EXHIBIT 10.1
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of March 11, 1997 (the
"Agreement"), by and between ULTRAK, INC., a Delaware corporation ("Ultrak"),
and CHECKPOINT SYSTEMS, INC., a Pennsylvania corporation ("Checkpoint").
WHEREAS, the Board of Directors of each of Ultrak and Checkpoint
(a) have approved the merger of Ultrak with and into a subsidiary of Checkpoint
pursuant to the Merger (as hereinafter defined) hereinafter provided for,
(b) deem the Merger to be advisable and in the best interests of their
respective shareholders, and (c) desire to make certain representations,
warranties and agreements in connection with the Merger; and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests under United States generally
accepted accounting principles ("GAAP"); and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger contemplated by this Agreement constitute a reorganization as described
in section 368 of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code"); and
WHEREAS, as a condition and inducement to each party's willingness to
enter into this Agreement, concurrently with the execution herewith Ultrak has
executed and delivered to Checkpoint the Ultrak Stock Option Agreement (the
"Ultrak Stock Option Agreement") and Checkpoint has executed and delivered to
Ultrak the Checkpoint Stock Option Agreement (the "Checkpoint Stock Option
Agreement"), both dated the date of this Agreement.
NOW, THEREFORE, in consideration of the foregoing, the representations,
warranties, covenants and agreements set forth herein and such other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Affiliate" shall mean, as to any person, any other person that
directly or indirectly controls, or is under common control with or is
controlled by such person, except that references to "affiliate" in Section 6.5
shall have the meaning set forth in Rule 145 of the Securities Act.
"Aggregate Number" shall have the meaning set forth in Section 6.7.
"Checkpoint" shall have the meaning set forth in the introductory
clauses hereto.
"Checkpoint Common Stock" shall have the meaning set forth in
Section 2.1.
"Checkpoint ESPP" shall have the meaning set forth in Section 3.2(a).
"Checkpoint Financial Statements" shall have the meaning set forth in
Section 3.5.
"Checkpoint Option Plan" shall have the meaning set forth in
Section 3.2(a).
"Checkpoint Plans" shall have the meaning set forth in Section 3.9.
"Checkpoint Properties" shall have the meaning set forth in
Section 3.11.
"Checkpoint SEC Reports" shall have the meaning set forth in
Section 3.5.
"Checkpoint Stock Option" shall have the meaning set forth in
Section 3.2(a).
"Code" shall have the meaning set forth in the introductory
clauses hereto.
"Common Stock Exchange Ratio" shall have the meaning set forth
in Section 2.1.
"Contamination" shall mean the uncontained presence of Hazardous
Materials which is required to be removed or remedied or can reasonably be
expected to require removal or remediation under any Environmental Law,
"Coopers & Xxxxxxx" shall mean Coopers & Xxxxxxx L.L.P., Checkpoint's
independent auditors.
"DGCL" shall have the meaning set forth in Section 2.1.
"Effective Time" shall have the meaning set forth in Section 2.2.
"Environmental Law" shall mean any applicable foreign, federal, state
and local law, statute, ordinance, order, rule, or regulation pertaining to
health, industrial hygiene or the environment, and the regulations implemented
or adopted under such laws, and all amendments thereto, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. (section) 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. (section) 1801 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. (section) 6901 et seq. ("RCRA")), the Toxic
Substances Control Act (15 U.S.C. (section) 2601 et seq.), the Clean Air Act (42
U.S.C. (section) 7001 et seq.) and the Federal Water Pollution Control Act (33
U.S.C. (section) 1251 et seq.).
"ERISA Affiliate," with respect to any party, shall mean any trade or
business, whether or not incorporated, that together with such party would be
deemed a "single employer" within the meaning of section 4001(a)(15) of ERISA.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
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"Form S-4" shall mean the Registration Statement on Form S-4 to be
filed with the SEC under the Securities Act in connection with the Merger for
the purpose of registering the shares of Checkpoint Common Stock to be issued in
the Merger.
"Governmental Entity" shall mean any court, administrative agency or
commission or other governmental or regulatory authority, agency or
instrumentality, domestic or foreign.
"Xxxxx Xxxxxxxx" shall mean Xxxxx Xxxxxxxx, LLP, Ultrak's independent
auditors.
"Hazardous Material" shall include without limitation those substances
included within the definitions of "Hazardous Substances," "Hazardous
Materials," "Toxic Substances," "Hazardous Waste," or "Solid Waste" in any
Environmental Law, those substances listed in the United States Department of
Transportation Table (49 C.F.R. 172.01 and any amendments thereto) or by the
Environmental Protection Agency as hazardous substances (40 C.F.R. Part 302 and
amendments thereto), and including, without limitation, petroleum products,
including crude oil or any fraction thereof.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of 1976, as amended.
"X.X. Xxxxxxxx" shall mean X.X. Xxxxxxxx & Co., an investment banking
firm retained by Ultrak.
"Knowledge" shall mean the actual knowledge, after investigation and
inquiry reasonable under the circumstances, of the officers of the representing
party; provided, however, for purposes of Sections 3.11 and 4.11 only,
"investigation and inquiry reasonable under the circumstances" shall mean a
review of current files relating to Environmental Laws and a review of Sections
3.11 or 4.11, whichever is applicable and the related Disclosure Schedule.
"Material Adverse Effect," with respect to any party, shall mean a
material adverse change or effect (or any development which, insofar as
reasonably can be foreseen, in the future is reasonably likely to have a
material adverse effect) on the business, properties, assets, liabilities,
financial or other condition, results of operations, regulatory status or
prospects of such party and its current Subsidiaries, taken as a whole.
"Merger Agreement" shall have the meaning set forth in Section 2.1.
"Merger Documents" shall have the meaning set forth in Section 2.2.
"Merger" shall have the meaning set forth in Section 2.1.
"Xxxxxx Xxxxxxx" shall mean Xxxxxx Xxxxxxx & Co. Incorporated, an
investment banking firm retained by Checkpoint.
"PBCL" shall have the meaning set forth in Section 2.1.
"Party" shall mean either of Ultrak or Checkpoint, as may be
applicable.
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"Person" shall mean any individual, corporation, partnership,
association, trust, unincorporated organization, entity or group (as defined in
the Exchange Act).
"Preferred Stock Exchange Ratio" shall have the meaning set forth in
Section 2.1.
"Proxy Statement" shall mean the joint proxy statement/prospectus to be
distributed to holders of shares of Checkpoint Common Stock and holders of
shares of Ultrak Common Stock and Ultrak Preferred Stock in connection with the
meetings of such holders to be held in connection with the transactions
contemplated by this Agreement and the Merger Agreement.
"Return Periods" shall have the meaning set forth in Section 3.15.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended and
the rules and regulations promulgated thereunder.
"Significant Subsidiary" shall have the meaning set forth in Rule 1-02
of Regulation S-X of the SEC.
"Stock Options" shall mean the Checkpoint Stock Options and the Ultrak
Stock Options.
"Subsidiary" shall mean present and former "subsidiaries" (as defined
in Rule 1-02 of Regulation S-X of the SEC) of the representing party and former
subsidiaries of their respective former parents, if any, which engaged in a
business conducted by, continued by or succeeded to by the representing party,
directly or indirectly, through a majority controlled subsidiary, provided that
former subsidiaries shall be included only during the periods such entities were
subsidiaries of the representing party or their respective former parents.
"Tax" or "Taxes" shall have the meaning set forth in Section 3.15.
"Termination Date" shall have the meaning set forth in Section 8.1.
"Ultrak" shall have the meaning set forth in the introductory clauses
hereto.
"Ultrak Common Stock" shall have the meaning set forth in Section 2.1.
"Ultrak Designees" shall have the meaning set forth in Section 2.4.
"Ultrak Financial Statements" shall have the meaning as set forth in
Section 4.5.
"Ultrak Plans" shall have the meaning set forth in Section 4.9.
"Ultrak Preferred Stock" shall have the meaning set forth in
Section 4.2.
"Ultrak Properties" shall have the meaning set forth in Section 4.11.
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"Ultrak SEC Reports" shall have the meaning set forth in Section 4.5.
"Ultrak Stock Option" shall have the meaning set forth in
Section 4.2(a).
"Ultrak Stock Plan" shall have the meaning set forth in Section 4.2(a).
ARTICLE II
THE MERGER
Section 2.1 The Merger.
(a) Checkpoint will form under the Delaware General
Corporation Law ("DGCL"), a wholly owned subsidiary (the "Merger Subsidiary"),
into which Ultrak will be merged (the "Merger"), as set forth in this Section
2.1. The Merger Subsidiary will be formed solely to facilitate the Merger and
will conduct no business or activity other than in connection with the Merger.
Checkpoint will (i) cause the Merger Subsidiary to execute and deliver a joinder
to this Agreement pursuant to Section 251 of the DGCL, and (ii) execute a formal
written consent under Section 228 of the DGCL, as the sole stockholder of the
Merger Subsidiary, approving the execution, delivery and performance of this
Agreement by the Merger Subsidiary.
(b) Ultrak and Checkpoint will execute and deliver, and agree,
subject to the terms and conditions of this Agreement and the Merger Agreement
(hereinafter defined), to submit to their respective shareholders for adoption
and approval as required under the DGCL or the Pennsylvania Business Corporation
Law (the "PBCL"), as applicable, together with this Agreement, in accordance
with Article II hereof, the Plan of Merger, in the form which is set forth as
Exhibit 2.1 hereto, with such further changes as may be mutually agreed upon by
the parties hereto (the "Merger Agreement"), providing for the Merger and the
conversion of (i) each outstanding share of Ultrak common stock, par value $0.01
per share (the "Ultrak Common Stock"), into 1.15 (the "Common Stock Exchange
Ratio") shares of Checkpoint common stock, par value $0.10 per share (the
"Checkpoint Common Stock"), and (ii) each outstanding share of Ultrak preferred
stock, par value $5.00 per share (the "Ultrak Preferred Stock") into 3.6756
(subject to the provisions of Section 6.22 hereof, the "Preferred Stock Exchange
Ratio") shares of Checkpoint Common Stock as set forth in the Merger Agreement.
As provided in the Merger Agreement, the Merger Subsidiary, to be renamed
Ultrak, Inc. as provided in Section 2.3(a), shall be the surviving corporation
in the Merger. From and after the Effective Time, the identity and separate
existence of Ultrak shall cease, and the Merger Subsidiary shall succeed,
without other transfer, to all the rights, properties, debts and liabilities of
Ultrak.
(c) In connection with the Merger, Checkpoint shall take such
actions as may be necessary to reserve sufficient shares of Checkpoint Common
Stock, prior to the Merger, to permit the issuance of shares of Checkpoint
Common Stock (i) to the holders of Ultrak Common Stock and Ultrak Preferred
Stock as of the Effective Time in accordance with the terms of the Merger
Agreement and (ii) upon the exercise of Ultrak Stock Options to be converted or
assumed by Checkpoint in accordance with Section 6.7 hereof. Subject to the
provisions of Section 6.1 hereof,
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each of Checkpoint and Ultrak shall use its best efforts to cause the Merger to
be consummated in accordance with the terms of this Agreement and the Merger
Agreement.
Section 2.2 Filing of Merger Documents. Immediately after all
conditions to this Agreement have been satisfied or waived, a certificate of
merger pertaining to the Merger (the "Merger Documents"), or such other
documents necessary to effect the Merger, shall be executed and filed in
accordance with the DGCL and the Merger shall become effective substantially
simultaneously in accordance with the terms of the Merger Agreement (such time
and date are referred to herein as the "Effective Time").
Section 2.3 Effect of Merger. The parties agree to the following
provisions with respect to the Merger:
(a) Name of Surviving Corporation. The name of the Merger
Subsidiary, as the surviving corporation in the Merger, from and after the
Effective Time shall be changed to "Ultrak, Inc.", until subsequently changed or
amended in accordance with applicable law.
(b) Charter Documents. At the Effective Time the Certificate
of Incorporation and Bylaws of the Merger Subsidiary, shall be the Certificate
of Incorporation and Bylaws of the Corporation surviving the Merger.
(c) Other Effects. The Merger shall have such other effects as
are set forth in the Merger Agreement and the DGCL.
Section 2.4 Directors of Checkpoint. Checkpoint shall take all actions
necessary to cause the directors comprising the full board of directors of
Checkpoint (the "Checkpoint Board") at the Effective Time to be comprised of 12
directors. Initially, three of such directors shall be designated by Ultrak and
nine shall be designated by Checkpoint. Checkpoint agrees that each Ultrak
Designee shall be either elected at the Effective Time (i) for a term of not
less than three (3) years or (ii) for a term of less than three (3) years but
subsequently nominated by the Checkpoint board of directors, when such person
next stands for election, for a new three (3) year term. Within twenty (20) days
of the date hereof, Ultrak shall designate in writing to Checkpoint the persons
who shall serve as its initial designees to the Checkpoint Board (the "Ultrak
Designees"). If, prior to the Effective Time, any of the Ultrak Designees shall
decline or be unable to serve as a Checkpoint director, Ultrak shall designate
another person to serve in such person's stead, which person shall be reasonably
acceptable to Checkpoint. The foregoing directors of Checkpoint shall hold their
positions until their resignation or removal or the election or appointment of
their successors in the manner provided in Checkpoint's Articles of
Incorporation and Bylaws, as each exists on the date of this Agreement, and
applicable law. In the event any Ultrak Designee is unable or unwilling to serve
as a director of Checkpoint at any time during the period ending on the third
anniversary of the Closing, Checkpoint shall replace such director with a
nominee who shall be satisfactory to the remaining Ultrak Designees.
Section 2.5 Closing and Closing Date. The execution and delivery of the
documents required to effectuate the transactions contemplated by this Agreement
(the "Closing") shall take place at such place and time as the parties shall
reasonably agree, on the second business day after
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satisfaction or waiver of the last to be fulfilled of the conditions set forth
in Article VII that by their terms are not to occur at the Closing (the "Closing
Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF CHECKPOINT
Except as disclosed in a disclosure schedule which specifically refers
to the section to which such disclosure relates (the "Checkpoint Disclosure
Schedule"), Checkpoint represents and warrants to and covenants with Ultrak as
follows:
Section 3.1 Organization and Qualification. Each of Checkpoint, its
Significant Subsidiaries and Merger Subsidiary, is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted, and is duly qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to so qualify or be in good standing, or to have such
authority, would not have a Material Adverse Effect on Checkpoint. True and
complete copies of the Articles of Incorporation and Bylaws of Checkpoint as in
effect on the date hereof, including all amendments thereto, have heretofore
been delivered to Ultrak.
Section 3.2 Capitalization.
