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EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
February 10, 1997 (the "Signing Date"), is among Monitor Dynamics, Inc., a
California corporation ("MDI"), Xxxxx Xxxx Xxxxxxx ("Xxxxxxx"), Xxxxxxx X.
Xxxxxxx ("Xxxxxxx"), Xxxxx X. Xxxxxx ("Strong"), I.O.M. Investments, L.P.
("I.O.M."), Xxxxx St. Pierre ("St. Pierre"), (Clinard, Finazzo, Strong, I.O.M.,
and St. Pierre are sometimes collectively referred to as the "Signing
Shareholders" and sometimes individually referred to as a "Signing
Shareholder"), Ultrak, Inc., a Delaware corporation ("Ultrak"), and MDI
Acquisition Corp., a Texas corporation and wholly-owned subsidiary of Ultrak
("Newco").
Recitals. The Boards of Directors of MDI, Ultrak, and Newco deem it
advisable and in the best interests of their respective shareholders that a
merger (the "Merger") is consummated whereby Newco is merged with and into MDI
pursuant to a reorganization hereafter provided for. MDI will be the surviving
corporation of the Merger. MDI, the Signing Shareholders, Ultrak, and Newco
desire to set forth the terms and conditions upon which they are willing to
consummate the Merger. The Boards of Directors of MDI, Ultrak, and Newco have
approved this Agreement and the Merger. Ultrak, as the sole shareholder of
Newco, has approved the terms of the Merger and the execution, delivery, and
performance of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the agreements,
provisions, and covenants in this Agreement, and for other consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby covenant and agree as follows:
ARTICLE I:
THE MERGER
1.01. The Merger. Upon the terms and subject to the conditions of this
Agreement, on the Effective Date (as defined in Section 1.02) and pursuant to
the provisions of the California General Corporation Law (the "CGCL") and the
Texas Business Corporation Act (the "TBCA"), Newco will be merged with and into
MDI, with MDI the surviving corporation (the "Surviving Corporation"), in
accordance with this Agreement and the Merger Filings (as defined in Section
1.02).
1.02. Effective Date of the Merger. The Merger shall become effective
on the date (the "Effective Date") that is the last to occur of (a) the date
the executed and acknowledged Officers Certificate in substantially the form of
Exhibit 1.02-A of each of MDI and Newco required by the CGCL and this
Agreement, with such Officers Certificates attached (together with any other
documents necessary to effect the Merger in accordance with the CGCL), are duly
filed with the Secretary of State of the State of California (the "California
Merger Filing") and (b) the date the executed Articles of Merger in
substantially the form of Exhibit 1.02-B (together with any other documents
necessary to effect the Merger in accordance with the TBCA) are duly filed with
the Secretary of State of the State of Texas (the "Texas Merger Filing") (the
California Merger Filing and the Texas Merger Filing are collectively referred
to as the "Merger Filings"), which Merger Filings shall be made as soon as
practicable after the Closing (as defined in Section 1.04).
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1.03. Effect of the Merger. The Merger shall have the effects set
forth in the TBCA and the CGCL. Without limiting the generality of the
foregoing, the Surviving Corporation shall possess all the rights, privileges,
powers, and franchises of a public as well as a private nature, and be subject
to all the restrictions, disabilities, and duties, of each of MDI and Newco
(collectively, the "Constituent Corporations"). The Surviving Corporation
shall be vested with the rights, privileges, powers, and franchises, all
property (real, personal, and mixed) and all debts due on whatever account and
all other things in action or belonging to, and all and every other interest
of, each of the Constituent Corporations. All debts, liabilities, and
obligations of each of the Constituent Corporations shall attach to the
Surviving Corporation and may be enforced against it to the same extent as if
such debts, liabilities, and duties had been incurred or contracted by it. The
Articles of Incorporation and the Bylaws of MDI, as they exist immediately
prior to the Effective Date, shall be the Articles of Incorporation and Bylaws
of the Surviving Corporation until amended in accordance with their terms and
the CGCL.
1.04. Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall take place at the offices of XxXxxxxxx,
Will & Xxxxx, Newport Beach, California at 10:00 a.m., local time, on the
second business day immediately following the date on which the last of the
conditions set forth in Articles VII, VIII, and IX is fulfilled or waived, or
at such other time and place as MDI, Newco, and Ultrak shall agree. The date
the Closing occurs is the "Closing Date." At the Closing, MDI, Newco, and
Ultrak will each carry out the procedures specified under the applicable
provisions of the CGCL and the TBCA, including duly executing and filing the
Merger Filings, to the end that the Merger shall become effective.
1.05. Effect on Stock. As a result of the Merger, on the Effective
Date and without any action on the part of MDI, Ultrak, or Newco, or any holder
of any of the following securities, the following will occur:
(a) Each share of Common Stock, no par value per share, of MDI
(an "MDI Common Share" and, collectively, the "MDI Common Shares"), and
each share of Preferred Stock, no par value per share, of MDI (an "MDI
Preferred Share" and, collectively, the "MDI Preferred Shares") (the MDI
Common Shares and the MDI Preferred Shares are collectively the "MDI
Shares") issued and outstanding immediately prior to the Effective Date
will cease to be outstanding and will be converted into the right to
receive, without interest, an amount equal to (i) the sum of (A)
Nineteen Million Dollars ($19,000,000) plus (B) the amount of the MDI
Net Worth (as defined in Section 1.06) (the sum of (A) and (B) is
sometimes referred to as the "Purchase Price") divided by (ii) the Fully
Diluted MDI Shares Outstanding (as defined in Section 1.07) (the "Merger
Consideration").
(b) Any MDI Shares held in the treasury of MDI will be
cancelled and retired and cease to exist. No cash, securities, or other
consideration will be paid or delivered in exchange for such treasury
shares.
(c) Each share of Common Stock, $0.01 par value per share, of
Newco ("Newco Common Stock") issued and outstanding immediately prior to
the Effective Date will cease to be outstanding and will be
automatically converted into and become one validly issued, fully paid,
and nonassessable share of Common Stock, no par value per share, of the
Surviving Corporation and the aggregate of such shares issuable upon
such conversion shall constitute the only outstanding capital shares of
the Surviving Corporation.
1.06. MDI Net Worth. The term "MDI Net Worth" means the total
shareholders' equity of MDI at March 31, 1997, as determined in accordance with
MDI's past accounting practices in the
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ordinary course of business, but (a) in all material respects (other than as
set forth on Exhibit 1.06) in accordance with generally accepted accounting
principles consistently applied ("GAAP") and (b) in accordance with Exhibit
1.06. The MDI Net Worth shall be determined in accordance with this Section
1.06. McGladrey & Xxxxxx, LLP (the "Accounting Firm") shall conduct an audit
(the "Special Audit") of MDI's financial statements at and as of March 31,
1997. MDI shall make such financial statements available to the Accounting
Firm as soon as possible after March 31, 1997. The Accounting Firm shall
promptly, but in no event later than May 15, 1997, make its determination of
the MDI Net Worth and make all of the Accounting Firm's workpapers and audit
materials in connection therewith promptly available to Xxxxx Xxxxxxxx LLP
("GT"). GT shall then promptly review the Accounting Firm's determination of
the MDI Net Worth and the Accounting Firm's workpapers and audit materials in
connection therewith. If GT agrees with the Accounting Firm's determination of
the MDI Net Worth, then GT shall promptly notify the Accounting Firm, Xxxxxxx,
and Ultrak and the MDI Net Worth as determined by the Accounting Firm shall be
final and binding on the parties and not subject to dispute. If GT disputes
the Accounting Firm's determination of the amount of the MDI Net Worth, then GT
shall set forth in writing the amount GT believes to be the MDI Net Worth and,
with as much specificity as possible, GT shall set forth GT's separate reasons
(the "Reasons") for disputing the Accounting Firm's determination of the MDI
Net Worth. For each Reason, GT shall set forth the amount by which such Reason
adjusts the Accounting Firm's determination of the MDI Net Worth. The
Accounting Firm and GT shall discuss the Reasons and attempt to reach a
mutually acceptable amount for the MDI Net Worth. If the Accounting Firm and
GT cannot agree on a mutually acceptable amount for the MDI Net Worth within
five (5) business days after GT delivers its determination of the MDI Net Worth
to the Accounting Firm, then MDI shall select one of Xxxxxx Xxxxxxxx LLP,
Coopers & Xxxxxxx LLP, and Ernst & Young LLP (the "Dispute Resolution Firm") to
finally determine the MDI Net Worth by reviewing the portions it deems relevant
and necessary of the following (collectively, the "Audit Materials"): the
Accounting Firm's determination of the MDI Net Worth, the Accounting Firm's
workpapers and audit materials in connection with the Special Audit, GT's
determination of the MDI Net Worth, and the Reasons. The Dispute Resolution
Firm shall review such of the Audit Materials as it deems relevant and
necessary and accept or reject each of the Reasons. The Dispute Resolution
Firm shall then calculate the MDI Net Worth based on the Reasons it determines
are valid and the calculation of the MDI Net Worth by the Dispute Resolution
Firm shall be final and binding on the parties and not subject to dispute.
Notwithstanding anything to the contrary in this Section 1.06, Ultrak shall
always have the right (but not the obligation) to accept, in writing, the
Accounting Firm's determination of the MDI Net Worth. Upon any such written
acceptance by Ultrak, the remaining procedures set forth in this Section 1.06
for determining the MDI Net Worth shall no longer be necessary. Ultrak or
Newco shall be responsible for paying for the Special Audit and any fees and
expenses of GT and the Dispute Resolution Firm. Notwithstanding anything to
the contrary in this Agreement, the provisions of Exhibit 1.06 shall be
considered and complied with in determining the MDI Net Worth. Each of the
parties hereto represents to the other parties that it does not have a pre-
existing, existing, or contemplated relationship with Xxxxxx Xxxxxxxx LLP,
Coopers & Xxxxxxx LLP, or Ernst & Young LLP.
