/100 Dollars
($25,000.00). This ARTICLE XI, SECTION 6 will not apply, however, to any breach
of any of Sellers' representations and warranties of which any Seller had
Knowledge at any time prior to the date on which such representation and
warranty is made or any intentional breach by any Seller of any covenant or
obligation, and Sellers will be jointly and severally liable for all Damages
with respect to such breaches.
7. Limitations on Amount - Buyer. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in CLAUSE
(i) or (ii) of ARTICLE XI, SECTION 4 until the total of all Damages with respect
to such matters exceeds Twenty-Five Thousand and no/100 Dollars ($25,000.00),
and then only for the amount by which such Damages exceed Twenty-Five Thousand
and no/100 Dollars ($25,000.00). This ARTICLE XI, SECTION 7 will not apply,
however, to any breach of any of Buyer's representations and warranties of which
Buyer had Knowledge at any time prior to the date on which such representation
and warranty is made or any intentional breach by Buyer of any covenant or
obligation, and Buyer will be liable for all Damages with respect to such
breaches.
8. Procedure for Indemnification - Third Party Claims.
(a) Promptly after receipt by an indemnified party under ARTICLE XI,
SECTION 2 or SECTION 4 or (to the extent provided in the last sentence
of SECTION 3) SECTION 3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure
to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party,
except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in ARTICLE XI, SECTION 8(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is
also a party to such Proceeding and the indemnified party determines in
good faith that joint representation would be inappropriate; or (ii)
the indemnifying party fails to provide reasonable assurance to the
indemnified party of its financial capacity to defend such Proceeding
and provide indemnification with respect to such Proceeding), to assume
the defense of such Proceeding, within ten (10) days after the
indemnified party's notice is given to the indemnifying party, with
counsel satisfactory to the indemnified party and, after notice from
the indemnifying party to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will not,
as long as it diligently conducts such defense, be liable to the
indemnified party under this ARTICLE XI for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding,
in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding. If the indemnifying
party assumes the defense of a Proceeding (x) it will be conclusively
established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification; (y)
no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (a)
there is no finding or admission of any violation of Legal Requirements
or any violation of the rights of any person and no effect on any other
claims that may be made against the indemnified party; and (b) the sole
relief provided is monetary damages that are paid in full by the
indemnifying party; and (z) the indemnified party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding
may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification
under this Agreement, the indemnified party may, by notice to the
indemnifying party, assume the exclusive right to defend, compromise,
or settle such Proceeding, but the indemnifying party will not be bound
by any determination of a Proceeding so defended or any compromise or
settlement effected without its consent (which consent may not be
unreasonably withheld).
9. Procedure for Indemnification - Other Claims. A claim for indemnification for
any matter not involving a third-party claim may be asserted by notice to the
party from whom indemnification is sought, subject, however, to the other terms
and provisions of this Agreement.
10. Insurance Claims. If any Indemnified Person makes a claim for indemnity
against any other party ("Indemnifying Party"), the Indemnified Person agrees to
file all claims and to take such other actions as are reasonably necessary to
recover against all applicable insurance policies that might cover all or any
part of the damages which the Indemnified Person seeks to recover from the
Indemnifying Party. Any recovery made by the Indemnified Person from insurance
companies will be credited against the liability, if any, of the Indemnified
Person hereunder.
ARTICLE XII
GENERAL PROVISIONS
1. Press Releases and Announcements. No party shall issue any press release or
announcement relating to the subject matter of this Agreement without the prior
written approval of Buyer and Sellers; provided, however, that any party may
make any public disclosure it believes in good faith is required by law or
regulation (in which case the disclosing party will advise the other parties
prior to making the disclosure).
2. No Third-Party Beneficiaries. This Agreement constitutes an agreement solely
among the parties hereto and is not intended to and will not confer any rights,
remedies, obligations or liabilities, legal or equitable, including any right of
employment or continued employment or related benefits, on any person (including
but not limited to any employee or former employee of CADDX or International)
other than the parties hereto and their respective successors or permitted
assigns, or otherwise constitute any person a third party beneficiary under or
by reason of this Agreement. Nothing in this Agreement, expressed or implied, is
intended to or shall constitute the parties hereto partners or participants in a
joint venture.
3. Amendment and Waiver. No amendment or waiver of any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto, and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
4. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be sent by facsimile transmission or by registered
or certified mail, postage prepaid, as follows:
If to CADDX or to Sellers:
CADDX-CADDI Controls, Inc.
1420 North Main Street
Gladewater, Texas 75647
Attention: Joe Hurst
Facsimile No.: (903) 845-6811
In each case with a copy to:
Brown McCarroll & Oaks Hartline
220 Energy Centre, 1127 Judson Road
Longview, Texas 75601-5157
Attention: T. John Ward
Facsimile No.: (903) 236-8787
If to Buyer:
ITI Technologies, Inc.
2266 North Second Street
North St. Paul, Minnesota 55109
Attention: General Counsel
Facsimile No.: (612) 779-4802
Any party may change its address for receiving notice by written notice given to
the others named above. All such notices shall be effective five (5) days after
being deposited in the mail addressed as set forth above or upon receipt of the
facsimile.
5. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
6. Parties in Interest. This Agreement shall bind and inure to the benefit of
the parties named herein and their respective heirs, successors and permitted
assigns.
7. Entire Transaction. This Agreement, including the exhibits and schedules
attached hereto and the documents delivered pursuant hereto together with the
Nondisclosure Agreement, constitutes the entire agreement among the parties with
respect to the transactions contemplated hereby and supersede all other
agreements and understandings among the parties.
8. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal substantive laws of the State of Delaware. Should
any provision of this Agreement be invalid, void or unenforceable for any
reason, the remaining provisions shall remain in full force and effect.
9. Headings. The section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10. Expenses. Except as otherwise expressly provided herein, each party to this
Agreement shall pay its own costs and expenses in connection with the
transactions contemplated hereby.
11. Severability. Any term or provision of this Agreement that is invalid or
unenforceable, shall be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the person intended to be benefited by such provision and provisions of this
Agreement.
12. Construction. This Agreement has been negotiated by Buyer and Sellers and
their respective legal counsel, and legal or equitable principles that might
require the construction of this Agreement or any provision hereof against the
party drafting this Agreement shall not apply in any construction or
interpretation of this Agreement.
13. Assignment. None of the parties hereto may assign its rights under this
Agreement without the consent of each other party hereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be duly
executed all as of the date first written above.
CADDX-CADDI CONTROLS, INC. SELLERS:
By: /s/ Joe Hurst /s/ Joe Hurst
------------------------------------ -----------------------------------
Joe Hurst, President Joe Hurst, Individually
/s/ Kenneth T. Lewis
-----------------------------------
ITI TECHNOLOGIES, INC. Kenneth T. Lewis, Individually
/s/ James E. Stevens
By: /s/ Thomas L. Auth -----------------------------------
------------------------------------ James E. Stevens, Individually
Thomas L. Auth, President and CEO
/s/ Kenneth Ryan Lewis
-----------------------------------
Kenneth Ryan Lewis, Individually