(a) The authorized capital stock of Checkpoint consists of
(i) the Checkpoint Common Stock which consists of 100,000,000 shares par value
$0.10 per share and (ii) 500,000 of shares of Class A preferred stock, no par
value (the "Checkpoint Preferred Stock"). As of March 7, 1997, there were
(i) 34,571,528 shares of Checkpoint Common Stock issued and outstanding, all of
which are validly issued, fully paid and nonassessable and are not subject to
and were not issued in violation of any preemptive rights, (ii) 4,000,000 shares
of the Checkpoint Common Stock reserved for issuance in connection with the
Checkpoint Stock Option Plan (1992) (the "Checkpoint Option Plan"), and
(iii) options to acquire 3,622,222 shares of Checkpoint Common Stock granted to
consultants, directors, officers and other employees of Checkpoint (the
"Checkpoint Stock Options"). No shares of Checkpoint Common Stock are reserved
for issuance under the Checkpoint Employee Stock Purchase Plan (the "Checkpoint
ESPP"). There are no shares of Checkpoint Preferred Stock issued or outstanding.
No Subsidiary of Checkpoint holds any shares of Checkpoint Common Stock. There
has been no material change in the information set forth in the second sentence
of this Section 3.2(a) between the close of business on March 7, 1997 and the
date hereof. The Checkpoint Disclosure Schedule sets forth a true, accurate and
complete list of each Checkpoint Stock Option which presently is outstanding,
with the name of optionholder, number of shares, grant date, expiration date,
exercise price and vesting schedule.
(b) Except for this Agreement, the Merger Agreement, the
Checkpoint ESPP and the Checkpoint Stock Options, there are not now, and at the
Effective Time there will not be, any options, warrants, calls, rights,
subscriptions, convertible securities or other rights or agreements,
arrangements or commitments of any kind obligating Checkpoint or any of its
current Subsidiaries to issue, transfer or sell any securities of Checkpoint.
All shares of Checkpoint Common Stock subject
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to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. There are no outstanding
contractual or other obligations of Checkpoint or any of its current
Subsidiaries to purchase, redeem or otherwise acquire any shares of Checkpoint
Common Stock. There is not now, and at the Effective Time there will not be, any
stockholder agreement, voting trust or other agreement or understanding to which
Checkpoint or any of its Subsidiaries is a party or bound relating to the voting
of any shares of the capital stock of Checkpoint or any of its current
Subsidiaries.
Section 3.3 Authority. Checkpoint has, and Merger Subsidiary will have,
all requisite corporate power and authority to execute and deliver this
Agreement and, as to Merger Subsidiary only, the Merger Agreement and, subject
to approval of this Agreement and the Merger Agreement by the shareholders of
Checkpoint, to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Merger Agreement and the
consummation by Checkpoint and Merger Subsidiary of the transactions
contemplated hereby and thereby, have been duly authorized by Checkpoint's board
of directors and no other corporate proceedings on the part of Checkpoint are
necessary to authorize the execution and delivery of this Agreement and the
consummation by Checkpoint of the transactions contemplated hereby and thereby,
except for the approval of this Agreement and the Merger Agreement by the
shareholders of Checkpoint and by the Board of Directors and sole stockholder of
Merger Subsidiary when formed. This Agreement has been duly and validly executed
and delivered by Checkpoint, and as of the Effective Time, this Agreement and
the Merger Agreement will be duly and validly executed and delivered by Merger
Subsidiary and, assuming the due authorization, execution and delivery hereof
and thereof by Ultrak, constitute or will constitute, as the case may be, valid
and binding agreements of Checkpoint and Merger Subsidiary, enforceable against
each in accordance with their terms, except that such enforceability may be
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights generally and (ii) by general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).
Section 3.4 Consents and Approvals; No Violation. None of the execution
and delivery by Checkpoint of this Agreement or the Merger Agreement by Merger
Subsidiary, the consummation by Checkpoint and Merger Subsidiary of the
transactions contemplated hereby and thereby or compliance by Checkpoint and
Merger Subsidiary with any of the provisions hereof will (i) conflict with or
result in a breach of any provision of the respective charters or bylaws (or
similar governing documents) of Checkpoint, the Merger Subsidiary or any of its
current Subsidiaries, (ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Entity, except
(A) pursuant to the Exchange Act, the Securities Act, certain state takeover,
securities and antitrust statutes and the HSR Act and (B) for filing the Merger
Documents with respect to the Merger pursuant to the DGCL, (iii) result in a
default (or an event which with notice or lapse of time or both would become a
default) or give to any third party any right of termination, cancellation,
amendment or acceleration under, or result in the creation of a lien or
encumbrance on any of the assets of Checkpoint or any of its current
Subsidiaries pursuant to any note, license, agreement or other instrument or
obligation to which Checkpoint or any of its current Subsidiaries is a party or
by which Checkpoint or any of its current Subsidiaries or any of their
respective assets may be bound or affected, or (iv) violate or conflict with any
order, writ, injunction, decree, statute, rule or regulation applicable to
Checkpoint or any of its current Subsidiaries or any of their respective
properties or assets; other than such defaults, rights of termination,
cancellation, amendment or acceleration, liens
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and encumbrances, violations, conflicts, consents, approvals, authorizations,
permits or filings which, in the aggregate, would not have a Material Adverse
Effect on Checkpoint and would not materially impair Checkpoint's ability to
consummate the transactions contemplated by this Agreement and the Merger
Agreement.
Section 3.5 SEC Reports and Financial Statements. Each form, report,
schedule, registration statement and definitive proxy statement filed by
Checkpoint with the SEC since December 31, 1994 (as such documents have since
the time of their filing been amended, the "Checkpoint SEC Reports"), which
include all the documents (other than preliminary material) that Checkpoint was
required to file with the SEC since such date, as of their respective dates,
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Checkpoint SEC Reports. None of the Checkpoint SEC
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except for such statements, if any, as have been modified by
subsequent filings prior to the date hereof. The financial statements of
Checkpoint included in such reports comply as to form in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present (subject in
the case of the unaudited statements, to normal, recurring audit and year-end
adjustments) the consolidated financial position of Checkpoint and its
Subsidiaries as at the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended. Since December 31, 1996,
neither Checkpoint nor any of its current Subsidiaries has incurred any
liabilities or obligations, whether absolute, accrued, fixed, contingent,
liquidated, unliquidated or otherwise and whether due or to become due, except
(i) as and to the extent set forth in the consolidated financial statements of
Checkpoint and its Subsidiaries as at December 31, 1996 (including the notes
thereto) (the "Checkpoint Financial Statements"), (ii) as incurred in connection
with the transactions contemplated, or as provided, by this Agreement, (iii) as
incurred after December 31, 1996 in the ordinary course of business and
consistent with past practices, (iv) as described in the Checkpoint SEC Reports
or (v) as would not, individually or in the aggregate, have a Material Adverse
Effect on Checkpoint.
Section 3.6 Absence of Certain Changes or Events. Except as disclosed
in the Checkpoint SEC Reports filed prior to the date of this Agreement, since
December 31, 1996, Checkpoint and its current Subsidiaries have conducted their
respective businesses only in the ordinary course, consistent with past
practice, and there has not occurred or arisen any event, individually or in the
aggregate, having or which, insofar as reasonably can be foreseen, in the future
is likely to have, a Material Adverse Effect on Checkpoint.
Section 3.7 Litigation. As of the date of this Agreement, except as
disclosed in the Checkpoint SEC Reports filed prior to the date of this
Agreement, there is no claim, suit, action or proceeding pending, or, to the
Knowledge of Checkpoint, threatened against or affecting Checkpoint or any of
its current Subsidiaries, which is reasonably likely to have a Material Adverse
Effect on Checkpoint, nor is there any judgment, decree, order, injunction, writ
or rule of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator outstanding against Checkpoint or
any of its current Subsidiaries having, or which, insofar as reasonably can be
foreseen, in the future is likely to have, any such effect. There are no suits,
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actions, claims, proceedings, or investigations pending or, to Checkpoint's
Knowledge, threatened which challenge the validity or propriety of the
transactions contemplated by this Agreement. The Checkpoint Disclosure Schedule
sets forth a summary description (including the result of any completed
investigation or inquiry) of any investigation or inquiry of Checkpoint by the
Federal Trade Commission.
Section 3.8 Information Supplied. The information supplied or to be
supplied by Checkpoint or its Subsidiaries for inclusion in (i) the Form S-4
will not, either at the time the Form S-4 is filed with the SEC or at the time
it becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) the Proxy
Statement, including any amendments and supplements thereto, will not, either at
the date mailed to shareholders or at the time of the meeting of shareholders of
Checkpoint to be held in connection with the transactions contemplated by this
Agreement and the Merger Agreement, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement and the Form S-4
will each comply as to form in all material respects with all applicable laws,
including the provisions of the Securities Act and the Exchange Act, except that
no representation is made by Checkpoint with respect to information supplied by
Ultrak for inclusion therein.
Section 3.9 Employee Matters.
(a) Checkpoint has made available to Ultrak full and complete
copies or descriptions of each material employment, bonus, profit sharing,
compensation, termination, stock option, stock appreciation right, restricted
stock, phantom stock, performance unit, pension, retirement, deferred
compensation, welfare or other employee benefit agreement, policy or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), trust fund or other arrangement and any union, guild or
collective bargaining agreement maintained or contributed to or required to be
contributed to by Checkpoint or any of its ERISA Affiliates, for the benefit or
welfare of any director, officer, employee or former employee of Checkpoint or
any of its ERISA Affiliates (such plans and arrangements, being referred to
herein as the "Checkpoint Plans"). All liabilities under each Checkpoint Plan
and Checkpoint Benefit Arrangement (as defined below) required to be accrued or
disclosed in accordance with GAAP (including, where appropriate, proportional
accruals for partial periods) are properly accrued or disclosed in the
Checkpoint Financial Statements. Each Checkpoint Plan and Checkpoint Benefit
Arrangement has been maintained in material compliance with its terms, and all
contributions, premiums or other payments due from Checkpoint or any of its
Subsidiaries to or under any of them have been fully paid or adequately provided
for in the Checkpoint Financial Statements. There has been no amendment, written
interpretation or announcement (whether or not written) by Checkpoint with
respect to, or change in employed participation or coverage under, any
Checkpoint Plan or Checkpoint Benefit Arrangement that would increase materially
the expense of maintaining any such plan or arrangement, individually or in the
aggregate, above the level of expense incurred with respect thereto for 1996. To
Checkpoint's Knowledge, no condition exists that is reasonably likely to subject
Checkpoint or any of its current Subsidiaries to any direct or indirect
liability under Title IV of ERISA or to a civil penalty under section 502 of
ERISA or liability under section 4069 of ERISA or 4975, 4976, 4980B or 6652 of
the Code or the loss of a Federal tax deduction under section 280G of the Code
or other liability with respect to the Checkpoint Plans or any similar plan
maintained with
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respect to any of Checkpoint's Subsidiaries that would have a Material Adverse
Effect on Checkpoint and that is not reflected in the Checkpoint Financial
Statements. No Checkpoint Plan (other than any Checkpoint Plan that is a
"multiemployer plan" as such term is defined in section 4001(a)(3) of ERISA) is
subject to Title IV of ERISA. There are no pending, or to Checkpoint's
Knowledge, threatened, or anticipated claims (other than routine claims for
benefits or immaterial claims) by, on behalf of or against any of the Checkpoint
Plans or any trusts related thereto.
(b) Checkpoint has made available to Ultrak full and complete
copies or descriptions of each material employment, bonus, profit sharing,
compensation, termination, stock option, stock appreciation right, restricted
stock, phantom stock, performance unit, pension, retirement, deferred
compensation, welfare or other employee benefit arrangement, policy or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), trust fund or other arrangement and any union, guild
or collective bargaining agreement which (i) is not Checkpoint Plan, (ii) is
maintained, established or contributed to by Checkpoint or any Subsidiary, and
(iii) covers any employee or former employee of Checkpoint or any of its
Subsidiaries with respect to services rendered outside of the United States,
(collectively, the "Checkpoint Benefit Arrangements").
(c)(i) None of the Checkpoint Plans or Checkpoint Benefit
Arrangements promises or provides retiree medical or other retiree welfare
benefits to any person except as required by applicable law, including but not
limited to COBRA; (ii) Checkpoint has maintained all Checkpoint Plans and
Checkpoint Benefit Arrangements in material compliance with the requirements
prescribed by applicable laws (including ERISA and the Code), orders, or
governmental rules or regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or
beneficiaries or the Department of Labor, Internal Revenue Service ("IRS") or
the Secretary of the Treasury, and Checkpoint has performed all material
obligations required to be performed by it under, is not in default under or in
violation of, and has no Knowledge of any default or violation by any other
party to, any of the Checkpoint Plans or Checkpoint Benefit Arrangements;
(iii) each Checkpoint Plan intended to qualify under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code is either
currently subject to a favorable determination letter from the IRS, or
Checkpoint has a remaining period of time under applicable Treasury Regulations
or IRS pronouncements in which to apply for such a determination letter and to
make any amendments necessary to obtain a favorable determination; and (iv) no
current or former Checkpoint Plan or Checkpoint Benefit Arrangement is, or
within the prior six (6) years has been subject to, and Checkpoint has not
incurred and does not expect to incur any liability under, Title IV of ERISA or
Section 412 of the Code.
(d) The Checkpoint Disclosure Schedule sets forth a true and
correct list of all material plans and policies maintained or administered by
Checkpoint or any of its Subsidiaries relating to benefits provided to employees
in foreign countries pursuant to the laws of such countries or other
jurisdictions. Checkpoint has maintained or administered each such plan or
policy in material compliance with its terms and applicable legal requirements,
and all contributions, premiums or other payments due from Checkpoint or any of
its Subsidiaries to or under any such plan or arrangement have been fully paid
or adequately provided for in accordance with GAAP in Checkpoint's Financial
Statements.
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Section 3.10 Affiliate Agreements. Except as disclosed in the
Checkpoint SEC Reports filed prior to the date of this Agreement and except for
this Agreement neither Checkpoint nor any of its Subsidiaries is a party to any
oral or written agreement with any of its Affiliates.