1.07. Fully Diluted MDI Shares Outstanding. The sum of (a) the number
of MDI Common Shares outstanding immediately prior to the Closing Date, (b) the
number of MDI Preferred Shares outstanding immediately prior to the Closing
Date, (c) and the maximum number of MDI Common Shares issuable upon exercise,
conversion, exchange, or otherwise pursuant to any agreement or commitment of
MDI immediately prior to the Closing Date and (d) the maximum number of MDI
Preferred Shares issuable upon exercise, conversion, exchange, or otherwise
pursuant to any agreement or commitment of MDI, immediately prior to the
Closing Date is referred to herein as the "Fully Diluted MDI Shares
Outstanding."
1.08. Payment of the Merger Consideration. The Merger Consideration
shall be payable as follows:
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(a) As soon as practicable after the Closing, the filing of
the Merger Filings, and compliance by an MDI Shareholder with the terms of
Section 1.09, such MDI shareholder will receive, for each MDI Share owned by
such MDI Shareholder and properly surrendered to Ultrak in accordance with
Section 1.09, an amount from Ultrak equal to (i) Twenty-Five Million Dollars
($25,000,000) divided by (ii) the Fully Diluted MDI Shares Outstanding. The
payment to an MDI Shareholder pursuant to this Section 1.08(a) is referred to
herein as the "Initial Merger Payment."
(b) Within five (5) days of the determination of the MDI Net
Worth pursuant to Section 1.06 and after compliance by an MDI Shareholder with
the terms of Section 1.09, such MDI Shareholder will receive for each MDI Share
owned by such MDI Shareholder and properly surrendered to Ultrak in accordance
with Section 1.09, an amount from Ultrak equal to (i) the positive difference
between (A) the Purchase Price less (B) Twenty-Five Million Dollars
($25,000,000) divided by (ii) the Fully Diluted MDI Shares Outstanding. If for
any reason the Purchase Price does not exceed Twenty-Five Million Dollars
($25,000,000), then no payments will be made pursuant to this Section 1.08(b).
The payment to an MDI Shareholder pursuant to this Section 1.08(b) shall be
referred to herein as the "Subsequent Merger Payment."
1.09. Exchange and Cancellation of Certificates.
(a) Ultrak shall make available to each MDI Shareholder as of
the Closing with respect to the outstanding certificate or certificates which
immediately prior to the Closing represented an MDI Share (the "Certificates"),
a letter of transmittal in substantially the form of Exhibit 1.09 (the "Letter
of Transmittal") for use in effecting the surrender of the Certificates for
payment therefor. Delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon proper delivery of the Certificates to
Ultrak with the duly executed and completed Letter of Transmittal. The holder
of each such Certificate shall be entitled to receive in exchange therefor a
certified or cashier's check or wire transfer representing the Initial Merger
Payment to which such MDI Shareholder shall have become entitled pursuant to
Section 1.08(a) and, within five (5) days following completion of the Special
Audit, a certified or cashier's check or wire transfer representing the
Subsequent Merger Payment to which such MDI Shareholder shall have become
entitled pursuant to Section 1.08(b), and the Certificates so surrendered shall
forthwith be cancelled. No interest will be paid or accrued on the Initial
Merger Payment or the Subsequent Merger Payment. From the Closing Date until
surrender in accordance with the provisions of this Section 1.09, each
Certificate (other than Certificates representing treasury shares of MDI),
shall represent for all purposes only the right to receive the Merger
Consideration provided in this Article I.
(b) In the case of any lost, mislaid, stolen, or destroyed
Certificates, the holder thereof may be required, as a condition precedent to
the delivery to such holder of the Consideration described in this Article I,
to deliver to Ultrak a bond in such reasonable sum as Ultrak may direct as
indemnity against any claim that may be made against Ultrak with respect to the
Certificate alleged to have been lost, mislaid, stolen, or destroyed.
(c) On or after the Closing Date, there shall be no transfers
(other than to Ultrak) on the stock transfer books of the Surviving Corporation
of the MDI Shares that were outstanding immediately prior to the Closing Date.
(d) Notwithstanding anything to the contrary in this
Agreement, neither Ultrak nor MDI shall be liable to any holder of MDI Shares
for any amount properly paid to a public official pursuant to any applicable
abandoned property, escheat, or similar law.
1.10. Dissenting Shares. MDI Shares (a) that are issued and
outstanding on the date for
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determination of the MDI Shareholders entitled to vote on the Merger; (b) that
are not voted in favor of the Merger; (c) with respect to which the fair market
value (the "Fair Market Value") has been properly demanded in accordance with
the applicable provisions of the CGCL; and (d) that otherwise are entitled to
be dissenting shares under the CGCL ("Dissenting Shares") shall not be
converted into the right to receive the Merger Consideration provided for in
this Article I unless and until (a) the holder of such Dissenting Shares
withdraws his demand for the Fair Market Value in accordance with the
applicable provisions of the CGCL; or (b) the Dissenting Shares lose their
status as such in accordance with the applicable provisions of the CGCL (except
in the situation where MDI or Ultrak abandon the Merger, or to the extent
permissible, the Dissenting Shares are transferred by the holder thereof, prior
to endorsement, to a third party). Upon the happening of either event
specified in the preceding sentence, then, as of the Effective Date or the
occurrence of either event, whichever later occurs, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Merger Consideration provided for in this
Article I. If any holder of Dissenting Shares shall assert the right to be paid
the Fair Market Value of such Dissenting Shares in accordance with the CGCL
prior to the Closing, then MDI shall give Ultrak notice thereof and Ultrak
shall have the right to participate in all negotiations and proceedings with
respect to any such demands. MDI shall not, except with the prior written
consent of Ultrak, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for the Fair Market Value of any Dissenting
Shares.
1.11. Signing Shareholders' Approval. The Signing Shareholders approve
this Agreement, agree to the terms of the Merger, and agree to vote all of
their MDI Shares in favor of the Merger.
ARTICLE II:
REPRESENTATIONS AND WARRANTIES OF MDI AND
THE SIGNING SHAREHOLDERS
Each of MDI and each Signing Shareholder jointly and severally
represents and warrants to each of Ultrak and Newco that the following are true
and correct as of the Signing Date and will be true and correct as of the
Effective Date as if made on that date:
2.01. Organization, Qualification, and Good Standing. MDI is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of California, has the full corporate power and authority to
own or hold under lease its properties and assets and to carry on its business
as it is now being conducted or is contemplated to be conducted and is duly
qualified to do business and is in good standing in each jurisdiction in which
the ownership of its property or the conduct of its business requires such
qualification. A list of all jurisdictions where MDI is qualified as a foreign
corporation is attached as Schedule 2.01.
2.02. Investments or Subsidiaries. Except as set forth on Schedule
2.02-A, MDI does not own the capital stock of any corporation (a "Subsidiary"),
nor does it have (nor, except as set forth on Schedule 2.02-A, has it ever had)
an equity, profit sharing, participation, or other interest in any partnership,
joint venture, or other entity. Each Subsidiary is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, has the corporate power and authority to own or
hold under lease its properties and assets and to carry on it business as it is
now being conducted or is contemplated to be conducted and is duly qualified to
do business and is in good standing in each jurisdiction in which the ownership
of its property or the conduct of its business requires such qualification. No
such Subsidiary, partnership, joint venture or other entity has any debts,
liabilities, or obligations not disclosed in MDI's financial statements or on
Schedule 2.02-B. Except as set forth in the Financial Statements or on
Schedule 2.02-B, MDI does not have any debts,
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liabilities, or obligations, contingent or otherwise, relating to any such
Subsidiary, partnership, joint venture, or other entity. Except as set forth
on Schedule 2.02-A, no person or entity has any right to acquire any of MDI's
ownership interest in Monitor Dynamics (Europe) SA.
2.03. Corporate Records. Copies of the Articles of Incorporation and
all amendments thereto and the Bylaws of MDI and each Subsidiary have been
delivered to Ultrak and Newco and such copies are true, correct, and complete.
The minute books of MDI, copies of which have been delivered to Ultrak and
Newco, contain accurate and complete minutes of all meetings of and accurate
and complete consents to all actions taken without meetings by the Board of
Directors (and any committee thereof) and the shareholders of MDI since April
1, 1994.
2.04. Corporate Authority Relative to This Agreement; No Violation.
MDI has the corporate power to enter into this Agreement and the Merger Filings
and to carry out its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Merger Filings and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by MDI's Board of Directors and, except for the approval of the MDI
shareholders, no other corporate proceedings on the part of MDI are necessary
to authorize this Agreement or the Merger Filings or the transactions
contemplated hereby and thereby. This Agreement has been, and the Merger
Filings will be, duly and validly executed and delivered by MDI and, assuming
this Agreement and the Merger Filings constitute valid and binding agreements
of the other parties hereto and thereto, this Agreement and the Merger Filings
constitute valid and binding agreements of MDI, enforceable against MDI in
accordance with their terms except that (a) such enforcement may be subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
other similar laws now or hereafter in effect relating to creditors' rights,
(b) the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought,
and (c) the enforceability of indemnification and contribution provisions may
be limited by the United States federal or state securities laws or the public
policies underlying such laws. Neither the execution and delivery of this
Agreement and the Merger Filings nor the consummation of the transactions
contemplated hereby or thereby (including, without limitation, the Merger)
will: (x) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of MDI, (y) violate or conflict with, or result in the
breach or termination of, or otherwise give any other contracting party the
right to terminate, or constitute a default (or an event which, with the lapse
of time, or the giving of notice, or both, will constitute a default) under,
any contract, license, instrument, or commitment to which MDI is a party or by
which MDI is bound, or result in the creation of any lien, charge, or
encumbrance upon the properties or assets of MDI pursuant to the terms of any
such contract, license, instrument, or commitment, or (z) violate or conflict
with any law, regulation, permit, authorization, franchise, license, judgment,
order, writ, injunction or decree of any court or governmental body of any
jurisdiction, in each case as such is related to MDI or MDI's assets. Other
than (a) the Merger Filings and (b) the approval of this Agreement and the
Merger by MDI's shareholders, no authorization, consent, or approval of, or
filing with, any governmental body or authority is necessary for the
consummation by MDI or the Signing Shareholders of the transactions
contemplated by this Agreement.