Section 3.11 Environmental. Except as otherwise disclosed in writing to
Ultrak and to Checkpoint's Knowledge: (i) the businesses as presently or
formerly engaged in by Checkpoint and its Subsidiaries are and have been
conducted in material compliance with all applicable Environmental Laws,
including, without limitation, having all material permits, licenses and other
approvals and authorizations, during the time Checkpoint or any Subsidiary of
Checkpoint engaged in such businesses; (ii) the properties presently or formerly
owned or operated by Checkpoint or any Subsidiary of Checkpoint (including,
without limitation, soil, groundwater or surface water on, under or adjacent to
the properties, and buildings thereon) ("Checkpoint Properties") do not contain
any Contamination other than as permitted under applicable Environmental Law
(provided, however, that with respect to Checkpoint Properties formerly owned or
operated by Checkpoint or any Subsidiary of Checkpoint, the representations in
this subsection (ii) are limited to the period Checkpoint or any Subsidiary of
Checkpoint owned or operated such Checkpoint Properties and to any Contamination
that Checkpoint was notified of in writing since the date of ownership or
operation of such Checkpoint Properties); (iii) neither Checkpoint nor any
Subsidiary of Checkpoint has received any written notices, demand letters or
requests for information from any Governmental Entity or any Person claiming
that Checkpoint or any Subsidiary of Checkpoint violated, may be in violation
of, or liable under, any Environmental Law in connection with the ownership or
operation of Checkpoint or its Subsidiaries' businesses; (iv) there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened against Checkpoint or any
Subsidiary of Checkpoint with respect to Checkpoint or any Subsidiary of
Checkpoint or the Checkpoint Properties relating to any violation, or alleged
violation, of any Environmental Law; (v) no reports have been filed, or are
required to be filed, and no notifications have been made or are required to be
made, by Checkpoint or any Subsidiary of Checkpoint with any Governmental Entity
concerning the release of any Hazardous Material or the threatened or actual
violation of any Environmental Law on or at Checkpoint Properties; (vi) other
than in compliance with Environmental Law, no Hazardous Material has been
generated at, transferred or transported to or from, disposed at or removed for
disposal from, or otherwise released at or from any of the Checkpoint Properties
in a manner which caused Contamination, (vii) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses conducted
since January 1, 1994 by or which are in the possession of Checkpoint or any
Subsidiary of Checkpoint relating to Checkpoint or any Subsidiary of Checkpoint
or the Checkpoint Properties which have not been delivered to Ultrak prior to
the date hereof, (viii) there are no underground storage tanks on, in or under
any of the Checkpoint Properties and no underground storage tanks have been
closed or removed by Checkpoint or any of its Subsidiaries from any Checkpoint
Properties which are or have been in the ownership of Checkpoint or any
Subsidiary of Checkpoint; (ix) there is no friable asbestos-containing material
on the Checkpoint Property presently owned or operated by Checkpoint or any
subsidiary of Checkpoint which would require, under ordinary occupancy
(nonconstruction) conditions, a remedial action pursuant to the Occupational
Safety & Health Act ("OSHA"), or applicable state and local counterparts to OSHA
and no such material has been removed from any Checkpoint Property while such
Checkpoint Property was owned or operated by Checkpoint or any Subsidiary of
Checkpoint; (x) none of the Checkpoint Properties has been used at any time by
Checkpoint or any Subsidiary of Checkpoint as a treatment, storage or disposal
facility under RCRA; and (xi) neither Checkpoint nor any Subsidiary of
Checkpoint has incurred, and none of the Checkpoint Properties are presently
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subject to, any material liabilities (fixed or contingent) relating to any suit,
settlement, court order, administrative order, judgment or claim asserted or
arising under any Environmental Law.
Section 3.12 No Violations. To Checkpoint's Knowledge, the business of
Checkpoint and its Subsidiaries are not being conducted in violation of, or in a
manner which would cause liability under any applicable law, rule or regulation,
judgment, decree or order of any Governmental Entity, except for any violations
or practices, which, individually or in the aggregate, have not had and will not
have a Material Adverse Effect on Checkpoint.
Section 3.13 Opinion of Financial Advisor. Checkpoint has received the
opinion of Xxxxxx Xxxxxxx to the effect that, as of March 10, 1997, the
consideration to be paid by Checkpoint in the Merger is fair to Checkpoint.
Section 3.14 Brokers and Finders. Neither Checkpoint nor any of its
Subsidiaries nor any of their respective directors, officers or employees has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions or similar payments in connection
with the transactions contemplated by this Agreement or the Merger Agreement
other than to Xxxxxx Xxxxxxx and to the Blackstone Group Ltd.
Section 3.15 Taxes. Checkpoint and each of its Subsidiaries has timely
filed (or caused to be filed) all Tax Returns required to be filed by each of
them, and all such Tax Returns are true, correct and complete in all material
respects. All Taxes required to be paid as shown on such Tax Returns have been
timely paid. All Taxes required to be paid in respect of the periods covered by
such Tax Returns ("Return Periods") have either been paid or fully accrued on
the books of Checkpoint. Checkpoint and each of its Subsidiaries has fully
accrued all unpaid Taxes in respect of all periods (or the portion of any such
periods) subsequent to the Return Periods and ending on or prior to the
Effective Time. No deficiencies or adjustments for any Tax have been claimed,
proposed or assessed, or to Checkpoint's Knowledge, threatened against
Checkpoint or its Subsidiaries. The Checkpoint Disclosure Schedule accurately
sets forth the last year for which Checkpoint's or its Subsidiaries' foreign,
federal and state income Tax Returns, respectively, have been audited and any
years which are the subject of a pending audit by the Internal Revenue Service
and the applicable state agencies. Except as so disclosed, neither Checkpoint
nor any of its Subsidiaries (i) is subject to any pending or, to Checkpoint's
Knowledge, threatened, Tax audit or examination, or (ii) is delinquent in the
payment of any Tax nor is subject to any outstanding Tax deficiency, proposed or
assessed. The Checkpoint SEC Reports contain adequate accruals for all unpaid
Taxes. All foreign, state, and local jurisdictions where Checkpoint has filed
Tax Returns are set forth on the Checkpoint Disclosure Schedule. There are no
claims currently being pursued by any Taxing Authority (as hereinafter defined)
against Checkpoint or any of its Subsidiaries which are material in amount
except as set forth on the Checkpoint Disclosure Schedule. There are no requests
for rulings in respect of any Tax that are pending between Checkpoint and any
Taxing Authority. Checkpoint has not filed an election or caused any deemed
election under Section 338 of the Code to be made for which the Tax liability
has not been paid. Checkpoint has not requested or granted to any Taxing
Authority any extension of the limitations period during which any Tax liability
may be assessed or collected, which request is still pending, or which extension
remains in effect. All monies required to be withheld or collected by
Checkpoint, and the portion of any such Taxes to be paid by Checkpoint to Taxing
Authorities, have been collected or withheld and either paid to the respective
Taxing Authority or set aside in accounts for such purposes, or such monies have
been approved, reserved against, and entered upon the books of Checkpoint.
Checkpoint will not be required, as a result of a change in a method of
accounting
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for Tax purposes for any Tax period ending on or before the Effective Time, to
include any adjustment under Section 481(c) of the Code in taxable income for
any Tax period beginning after the Effective Time. For the purposes of this
Agreement, the terms "Tax" and "Taxes" shall include (A) all federal, state,
local and foreign taxes, assessments, duties, and other governmental charges or
impositions and tariffs, including without limitation all income, franchise,
property, production, sales, business privilege, use, payroll, license, windfall
profits, severance, withholding, excise, value added, employment, recapture
gross receipts and other taxes, as well as any interest, additions or penalties
relating thereto and any interest in respect of such additions or penalties,
imposed by any governmental authority (a "Taxing Authority") responsible for the
imposition of any such tax (federal, state, and local, foreign or domestic),
(B) liability for the payment of any amounts of the type described in clause
(A) as a result of being a member of an affiliated, consolidated, combined or
unitary group for any period ending on or before the Effective Time, or as a
result of being a party to any agreement or arrangement whereby liability for
payment of such amounts was determined or taken into account with reference to
the liability of another party for any period prior to the Effective Time, and
(C) liability for the payment of any amounts of the type described in (A) as a
result of any express or implied obligation to indemnify any other person. "Tax
Return" means any return, declaration, report, claim for refund, or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
Section 3.16 Intellectual Property. Checkpoint, directly or indirectly,
owns, or is licensed or otherwise possesses legally enforceable rights to use,
all patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, trade dress, know-how, computer software
programs or applications, tangible or intangible proprietary information or any
intellectual property that are material to the business of Checkpoint and its
Subsidiaries as currently conducted (the "Checkpoint Intellectual Property").
The Checkpoint Disclosure Schedule sets forth a complete list of (i) all
patents, trademarks, registered copyrights, trade names, and service marks, and
any applications therefor, included in the Checkpoint Intellectual Property, and
specifies, where applicable, the jurisdiction in which each has been issued or
registered, or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers and the
names of all registered owners, and (ii) all material licenses, sublicenses and
other agreements as to which Checkpoint or any of its Subsidiaries is a party
and pursuant to which Checkpoint or any of its subsidiaries or any other person
is authorized to use any Checkpoint Intellectual Property or other trade secret
or computer software material to Checkpoint, and includes the identity of all
parties thereto and the description of the nature and subject matter thereof.
Neither Checkpoint nor any of its Subsidiaries is in violation of any license,
sublicense or agreement described in the Checkpoint Disclosure Schedule, except
such violations as do not materially impair their rights under such license,
sublicense or agreement. Checkpoint is the sole and exclusive owner or licensee
of, with all right, title and interest in and to (free and clear of any liens or
encumbrances), the Checkpoint Intellectual Property, and has sole and exclusive
rights (and is not contractually obligated to pay any compensation to any third
party in respect thereof) to the use thereof or the material covered thereby in
connection with the services or products in respect of which the Checkpoint
Intellectual Property is being used. All material registered trademarks, service
marks and copyrights held by Checkpoint or its Subsidiaries are valid and
subsisting. To the Knowledge of Checkpoint, there is no material unauthorized
use, infringement or misappropriation of any Checkpoint Intellectual Property by
any Person, including any employee or former employee of Checkpoint or any of
its Subsidiaries. No Checkpoint Intellectual Property or product of Checkpoint
or any of its Subsidiaries is subject to any outstanding decree, order, judgment
or stipulation restricting in any manner, the licensing or use thereof by
Checkpoint or any of its Subsidiaries.
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Neither Checkpoint nor any of its Subsidiaries has entered into any agreement
(other than exclusive distribution agreements disclosed in the Checkpoint
Disclosure Schedule) under which Checkpoint or its Subsidiaries is restricted
from selling, licensing or otherwise distributing any of its products to any
class of customers, in any geographic area, during any period of time or in any
segment of the market. Checkpoint has a policy requiring that each employee of
Checkpoint and any of its Subsidiaries shall execute a proprietary information
and confidentiality agreement in favor of Checkpoint, in addition to an
agreement to assign intellectual property to Checkpoint. To Checkpoint's
Knowledge, neither Checkpoint nor any of its Subsidiaries utilizes or has
utilized any patent, trademark, tradename, service xxxx, copyright, software,
trade secret or know-how, except for those which are owned, possessed or
lawfully used by Checkpoint or its Subsidiaries in their operations, and, to the
Knowledge of Checkpoint, neither Checkpoint nor any of its Subsidiaries
infringes upon or unlawfully or wrongfully uses any patent, trademark,
tradename, service xxxx, copyright or trade secret owned or validly claimed by
another. Checkpoint has no continuing obligation to pay royalties or other
payments to third parties as a result of any infringement or prior infringement.
All licenses relating to Checkpoint Intellectual Property are evidenced by valid
and effective written agreements and no other party to any such agreement with
Checkpoint has breached, terminated, given notice of future termination of,
given notice of a material change in terms upon any renewal or extension, or
advised Checkpoint that it will not renew or extend any such agreement with
Checkpoint.
Section 3.17 Insurance. Except as disclosed to Ultrak, each of
Checkpoint and its Subsidiaries is, and has been continuously since January 1,
1990, insured with financially responsible insurers in such amounts and against
such risks and losses as are customary for companies conducting the businesses
as conducted by Checkpoint and its Subsidiaries during such time period. Except
as disclosed to Ultrak, since December 31, 1994, neither Checkpoint nor any of
its Subsidiaries has received notice of cancellation or termination with respect
to any material insurance policy of Checkpoint or its Subsidiaries. The
insurance policies of Checkpoint and its Subsidiaries are valid and enforceable
policies.
Section 3.18 Disclosure. No representation or warranty of Checkpoint
contained in this Agreement, or of Merger Subsidiary in the Merger Agreement,
and no statement contained in any certificate or the Checkpoint Disclosure
Schedule furnished or to be furnished by or on behalf of Checkpoint to Ultrak or
any of its representatives pursuant thereto contains or will contain any untrue
statement of a material fact, or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made, in
order to make the statements herein or therein not misleading or necessary in
order to fully and fairly provide the information required to be provided in any
such document, certificate or schedule.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF ULTRAK
Except as disclosed in a disclosure schedule which specifically refers
to the section to which such disclosure relates (the "Ultrak Disclosure
Schedule"), Ultrak represents and warrants to and covenants with Checkpoint as
follows:
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Section 4.1 Organization and Qualification. Each of Ultrak and its
Significant Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and is duly qualified to do
business and in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to so qualify or be
in good standing, or have such authority, would not have a Material Adverse
Effect on Ultrak. True and complete copies of the Certificate of Incorporation
and Bylaws of Ultrak as in effect on the date hereof, including all amendments
thereto, have heretofore been delivered to Checkpoint.
Section 4.2 Capitalization.
(a) The authorized capital stock of Ultrak consists of (i) the
Ultrak Common Stock which consists of 20,000,000 shares, par value $0.01 per
share and (ii) the Ultrak Preferred Stock which consists of 2,000,000 shares,
par value $5.00 per share. As of March 7, 1997, (i) 14,083,656 shares of Ultrak
Common Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable and are not subject to and were not issued in violation
of any preemptive rights, (ii) 900,000 shares of Ultrak Common Stock were
reserved for issuance in connection with the Ultrak Inc. 1988 Non-qualified
Stock Option Plan (the "Ultrak Stock Plan"), (iii) options to acquire 778,776
shares of Ultrak Common Stock held by officers and other employees of Ultrak and
by certain other Persons had been granted and were outstanding (the "Ultrak
Stock Options"), and (iv) 195,351 shares of Ultrak Preferred Stock were issued
and outstanding, all of which are validly issued, fully paid and nonassessable.
There has been no material change in the information set forth in this Section
4.2(a) between the close of business on March 7, 1997, and the date hereof. The
Ultrak Disclosure Schedule sets forth true, accurate and complete list of each
Ultrak Stock Option which presently is outstanding, with the name of
optionholder, number of shares, grant date, expiration date, exercise price and
vesting schedule.
(b) Except for this Agreement, the Merger Agreement and the
Ultrak Stock Options, there are not now, and at the Effective Time there will
not be, any options, warrants, calls, rights, subscriptions, convertible
securities or other rights or agreements, arrangements or commitments of any
kind obligating Ultrak to issue, transfer or sell any securities of Ultrak. All
shares of Ultrak Common Stock subject to issuance as aforesaid, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
There are no outstanding contractual or other obligations of Ultrak to purchase,
redeem or otherwise acquire any shares of Ultrak Common Stock. There is not now,
and at the Effective Time there will not be, any stockholder agreement, voting
trust or other agreement or understanding to which Ultrak is a party or bound
relating to the voting of any shares of the capital stock of Ultrak.