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2.05. Capitalization.
(a) The authorized capital stock of MDI consists of 5,000,000
MDI Common Shares, 281,934 shares of which are issued and outstanding and
343,750 MDI Preferred Shares, 45,710 shares of which are issued and
outstanding.
(b) All outstanding MDI Shares were duly authorized, validly
issued, fully paid and nonassessable and were offered, issued, sold, and
delivered by MDI in compliance with applicable federal and state securities
laws. Other than as set forth in MDI's bylaws and in MDI's Articles of
Incorporation, there are no preemptive rights with respect to MDI's capital
stock. No MDI Shares have been issued in violation of any preemptive or
preferential rights of any person or entity.
(c) Except as set forth on Schedule 2.05-A, there are no
outstanding subscriptions, options, warrants, rights, or other arrangements or
commitments, whether express or implied, obligating MDI to issue any shares of
its capital stock or securities exchangeable for or convertible into its
capital stock.
(d) Schedule 2.05-B is a list of all of the MDI Shareholders,
the address of each MDI Shareholder as shown in MDI's books and records, and
the number of MDI Common Shares and MDI Preferred Shares owned by each MDI
Shareholder.
2.06. MDI Financial Statements. The reviewed consolidated balance
sheet of MDI and the Subsidiaries as of March 31, 1996 (the "Reviewed Balance
Sheet") and the reviewed consolidated statement of income and retained earnings
and statement of cash flows for the fiscal year then ended (collectively,
including the Reviewed Balance Sheet, the "Reviewed Financial Statements"),
each reviewed by McGladrey & Xxxxxx, LLP, whose report thereon is included
therein, and the unaudited consolidated balance sheet of MDI and the
Subsidiaries as of January 31, 1997 (the "Unaudited Balance Sheet") (the
Reviewed Balance Sheet and the Unaudited Balance Sheet are collectively
referred to as the "Balance Sheets") and the unaudited statement of income and
retained earnings for the ten-month period ended January 31, 1997
(collectively, including the Unaudited Balance Sheet, the "Unaudited Financial
Statements"), have been prepared in accordance with the books and records of
MDI, which books and records are complete, maintained on a consistent basis,
and correctly reflect its income, expenses, assets, and liabilities in all
material respects and present fairly in accordance with GAAP the financial
position of MDI as of the dates of the Balance Sheets and the results of
operations of MDI for the periods covered by said statements of income, in
accordance with GAAP consistently applied, except as otherwise disclosed
therein and except, in the case of the Unaudited Financial Statements, for (i)
normally recurring year-end adjustments, which adjustments will not, either
individually or in the aggregate, have an adverse financial impact on MDI of at
least $150,000 (a "Material Adverse Effect") and (ii) the absence of notes
required by GAAP. The Reviewed Financial Statements and the Unaudited
Financial Statements are collectively referred to in this Agreement as the
"Financial Statements."
2.07. Compliance with Applicable Laws. MDI has complied with all
foreign, federal, state, and local judicial, governmental, and regulatory laws
(collectively, "Laws") applicable to MDI, a Subsidiary, or to the operation of
MDI's or the Subsidiary's business, the non-compliance with which would have a
Material Adverse Effect, and MDI has received no notice of any alleged
violation of any such applicable Laws.
2.08. Taxes. Except as set forth on Schedule 2.08, MDI has duly filed
when due all income, excise, corporate, franchise, property, sales, payroll,
withholding, and other tax returns and reports required to be filed by it as of
the date hereof by the United States of America or any state or any political
subdivision thereof and has paid or established adequate reserves for all taxes
(including
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penalties and interest) which have or may become due for the tax periods
covered by such returns, and any assessments which have been received by it.
All such tax returns or reports which are income tax returns or reports fairly
reflect the taxable income generated by MDI and the taxes of MDI for the
periods covered thereby. MDI is not delinquent in the payment of any tax,
assessment, or governmental charge, there is no tax deficiency or delinquency
asserted against the MDI and there is no unpaid assessment, proposal for
additional taxes, deficiency or delinquency in the payment of any of the taxes
of MDI that could be asserted by any taxing authority, nor of any violation of
any tax Law. There are no waivers or agreements by MDI for the extension of
time for the assessment of any tax as shown on such returns or reports with
respect to MDI. No audit of MDI by any governmental agency having jurisdiction
with respect to taxes imposed on MDI or on its income, properties, sales,
franchises, or operations is pending or, to our knowledge, threatened. All
monies required to be withheld or collected by MDI from employees or customers
for income taxes, social security and unemployment insurance taxes and sales,
excise, and use taxes, and the portion of any such taxes to be paid by MDI to
governmental agencies, have been collected or withheld and either paid to the
respective governmental agencies or set aside for such purpose in the manner
required by applicable law and are properly reflected in the Financial
Statements or on the books and records of MDI.
2.09. Liabilities and Obligations. The Financial Statements reflect
all material liabilities or obligations of MDI, accrued, contingent, or
otherwise (asserted or known but unasserted), arising out of transactions
effected or events occurring on or prior to the Signing Date, other than
liabilities and obligations incurred in the ordinary course of business of MDI
since the date of the Unaudited Financial Statements, which liabilities and
obligations (a) would, individually or in the aggregate, not have a Material
Adverse Effect or (b) are set forth on Schedule 2.09. All reserves shown in
the Financial Statements are appropriate, reasonable, and sufficient to provide
for the losses thereby contemplated. Except as set forth in the Financial
Statements, MDI is not liable upon or with respect to, or obligated in any
other way to provide funds in respect of or to guarantee or assume in any
manner, any debt, obligation, or liability of any person, corporation,
association, partnership, joint venture, trust, or other entity, and MDI knows
of no basis for the assertion of any other claims, liabilities, or obligations
of any nature or in any amount that would, individually or in the aggregate,
have a Material Adverse Effect.
2.10. Employee Benefit Plans; ERISA. Except as set forth on Schedule
2.10:
(a) Neither MDI nor any Subsidiary or other entity under
common control with MDI (an "ERISA Affiliate") as determined under
Sections 414(b), 414(c), or 414(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), sponsors, maintains, or otherwise is a party
to, or is in default under, or has any accrued obligations under any
pension, profit sharing, thrift or other retirement plan, employee stock
ownership plan, deferred compensation, stock option, stock purchase,
performance, share, bonus or other incentive plan, severance plan,
health, group insurance or other welfare plan, or other similar plan,
agreement, policy or understanding, including without limitation any
"employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not such plan is intended to be qualified under Section
401(a) of the Code and whether or not such plan, agreement, policy or
understanding is or has been administered or maintained in compliance
with ERISA, whether formal or informal and whether legally binding or
not, under which MDI or an ERISA Affiliate has any current or future
obligation or liability or under which any present or former employee of
MDI or an ERISA Affiliate, or such present or former employee's
dependents or beneficiaries, has any current or future right to benefits
(each such plan, agreement, policy or understanding being hereinafter
referred to individually as a "Plan"). Except as may be required by law
or as contemplated by this Agreement, neither MDI nor any ERISA
Affiliate has any formal plan or commitment, whether legally binding or
not, to create any additional Plan or modify or change any existing Plan
that would affect any present or
9
former employee of MDI, or such present or former employee's dependents
or beneficiaries. Schedule 2.10 identifies each Plan which is (i) a
multiemployer plan (as defined in Section 3(37) of ERISA) (a
"Multiemployer Plan"), (ii) subject to Title IV of ERISA, excluding for
these purposes, a Multiemployer Plan (a "Title IV Plan"), (iii)
maintained in connection with any trust described in Section 501(c)(9)
of the Code, or (iv) intended to be qualified under Section 401(a) of
the Code.
(b) No liability under Title IV of ERISA has been incurred by
MDI or any ERISA Affiliate since the effective date of ERISA that has
not been satisfied in full, and no condition exists that presents a
material risk to MDI or an ERISA Affiliate of incurring a liability
under such Title, other than liability for premiums due to the Pension
Benefit Guaranty Corporation ("PBGC"). There are no circumstances
pursuant to which MDI may be liable to the PBGC with respect to any
Title IV Plan sponsored or previously sponsored by an entity other than
MDI, including any predecessor of MDI, any former employer of any
present or former employee of MDI if such former employer (or the assets
of such former employer) was acquired by or merged into MDI, or any
ERISA Affiliate of MDI.
(c) The PBGC has not instituted proceedings to terminate any
Title IV Plan and no condition exists that presents a material risk that
such proceedings will be instituted. No "reportable event", within the
meaning of Section 4043 of ERISA and regulations promulgated thereunder,
and no event described in Sections 4062 or 4063 of ERISA, have occurred
in connection with any Plan. With respect to each Title IV Plan, the
fair market value of the assets of each such plan as of the date of this
Agreement (excluding for these purposes any accrued but unpaid
contributions) exceeds the present value of accrued benefits under such
Title IV Plan determined on a termination basis using the actuarial
assumptions established by the PBGC as in effect on the Signing Date.
(d) Full payment has been made, or will be made in accordance
with Section 404(a)(6) of the Code, of all amounts which MDI is required
to pay under the terms of each Plan as of the last day of the most
recent plan year thereof ended prior to the date of this Agreement. No
Plan or any trust established thereunder has incurred any "accumulated
funding deficiency" (as defined in Section 302 of ERISA and Section 412
of the Code), whether or not waived. No ERISA Affiliate of MDI has
failed to make a contribution to a Plan which could subject MDI to any
liability under ERISA.
(e) Neither MDI nor an ERISA Affiliate participates in or
contributes or has participated in or contributed, or is or has been
obligated to participate in or contribute, to a Multiemployer Plan
subject to Title IV of ERISA.