Section 4.3 Authority. Ultrak has all requisite corporate power and
authority to execute and deliver this Agreement and the Merger Agreement and,
subject to approval of this Agreement and the Merger Agreement by the
shareholders of Ultrak, to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Merger Agreement
and the consummation by Ultrak of the transactions contemplated hereby and
thereby, have been duly authorized by Ultrak's board of directors and no other
corporate proceedings on the part of Ultrak are necessary to authorize the
execution and delivery of this Agreement and the consummation by Ultrak
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of the transactions contemplated hereby and thereby, except for the approval of
this Agreement and the Merger Agreement by the shareholders of Ultrak. This
Agreement has been, and as of the Effective Time, the Merger Agreement will be,
duly and validly executed and delivered by Ultrak and, assuming the due
authorization, execution and delivery hereof and thereof by Checkpoint and
Merger Subsidiary, constitute or will constitute, as the case may be, valid and
binding agreements of Ultrak, enforceable against Ultrak in accordance with
their terms, except that such enforceability may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' fights generally and (ii) by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
Section 4.4 Consents and Approvals; No Violation. None of the execution
and delivery by Ultrak of this Agreement or the Merger Agreement, the
consummation by Ultrak of the transactions contemplated hereby and thereby or
compliance by Ultrak with any of the provisions hereof will (i) conflict with or
result in a breach of any provision of the charter or bylaw (or similar
governing documents) of Ultrak or any of its current Subsidiaries, (ii) require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (A) pursuant to the Exchange
Act, the Securities Act, certain state takeover, securities and antitrust
statutes and the HSR Act and (B) for filing the Merger Documents with respect to
the Merger pursuant to the DGCL, (iii) result in a default (or an event which
with notice or lapse of time or both would become a default) or give to any
third party any right of termination, cancellation, amendment or acceleration
under, or result in the creation of a lien or encumbrance on any of the assets
of Ultrak or any of its current Subsidiaries pursuant to any note, license,
agreement or other instrument or obligation to which Ultrak or any of its
current Subsidiaries is a party or by which Ultrak or any of its current
Subsidiaries or any of their respective properties or assets may be bound or
affected, or (iv) violate or conflict with any order, writ, injunction, decree,
statute, rule or regulation applicable to Ultrak or any of its current
Subsidiaries or any of their respective properties or assets; other than such
defaults, rights of termination, cancellation, amendment or acceleration, liens
and encumbrances, violations, conflicts consents, approvals, authorizations,
permits or filings which, in the aggregate, would not have a Material Adverse
Effect on Ultrak and would not materially impair Ultrak's ability to consummate
the transactions contemplated by this Agreement and the Merger Agreement.
Section 4.5 SEC Reports and Financial Statements. Each form, report,
schedule, registration statement and definitive proxy statement filed by Ultrak
with the SEC since December 31, 1994 (as such documents have since the time of
their filing been amended, the "Ultrak SEC Reports"), which include all the
documents (other than preliminary material) that Ultrak was required to file
with the SEC since such date, as of their respective dates, complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Ultrak SEC Reports. None of the Ultrak SEC Reports contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
for such statements, if any, as have been modified by subsequent filings prior
to the date hereof. The financial statements of Ultrak included in such reports
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of the unaudited statements, as permitted by Form
10-Q of the SEC) and fairly present (subject in the case of the unaudited
statements, to normal, recurring audit and year-end adjustments) the
consolidated financial position of Ultrak and its Subsidiaries as at
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the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended. Since December 31, 1996, neither Ultrak nor
any of its current Subsidiaries has incurred any liabilities or obligations,
whether absolute, accrued, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due, except (i) as and to the extent set
forth on the audited consolidated financial statements of Ultrak and its
Subsidiaries as at December 31, 1996 (including the notes thereto) (the "Ultrak
Financial Statements"), (ii) as incurred in connection with the transactions
contemplated, or as provided, by this Agreement, (iii) as incurred after
December 31, 1996 in the ordinary course of business and consistent with past
practices, (iv) as described in the Ultrak SEC Reports or (v) as would not,
individually or in the aggregate, have a Material Adverse Effect on Ultrak.
Section 4.6 Absence of Certain Changes or Events. Except as disclosed
in the Ultrak SEC Reports filed prior to the date of this Agreement, since
December 31, 1996, Ultrak and its current Subsidiaries have conducted their
respective businesses only in the ordinary course, consistent with past
practice, and there has not occurred or arisen any event, individually or in the
aggregate, having or which, insofar as reasonably can be foreseen, in the future
is likely to have, a Material Adverse Effect on Ultrak.
Section 4.7 Litigation. As of the date of this Agreement, except as
disclosed in the Ultrak SEC Reports filed prior to the date of this Agreement,
there is no claim, suit, action or proceeding pending, or, to the Knowledge of
Ultrak, threatened against or affecting Ultrak or any of its current
Subsidiaries, which is reasonably likely to have a Material Adverse Effect on
Ultrak, nor is there any judgment, decree, order, injunction, writ or rule of
any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator outstanding against Ultrak or any of its current
Subsidiaries having, or which, insofar as reasonably can be foreseen, in the
future is likely to have, any such effect. There are no suits, actions, claims,
proceedings or investigations pending or, to Ultrak's Knowledge, threatened
which challenge the validity or propriety of the transactions contemplated by
this Agreement. The Ultrak Disclosure Schedule sets forth a summary description
(including the result of any completed investigation or inquiry) of any
investigation or inquiry of Ultrak by the Federal Trade Commission.
Section 4.8 Information Supplied. The information supplied or to be
supplied by Ultrak or its Subsidiaries for inclusion in (i) the Form S-4 will
not, either at the time the Form S-4 is filed with the SEC or at the time it
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading or (ii) the Proxy
Statement, including any amendments and supplements thereto, will not, either at
the date mailed to shareholders or at the time of the meeting of shareholders of
Ultrak to be held in connection with the transactions contemplated by this
Agreement and the Merger Agreement, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. The Proxy Statement and the Form S-4
will each comply as to form in all material respects with all applicable laws,
including the provisions of the Securities Act and the Exchange Act, except that
no representation is made by Ultrak with respect to information supplied by
Checkpoint for inclusion therein.
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Section 4.9 Employee Matters.
(a) Ultrak has made available to Checkpoint full and complete
copies or descriptions of each material employment, bonus, profit sharing,
compensation, termination, stock option, stock appreciation right, restricted
stock, phantom stock, performance unit, pension, retirement, deferred
compensation, welfare or other employee benefit agreement, policy or arrangement
(written or oral) providing for insurance coverage (including any self-insured
arrangements), trust fund or other arrangement and any union, guild or
collective bargaining agreement maintained or contributed to or required to be
contributed to by Ultrak or any of its ERISA Affiliates, for the benefit or
welfare of any director, officer, employee or former employee of Ultrak or any
of its ERISA Affiliates (such plans and arrangements being referred to herein as
the "Ultrak Plans"). All liabilities under each Ultrak Plan and Ultrak Benefit
Arrangement as defined below required to be accrued or disclosed in accordance
with GAAP (including, where appropriate, proportioned accruals for partial
periods) are properly accrued or disclosed in the Ultrak Financial Statements.
Each Ultrak Plan and Ultrak Benefit Arrangement has been maintained in material
compliance with its terms, and all contributions, premiums or other payments due
from Ultrak or any of its Subsidiaries to or under any of them have been fully
paid or adequately provided for in the Ultrak Financial Statements. There has
been no amendment, written interpretation or announcement (whether or not
written) by Ultrak with respect to, or change in employed participation or
coverage under, any Ultrak Plan or Ultrak Benefit Arrangement that would
increase materially the expense of maintaining any such plan or arrangement,
individually or in the aggregate, above the level of expense incurred with
respect thereto for 1996. To Ultrak's Knowledge, no condition exists that is
reasonably likely to subject Ultrak to any direct or indirect material liability
under Title IV of ERISA or to a civil penalty under section 502 of ERISA or
liability under section 4069 of ERISA or 4975, 4976, 4980B or 6652 of the Code
or the loss of a Federal tax deduction under section 280G of the Code or other
liability with respect to the Ultrak Plans or any similar plans maintained with
respect to any of Ultrak's Subsidiaries, that would have a Material Adverse
Effect on Ultrak and that is not reflected in the Ultrak Financial Statements.
No Ultrak Plan is subject to Title IV of ERISA. There are no pending, or to
Ultrak's Knowledge, threatened, or anticipated claims (other than routine claims
for benefits) by, on behalf of or against any of the Ultrak Plans or any trusts
related thereto.
(b) Ultrak has made available to Checkpoint and complete
copies or descriptions of each material employment, bonus, profit sharing,
compensation, termination, stock option, stock appreciation right, restricted
stock, phantom stock, performance unit, pension, retirement, deferred
compensation, welfare or other employee benefit arrangement, policy or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), trust fund or other arrangement and any union, guild
or collective bargaining agreement which (i) is not an Ultrak Plan, (ii) is
maintained, established or contributed to by Ultrak or any Subsidiary, and
(iii) covers any employee or former employee of Ultrak or any of its
Subsidiaries with respect to services rendered outside of the United States,
(collectively, the "Ultrak Benefit Arrangements").
(c)(i) None of the Ultrak Plans or Ultrak Benefit Arrangements
promises or provides retiree medical or other retiree welfare benefits to any
person except as required by applicable law, including but not limited to COBRA;
(ii) Ultrak has maintained all Ultrak Plans and Ultrak Benefit Arrangements in
material compliance with the requirements prescribed by applicable laws
(including ERISA and the Code), orders, or governmental rules or regulations
currently in effect with respect thereto (including all applicable requirements
for notification to participants or beneficiaries or the Department of Labor,
IRS or the Secretary of the Treasury, and Ultrak has
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performed all material obligations required to be performed by it under, is not
in default under or in violation of, and has no Knowledge of any default or
violation by any other party to, any of the Ultrak Plans or Ultrak Benefit
Arrangements; (iii) each Ultrak Plan intended to qualify under Section 401(a) of
the Code and each trust intended to qualify under Section 501(a) of the Code is
either currently subject to a favorable determination letter from the IRS, or
Ultrak has a remaining period of time under applicable Treasury regulations or
IRS pronouncements in which to apply for such a determination letter and to make
any amendments necessary to obtain a favorable determination; (iv) no current or
former Ultrak Plan or Ultrak Benefit Arrangement is, or within the prior six (6)
years has been subject to, and Ultrak has not incurred and does not expect to
incur any liability under, Title IV of ERISA or Section 412 of the Code; and
(v) nothing in any Ultrak Plan or Ultrak Benefit Arrangement precludes or
interferes with Checkpoint's ability to cause Ultrak to terminate (or
consolidate) any Ultrak Plan or Ultrak Benefit Arrangement after closing except
for legally required notices of not more than sixty (60) days in length.
(d) The Ultrak Disclosure Schedule sets forth a true and
correct list of all material plans and policies maintained or administered by
Ultrak or any of its Subsidiaries relating to benefits provided to employees in
foreign countries pursuant to the laws of such countries or other jurisdiction.
Ultrak has maintained or administered each such plan or policy in material
compliance with its terms and applicable legal requirements, and all
contributions, premiums or other payments due from Ultrak or any of its
subsidiaries to or under any such plan or arrangement have been fully paid or
adequately provided for in accordance with GAAP in Ultrak's Financial
Statements.
Section 4.10 Affiliate Agreements. Except as disclosed in the Ultrak
SEC Reports filed prior to the date of this Agreement and except for this
Agreement, Ultrak is not a party to any oral or written agreement with any of
its Affiliates.
Section 4.11 Environmental. Except as otherwise disclosed in writing to
Checkpoint and to Ultrak's Knowledge: (i) the businesses as presently or
formerly engaged in by Ultrak and its Subsidiaries are and have been conducted
in material compliance with all applicable Environmental Laws, including,
without limitation, having all material permits, licenses and other approvals
and authorizations, during the time Ultrak or any Subsidiary of Ultrak engaged
in such businesses; (ii) the properties presently or formerly owned or operated
by Ultrak or any Subsidiary of Ultrak (including, without limitation, soil,
groundwater or surface water on, under or adjacent to the properties, and
buildings thereon) ("Ultrak Properties") do not contain any Contamination other
than as permitted under applicable Environmental Law (provided, however, that
with respect to Ultrak Properties formerly owned or operated by Ultrak or any
Subsidiary of Ultrak, the representations in this Subsection (ii) are limited to
the period Ultrak or any Subsidiary of Ultrak owned or operated such Ultrak
Properties and to any Contamination that Ultrak was notified of in writing since
the date of ownership or operation of such Ultrak Properties); (iii) neither
Ultrak nor any Subsidiary of Ultrak has received any written notices, demand
letters or requests for information from any Governmental Entity or any Person
claiming that Ultrak or any Subsidiary of Ultrak violated, may be in violation
of, or liable under, any Environmental Law in connection with the ownership or
operation of Ultrak's or its Subsidiaries' businesses; (iv) there are no civil,
criminal or administrative actions, suits, demands, claims, hearings,
investigations or proceedings pending or threatened against Ultrak or any
Subsidiary of Ultrak with respect to Ultrak or any Subsidiary of Ultrak or the
Ultrak Properties relating to any violation, or alleged violation, of any
Environmental Law; (v) no reports have been filed, or are required to be filed,
and no notifications have been made or are required to be made, by Ultrak or any
Subsidiary of Ultrak with any Governmental Entity concerning the release of any
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Hazardous Material or the threatened or actual violation of any Environmental
Law on or at Ultrak Properties; (vi) other than in compliance with Environmental
Law no Hazardous Material has been generated at, transferred or transported to
or from, disposed at or removed for disposal from, or otherwise released at or
from any of the Ultrak Properties in a manner which caused Contamination;
(vii) there have been no environmental investigations, studies, audits, tests,
reviews or other analyses conducted since January 1, 1994 by or which are in the
possession of Ultrak or any Subsidiary of Ultrak relating to Ultrak or any
Subsidiary of Ultrak or the Ultrak Properties which have not been delivered to
Checkpoint prior to the date hereof, (viii) there are no underground storage
tanks on, in or under any of the Ultrak Properties and no underground storage
tanks have been closed or removed by Ultrak or any of its Subsidiaries from any
Ultrak Properties which are or have been in the ownership of Ultrak or any
Subsidiary of Ultrak; (ix) there is no friable asbestos-containing material on
the Ultrak Property presently owned or operated by Ultrak or any subsidiary of
Ultrak which would require, under ordinary occupancy (nonconstruction)
conditions, a remedial action pursuant to OSHA, or applicable state and local
counterparts to OSHA, and no such material has been removed from any Ultrak
Property while such Ultrak Property was owned or operated by Ultrak or any
Subsidiary of Ultrak; (x) none of the Ultrak Properties has been used at any
time by Ultrak or any Subsidiary of Ultrak as a treatment, storage or disposal
facility under RCRA; and (xi) neither Ultrak nor any Subsidiary of Ultrak has
incurred, and none of the Ultrak Properties are presently subject to, any
material liabilities (fixed or contingent) relating to any suit, settlement,
court order, administrative order, judgment or claim asserted or arising under
any Environmental Law.
Section 4.12 No Violations. To Ultrak's Knowledge, the business of
Ultrak and its Subsidiaries are not being conducted in violation of, or in a
manner which could cause liability under any applicable law, rule or regulation,
judgment, decree or order of any Governmental Entity, except for any violations
or practices, which, individually or in the aggregate, have not had and will not
have a Material Adverse Effect on Ultrak.
Section 4.13 Opinion of Financial Advisor. Ultrak has received the
opinion of X.X. Xxxxxxxx to the effect that, as of March 10, 1997, the
consideration to be received in the Merger by the holders of shares of Ultrak
Common Stock is fair to such holders from a financial point of view.
Section 4.14 Brokers and Finders. Neither Ultrak nor any of its
Subsidiaries nor any of its directors, officers or employees has employed any
broker or finder or incurred any liability for any financial advisory fees,
brokerage fees, commissions or similar payments in connection with the
transactions contemplated by this Agreement or the Merger Agreement other than
to X.X. Xxxxxxxx in the nature of a fee for rendering a fairness opinion and a
fee to the valuation firm referred to in Section 6.22.