(f) Each of the Plans covering any employee or former employee
of MDI has been maintained and administered in all material respects in
accordance with applicable laws, including but not limited to the
Americans with Disabilities Act of 1990 ("ADA"), the Age Discrimination
in Employment Act, as amended, Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1986, as amended ("COBRA"), ERISA and the
Code. All reports required by any governmental agency with respect to
each of the Plans covering any employee or former employee of MDI have
been timely filed. MDI shall cooperate in full with any action deemed
necessary by Ultrak to ensure compliance with any federal or state law
applicable to the Plans, whether such action occurs prior to, on, or
after the Closing Date. There are no pending or threatened claims or
actions with respect to any Plan covering any employee or former
employee of MDI (other than routine claims for benefits by employees
covered under any such Plan and their beneficiaries). MDI is not aware
of any facts which would give rise
10
to or could reasonably be expected to give rise to any such claims or
actions. No "prohibited transaction", as defined in Section 406 of
ERISA or Section 4975 of the Code has occurred with respect to any Plan,
excluding transactions effected pursuant to a statutory or
administrative exemption. No tax under Section 4980B of the Code has
been incurred, or is reasonably expected to be incurred, in respect of
any Plan that is a group health plan as defined in Section 4980B(g)(2)
of the Code. No lien has been filed by any person or entity on the
assets of MDI or any ERISA Affiliate relating to the operation or
maintenance of the Plans and no lien exists by operation of law or
otherwise on the assets of MDI as a result of the operation or
maintenance of the Plans or any other similar plan or plans, and we have
no knowledge of the existence of facts or circumstances that could
result in the imposition of such a lien.
(g) Each Plan that is intended to be "qualified" within the
meaning of Section 401(a) of the Code is, and has been during the period
from its adoption to date, so qualified, both as to form and operation
and all necessary governmental approvals, including a favorable
determination as to the qualification under the Code of each of the
Plans and each amendment thereto, have been or will be timely obtained.
Each trust created under any such Plan and each trust described in
Section 501(c)(9) of the Code is exempt from federal income taxation
under Section 501(a) of the Code and has been so exempt during the
period from creation to date. Future compliance with the requirements
of ERISA and the Code as in effect on the Closing Date or any collective
bargaining agreements to which MDI is a party will not result in any
increase in the rate of benefit accrual under any of the Plans.
(h) MDI does not provide, and is not obligated to provide,
benefits, including but not limited to death, health, medical, or
hospitalization benefits (whether or not insured), with respect to
current or former employees, their dependents or beneficiaries beyond
their retirement or other termination of employment other than (i)
coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension benefit plan", as that term is
defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of MDI or (iv) benefits the full
cost of which is borne by the current or former employee (or his
beneficiary).
(i) A true and complete copy of each Plan that covers any
employee or former employee of MDI or any ERISA Affiliate (and, if
applicable, related trust agreements) and all amendments thereto and
written interpretations thereof (other than individual claim denials or
approvals) have been furnished to Ultrak together with (i) the most
recent favorable determination letter, if any, with respect to each
Plan, (ii) the two most recent annual reports prepared in connection
with any such Plan (Form 5500 including all applicable schedules), (iii)
the most recent actuarial valuation report prepared in connection with
any such Plan, and (iv) the most recently disseminated summary plan
description and an explanation of any material plan modifications made
after the date thereof.
2.11. Absence of Certain Changes. Except as otherwise contemplated by
or provided for or permitted in this Agreement or as set forth on Schedule
2.11, since January 31, 1997, MDI has not: (a) suffered any material adverse
change in its condition (financial or otherwise), business, or operations;
(b) contracted for or paid any single capital expenditure in excess of $100,000
or total capital expenditures in excess of $500,000; (c) mortgaged, pledged, or
subjected to any lien, lease, security interest, or other charge or encumbrance
any of its material properties or assets; (d) formed or acquired or disposed of
any interest in any corporation, partnership, joint venture, or other entity;
(e) suffered any damage or destruction to or loss of any assets (whether or not
covered by insurance) or lost or terminated employees or suppliers that could
or does have a Material Adverse Effect; (f) except for the disposal of
inventory, machinery, vehicles, and equipment consistent with past
11
practices, acquired or disposed of any assets or incurred, assumed, or
guaranteed any indebtedness for borrowed money or other liabilities or
obligations to pay money other than trade payables in the ordinary course of
business; (g) forgiven, compromised, cancelled, released, permitted to lapse,
or waived any rights or claims that are material to the condition (financial or
otherwise), business or operations of MDI; (h) entered into, terminated or
agreed to any modifications or amendments to any material agreements, leases,
or commitments; (i) paid any bonus, granted any benefit, made any payments, or
loaned any money to its shareholders, employees, or other affiliates; (j)
entered into any employment, compensation, consulting, or collective bargaining
agreement with any person or group, or modified or amended the terms of any
such existing agreement or entered into, adopted, or amended any Plan; or (k)
entered into or terminated any other commitment or transaction or experienced
any other event that could, individually or in the aggregate, have a Material
Adverse Effect.
2.12. Title and Related Matters. MDI has good and marketable title to
all assets reflected in the Financial Statements as owned by MDI and to those
other assets reflected in MDI's books and records as being owned (except as
they have since been affected by transactions in the ordinary course of
business and consistent with past practices), and MDI owns such assets free and
clear of all mortgages, liens, pledges, charges, or encumbrances of any kind or
character, except as set forth on Schedule 2.12.
2.13. Insurance. All the insurable properties of MDI material to the
conduct of MDI's business are insured for its benefit under valid and
enforceable policies, issued by insurers of recognized responsibility.
Complete and accurate copies of all policies of fire, liability, business
interruption, workers' compensation and other forms of insurance and all
fidelity bonds held by or applicable to MDI at any time within the past three
years have been made available to Ultrak. Other than the transactions
contemplated by this Agreement, no event relating to MDI has occurred which
will result in a retroactive upward adjustment of premiums under any such
policies or which is likely to result in any prospective upward adjustment in
such premiums, except that premiums for workers' compensation insurance may
increase on a prospective basis. Except as set forth on Schedule 2.13, there
has been no material change in the type of insurance coverage maintained by MDI
during the past three years which resulted in any period during which MDI had
inadequate insurance coverage. Excluding insurance policies which have expired
and been replaced with comparable policies, no insurance policy of MDI has been
cancelled within the last three years and, to our knowledge, no threat has been
made to cancel any insurance policy of MDI.
2.14. Patents, Trademarks, Copyrights, Etc.
(a) Except as set forth on Schedule 2.14 and, other than "off
the shelf" computer software programs available to anyone, MDI owns all
patents, technology, trademarks, service marks, internet domain names, and
copyrights, if any, reasonably necessary to conduct its business (the
"Proprietary Rights"). No affiliate of MDI (other than a Subsidiary) has any
right, title, license, or other ability to use any of the Proprietary Rights.
Schedule 2.14 includes a list of all internet domain names used by MDI or any
Subsidiary.
(b) MDI has the sole and exclusive right to use the
Proprietary Rights without infringing, violating, or conflicting with the
rights of third parties. No consent of third parties is required for the use
thereof by MDI, and, to our knowledge, no claim has been asserted by any person
to the ownership of or right to use any Proprietary Right, and MDI does not
know of any basis for any such claim. Each of the Proprietary Rights is valid
and subsisting, has not been cancelled, abandoned, or otherwise terminated and,
if applicable, has been duly issued or filed with all appropriate authorities.
(c) To our knowledge, (i) there is no claim that, or inquiry
as to whether, any product,
12
activity or operation of MDI infringes upon or involves, or has resulted in the
infringement of, any Proprietary Right of any other person, corporation or
other entity and (ii) no proceedings have been instituted, are pending or are
threatened which challenge the rights of MDI with respect thereto.
2.15. Consents. Except as set forth on Schedule 2.15, no
authorization, consent, approval, permit, or license of, or filing with, any
governmental or public body or authority, any lender or lessor or any other
person or entity is required to authorize, or is required in connection with,
the execution, delivery, and performance of this Agreement or the agreements
contemplated hereby on the part of MDI, and the execution, delivery, and
performance of this Agreement will not with the giving of notice, the lapse of
time, or both, terminate such licenses, franchises, permits, and governmental
authorizations.
2.16. Labor Relations.
(a) MDI is not a party to any collective bargaining agreements
with any union and no collective bargaining agreement is currently being
negotiated by MDI.
(b) There are no unfair labor practice charges, complaints, or
proceedings against MDI pending or, to our knowledge, threatened before the
National Labor Relations Board.
(c) There are no discrimination charges (relating to sex, age,
race, national origin, handicap, or veteran status) pending against MDI, or, to
our knowledge, any officer, director, employee or agent of MDI (in his or her
capacity with MDI) before any federal or state agency or authority.
(d) There is no pending representation question involving an
attempt to organize a bargaining unit including any employees of MDI and no
labor grievance has been filed.
2.17. Litigation and Claims. Except as set forth on Schedule 2.17, MDI
is not a party to, and the business and assets of MDI are not the subject of or
affected by, any pending or, to our knowledge, threatened suit, claim, action
or litigation by or with any party or any administrative, arbitration, or other
governmental proceeding, investigation, or inquiry which, if adversely
determined, would have a Material Adverse Effect. Except as set forth on
Schedule 2.17, MDI is not (a) subject to any continuing court or administrative
order, writ, injunction or decree applicable specifically to MDI or to its
business, assets, operations or employees, or (b) in default with respect to
any such order, writ, injunction or decree. Except as set forth on Schedule
2.17, MDI does not know of any basis for any such action, proceeding, or
investigation.
13
2.18. Employees and Consultants.
(a) Except as set forth on Schedule 2.18 MDI has no direct or
indirect, express or implied, obligation to pay severance or termination pay to
any officer or employee of MDI, or to pay any termination or severance payments
to any consultant, agent, or other person or entity.
(b) Set forth on Schedule 2.18 are the following:
(i) A description of the termination or severance pay
policy of MDI.
(ii) A complete and accurate list of all holiday and
vacation pay and other benefits (other than ERISA matters)
accrued as of the date hereof, in respect of employees of MDI.
(iii) A description of the workers compensation loss
experience of MDI as of the date hereof.