Section 4.15 Taxes. Ultrak and each of its Subsidiaries has timely
filed (or caused to be filed) all Tax Returns required to be filed by them, and
all such Tax Returns are true, correct and complete in all material respects.
All Taxes required to be paid as shown on such Tax Returns, reports and other
statements have been timely paid. All Taxes required to be paid in respect of
the periods covered by such Tax Returns, have either been paid or fully accrued
on the books of Ultrak. Ultrak and each of its Subsidiaries have fully accrued
all unpaid Taxes in respect of all periods (or the portion of any such periods)
subsequent to the Return Periods and ending on or prior to the Effective Time.
No deficiencies or adjustments for any Tax have been claimed, proposed or
assessed, or to Ultrak's Knowledge, threatened against Ultrak or its
Subsidiaries. The Ultrak Disclosure Schedule accurately sets forth the last year
for which Ultrak's or its Subsidiaries' foreign, federal and state
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income Tax Returns, respectively, have been audited and any years which are the
subject of a pending audit by the Internal Revenue Service and the applicable
state agencies. Except as so disclosed, neither Ultrak nor any of its
Subsidiaries (i) is subject to any pending or, to Ultrak's Knowledge, threatened
Tax audit or examination, or (ii) is delinquent in the payment of any Tax nor is
subject to any outstanding Tax deficiency, proposed or assessed. The Ultrak SEC
Reports contain adequate accruals for all unpaid Taxes. All foreign, state, and
local jurisdictions where Ultrak has filed Tax Returns are set forth on the
Ultrak Disclosure Schedule. There are no claims currently being pursued by any
Taxing Authority against Ultrak or any of its Subsidiaries which are material in
amount except as set forth on the Ultrak Disclosure Schedule. There are no
requests for rulings in respect of any Tax that are pending between Ultrak and
any Taxing Authority. Ultrak has not filed an election or caused any deemed
election under Section 338 of the Code to be made for which the Tax liability
has not been paid. Ultrak has not requested or granted to any Taxing Authority
any extension of the limitations period during which any Tax liability may be
assessed or collected, which request is still pending, or which extension
remains in effect. All monies required to be withheld or collected by Ultrak,
and the portion of any such Taxes to be paid by Ultrak to Taxing Authorities,
have been collected or withheld and either paid to the respective Taxing
Authority or set aside in accounts for such purposes, or such monies have been
approved, reserved against, and entered upon the books of Ultrak. Ultrak will
not be required, as a result of a change in a method of accounting for Tax
purposes for any Tax period ending on or before the Effective Time, to include
any adjustment under Section 481(c) of the Code in taxable income for any Tax
period beginning after the Effective Time.
Section 4.16 Intellectual Property. Ultrak, directly or indirectly,
owns, or is licensed or otherwise possesses legally enforceable rights to use,
all patents, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, trade dress, know-how, computer software
programs or applications, tangible or intangible proprietary information or any
intellectual property that are material to the business of Ultrak and its
Subsidiaries as currently conducted (the "Ultrak Intellectual Property"). The
Ultrak Disclosure Schedule sets forth a complete list of (i) all patents,
trademarks, registered copyrights, trade names, and service marks, and any
applications therefor, included in the Ultrak Intellectual Property, and
specifies, where applicable, the jurisdiction in which each has been issued or
registered, or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers and the
names of all registered owners, and (ii) all material licenses, sublicenses and
other agreements as to which Ultrak or any of its Subsidiaries is a party and
pursuant to which Ultrak or any of its subsidiaries or any other person is
authorized to use any Ultrak Intellectual Property or other trade secret or
computer software material to Ultrak, and includes the identity of all parties
thereto and the description of the nature and subject matter thereof. Neither
Ultrak nor any of its Subsidiaries is in violation of any license, sublicense or
agreement described in the Ultrak Disclosure Schedule, except such violations as
do not materially impair their rights under such license, sublicense or
agreement. Ultrak is the sole and exclusive owner or licensee of, with all
right, title and interest in and to (free and clear of any liens or
encumbrances), the Ultrak Intellectual Property, and has sole and exclusive
rights (and is not contractually obligated to pay any compensation to any third
party in respect thereof) to the use thereof or the material covered thereby in
connection with the services or products in respect of which the Ultrak
Intellectual Property is being used. All material registered trademarks, service
marks and copyrights held by Ultrak or its Subsidiaries are valid and
subsisting. To the Knowledge of Ultrak, there is no material unauthorized use,
infringement or misappropriation of any Ultrak Intellectual Property by any
Person, including any employee or former employee of Ultrak any or of its
Subsidiaries. No Ultrak Intellectual Property or product of Ultrak or any of its
Subsidiaries is subject to any outstanding decree, order, judgment or
stipulation restricting in any manner, the
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licensing or use thereof by Ultrak or any of its Subsidiaries. Neither Ultrak
nor any of its Subsidiaries has entered into any agreement (other than exclusive
distribution agreements disclosed in the Ultrak Disclosure Schedule) under which
Ultrak or its Subsidiaries is restricted from selling, licensing or otherwise
distributing any of its products to any class of customers, in any geographic
area, during any period of time or in any segment of the market. Ultrak has a
policy requiring that each employee of Ultrak and any of its Subsidiaries shall
execute a proprietary information and confidentiality agreement in favor of
Ultrak, in addition to an agreement to assign intellectual property to Ultrak.
To Ultrak's Knowledge, neither Ultrak nor any of its Subsidiaries utilizes or
has utilized any patent, trademark, tradename, service xxxx, copyright,
software, trade secret or know-how, except for those which are owned, possessed
or lawfully used by Ultrak or its Subsidiaries in their operations, and, to the
Knowledge of Ultrak, neither Ultrak nor any of its Subsidiaries infringes upon
or unlawfully or wrongfully use any patent, trademark, tradename, service xxxx,
copyright or trade secret owned or validly claimed by another. Ultrak has no
continuing obligation to pay royalties or other payments to third parties as a
result of any infringement or prior infringement. All licenses relating to
Ultrak Intellectual Property are evidenced by valid and effective written
agreements and no other party to any such agreement with Ultrak has breached,
terminated, given notice of future termination of, given notice of a material
change in terms upon any renewal or extension, or advised Ultrak that it will
not renew or extend any such agreement with Ultrak.
Section 4.17 Insurance. Except as disclosed to Checkpoint, each of
Ultrak and its Subsidiaries is, and has been continuously since January 1, 1990,
insured with financially responsible insurers in such amounts and against such
risks and losses as are customary for companies conducting the business as
conducted by Ultrak during such time period. Except as disclosed to Checkpoint,
since December 31, 1994, Ultrak has not received notice of cancellation or
termination with respect to any material insurance policy of Ultrak or its
Subsidiaries. The insurance policies of Ultrak and its Subsidiaries are valid
and enforceable policies.
Section 4.18 Disclosure. No representation or warranty of Ultrak
contained in this Agreement or the Merger Agreement and no statement contained
in any certificate or the Ultrak Disclosure Schedule furnished or to be
furnished by or on behalf of Ultrak to Checkpoint or any of its representatives
pursuant thereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary, in light of
the circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading or necessary in order to fully and
fairly provide the information required to be provided in any such document,
certificate or schedule.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business of Checkpoint Pending the Effective
Time. Except as expressly permitted or contemplated by this Agreement (including
exceptions set forth in the Checkpoint Disclosure Schedule) or the Merger
Agreement or as shall be consented to in writing by Ultrak (which consent shall
not be unreasonably withheld), until the Effective Time, Checkpoint shall, and
shall cause each of its Subsidiaries to, conduct its operations in the ordinary
and usual course of business consistent with past practice and use all
reasonable efforts (in the ordinary course of business consistent with past
practice) to preserve intact their respective business organizations' goodwill,
keep
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available the services of their respective present officers and key employees,
and preserve the goodwill and business relationships with suppliers,
distributors, customers and others having business relationships with them.
Without limiting the generality of the foregoing, and except as otherwise
permitted by this Agreement, prior to the Effective Time, without the written
consent of Ultrak, which consent shall not be unreasonably withheld, Checkpoint
will not, and will cause each of its Subsidiaries not to:
(a) amend or propose to amend their respective charters or
bylaws (other than to increase its authorized common stock to 200,000,000
shares); or split, combine or reclassify their outstanding capital stock or
declare, set aside or pay any dividend or distribution in respect of any capital
stock (other than to redeem the rights outstanding under Checkpoint's 1988
shareholder's rights plan and to establish a new shareholders rights plan (which
will include as participants the holders of Checkpoint Common Stock issued as a
result of the Merger provided no triggering event occurs under such plan prior
to the Effective Time), or the payment to Checkpoint or any of its Subsidiaries
of any dividend or distribution) or issue or authorize or propose the issuance
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock;
(b)(i) issue or authorize or propose the issuance of, sell,
pledge or dispose of, or agree to issue or authorize or propose the issuance of,
sell, pledge or dispose of, any additional shares of, or any options, warrants
or rights of any kind to acquire any shares of, their capital stock of any class
or any debt or equity securities convertible into or exchangeable for such
capital stock, other than any such issuance pursuant to options or rights
outstanding as of the date hereof in accordance with their terms, the adoption
of a new shareholder's rights plan, and the grant of stock options which are
consistent with past practice as to amount, timing and participants;
(ii) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or otherwise
acquire or agree to acquire any assets if such acquisitions involve aggregate
consideration (which may be in cash or Checkpoint Common Stock) in excess of 10%
of Checkpoint's consolidated assets as of December 31, 1996; (iii) sell
(including by sale-leaseback), lease, pledge, dispose of or encumber any assets
or interests therein, which are material, individually or in the aggregate, to
Checkpoint and its Subsidiaries taken as a whole, other than in the ordinary
course of business and consistent with past practice and other than the sale of
its Alarmex subsidiary; (iv) incur or become contingently liable with respect to
any material indebtedness for borrowed money or guarantee any such indebtedness
or issue any debt securities or otherwise incur any material obligation or
liability (absolute or contingent) other than short-term indebtedness in the
ordinary course of business and consistent with past practice; (v) redeem,
purchase, acquire or offer to purchase or acquire any shares of its capital
stock or its long-term debt, other than as required by the governing instruments
relating thereto (except for redemption of Checkpoint's 1988 shareholders
rights); or (vi) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(c) enter into or amend any employment agreement or any
severance or special pay arrangement with respect to termination of employment
or other arrangements, or modify levels of compensation or benefits, respecting
any directors, officers or key employees, other than in the ordinary course of
business;
(d) adopt, enter into or amend any, or become obligated under
any new, bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, health care,
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employment or other employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any employee or retiree, except as required to
comply with changes in applicable law occurring after the date hereof and except
in the ordinary course of business and consistent with past practice; or
(e) take any action that would, or is reasonably likely to,
result in any of its representations and warranties set forth in this Agreement
becoming untrue, or in any of the conditions to the Merger set forth in Article
VII not being satisfied.
Section 5.2 Conduct of Business of Ultrak Pending the Effective Time.
Except as expressly permitted or contemplated by this Agreement (including
exceptions set forth in the Ultrak Disclosure Schedule) or the Merger Agreement
or as shall be consented to in writing by Checkpoint (which consent shall not be
unreasonably withheld), until the Effective Time, Ultrak shall, and shall cause
each of its Subsidiaries to, conduct its operations in the ordinary and usual
course of business consistent with past practice and use all reasonable efforts
(in the ordinary course of business consistent with past practice) to preserve
intact its business organizations' goodwill, keep available the services of its
present officers and key employees, and preserve the goodwill and business
relationships with suppliers, distributors, customers and others having business
relationships with them. Without limiting the generality of the foregoing, and
except as otherwise permitted by this Agreement, prior to the Effective Time,
without the written consent of Checkpoint, which consent shall not be
unreasonably withheld, Ultrak will not, and will cause each of its Subsidiaries
not to:
(a) amend or propose to amend their respective charters or
bylaws; or split, combine or reclassify their outstanding capital stock or
declare, set aside or pay any dividend or distribution in respect of any of its
capital stock (other than a regular quarterly cash dividend on the Ultrak
Preferred Stock consistent with past practice, or the payment to Ultrak or any
of its Subsidiaries of any dividend or distribution) or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock;
(b)(i) issue or authorize or propose the issuance of, sell,
pledge or dispose of or agree to issue or authorize or propose the issuance of,
sell, pledge or dispose of, any additional shares of, or any options, warrants
or rights of any kind to acquire any shares of, their capital stock of any class
or any debt or equity securities convertible into or exchangeable for such
capital stock, other than (A) any such issuance pursuant to options or rights
outstanding as of the date hereof in accordance with their terms and pursuant to
the options granted in accordance with clauses (B) and (C) immediately
following, (B) the grant of stock options or stock bonus awards, which in the
aggregate may not exceed 50,000 shares of Ultrak Common Stock, consistent with
past practice as to amount, timing and participants, and (C) the grant of
options to acquire 140,000 shares of Ultrak Common Stock which were authorized
in January, 1997 but not yet issued; (ii) acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any such assets in
each case which acquisitions involve aggregate consideration (which may be in
cash or Ultrak Common Stock) in excess of 10% of Ultrak's consolidated assets as
of December 31, 1996; (iii) sell (including by sale-leaseback), lease, pledge,
dispose of or encumber any assets or interests therein, which are material,
individually or in the aggregate, to Ultrak and its Subsidiaries as a whole,
other than in the ordinary course of business and consistent with past practice;
(iv) incur or become contingently liable with respect to any material
indebtedness for
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borrowed money or guarantee any such indebtedness or issue any debt securities
or otherwise incur any material obligation or liability (absolute or contingent)
other than short-term indebtedness in the ordinary course of business and
consistent with past practice; (v) redeem, purchase, acquire or offer to
purchase or acquire any shares of its capital stock or its long-term debt, other
than as required by the governing instruments relating thereto; or (vi) enter
into any contract, agreement, commitment or arrangement with respect to any of
the foregoing,
(c) enter into or amend any employment agreement or any
severance or special pay arrangement with respect to termination of employment
or other arrangements, agreements with, or modify levels of compensation or
benefits, respecting any directors, officers or key employees;
(d) adopt, enter into or amend any, or become obligated under
any new, bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, health care, employment or other employee benefit plan,
agreement, trust, fund or arrangement for the benefit or welfare of any employee
or retiree, except (i) for an amendment to the Ultrak Stock Plan to increase the
number of shares for which options may be granted thereunder to 1,000,000 and
the issuance of stock options permitted by Section 5.2(b)(i), (ii) as required
to comply with changes in applicable law occurring after the date hereof and
(iii) with respect to all plans other than bonus plans, in the ordinary course
of business and consistent with past practice; or
(e) take any action that would, or is reasonably likely to,
result in any of its representations and warranties set forth in this Agreement
becoming untrue, or in any of the conditions to the Merger set forth in Article
VII not being satisfied.
Section 5.3 Cooperation. Subject to compliance with applicable law,
from the date hereof until the Effective Time, each of Checkpoint and Ultrak
shall confer on a regular and frequent basis with one or more representatives of
the other party to report operational matters of materiality and the general
status of ongoing operations and shall promptly provide the other party or its
counsel with copies of all filings made by such party with any Governmental
Entity in connection with this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby.
ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
Section 6.1 No Solicitation. From and after the date hereof, Ultrak and
Checkpoint, without the prior written consent of the other, will not, and will
not authorize or permit any of their respective representatives to, directly or
indirectly, solicit, initiate or encourage (including by way of furnishing
information) or take any other action to facilitate knowingly any inquiries or
the making of any proposal which constitutes or may reasonably be expected to
lead to an Acquisition Proposal (as defined below) from any Person, or engage in
any discussion or negotiations relating thereto or accept any Acquisition
Proposal; provided, however, that notwithstanding any other provision hereof,
the respective Party may (a) at any time prior to the time the respective
Party's shareholders shall have voted to approve this Agreement, engage in
discussions or negotiations with a Person who (without any solicitation,
initiation, encouragement, discussion or negotiation, directly or indirectly, by
or with the Party or its representatives after the date hereof) seeks to
initiate such discussions or negotiations and may furnish such Person
information concerning the Party and its business, properties and assets
-26-
if, and only to the extent that, (i) [A] such Person has first made an
Acquisition Proposal that is financially superior to the transactions
contemplated by this Agreement and has demonstrated that the funds necessary (if
the Acquisition Proposal is a cash transaction) for the Acquisition Proposal are
reasonably likely to be available (as determined in good faith in each case by
the Party's Board of Directors after consultation with its financial advisors)
and [B] the Party's Board of Directors shall conclude in good faith, after
considering applicable provisions of state law, on the basis of oral or written
advice of outside counsel, that such action is necessary (if the Acquisition
Proposal is a cash transaction) for the Board of Directors to act in a manner
consistent with its fiduciary duties under applicable law and (ii) prior to
furnishing such information to or entering into discussions or negotiations with
such Person, such Party [A] provides prompt notice to the other Party to the
effect that it is furnishing information to or entering into discussions or
negotiations with such Person and [B] receives from such Person an executed
confidentiality agreement in reasonably customary form on terms not in the
aggregate materially more favorable to such Person than the terms contained in
the Confidentiality Agreement (as referred to in Section 9.4 hereof), (b) comply
with Rule 14c-2 promulgated under the Exchange Act with regard to a tender or
exchange offer, and/or (c) provided such Party terminates this Agreement
pursuant to Section 8.1(e) hereof, accept an Acquisition Proposal from a Person.
Concurrently with the execution and delivery of this Agreement, each Party shall
immediately cease and terminate any existing solicitation, initiation,
encouragement, activity, discussion or negotiation with any Persons conducted
heretofore by the Party or its representatives with respect to the foregoing.
Each of Ultrak and Checkpoint agrees not to release any Person from, or waive
any provision of, any standstill agreement to which it is a Party or any
confidentiality agreement between it and another Person who has made, or who may
reasonably be considered likely to make, an Acquisition Proposal, unless its
Board of Directors shall conclude in good faith, after considering applicable
provisions of state law, on the basis of oral or written advice of outside
counsel, that such action is necessary for the Board of Directors to act in a
manner consistent with its fiduciary duties. Each of Ultrak and Checkpoint shall
notify the other Party orally and in writing of any such inquiries, offers or
proposals (including, without limitation, the terms and conditions of any such
proposal and the identity of the Person making it), within 24 hours of the
receipt thereof, shall keep the other Party informed of the status and details
of any such inquiry, offer or proposal, and shall give the other Party five
days' advance notice of any agreement to be entered into with, or any
information to be supplied to, any Person making such inquiry, offer or
proposal. As used herein, "Acquisition Proposal" shall mean a proposal or offer
(other than by another Party) for a tender or exchange offer, merger,
consolidation or other business combination involving Ultrak, Checkpoint or any
Significant Subsidiary of such Party or any proposal to acquire in any manner a
substantial equity interest in, or all or substantially all of the assets of,
such Party or any Significant Subsidiary of such Party; provided, however, that
any proposal or offer involving the acquisition by Ultrak or Checkpoint of an
equity interest in or assets of any Person, whether by tender or exchange offer,
merger, consolidation or otherwise, which involves, directly or indirectly, the
issuance of outstanding common stock as of the date hereof of Ultrak or
Checkpoint, as the case may be, with an aggregate value equal to less than 10%
of their respective consolidated assets as of December 31, 1996, shall not
constitute an Acquisition Proposal.
Section 6.2 Access to Information.
(a) Subject to compliance with applicable law, upon reasonable
notice Ultrak and Checkpoint shall each (and shall cause its Subsidiaries to)
afford to the other and the officers, employees, accountants, counsel, financial
advisors and other representatives of the other, access during normal business
hours throughout the period prior to the Effective Time to all of its key
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employees, properties, books, contracts, commitments and records and, during
such period, each of Ultrak and Checkpoint shall (and shall cause its
Subsidiaries to) furnish promptly to the other (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of Federal securities laws, and
(b) all other information concerning its businesses, properties and Personnel as
such other Party may reasonably request.
(b) Unless otherwise required by law, the parties will hold
any such information which is nonpublic in confidence until such time as such
information otherwise becomes publicly available through no wrongful act of
either Party and in the event of termination of this Agreement for any reason,
each Party shall promptly return all nonpublic documents obtained from any other
Party, and any copies made of such documents, to such other Party. In addition,
in the event of such termination, all documents, memoranda, notes and other
writings whatsoever prepared by each Party based on the information in such
material shall be destroyed (and each Party shall use its best efforts to cause
its advisors and their representatives to similarly destroy their respective
documents, memoranda and notes), and such destruction (and best efforts) shall
be certified in writing to the other Party by an authorized officer supervising
such destruction.
Section 6.3 Registration Statement and Proxy Statement. As soon as is
reasonably practicable after the date hereof, Ultrak and Checkpoint shall
prepare and file the Proxy Statement with the SEC and Checkpoint shall promptly
prepare and file with the SEC the Form S-4 in which the Proxy Statement will be
included. Each of Ultrak and Checkpoint shall use its best efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing. Ultrak and Checkpoint shall take any action
required to be taken under applicable state securities and blue sky laws in
connection with the issuance of shares of Checkpoint Common Stock in the Merger
and as contemplated by this Agreement. Ultrak and Checkpoint shall promptly
furnish to each other all information, and take such other actions, as may
reasonably be requested in connection with any action by any of them in
connection with this Section 6.3.
Section 6.4 Shareholder Approval. Each of Ultrak and Checkpoint shall
call a meeting of its shareholders to be held as promptly as practicable for the
purpose of voting upon this Agreement and the Merger Agreement. Subject to
Section 6.1, the respective boards of directors of Checkpoint and Ultrak shall
recommend to their respective shareholders approval of such matters. Checkpoint
and Ultrak shall coordinate and cooperate with respect to the timing of such
meetings and shall use their best efforts to hold such meetings on the same day
and to take all additional actions as necessary to adopt and approve this
Agreement, the Merger Agreement and the transactions contemplated hereby and
thereby; provided, however, that it shall be a condition to the obligations of
the Parties under this Section 6.4 that each of them has obtained the opinion of
its respective financial advisor which shall be downdated from the dates of
opinions referred to in Sections 3.13 and 4.13 to a date no more than three (3)
business days prior to the date each Party forwards its Proxy Statement to its
respective shareholders.
Section 6.5 Affiliates. Ultrak shall use its best efforts to cause each
Person who may be deemed to be an "affiliate," for purposes of Rule 145 under
the Securities Act, of Ultrak to deliver to Ultrak on or prior to the Effective
Time a written agreement to the effect that such Person will not offer to sell,
sell or otherwise dispose of any shares of Checkpoint Common Stock, issued in
the Merger, except, in each case, pursuant to an effective registration
statement or in compliance with Rule 145 and Accounting Series Releases 130 and
135, each, as amended from time to time, or in a transaction which, in the
opinion of legal counsel satisfactory to Checkpoint, is exempt from the
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registration requirements of the Securities Act. The Parties agree that the
affiliates of Ultrak are the Persons identified in Exhibit B.
Section 6.6 Agreement to Cooperate; Further Assurances. Subject to the
terms and conditions of this Agreement, each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement and the Merger Agreement, subject to the appropriate vote of
shareholders of Checkpoint and Ultrak described in Section 7.1(a) hereof and
subject to Section 6.1 hereof, including providing information and using
reasonable efforts to obtain all necessary or appropriate waivers, consents and
approvals, and effecting all necessary registrations and filings (including
filings under the HSR Act); provided, that nothing herein shall require Ultrak
or Checkpoint to hold, manage or operate any assets separately in order to
obtain any such consent or approval or to enter into any sale or divestiture of
assets. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or the Merger
Agreement, the proper officers and directors of each Party to this Agreement
shall take all necessary actions to the extent not inconsistent with their other
duties and obligations or applicable law.
Section 6.7 Stock Options.
(a) To the extent that acceleration of the exercisability of
any Ultrak Stock Option is permitted but not required by the applicable
governing instrument, then Ultrak shall take all necessary action or refrain
from taking action, so as to cause such acceleration not to occur. The Parties
acknowledge that the Ultrak Stock Options outstanding under the Ultrak Stock
Plan are subject to automatic accelerated vesting without discretionary action
by the Ultrak Board of Directors. In connection therewith, at the Effective
Time, to the extent permitted by the terms of the relevant governing
instruments, each Ultrak Stock Option, whether vested or unvested, shall be
assumed by Checkpoint. Unless Ultrak and Checkpoint shall otherwise agree prior
to the Effective Time, each such Ultrak Stock Option shall pursuant to the
Merger Agreement be converted to an option to acquire, on the same terms and
conditions as were applicable under such Ultrak Stock Option, shares of
Checkpoint Common Stock subject to the following adjustments which shall be made
regardless of whether such option was intended to qualify as an incentive stock
option under Section 422 of the Code and its applicable regulations:
(i) Each Ultrak Stock Option will be exercisable for
a number of whole shares (with any fraction rounded up to the next whole number)
of Checkpoint Common Stock (the "Aggregate Number") equal to the product of:
(x) the number of shares of Ultrak Common Stock remaining subject to the Ultrak
Stock Option immediately prior to the Effective Time, multiplied by (y) the
Common Stock Exchange Ratio;
(ii) The exercise price per share for the number of
Checkpoint Common Shares determined in clause (i) shall be a price per share
equal to (x) the aggregate exercise price for Ultrak Common Stock remaining
subject to such Ultrak Stock Option immediately prior to the Effective Time
divided by (y) the Aggregate Number.
(b) After the Effective Time and in any event within 30 days,
Checkpoint shall promptly issue to each holder of an outstanding Ultrak Stock
Option a document evidencing the foregoing assumptions of said option by
Checkpoint or conversions to Checkpoint options.
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(c) As soon as practicable after the Effective Time (and in
any event within 90 days), Checkpoint shall file a registration statement on
Form S-8, (or any successor or other appropriate forms) with respect to the
shares of Checkpoint Common Stock subject to such options granted under the
Ultrak Stock Plan and shall use its best efforts to maintain the effectiveness
of such registration statement or registration statements (and maintain the
current status of the prospectus or prospectuses contained therein) for so long
as such options remain outstanding.
(d) Checkpoint shall administer the Ultrak Stock Plan in a
manner that complies with Rule 16b-3 promulgated under the Exchange Act to the
extent the Ultrak Stock Plan complied with such rule prior to the Merger.
Section 6.8 Public Statements. The parties shall consult with each
other at least 24 hours prior to issuing any public announcement or statement
with respect to this Agreement, the Merger Agreement, or the transactions
contemplated hereby or thereby and shall not issue any such public announcement
or statement prior to such consultation, except as may be required by law or by
the rules of the National Association of Securities Dealers, Inc. or the New
York Stock Exchange ("NYSE").
Section 6.9 Letter of Checkpoint's Accountants. Checkpoint shall use
its best efforts to cause to be delivered to Ultrak a letter of Coopers &
Xxxxxxx, dated a date within two business days before the date on which the Form
S-4 shall become effective and addressed to Ultrak, in form and substance
reasonably satisfactory to Ultrak and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Form S-4.
Section 6.10 Letter of Ultrak's Accountants. Ultrak shall use its best
efforts to cause to be delivered to Checkpoint a letter of Xxxxx Xxxxxxxx, dated
a date within two business days before the date on which the Form S-4 shall
become effective and addressed to Checkpoint, in form and substance reasonably
satisfactory to Checkpoint and customary in scope and substance for letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4.
Section 6.11 Expenses. All costs and expenses incurred in connection
with this Agreement, the Merger Agreement and the transactions contemplated
hereby and thereby shall be paid by the Party incurring such expenses, except
that those expenses incurred in connection with printing and mailing the Proxy
Statement and the Form S-4, as well as the filing fee relating thereto, shall be
shared equally by Ultrak, on the one hand, and Checkpoint, on the other hand.
Section 6.12 Opinions of Financial Advisors. Each of Checkpoint and
Ultrak shall use its best efforts to cause Xxxxxx Xxxxxxx and X.X. Xxxxxxxx,
respectively, to provide its opinion, as of a date no earlier than three
business days prior to the date that the Proxy Statement is mailed to
shareholders of Checkpoint and Ultrak, as to the fairness of the consideration
to be received by Checkpoint on the one hand, and by the shareholders of Ultrak
on the other hand, from a financial point of view, as contemplated by this
Agreement, and shall include such updated opinions in the Proxy Statement.
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Section 6.13 Employee Benefits.
(a) Checkpoint and Ultrak expressly intend to continue
immediately after the Effective Time at least through December 31, 1997 to make
available to employees of Ultrak as of the Effective Time (regardless of the
division or other corporate unit in which they may be employed after the
Effective Time) employee benefits which are substantially similar to the
benefits presently available to Ultrak employees. For all purposes with respect
to Checkpoint's employee benefits for which Ultrak employees are otherwise
eligible, including without limitation determining eligibility, vesting, the
amount of benefits and benefit accrual, to the extent prior service credit is
taken into account for Checkpoint employees, Ultrak employees shall receive
credit for their periods of service with Ultrak and its Affiliates (including
time prior to acquisition by Ultrak) on the same basis as employees of
Checkpoint and its Affiliates. If Checkpoint establishes a plan or benefit
program in which Ultrak employees are entitled to participate after December 31,
1997, and if Ultrak does not have a comparable plan or benefit, to the extent
that prior service is taken into account, service credit will be provided to
Ultrak and Checkpoint employees on a comparable basis. In the ordinary course of
business after the Effective Time, Checkpoint will evaluate its employee
benefits programs for all employees and shall have the right to make such
modifications in all such programs, including the elimination of any particular
benefits (subject to contractual rights under any agreement), as Checkpoint
believes reasonable. Nothing contained in this Agreement is intended, nor shall
anything herein be construed, to confer any legal rights upon, or Person
beneficiary interest in, any employee of Ultrak, Checkpoint or any Subsidiary,
or any other Person.