Except as set forth on Schedule 2.18, no employment manual or written
employment policy and/or procedures have been provided to or for
employees, and no written or verbal employment, consultant or
independent contractor agreement exists to which MDI may be bound. MDI
has made available to Ultrak accurate and complete copies of all such
employment agreements, consulting agreements, confidentiality agreements
and all other agreements, plans and other instruments to which MDI is a
party and under which its employees or consultants are entitled to
receive benefits of any nature. None of the employees of MDI is
represented by any labor union or organization. Since January 1, 1994,
MDI has been in compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of employment
and wages and hours and is not engaged in, nor has MDI committed, any
unfair labor practice as defined in the National Labor Relations Act of
1947, as amended.
(c) No present or former employee of MDI has asserted, or, to
our knowledge, has any basis to assert, any claim against MDI (whether
under federal, state or local law, any employment agreement, or
otherwise) on account of or for (a) overtime pay, other than overtime
pay for the then current payroll period, (b) wages or salary for any
period other than the current payroll period, (c) vacation, time off or
pay in lieu of vacation or time off, other than that earned in respect
of the current fiscal year or accrued on MDI's books and records, or (d)
any violation of any statute, ordinance or regulation relating to
minimum wages or maximum hours of work. All amounts required to be
withheld by MDI from its employees have been properly withheld and have
been or will be timely deposited and all contributions required to be
paid by MDI in respect of its employees have been paid in accordance
with the applicable provisions of federal, state and local laws
regarding income tax withholding and social security, workers
compensation, unemployment compensation or similar taxes or
contributions.
(d) To our knowledge, no person or entity (including, but not
limited to, governmental agencies of any kind) has any claim, or basis
for any action or proceeding, against MDI arising out of any statute,
ordinance or regulation relating to discrimination in employment or
employment practices or occupational safety and health standards other
than those listed on Schedule 2.18. MDI has not received any notice
from any federal, state or local entity alleging a violation of
occupational safety or health standards.
(e) With respect to each person employed by MDI on or after
May 1, 1987, and who actually commenced such employment on or after
November 6, 1986, (a) MDI hired such
14
person in compliance with the Immigration Reform and Control Act of 1986
and the rules and regulations thereunder ("IRCA") and (b) MDI has
complied with all recordkeeping and other regulatory requirements under
IRCA.
2.19. [Intentionally omitted]
2.20. Distributions. Except as set forth on Schedule 2.20, since
January 31, 1997, no distribution, payment or dividend of any kind has been
declared, paid or distributed by MDI on or with respect to any of its capital
stock at any time.
2.21. Corporate Name. There are no actions, suits, or proceedings
pending or, to our knowledge, threatened against or affecting MDI which may
result in any impairment of the right of MDI to use its corporate name or any
internet domain name used by MDI. To our knowledge, the use of the corporate
name of MDI does not infringe the rights of any third party nor is it
confusingly similar with the corporate name of any third party. Except as set
forth on Schedule 2.21, to our knowledge, no person or business entity other
than MDI is authorized, directly or indirectly, to use the corporate name of
MDI, or any name confusingly similar thereto.
2.22. Environmental Matters.
(a) The following terms shall have the following meanings:
(i) "Applicable Environmental Laws" means all federal,
state and local or municipal, statutory, regulatory, and common
law requirements as in effect as of the date hereof or on the
Closing Date relating to the protection of human health and
safety or the environment, including, without limitation, the
Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean
Water Act, (33 U.S.C. Section 1251 et seq.), the Clean Air Act,
(42 U.S.C. Section 7401 et seq.), the Toxic Substance Control
Act (15 U.S.C. Section 2601 et seq.), Federal Insecticide
Fungicide Rodenticide Act (7 U.S.C. Section 136 et seq.),
Occupational Safety and Health Act (29 U.S.C. Section 651 et
seq.), and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders.
(ii) "Hazardous Materials" means any chemical
substances, pollutants, contaminants, materials, industrial solid
wastes or other wastes, or combinations thereof, whether solid,
liquid or gaseous in nature which poses or may pose a hazard to
the health or safety of persons or the environment or the
presence of which may require investigation or remediation under
any Applicable Environmental Law, including, without limitation,
material which is or, prior to the Closing, becomes defined as a
"hazardous waste" or "hazardous substance" under the
Comprehensive Environmental Response Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.) and/or the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.)
or which contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, urea
formaldehyde foam insulation, or radon gas.
15
(b) Except as set forth on Schedule 2.22, MDI is, and has been
at all times in compliance with all Applicable Environmental Laws except
where the failure to be in compliance would not have a Material Adverse
Effect.
(c) Except as set forth on Schedule 2.22, there has been no
spill, discharge, disposal, or release by MDI of Hazardous Materials
onto or from the real property owned or occupied by MDI (the "Real
Property"), nor, to our knowledge, have any Hazardous Materials migrated
from, or migrated to, the Real Property.
(d) Except as set forth on Schedule 2.22, MDI has all permits,
licenses, approvals and/or registrations required to be issued to it
under Applicable Environmental Laws and is in compliance with the terms
and conditions of each permit, license, approval, and registration.
(e) Except as set forth on Schedule 2.22, MDI has not received
notice or other communication concerning any alleged violation by MDI of
any Applicable Environmental Law, or notice or other communication
concerning alleged liability of MDI for any response costs or remedial
action in connection with the Real Property, or for which MDI is alleged
to be liable under any Applicable Environmental Law, and, to our
knowledge, there exists no writ, injunction, decree, order, judgment, or
lien outstanding, nor any lawsuit, claim, proceeding, citation,
directive, summons or investigation, pending or threatened, relating to
the Real Property, or any alleged violation of Applicable Environmental
Law by MDI or suspected presence of Hazardous Materials on the Real
Property, or any offsite location for which MDI is alleged to be liable.
(f) Except as set forth on Schedule 2.22, no claim has been
asserted against MDI, arising out of violations of any Applicable
Environmental Laws or the handling, treatment, storage, transportation,
disposal (or the arranging therefor), or the discharge into the
environment of any Hazardous Materials.
(g) Except as set forth on Schedule 2.22, to our knowledge, no
underground storage tanks for petroleum or any other substance, or
underground piping or conduits associated with such tanks, have been
located on the Real Property.
(h) To our knowledge, no Hazardous Materials, including
without limitation, asbestos-containing materials or PCB-containing
materials, have been installed, contained in building material,
contained in transformers or other electrical equipment, or are
otherwise present on the Real Property.
(i) MDI has never been refused insurance coverage, nor has
insurance coverage ever been cancelled, as a result of the presence of
Hazardous Materials on the Real Property or violations of Applicable
Environmental Laws.
(j) Except as set forth on Schedule 2.22, there have been no
active or inactive hazardous waste management units on the Real
Property.
(k) Except as set forth on Schedule 2.22, MDI is not aware of
any plans or documents, whether or not government approved, which are
specifically directed at all or some portion of the Real Property which
impose environmental obligations on MDI or against the Real Property.
(l) Except as set forth on Schedule 2.22, there are no
environmental liens or security
16
interests against the Real Property nor are there any actions pending or
events or circumstances that have occurred or are occurring which would
or could result in the creation of any lien relating to environmental
conditions on the Real Property.
(m) To the extent in the possession of MDI, MDI has made
available to Ultrak all environmental studies, reports and records
regarding MDI, and all documents concerning environmental conditions of
the Real Property, or which identify underground tanks, or otherwise
relate to actual or potential contamination of the soil or groundwater.
(n) No Hazardous Materials have been disposed of by MDI on the
Real Property or have been transported to any off-site disposal area
other than those identified on Schedule 2.22, and none of those sites
have been designated or are being considered for designation as a site
requiring clean-up pursuant to any Applicable Environmental Law.
2.23. Condition of Fixed Assets. Except as set forth on Schedule 2.23,
all of the fixed assets owned or leased by MDI are in good condition and repair
(ordinary wear and tear excepted) for the intended use in the ordinary course
of business and conform in all material respects with all applicable
ordinances, regulations and other laws and there are no known latent defects
therein.
2.24. Customers.
(a) Schedule 2.24 is a complete and accurate list of MDI's
sales to MDI's ten largest customers by dollar volume of purchases from
MDI, for MDI's fiscal years 1994, 1995, and 1996.
(b) The backlog set forth on Schedule 2.24 represents MDI's
internal records of backlog of unfilled firm orders by customer and
amount as of a date within thirty (30) days prior to the Signing Date.
Schedule 2.24 reflects a list of all known outstanding bids and quotes,
including name of bid or quote recipient, and amount of bid or quote,
quoted as of a date within thirty (30) days prior to the Signing Date.
(c) Neither MDI nor any Signing Shareholder has actual notice
or information from or concerning any of MDI's customers that any such
customer will cease, or be unable, to do business with MDI consistent
with such customer's prior business practices with MDI.
(d) Except as set forth on Schedule 2.24, neither MDI nor, to
our knowledge, any officer of MDI has (i) made any payment to any person
(an "Official") employed by or affiliated with any customer, supplier,
or governmental entity or agency charged with reviewing, monitoring, or
regulating any activities of MDI, (ii) given any personal property or
real property to any Official (valued at more than $100), (iii) sold any
personal property or real property to any Official at less than fair
market value, (iv) made a political contribution to any governmental
Official in violation of applicable law, or (v) otherwise taken any
action in violation of any statute, rule, or regulation prohibiting
bribes, kickbacks, or other activities that seek to wrongfully influence
any Official.
(e) Except as set forth on Schedule 2.24, there is no
restriction, fact, or situation currently applicable or contemplated
with respect to MDI that restricts, impedes, impairs, or prohibits the
ability of MDI to submit bids to and/or contract with (i) any federal,
state, or local government or any branch or agency thereof, (ii) any
corporation or other entity, or (iii) any foreign government or any
branch or agency thereof.
17
2.25. Accounts Receivable. The accounts receivable of MDI on the
Signing Date, and those existing on the Closing Date:
(a) will have arisen out of sales in the ordinary course of
business and represent bona fide indebtedness of the applicable account
debtor;
(b) to our knowledge, are and will be collectible in full, net
of the reserves therefore set forth on the books of MDI, which reserves
were calculated consistent with past practices and with GAAP with the
Reviewed Financial Statements; and
(c) except as set forth on Schedule 2.25-A are, net of the
reserves therefor set forth on the books of MDI, subject to no claims
of offset, counterclaim, or recoupment that have been asserted and, to
our knowledge, there are no facts or circumstances (whether asserted or
unasserted) that could give rise to such a claim.