(b) In the event that any of the United States employees of
Ultrak, has his or her employment terminated within eighteen (18) months of the
Closing Date as a result of a reduction in force, and not as a result of
unsatisfactory performance or for cause, such employee shall be entitled to the
following severance benefits: (i) for all non-supervisory personnel, a lump sum
payment equal to the greater of (A) three month's base salary, or (B) one
month's base salary for each year employed by Ultrak, Checkpoint or any
Affiliate (including services whether before or after the acquisition of such
affiliates, (ii) for all supervisory personnel, a lump sum payment equal to the
greater of (A) six month's base salary, or (B) one month's base salary for each
year of employment by Checkpoint, Ultrak or any Affiliate (including services
whether before or after the acquisition of such affiliates), and
(iii) outplacement services shall be provided at Ultrak's or Checkpoint's cost
for supervisory personnel for a period of up to three (3) months each.
(c) Unpaid bonuses for the executive officers of Ultrak
designated on Exhibit A hereto shall not exceed $750,000 in the aggregate, to
the extent conditionally approved by Ultrak's Board of Directors in January,
1997, and unpaid bonuses for the remaining Key Employees (as hereinafter
defined) of Ultrak shall not exceed $175,000, and all such bonuses shall be paid
or accrued by Ultrak by the Closing Date. No other bonuses shall be paid to the
Key Employees or any other employees of Ultrak in connection with the Merger.
Commencing on the Closing Date, the Key Employees shall be eligible to
participate in the Checkpoint Option Plan.
Section 6.14 Notification of Certain Matters. Each of Checkpoint and
Ultrak shall give prompt notice to the other of the following:
(a) The occurrence or non-occurrence of any event whose
occurrence or non-occurrence will be likely to (i) cause either any
representation or warranty contained in this
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Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Effective Time, or (ii) directly or indirectly have a
Material Adverse Effect on such Party;
(b) Any material failure of such Party, or any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied hereunder; and
(c) Any facts relating to such Party which would make it
necessary or advisable to amend the Registration Statement and/or Proxy
Statement in order to make the statements therein not misleading or to comply
with applicable law; provided, however, that the delivery of any notice pursuant
to this Section 6.14 shall not limit or otherwise affect the remedies available
hereunder to the Party receiving such notice.
Section 6.15 Indemnification, Directors' and Officers' Insurance.
(a) In the event of any threatened or actual claim, action,
suit, proceeding, or investigation, whether civil, criminal, or administrative,
including, without limitation, any such claim, action, suit, proceeding, or
investigation in which any of the present or former officers or directors (the
"Managers") of Ultrak is, or is threatened to be, made a party by reason of the
fact that he is or was a director, officer, employee, or agent of Ultrak or any
of its Significant Subsidiaries (but only for the period during which such
Subsidiary was owned directly or indirectly by Ultrak) or is or was serving at
the request of Ultrak or any of its Significant Subsidiaries (but only for the
period during which such Subsidiary was owned directly or indirectly by Ultrak)
as a director, officer, employee, or agent of another Person, whether before or
after the Effective Time, Ultrak shall indemnify and hold harmless, and from and
after the Effective Time, the Merger Subsidiary shall indemnify and hold
harmless to the fullest extent permitted by applicable law (including by
advancing expenses promptly as statements therefor are received), each such
Manager against any losses, claims, damages, liabilities, costs, expenses
(including reasonable attorneys' fees), judgments, fines, and amounts paid in
settlement in connection with any such claim, action, suit, proceeding, or
investigation, and in the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time) (i) if Ultrak
(prior to the Effective Time) or the Merger Subsidiary (after the Effective
Time) have not promptly assumed the defense of such matter, the Managers may
retain counsel satisfactory to them, and Ultrak prior to the Effective Time, or
the Merger Subsidiary after the Effective Time, shall pay all reasonable fees
and expenses of such counsel for the Managers promptly, as statements therefor
are received, and (ii) Ultrak prior to the Effective Time, or the Merger
Subsidiary after the Effective Time, will use their respective best efforts to
assist in the vigorous defense of any such matter; provided that neither Ultrak
nor the Merger Subsidiary or Checkpoint shall be liable for any settlement
effected without its prior written consent (which consent shall not be
unreasonably withheld). Merger Subsidiary shall have no obligation under the
foregoing provisions of this Section 6.15 to any Manager when and if a court of
competent jurisdiction shall ultimately determine, and such determination shall
have become final and non-appealable, that indemnification of such Manager in
the manner contemplated hereby is prohibited by applicable law. The Merger
Subsidiary's obligation to pay expenses in advance of final disposition of any
such claim, action, suit, investigation or proceeding shall be conditioned on
the receipt from the indemnified party of an undertaking to repay such advances
as contemplated by Section 145 of the DGCL. Checkpoint hereby guarantees and
stands as surety for the obligations of the Merger Subsidiary under this
Subsection 6.15(a).
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(b) Any Manager wishing to claim indemnification under this
Section 6.15, upon learning of any such claim, action, suit, proceeding, or
investigation, shall notify Ultrak prior to the Effective Time, and the Merger
Subsidiary and Checkpoint after the Effective Time, thereof (provided that the
failure to give such notice shall not affect any obligations hereunder except to
the extent that the indemnifying party is actually prejudiced thereby).
Checkpoint and Ultrak agree that all rights to indemnification existing in favor
of the Managers as provided in Ultrak's Certificate of Incorporation and Bylaws
as in effect as of the date hereof, and in any agreement between Ultrak and any
Manager with respect to matters occurring prior to the Effective Time, shall
survive the Merger. Checkpoint further covenants not to amend or repeal any
provisions of the Certificate of Incorporation or Bylaws of Ultrak or the Merger
Subsidiary in any manner which would adversely affect the indemnification or
exculpatory provisions contained therein. The provisions of this Section 6.15
are intended to be for the benefit of, and shall be enforceable by, each
indemnified party and his heirs and representatives.
(c) Each of the parties hereto will use its best efforts to
continue to provide officers' and directors' liability insurance with respect to
matters occurring prior to the Effective Time for the benefit of the Managers
for the six (6) year period commencing at the Effective Time on terms consistent
in scope and amount of coverage with such insurance currently maintained by
Ultrak; provided, however, in no event shall Checkpoint or the Merger Subsidiary
be required to maintain such insurance if the cost thereof exceeds on an annual
basis 200% of the premium cost for such policy as of the date of this Agreement.
Section 6.16 Employment Arrangements. Ultrak shall be permitted to
enter into written employment agreements with the employees listed on Exhibit A
hereto (the "Key Employees") in a form reasonably satisfactory to Checkpoint and
incorporating the terms set forth on Exhibit A and such other terms as are
reasonably satisfactory to Checkpoint. The employment agreements for the
executive officers of Ultrak designated on Exhibit A shall provide that,
commencing January 1, 1998, such executive officers shall be entitled to receive
medical and life insurance benefits and other fringe benefits, excluding salary,
bonus and discretionary stock option awards or stock grants, that senior
managers of Checkpoint of comparable positions are entitled to receive as of the
date hereof. Checkpoint agrees to guarantee the obligations of Ultrak to its
executive officers under the employment agreements to be entered into pursuant
to this Section 6.16.
Section 6.17 Stock Exchange Listing. Each of the Parties shall use its
best efforts to obtain, prior to the Effective Time, the approval for listing on
the NYSE, effective upon official notice of issuance, of the additional shares
of Checkpoint Common Stock into which the Ultrak Common Stock and Ultrak
Preferred Stock will be converted pursuant to Section 2.1(b) hereof and which
will be issuable upon exercise of the Ultrak Stock Options pursuant to Section
6.7 hereof.
Section 6.18 Pooling of Interests. Each of the Parties will use its
best efforts to cause the transactions contemplated by this Agreement to be
accounted for as a pooling of interests in accordance with GAAP, and such
accounting treatment to be accepted by Checkpoint's independent certified public
accountant, by the NYSE and by the SEC, respectively, and each of the Parties
agrees that it will take no action that would cause such accounting treatment
not to be obtained.
Section 6.19 Tax-Free Reorganization. Each of the Parties will use its
best efforts to cause the Merger to qualify as a tax-free reorganization under
Section 368 of the Code. Each Party shall provide customary representation
letters and appropriate investment intent letters from executive
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officers, directors and one percent (1%) shareholders of Ultrak to counsel for
each of the parties in connection with the tax opinions to be provided under
Article VII hereof.
Section 6.20 No Shelf Registration. Checkpoint shall not be required to
amend or maintain the effectiveness of the Registration Statement for the
purpose of permitting resale of the shares of Checkpoint Common Stock received
pursuant hereto by the Persons who may be deemed to be "Affiliates" of Ultrak or
Checkpoint within the meaning of Rule 145.
Section 6.21 Delivery of Disclosure Schedules and Other Documents. Each
Party agrees to deliver to the other (i) its respective Disclosure Schedule and
1996 Form 10-K (with all Exhibits) by no later than March 31, 1997, and (ii) all
other documents, lists, reports and/or schedules called for or required under
this Agreement promptly after the execution hereof, and in each case, at least
one week prior to the dates set forth in Sections 7.2(f) and 7.3(f) hereof.
Notwithstanding anything contained in this Agreement to the contrary, no party
shall be deemed in breach hereof for having failed to deliver any document,
list, report and/or schedule recited herein to have been delivered, provided
such document, list, report or schedule is promptly delivered to the other Party
after execution of this Agreement.
Section 6.22 Preferred Stock Exchange Ratio. On or before March 25,
1997 Ultrak shall obtain a detailed written opinion from either Xxxxxx Capital,
Xxxxxxx Xxxxx Business Advisory Services, Xxxxxxxx, Inc. or Hoak, Breedlove,
Xxxxxxxx & Co. that the Preferred Stock Exchange Ratio accurately reflects both
the conversion rights of the Ultrak Preferred Stock pursuant to Ultrak's
Certificate of Incorporation and the fair value of the dividend and voting
rights of the Ultrak Preferred Stock which will be given up as a result of the
Merger. The valuation opinion may be relied upon by, and shall be sufficient to,
Coopers & Xxxxxxx and Xxxxx Xxxxxxxx for purposes of the letters to be provided
pursuant to Section 7.1(h) hereof. Ultrak shall promptly provide such written
opinion to Checkpoint, Coopers & Xxxxxxx and Xxxxx Xxxxxxxx, and shall use its
reasonable best efforts to cause its valuation expert to provide all supporting
information and work papers to, and meet with, Coopers & Xxxxxxx and Xxxxx
Xxxxxxxx promptly thereafter. Coopers & Xxxxxxx and Xxxxx Xxxxxxxx shall use
reasonable diligence to meet with the valuation expert during the five (5)
business days after delivery of such expert's opinion and attempt to resolve any
disagreements or concerns which they may have with respect to such opinion. As
promptly as reasonably practical after March 25, 1997 and after the meetings
referred to in the preceding sentence, Coopers & Xxxxxxx and Xxxxx Xxxxxxxx
shall advise Checkpoint and Ultrak in writing whether the valuation opinion is
sufficient for each to render the letters required by Section 7.1(h) hereof. In
the event that such valuation opinion is not sufficient to either Coopers &
Xxxxxxx or Xxxxx Xxxxxxxx, Ultrak shall promptly (but in any event within five
(5) business days) either (i) reduce the Preferred Stock Exchange Ratio to a
level at which Coopers & Xxxxxxx and Xxxxx Xxxxxxxx shall then be able to issue
the letters required under Section 7.1(h) hereof or (ii) obtain a new written
opinion from one of the firms mentioned in the first sentence of this Section,
which opinion shall have been determined by Coopers & Xxxxxxx and Xxxxx
Xxxxxxxx, within such five (5) business day period, to be sufficient to enable
them to issue the letters required under Section 7.1(h) hereof. The failure of
Ultrak to have obtained by April 11, 1997 both (y) a written valuation opinion
from any of the firms referred to in the first sentence of this Section (or to
have reduced the Preferred Stock Exchange Ratio as provided in clause (i) of the
preceding sentence) and (z) written confirmation from both Coopers & Xxxxxxx and
Xxxxx Xxxxxxxx of the sufficiency of the opinion (or reduction in the Preferred
Stock Exchange Ratio) for purposes of their rendering the letters required under
Section 7.1(h) hereof, shall be deemed a material breach of this Agreement by
Ultrak. Coopers & Xxxxxxx and Xxxxx Xxxxxxxx
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shall use reasonable diligence to meet with the valuation expert within two (2)
business days after delivery of such second opinion and attempt to resolve any
disagreements or concerns which they may have with respect to such opinion.
ARTICLE VII
CONDITIONS
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each Party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby shall have been approved and adopted by the
requisite vote of the holders entitled to vote of Ultrak Common Stock and Ultrak
Preferred Stock, on the one side, and Checkpoint Common Stock, on the other
side.
(b) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated;
(c) The Form S-4 shall have become effective in accordance
with the provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect;
(d) No temporary restraining order, preliminary or permanent
injunction or other order or decree by any court of competent jurisdiction which
prevents the consummation of the Merger or imposes material conditions with
respect thereto shall have been issued and remain in effect (each Party agreeing
to use its best efforts to have any such injunction, order or decree lifted);
(e) No action shall have been taken, and no statute, rule or
regulation shall have been enacted, by any Governmental Entity which would
prevent the consummation of the Merger or imposes material conditions with
respect thereto;
(f) All consents and approvals of all Governmental Entities
legally required for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained and be in effect at the Effective
Time, except those for which failure to obtain such consents and approvals would
not, individually or in the aggregate, have a Material Adverse Effect on
Checkpoint, or upon the consummation of the transactions contemplated hereby and
all state securities or blue sky permits and other authorizations necessary to
issue the shares of Checkpoint Common Stock pursuant to this Agreement and the
Merger Agreement and as contemplated by Section 6.7 hereof;
(g) The shares of Checkpoint Common Stock into which the
Ultrak Common Stock and Ultrak Preferred Stock will be converted pursuant to
Section 2.1(b) hereof and the shares of Checkpoint Common Stock issuable upon
exercise of the Ultrak Stock Options pursuant to Section 6.7 hereof shall have
been duly approved for listing on the NYSE, subject to official notice of
issuance;
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(h) Each of Checkpoint and Ultrak shall receive a letter from
Coopers & Xxxxxxx, and Xxxxx Xxxxxxxx, both dated as of the Closing Date, to the
effect that the transactions contemplated hereby will qualify for pooling of
interests accounting treatment; and
(i) Checkpoint shall have received from each Person specified
in Section 6.5 hereof the written agreement referred to in such Section 6.5.