Schedule 2.25-B is a complete and accurate accounts receivable aging report for
MDI as of a date within thirty (30) days prior to the Signing Date.
2.26. Contracts.
(a) Except as set forth on Schedule 2.26, MDI is not a party
to, or bound by, any material undischarged written or oral:
i) contract of employment for any period of time
whatsoever, or restricting the employment, of any employee,
except as contemplated by this Agreement;
ii) consulting agreement;
iii) collective bargaining agreement;
iv) contract or agreement restricting in any manner
MDI's right to compete with any other person or restricting MDI's
right to sell to or purchase from any other person;
v) agreement with any affiliate of MDI or person
controlled directly or indirectly by an affiliate of MDI for or
with respect to the borrowing or lending of monies, the purchase
or sale of goods or the performance of services;
vi) contract for the payment or receipt of license fees
or royalties to or from any person, firm or corporation;
vii) contract of agency, representation, distribution or
franchise which cannot be canceled without payment or penalty
upon notice of thirty (30) days or less;
viii) service contract in an annual amount in excess of
$100,000;
ix) guaranty, performance, bid or completion bond, or
surety or indemnification agreement;
x) contract relating to the purchase, sale, ownership,
use or license of technology except licenses for third party
software generally available to the public;
18
xi) lease or sublease, either as lessee or sublessee,
lessor or sublessor, of real or personal property or intangibles;
xii) contracts relating to the purchase, sale or
margining of securities;
xiii) warranty or product service contracts (other than
the standard one year limited warranty given on all complete
jobs); or
xiv) joint venture, partnership or other contracts
involving a sharing of profits, losses, costs or liabilities.
All material contracts, leases, subleases and other instruments of the
type referred to in this Section 2.26 and described on Schedule 2.26
(collectively, "Contracts") are in full force and effect and are binding upon
MDI and, to our knowledge, are binding on the other parties thereto. Except as
set forth on Schedule 2.26, no default by MDI under any Contract has occurred,
no material default by the other contracting parties under any Contract has
occurred, and, to our knowledge, no event has occurred which with the giving of
notice or the lapse of time, or both, would constitute a material default by
MDI under any Contract. MDI has made available to Ultrak true and complete
copies of each Contract.
(b) Except as disclosed on Schedule 2.26, MDI is not a party
to, or bound by, any Contract under the terms of which performance by
MDI according to the terms of this Agreement will be a default or an
event of acceleration, or would otherwise require consent.
(c) Schedule 2.26 contains a list of every material license,
permit or governmental approval, order, directive and agreement applied
for, pending, issued, rejected or given to MDI with respect to the
conduct of its business or operations. MDI possesses all material
licenses, permits, and governmental approvals and authorizations which
are required in order to operate its business as presently conducted and
MDI is in compliance in all material respects with all such licenses,
permits, approvals, and authorizations.
(d) Schedule 2.26 contains a list of all pending or known
threatened claims against MDI under each Contract (including without
limitation, claims for back charges, rebates, price reductions, breaches
of product or service warranties or for product or service liability for
products manufactured or sold, but excluding requests for service in the
ordinary course of business which MDI is required to perform pursuant to
the terms of standard warranties and which are covered by warranty
reserves), to the extent such claims, individually or in the aggregate,
could have a Material Adverse Effect.
2.27. Agreements with Affiliates. Set forth on Schedule 2.27 is a
complete list of all agreements (written or oral) between MDI shareholders, any
entities owned or controlled by such shareholders (the "Shareholder
Affiliates"), and/or their family members, on the one hand, and MDI, on the
other hand. Schedule 2.27 also sets forth all amounts due and owing by the
shareholders, the Shareholder Affiliates, or the shareholders' family members
to MDI or by MDI to the shareholders, the Shareholder Affiliates, or the
shareholders' family members.
2.28. ADA. MDI has not received notice from any individual, entity or
federal, state, local governmental agency or official notifying MDI that MDI or
any property or asset of MDI is in violation of, or in noncompliance with, the
ADA. MDI has not received any notice of a claim or potential claim under the
Civil Rights Act of 1991 for any violation of the ADA.
19
2.29. Products. To our knowledge, there is no claim, including but not
limited to any claim alleging personal injury or claim alleging product
liability against MDI on account of product warranties or with respect to the
manufacture, sale, lease, or rental of products and, to our knowledge, there is
no basis for any such claim on account of products heretofore manufactured,
sold, or rented which is not fully covered by insurance.
2.30. Business Relations with Suppliers. Except as set forth on
Schedule 2.30, MDI has not received notice or information that any supplier of
MDI will cease or refuse to do business with MDI after the consummation of the
transactions contemplated hereby consistent with such supplier's prior business
practices with MDI. Except as set forth on Schedule 2.30, MDI has not received
any notice of any disruption (including delayed deliveries or allocations by
suppliers or service providers) in the availability of the materials, products,
supplies or services used by MDI, nor is MDI aware of any facts which could
lead MDI to believe that MDI (whether before or after the Closing) will be
subject to any such material disruption. Other than policies which may be
imposed upon such suppliers subsequent to the Closing, MDI is not aware of any
condition (financial or otherwise) affecting any key or major supplier of MDI
that is likely to reduce such supplier's ability to do business with MDI
consistent with such supplier's prior business practices with MDI.
2.31. Brokers and Finders. Other than as set forth on Schedule 2.31,
neither MDI nor any of its officers, directors, and employees has employed any
broker, finder, or investment bank or incurred any liability for any investment
banking fees, financial advisory fees, brokerage fees, or finders' fees in
connection with the transactions contemplated hereby.
2.32. Accuracy of Information Furnished. No representation or warranty
in this Article II contains an untrue statement of material fact or omits to
state a material fact necessary to make the statements and facts contained
therein, in light of the circumstances in which they were made, not false or
misleading.
ARTICLE III:
SPECIAL REPRESENTATIONS AND WARRANTIES
OF SIGNING SHAREHOLDERS
Each Signing Shareholder severally represents and warrants to each of
Ultrak and Newco that the following are true and correct as of the Signing Date
and will be true and correct as of the Effective Date as if made on that date:
3.01. Stock Ownership. As of the date hereof, such Signing Shareholder
is the lawful record and beneficial owner of the MDI Common Shares and MDI
Preferred Shares set forth by his name on Schedule 2.05-B, free and clear of
all liens, liabilities, proxies, claims, voting agreements, options, and rights
of first refusal of any kind.
3.02. Adverse Occurrences. No Signing Shareholder is aware of any
event (other than the Merger) that has occurred with respect to MDI, MDI's
customers, or MDI's suppliers that will materially adversely impact, or that is
reasonably likely to materially adversely impact, MDI's business, liquidity,
capital resources, and/or results of operations (general economic trends and
general business trends applicable to all business are expressly excluded from
this Section 3.02). This Section 3.02 includes potential actions of MDI's
customers and MDI's suppliers in response to the Merger only to the extent that
such a customer or supplier has indicated, orally or in writing, to a Signing
Shareholder that such a customer or supplier will, or is likely to, cease doing
business with MDI following the Merger.
20
ARTICLE IV:
REPRESENTATIONS AND WARRANTIES OF
ULTRAK AND NEWCO
Each of Ultrak and Newco jointly and severally represents and warrants
to MDI that the following are true and correct as of the Signing Date and will
be true and correct as of the Effective Date as if made on that date:
4.01. Organization, Qualification, and Good Standing. Ultrak is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware, and Newco is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas,
and each of Ultrak and Newco has the corporate power and authority to own or
hold under lease its properties and assets 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 ownership of its property or the
conduct of its business requires such qualification.
4.02. Corporate Records. The copies of the Certificate of
Incorporation of Ultrak and the Articles of Incorporation of Newco and any
amendments thereto and the Bylaws, and any amendments thereto, of both Ultrak
and Newco that have been delivered to MDI are true, correct, and complete
copies thereof.
4.03. Capitalization of Ultrak. The authorized capital stock of
Ultrak consists of 20,000,000 shares of Ultrak Common Stock and 2,000,000
shares of Preferred Stock, $5.00 par value per share, of which 195,351 shares
have been designated as Series A 12% Cumulative Convertible Preferred Stock
("Series A Preferred Stock"). As of December 27, 1996, there were issued and
outstanding 13,863,101 shares of Ultrak Common Stock and 195,351 shares of
Series A Preferred Stock. All outstanding shares of Ultrak Common Stock are
duly authorized, validly issued, fully paid and nonassessable. All outstanding
shares of capital stock of Newco are validly issued, fully paid and
nonassessable and are owned by Ultrak.
4.04. Corporate Authority Relative to This Agreement; No Violation.
Ultrak and Newco have the corporate power to enter into this Agreement and the
Merger Filings and to carry out their respective obligations hereunder and
thereunder (to the extent each is a party thereto). The execution and delivery
of this Agreement and the Merger Filings and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the Boards of Directors of Ultrak and Newco and no other
corporate proceedings on the part of Ultrak or Newco are necessary to authorize
this Agreement or the Merger Filings or the transactions contemplated hereby
and thereby. This Agreement and the Merger Filings have been duly and validly
executed and delivered by Ultrak and Newco (to the extent each is a party
thereto) and, assuming this Agreement and the Merger Filings constitute valid
and binding agreements of the other parties hereto and thereto, this Agreement
and the Merger Filings constitute valid and binding agreements of Ultrak and
Newco, enforceable against Ultrak and Newco in accordance with their terms
except that (a) such enforcement may be subject to bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, (b) the remedy of specific
performance and injunctive and other forms of equitable relief are subject to
certain equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, and (c) the enforceability of
indemnification and contribution provisions may be limited by the United States
federal or state securities laws or the public policies underlying such laws.
Neither the execution and delivery of this Agreement nor of the Merger Filings
nor the consummation of the transactions contemplated hereby
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or thereby (including without limitation the Merger) will: (x) violate or
conflict with any provision of the Certificate of Incorporation or Bylaws of
Ultrak or the Articles of Incorporation or Bylaws of Newco, (y) violate or
conflict with, or result in the breach or termination of, or otherwise give any
other contracting party the right to terminate, or constitute a default (or an
event which, with the lapse of time, or the giving of notice, or both, will
constitute a default) under, any contract, license, other instrument or
commitment to which Ultrak or Newco is a party or by which Ultrak or Newco is
bound, or result in the creation of any lien, charge or encumbrance upon the
properties or assets of Ultrak or Newco pursuant to the terms of any such
contract, license, instrument or commitment, or (z) violate or conflict with
any law, regulation, permit, authorization, franchise, license, judgment,
order, writ, injunction or decree of any court or governmental body of any
jurisdiction, in each case as such is related to Ultrak or Newco or their
assets. Other than in connection with or in compliance with the provisions of
the TBCA, the CGCL, the Securities Exchange Act of 1934, no authorization,
consent, or approval of, or filing with, any governmental body or authority is
necessary for the consummation by Ultrak and Newco of the transactions
contemplated herein.
4.05. Ultrak Reports and Financial Statements. Ultrak has previously
furnished to MDI true and complete copies of the following (the "SEC Filings"):
(i) Ultrak's annual report on Form 10-K filed with the
SEC for the year ended December 31, 1995;
(ii) Ultrak's quarterly reports on Form 10-Q filed with
the SEC for the quarters ended March 31, 1996, June
30, 1996, and September 30, 1996; and
(iii) Ultrak's current reports on Form 8-K dated August
23, 1996, October 11, 1996 and December 31, 1996
filed with the SEC; and
(iv) Ultrak's prospectus dated November 18, 1996
constituting a part of Ultrak's Registration
Statement on Form S-3.
The audited consolidated financial statements and unaudited consolidated
interim financial statements (collectively referred to herein as the "Ultrak
Financials") included in the SEC Filings (including any related notes and
schedules) fairly presented the financial position of Ultrak as of the dates
thereof and the results of operations and changes in financial position or
other information included therein for the periods or as of the dates then
ended, all in accordance with generally accepted accounting principles
consistently applied during the periods involved (except as otherwise stated
therein). Since the date of the last filing of an SEC Filing, Ultrak has made
no filings with the SEC.
4.06. Compliance with Applicable Laws. Ultrak has complied with all
judicial, governmental, and regulatory laws applicable to it or to the
operation of its business, the non-compliance with which would have a material
adverse effect on the financial condition or business of Ultrak and neither
Ultrak nor Newco has received notice of any alleged violation of any such
applicable laws.
4.07. Brokers and Finders. Neither of Ultrak, Newco nor any officer or
director of Ultrak has employed any broker, finder, or investment bank or
incurred any liability for any investment banking fees, financial advisory
fees, brokerage fees, or finders' fees in connection with the transactions
contemplated hereby.
4.08. Funding. Ultrak has and will have on Final Payment Date
sufficient funds available to fund the payment of the Merger Consideration in
accordance with this Agreement.
22
4.09. Accuracy of Information Furnished. No representation or warranty
in this Article IV contains an untrue statement of material fact or omits to
state a material fact necessary to make the statements and facts contained
therein, in light of the circumstances in which they were made, not false or
misleading.
No disclosure by Ultrak (not contained in this Agreement or in a
supplement to a Schedule to this Agreement) and no investigation by or on
behalf of MDI with respect to Ultrak shall be deemed to affect MDI's reliance
on the representations, warranties, covenants, or agreements of Ultrak
contained herein or to waive any rights for the breach or inaccuracy or failure
to perform or comply with any representation, warranty, covenant, or agreement
of Ultrak.
ARTICLE V:
JOINT COVENANTS OF ULTRAK AND MDI
5.01. Access. Upon reasonable prior notice, each of Ultrak and MDI
will afford to one another and to one another's officers, employees,
accountants, counsel, and other authorized representatives, full and complete
access during normal business hours, throughout the period prior to the earlier
of the Effective Date or the Termination Date (as hereinafter defined), to its
properties, personnel, contracts, commitments, books, records (including but
not limited to tax returns) and reports, schedules, or other documents
(including but not limited to reports, schedules, and documents relating to
environmental matters) and will use all its reasonable efforts to cause its
respective representatives to furnish promptly to the other such additional
financial and operating data and other information as to its respective
businesses and properties as the other or its duly authorized representatives
may from time to time reasonably request.
5.02. Notice of any Material Change. Each of Ultrak and MDI, promptly
after the first notice or occurrence thereof, but not later than the Effective
Date, shall disclose to the other in writing the occurrence of any event or the
existence of any state of facts that: (a) had such event occurred or such
facts existed or been known at the date hereof, would have been required to
have been set forth in this Agreement; (b) would make any of its
representations and warranties in this Agreement untrue in any material
respect; or (c) would otherwise constitute a material adverse change in the
business, results of operations, working capital, assets, liabilities or
condition (financial or otherwise) of Ultrak or MDI, as the case may be. No
notice hereunder will have any effect for the purpose of determining the
satisfaction of or compliance with the conditions to the obligations of the
parties set forth elsewhere in this Agreement.
5.03. Cooperation. Ultrak and MDI will: (a) cooperate with one another
in determining whether any filings not described in this Agreement are required
to be made with or consents, authorizations, clearances and approvals required
to be obtained from, any governmental or regulatory authorities in any
jurisdiction or any third party prior to the Effective Date in connection with
the consummation of the transactions contemplated in this Agreement and
cooperate in making any such filings promptly and in seeking timely to obtain
any such consents; (b) keep each other informed in connection with the
transactions contemplated by this Agreement; (c) cooperate with one another and
expend reasonable amounts in order to lift any injunctions or remove any other
impediment to the consummation of the transactions contemplated herein; and (d)
take such actions as the other party may reasonably request to consummate the
transactions contemplated by this Agreement and use all its reasonable efforts
to satisfy all conditions precedent to the obligations to close such
transactions.
5.04. Confidentiality. Each party to this Agreement will take all
reasonable precautions to maintain the confidentiality of any information
concerning any other
23
party or any affiliate of any other party provided to or discovered by it or
its representatives and will not disclose such information to anyone other than
those people directly involved in the investigation and negotiations pertaining
to the transactions contemplated hereby. Each party further agrees that in the
event the transactions contemplated by this Agreement are not consummated, it
will return or destroy all documents and records obtained from any other party
during the course of its investigation or negotiations pertaining to the
transactions contemplated hereby and will use all its reasonable efforts to
cause all information with respect to such other party and its businesses which
it obtained pursuant to this Agreement to be kept confidential.
Notwithstanding the foregoing, the obligation of any party to maintain
confidentiality with respect to information received by it will not apply to
(a) any disclosure of information required by applicable law or (b) any
information that is or becomes publicly available without violation of this
Agreement.
5.05. No Solicitation. Until the Termination Date, MDI covenants that
neither it nor its officers, directors, agents, or affiliates, will: (a)
directly or indirectly, encourage, solicit, or initiate discussion or
negotiations with any corporation, partnership, person, or other entity or
group concerning any merger, sale of all or substantially all of the assets,
business combination, sale of shares of capital stock, or similar transactions
involving MDI, whether by providing nonpublic information or otherwise; or (b)
disclose, directly or indirectly, any information not customarily disclosed to
any person concerning its business and properties, afford to any other person
access to its properties, books, or records or otherwise assist or encourage
any person in connection with any of the foregoing. In the event MDI receives
any offer or inquiry for a transaction of the type referred to in (a) above,
MDI will promptly inform Ultrak as to any such offer or inquiry.
5.06. Public Announcements. Ultrak and MDI will consult with each
other before issuing any press release, public announcement, or make any public
filing regarding this Agreement and the Merger, and will not, unless otherwise
required by law, issue any such press release prior to such consultation.
ARTICLE VI:
COVENANTS
6.01. Covenants of MDI. (a) Except as set forth on Schedule 6.01,
prior to the earlier of the Effective Date or the Termination Date, and except
as may be permitted, required, or contemplated pursuant to this Agreement or as
may be consented to in writing by Ultrak, MDI covenants and agrees that it:
(i) will conduct its operations in the ordinary and usual
course of business consistent with MDI's past and current practices, and
will use all its reasonable efforts to maintain and preserve intact
MDI's business organization and goodwill, to retain the service of its
key officers and employees, and to maintain satisfactory relationships
with customers and those having business relationships with it;
(ii) will not declare or pay any dividends on its outstanding
shares of capital stock;
(iii) will not propose or adopt any amendments to its Articles
of Incorporation or Bylaws;
(iv) will not issue any shares of its capital stock or effect
any stock split or otherwise change its current capitalization except
pursuant to the exercise of existing stock options described on Schedule
2.05-A;
24
(v) will not grant, confer or award any options, warrants,
conversion rights or other rights, not existing on the date hereof, to
acquire any shares of its capital stock;
(vi) will not purchase or redeem any shares of its capital
stock; and/or
(vii) unless otherwise required by law (in which event MDI will
notify Ultrak), will not take any action, or agree to take any action,
that would make any representation or warranty in Article II hereof
untrue or incorrect.
(b) MDI shall promptly submit this Agreement and the
transactions contemplated hereby for the approval of its shareholders at a
meeting of such shareholders to be held as soon as practicable after the date
hereof, and MDI shall use reasonable efforts to obtain shareholder approval of
this Agreement and the transactions contemplated hereby. MDI shall, through
its Board of Directors, recommend to its shareholders approval of this
Agreement and the transactions contemplated by this Agreement.
6.02. Covenants of Ultrak. Ultrak covenants and agrees as follows:
(a) During the period from the Effective Date through the later of
the date of payment of the Subsequent Merger Payment or the final determination
of the MDI Net Worth pursuant to Section 1.06 if there is no Subsequent Merger
Payment (the "Transition Period"), Xxxxxxx shall be appointed by Ultrak as a
member of the Board of Directors of MDI (the "Board") and the action of the
Board shall require the affirmative approval of a majority of the members of
the Board (including the affirmative approval of Xxxxxxx). During the
Transition Period, the executive officers of MDI shall continue to consist of
the executive officers of MDI immediately prior to the Closing Date.