Section 7.2 Conditions to Obligation of Checkpoint to Effect the
Merger. The obligation of Checkpoint to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Ultrak shall have performed in all material respects its
agreements contained in this Agreement and the Merger Agreement and required to
be performed on or prior to the Effective Time and the representations and
warranties of Ultrak contained in this Agreement and the Merger Agreement shall
be true and correct in all material respects on and as of the date of this
Agreement and on and as of the Effective Time as if made on and as of such date,
except as contemplated or permitted by this Agreement and the Merger Agreement,
and Checkpoint shall have received a certificate of the President of Ultrak to
that effect;
(b) Ultrak shall have obtained the consent or approval of each
Person whose consent or approval shall be required in connection with the
transactions contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Ultrak, or
upon the consummation of the transactions contemplated hereby,
(c) Checkpoint shall have received an opinion of Gardere &
Xxxxx, L.L.P. in form and substance reasonably satisfactory to Checkpoint
covering such matters customary for transactions of the nature contemplated by
this Agreement;
(d) Checkpoint shall have received the letter of Xxxxx
Xxxxxxxx referred to in Section 6.10 hereof,
(e) Checkpoint shall have received an opinion from Stradley,
Ronon, Xxxxxxx & Xxxxx, LLP substantially to the effect that the Merger shall be
a tax-free transaction for Checkpoint; and
(f) Checkpoint shall have completed its due diligence to its
reasonable satisfaction not later than April 11, 1997.
Section 7.3 Conditions to Obligations of Ultrak to Effect the Merger.
The obligations of Ultrak to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the additional following
conditions:
(a) Checkpoint shall have performed in all material respects
its agreements contained in this Agreement, the Merger Agreement and required to
be performed on or prior to the Effective Time and the representations and
warranties of Checkpoint contained in this Agreement, the Merger Agreement and
shall be true and correct in all material respects on and as of the date of this
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Agreement and on and as of the Effective Time as if made on and as of such date,
except as contemplated by this Agreement and the Merger Agreement and Ultrak
shall have received a certificate of the President of Checkpoint to that effect;
(b) Checkpoint shall have obtained the consent or approval of
each Person whose consent or approval shall be required in connection with the
transaction contemplated hereby under any loan or credit agreement, note,
mortgage, indenture, lease, license or other agreement or instrument, except
those for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Checkpoint,
or upon the consummation of the transactions contemplated hereby;
(c) Ultrak shall have received an opinion of Stradley, Ronon,
Xxxxxxx & Young, LLP, in form and substance reasonably satisfactory to Ultrak
covering such matters customary for transactions of the nature contemplated by
this Agreement;
(d) Ultrak shall have received the letter of Coopers & Xxxxxxx
referred to in Section 6.9 hereof;
(e) Ultrak shall have received an opinion from Gardere &
Xxxxx, L.L.P. substantially to the effect that the Merger shall be a tax-free
transaction for Ultrak and the shareholders of Ultrak who receive Checkpoint
Common Stock in the Merger; and
(f) Ultrak shall have completed its due diligence to its
reasonable satisfaction not later than April 11, 1997.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Ultrak or Checkpoint:
(a) by the mutual written consent of Ultrak and Checkpoint;
(b) by either Ultrak or Checkpoint if (i) the Merger shall not
have been consummated on or before September 30, 1997 (the "Termination Date");
(ii) any Governmental Entity, the consent of which is a condition to the
obligations of Ultrak and Checkpoint to consummate the transactions contemplated
hereby or by the Merger Agreement, shall have determined not to grant its
consent and all appeals of such determination shall have been taken and have
been unsuccessful, (iii) any court of competent jurisdiction in the United
States or any State shall have issued an order, judgment or decree (other than a
temporary restraining order) restraining, enjoining or otherwise prohibiting the
Merger and such order, judgment or decree shall have become final and
nonappealable, or (iv) either Party gives written notice to the other on or
before April 11, 1997, that the notifying Party has elected in good faith to
terminate this Agreement because its due diligence has not been completed to its
reasonable satisfaction;
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(c) by Checkpoint if (i) there has been a material breach by
Ultrak of any representation, warranty, covenant or agreement set forth in this
Agreement or the Merger Agreement, which breach has not been cured within ten
business days following notice of such breach; (ii) the Board of Directors of
Ultrak should fail to recommend to its shareholders approval of the transactions
contemplated by this Agreement and the Merger Agreement or such recommendation
shall have been made and subsequently withdrawn other than as provided for in
Section 6.1, or Ultrak shall have failed for any reason to obtain an updated
fairness opinion from its financial advisor as required by Section 6.4,
(iii) following the execution of this Agreement, Ultrak shall have engaged in
negotiations concerning, or provided any confidential information or data to, or
had any discussions with, any Person other than Checkpoint or any of its
Affiliates relating to, any Acquisition Proposal relating to Ultrak or any of
its Subsidiaries other than as provided for in Section 6.1, or (iv) the average
of the daily last sale prices of Ultrak Common Stock as reported on the Nasdaq
National Market automated quotation reporting system (as reported in The Wall
Street Journal) for the ten (10) consecutive full trading days in which such
shares are traded on Nasdaq immediately preceding the date of the Checkpoint
shareholders' meeting as set forth in the Proxy Statement is less than $13.00
per share;
(d) by Ultrak if (i) there has been a material breach by
Checkpoint of any representation, warranty, covenant or agreement set forth in
this Agreement or the Merger Agreement which breach has not been cured within
ten business days following receipt by the breaching Party of notice of such
breach; (ii) the Board of Directors of Checkpoint should fail to recommend to
its shareholders approval of the transactions contemplated by this Agreement and
the Merger Agreement or such recommendation shall have been made and
subsequently withdrawn other than as provided in Section 6.1, or Checkpoint
shall have failed for any reason to obtain an updated fairness opinion from its
financial advisor as required by Section 6.4, (iii) following the execution of
this Agreement, Checkpoint shall have engaged in negotiations concerning,
provided any confidential information or data to, or had any discussions with,
any Person other than Ultrak or any of its Affiliates relating to, any
Acquisition Proposal relating to Checkpoint or any of its Subsidiaries other
than as provided in Section 6.1 or (iv) the average of the daily last sales
prices of Checkpoint Common Stock as reported on the NYSE composite transactions
reporting system (as reported in The Wall Street Journal) for the ten (10)
consecutive full trading days in which such shares are traded on the NYSE
immediately preceding the date of the Ultrak shareholders' meeting as set forth
in the Proxy Statement is less than $15.00 per share;
(e) by either Ultrak or Checkpoint, prior to the approval of
this Agreement by the shareholders of such Party, upon five (5) days prior
notice to the other, if, as a result of an Acquisition Proposal (as defined in
Section 6.1 hereof) received by such Party from a Person other than a Party to
this Agreement or any of its Affiliates, the Board of Directors of such Party
determines in good faith that their fiduciary obligations under applicable law
require that such Acquisition Proposal be accepted; provided, however, that
(i) the Board of Directors of such Party shall have concluded in good faith,
after considering applicable provisions of state law and after giving effect to
all concessions which may be offered by the other Party pursuant to paragraph
(ii) below, on the basis of oral or written advice of outside counsel, that such
action is necessary for the Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law and (ii) prior to any such
termination, such Party shall, and shall cause its respective financial and
legal advisers to, negotiate in good faith for a period of ten (10) business
days with the other Party to this Agreement to make such adjustments in the
terms and conditions of this Agreement as would enable such Party to proceed
with the transaction contemplated hereby; provided, that no termination shall be
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effective pursuant to this Section 8.1(e) unless concurrently with such
termination, the termination fee described in Section 8.5 is paid in full by the
terminating Party in accordance with the provisions of Sections 8.5(a) or (b),
as the case may be; provided, that the right to terminate this Agreement
(i) under Section 8.1(b)(i) hereof shall not be available to any Party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date
and (ii) under Section 8.1(c) (other than clause (iv) thereof) and 8.1 (d)
(other than clause (iv) thereof) hereof shall not be available to any Party who
at such time is in material breach of any representation, warranty, covenant or
agreement set forth in this Agreement or the Merger Agreement.
Section 8.2 Effect of Termination. In the event of termination of this
Agreement by either Ultrak or Checkpoint as provided in Section 8.1 hereof, this
Agreement shall forthwith become void (except as set forth in Sections 6.2(b),
6.11, 8.5 and 9.8, hereof which shall survive the termination) and there shall
be no liability on the part of Ultrak or Checkpoint except for any breach of any
of its obligations under Sections 6.2(b), 6.11, 8.5 and 9.8 hereof.
Notwithstanding the foregoing, no Party hereto shall be relieved from liability
for any willful, material breach of this Agreement. The rights of the Parties
under the Ultrak Stock Option Agreement and Checkpoint Stock Option Agreement
shall be as provided therein notwithstanding any termination of this Agreement.
Section 8.3 Amendment. This Agreement and the Merger Agreement may be
amended by the parties hereto at any time before or after approval hereof by the
shareholders of Ultrak or Checkpoint, provided that after any such approval, no
amendment shall be made which (a) changes the ratios at which shares are to be
converted into shares of Checkpoint Common Stock pursuant to the Merger
Agreement, (b) in any way materially adversely affects the rights of holders of
shares of Ultrak Common Stock, Ultrak Preferred Stock or Checkpoint Common Stock
or (c) changes any of the principal terms of this Agreement or the Merger
Agreement, in each case without the further approval of such shareholders. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 8.4 Waiver. At any time prior to the Effective Time, each Party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other Parties hereto, (b) waive in writing any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive in writing compliance with any of the agreements
or conditions contained herein.
Section 8.5 Termination Fee.
(a) If this Agreement is terminated (i) by Checkpoint pursuant
to any clause of Section 8.1(c) hereof (other than by reason of clause (iv)
thereof) and if Ultrak is not entitled to terminate this Agreement by reason of
Section 8.1(d) hereof (other than by reason of clause (iv) thereof), (ii) by
Ultrak pursuant to Section 8.1(b)(iv) and, if within six (6) months thereafter,
Ultrak receives, or there is a public announcement of, a friendly or unsolicited
tender offer, or Ultrak executes a formal letter of intent evidencing an
Acquisition Proposal or enters into a definitive agreement respecting a
transaction incident to an Acquisition Proposal which (with respect to each of
the foregoing) subsequently closes, or (iii) pursuant to Section 8.1(e) by
Ultrak, and at the time of such termination under this clause (iii) or prior to
the meeting of Ultrak's shareholders as set forth in the Proxy Statement there
shall have been an Acquisition Proposal involving Ultrak (whether or not such
proposal shall have been rejected or withdrawn prior to the time of such
termination or the
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meeting), then in either case, Ultrak shall pay to Checkpoint a termination fee
of $5,000,000 payable in good funds in Philadelphia, PA on the next business day
following notice of termination with respect to clauses (i) and (iii) and, at
the time of closing of the Acquisition Proposal, in the case of clause (ii).
(b) If this Agreement is terminated (i) by Ultrak pursuant to
any clause of Section 8.1(d) hereof (other than by reason of clause (iv)
thereof) and if Checkpoint is not entitled to terminate this Agreement by reason
of Section 8.1(c) hereof (other than by reason of clause (iv) thereof), (ii) by
Checkpoint pursuant to Section 8.1(b)(iv) and, if within six (6) months
thereafter, Checkpoint receives, or there is a public announcement of, a
friendly or unsolicited tender offer, or Checkpoint executes a formal letter of
intent evidencing an Acquisition Proposal or enters into a definitive agreement
respecting a transaction incident to an Acquisition Proposal which (with respect
to each of the foregoing) subsequently closes, or (iii) pursuant to Section
8.1(e) by Checkpoint, and at the time of such termination under this clause
(iii) or prior to the meeting of Checkpoint's shareholders as set forth in the
Proxy Statement there shall have been an Acquisition Proposal involving
Checkpoint (whether or not such proposal shall have been rejected or withdrawn
prior to the time of such termination or the meeting), then in either case,
Checkpoint shall pay to Ultrak a termination fee of $5,000,000 payable in good
funds in Dallas, TX on the next business day following notice of termination
with respect to clauses (i) and (iii) and, at the time of closing of the
Acquisition Proposal, in the case of clause (ii).
(c) In the event the Checkpoint shareholders fail to approve
the Merger by September 30, 1997 and the Ultrak shareholders approve the Merger,
then Checkpoint shall pay to Ultrak its direct out-of-pocket expenses (not to
exceed $2,000,000) incurred in connection with the negotiation and execution and
delivery of this Agreement and the performance of its obligations hereunder. In
the event the Ultrak shareholders fail to approve the Merger by September 30,
1997 and the Checkpoint shareholders approve the Merger, then Ultrak shall pay
to Checkpoint its direct out-of-pocket expenses (not to exceed $2,000,000)
incurred in connection with the negotiation and execution and delivery of this
Agreement and the performance of its obligations hereunder. Such payments shall
be made within two (2) business days of receipt of a statement describing the
expenses by payee, service and amount.
(d) Checkpoint and Ultrak agree that the covenants contained
in Sections 8.5(a), (b) and (c) are an integral part of the transactions
contemplated by this Agreement and constitute liquidated damages and not a
penalty. If one Party fails to promptly pay to the other any fee due under
Sections 8.5(a), (b) or (c), the defaulting Party shall pay the costs of
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A. from the date such fee was required to be
paid.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time.
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Section 9.2 Notices. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed duly given upon
(a) transmitter's confirmation of a receipt of a facsimile transmission,
(b) confirmed delivery by a standard overnight carrier or when delivered by hand
or (c) the expiration of three (3) business days after the day when mailed by
certified or registered mail, postage prepaid, addressed at the following
addresses (or at such other address as the parties hereto shall specify by like
notice):
If to Ultrak, to: Ultrak, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Telecopy No.: 000-000-0000
Attention: President
with a copy to: Gardere & Xxxxx, L.L.P.
Thanksgiving Tower, Suite 3000
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
If to Checkpoint, to: Checkpoint Systems, Inc.
000 Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: President
with a copy to: Xxxxxxxx Ronon Xxxxxxx & Xxxxx, LLP
0000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Section 9.3 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." Whenever the words "herein," "hereof," "hereby"
or similar terms are used in this Agreement, they relate to this Agreement as a
whole (and not to any particular Section) unless the context clearly requires
otherwise.
Section 9.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein) (a) together with the Confidentiality Agreement
dated January 16, 1997, the Ultrak Stock Option Agreement, the Checkpoint Stock
Option Agreement, and the Merger Agreement, constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof,
(b) is not intended to confer upon any other Person any rights or remedies
hereunder; (c) shall not be assigned by operation of law or otherwise without
the prior written consent of the other parties hereto; and (d) shall be governed
in all respects, including validity, interpretation and effect, by the
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laws of the State of Delaware (without giving effect to the provisions thereof
relating to conflicts of law).
Section 9.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
Section 9.6 Parties in Interest. Subject to the provisions of Section
9.4(c) hereof, this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective successors and
assigns and, except as set forth in Section 9.4 hereof, nothing in this
Agreement, express or implied, is intended to confer upon any other Person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 9.7 Severability. Any term or provision of this Agreement which
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
Section 9.8 Confidentiality. Except as otherwise provided in Section
6.2, each Party and its respective agents, attorneys and accountants will comply
with the provisions of the Confidentiality Agreement dated January 16, 1997, and
will maintain the confidentiality of all information provided to it by the other
Party in connection herewith which has not been publicly disclosed unless it is
advised by counsel that any such information or document is required by law or
applicable Nasdaq or NYSE rule to be disclosed.
IN WITNESS WHEREOF, Ultrak and Checkpoint have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
ULTRAK, INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx
President and Chief Executive Officer
CHECKPOINT SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxx
-----------------------------------------
Xxxxx X. Xxxx
President and Chief Executive Officer
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