(b) During the period from the Effective Date through March 31, 1997
(the "Initial Period"), the business, operations, and affairs of MDI shall
continue to be conducted in accordance with MDI's past practices.
(c) During the Initial Period, Ultrak shall use its reasonable
efforts to promote the business of MDI. In connection therewith, Ultrak shall
not, and shall not permit Ultrak's affiliates (other than MDI) to, (i) pursue
any business strategy, undertake any investment in any Person, or undertake any
action which directly or indirectly competes with the business, operations or
affairs of MDI, (ii) require Ultrak or Ultrak's affiliates (other than MDI) to
incur any expense on behalf of, or make any contribution to, MDI or its
affiliates, except as set forth in this Agreement, or (iii) effect any capital
restructuring or reorganization of, or change in ownership or control of, any
of Ultrak's affiliates. For purposes of this Section 6.02, an affiliate of
Ultrak shall mean an entity that has a majority of its equity owned, directly
or indirectly, by Ultrak.
(d) During the Initial Period, Ultrak shall own and operate MDI as a
stand alone subsidiary.
(e) During the Initial Period, Ultrak agrees to use its reasonable
efforts to explore and pursue revenue expansion opportunities for MDI. During
the Initial Period, if Ultrak desires to purchase services or products from MDI
or any of MDI's affiliates immediately prior to the Closing for resale by
Ultrak or Ultrak's affiliates, then the terms and conditions of such
intercompany sales will be negotiated with Xxxxxxx in good faith and on an
arms-length basis by the executive officers of Ultrak.
(f) During the Initial Period, Ultrak shall charge MDI only for
services requested by the Board (as contemplated by Section 6.02(a) hereof) and
all such intercompany expenses, if any, will be billed at actual cost. All
such costs will be cleared monthly by cash transfers in response to an invoice
25
or other documentation. Ultrak will provide such information as is available
to Ultrak as may be reasonably requested by MDI for the purpose of permitting
MDI to verify the pricing for intercompany services provided by Ultrak.
(g) Ultrak and MDI agree that during the Initial Period, the
affirmative approval of the Board (as contemplated by Section 6.02(a) hereof),
shall be required to authorize the following actions of MDI, whether such
actions are taken directly or indirectly, through subsidiaries, affiliates or
otherwise:
(i) any relocation of the executive offices and primary
operations of MDI from existing locations;
(ii) the payment of dividends, the redemption or purchase by
MDI of any shares of MDI's outstanding capital stock, options related
thereto, or any other distributions to the stockholders of MDI (except
as provided in this Agreement or reserved for in the Financial
Statements);
(iii) any liquidation, dissolution or sale of all or
substantially all of MDI's assets, or any merger, consolidation or other
capital reorganization of MDI;
(iv) the execution or delivery of any general assignment for
the benefit of creditors of MDI or the filing of any voluntary petition
in bankruptcy on behalf of MDI;
(v) any amendment to MDI's Articles of Incorporation or
Bylaws;
(vi) the entering into of employment contracts with MDI's
management, the granting of any salary increase, bonuses or option
awards to MDI management;
(vii) the acquisition or sale in one transaction or series of
related transactions of any material assets, business or properties of,
or by, MDI (other than purchases from suppliers or sales to customers in
the ordinary course of business); and
(viii) any other action which constitutes a material deviation
from the past practices of the business, operations, and affairs of MDI.
(h) Xxxxxxx as the President of MDI, shall have the sole power and
authority to set prices for MDI's products and services during the Initial
Period.
(i) During the Transition Period, Ultrak will not sell, convey, or
transfer its ownership interest in MDI to any person or entity; provided that
Ultrak may, during the Transition Period, transfer its ownership interest to an
affiliate of Ultrak if such affiliate shall agree in writing to perform all
Ultrak's obligations under this Agreement and the agreements provided for
herein. Nothing herein shall relieve Ultrak from its obligations under this
Agreement and the agreements provided for herein.
(j) Before consummating any future acquisition by Ultrak or MDI
during the Initial Period, Ultrak will negotiate in good faith with Xxxxxxx the
impact that any such acquisition shall have on the MDI Net Worth. During the
Initial Period, Ultrak agrees that the impact on MDI Net Worth of all
expenditures of opening new or closing old operations, branches of business,
and redundancy costs and any other discretionary expenditures that are not
capitalizable under generally accepted accounting principles, which costs are
incurred in anticipation of increased profitability in future accounting
periods, will be separately negotiated before any such expenditures are
incurred.
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ARTICLE VII:
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
Except as may be waived by all parties, the obligations of Ultrak,
Newco, and MDI to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the Effective Date, of each
of the following conditions:
7.01. Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the MDI shareholders in
accordance with MDI's Articles of Incorporation and Bylaws and the applicable
provisions of the CGCL.
7.02. Absence of Litigation. No governmental agency or authority shall
have instituted, or threatened in writing to institute, any action or
proceeding seeking to delay, restrain, enjoin or prohibit the consummation of
the transactions contemplated by this Agreement, and no order, judgment or
decree by any court or governmental agency or authority shall be in effect that
enjoins, restrains or prohibits the same or, in the sole judgment of Ultrak,
otherwise would materially interfere with the operation of the assets and
business of MDI and Ultrak after the Merger.
ARTICLE VIII:
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF ULTRAK AND NEWCO
The obligations of Ultrak and Newco to consummate the transactions
contemplated by this Agreement will be subject to the satisfaction on or before
the Closing Date of each of the following conditions:
8.01. Representations and Warranties; Compliance. The representations
and warranties of MDI and the Signing Shareholders in this Agreement shall have
been true and correct in all material respects on and as of the Signing Date
and shall be true and correct in all material respects as of the Closing Date
as though made on and as of the Closing Date, and the covenants and agreements
of MDI in this Agreement shall have been complied with in all material
respects. On the Closing Date, MDI will provide Ultrak with a Certificate of
Compliance in the form of Exhibit 8.01-A and a certificate of the Signing
Shareholders to such effect in the form of Exhibit 8.01-B.
8.02. No Material Adverse Change. There shall have been no material
adverse change from the Signing Date in MDI's business, properties, assets,
liabilities, results of operations, or condition, financial or otherwise.
8.03. Opinion. Ultrak shall have received the opinion of XxXxxxxxx,
Will & Xxxxx, counsel for MDI, dated as of the Closing Date, with respect to
the matters set forth on Exhibit 8.03.
8.04. Employment Agreement. Xxxxxxx shall have executed an Employment
Agreement in the form of Exhibit 8.04.
8.05. Resignations. Each director of MDI shall have tendered to Ultrak
a resignation letter in form and substance reasonably satisfactory to Ultrak;
provided, however, Xxxxxxx shall not be required to resign as a director of
MDI.
8.06. [intentionally omitted].
27
8.07. Resale Certificates. MDI shall have obtained and delivered
copies to Ultrak of resale certificates for all dealers or distributors of MDI
and for all other direct purchasers from MDI of MDI products, in Virginia and
Texas which purchased more than $100,000 of MDI products during the period from
and including January 1, 1994 through the Closing Date.
8.08. Release of Liens. All persons or entities with liens and/or
encumbrances filed against MDI or any asset of MDI shall have fully released
all such liens and encumbrances, including but not limited to all liens and
encumbrances of Sanwa Bank of California.
8.09. MDI-UK. MDI shall have consummated the sale of all of the assets
or stock of MDI Dynamics (UK) Limited ("MDI-UK") and recognized and recorded
any loss resulting from such sale.
8.10. Life Insurance. The beneficiary of the existing life insurance
policy on Xxxxxxx shall be changed from Xxxxxx Xxxxxxx to MDI or an amount
equal to the cash surrender value of such policy shall have been paid, in cash,
to MDI by Xxxxxxx (in which case Xxxxxx Xxxxxxx may remain the beneficiary of
such policy and MDI shall have no rights to such policy, but MDI will no longer
be responsible for paying the premiums on such policy).
8.11. No Dissenting Shares. Not more than ten percent (10%) of the
Fully Diluted MDI Shares Outstanding shall exercise dissenters rights as to the
Merger.
8.12. Exercise of Options. Prior to the Closing Date, all outstanding
options, warrants, or other rights to acquire MDI Common Shares shall have been
exercised or cancelled pursuant to a writing executed by the holder of the
option, warrant, or right and in form and substance reasonably satisfactory to
Ultrak.
8.13. Special Tax Matter. Ultrak shall, in Ultrak's discretion, have
determined that MDI's maximum exposure to taxes, penalties, and interest with
respect to accumulated earnings tax is acceptable.
8.14. Reserves, Adjustments, Write Downs, and Accruals. MDI shall have
made or taken all reserves, adjustments, write downs, and accruals with respect
to MDI as necessary or appropriate effective as of the end of the month prior
to the Closing Date.
8.15. Shareholder's Equity. The MDI Net Worth after adjustments,
pursuant to Exhibit 1.06 shall be at least Six Million Dollars ($6,000,000).
8.16. NationsBank Approval. NationsBank of Texas, N.A. shall have
approved this Agreement and the Merger pursuant to its rights under its Loan
Agreement with Ultrak to approve significant transactions involving Ultrak.
ARTICLE IX:
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF MDI
The obligations of MDI to consummate the transactions contemplated by
this Agreement will be subject to the satisfaction on or before the Closing
Date of each of the following conditions:
9.01. Representations and Warranties; Compliance. The representations
and warranties of Ultrak in this Agreement shall have been true and correct in
all material respects on and as of the Signing Date and shall be true and
correct in all material respects as of the Closing Date as though
28
made on and as of the Closing Date, and the covenants and agreements of Ultrak
in this Agreement shall have been complied with in all material respects. On
the Closing Date, Ultrak will provide MDI with a Certificate of Compliance in
the form of Exhibit 9.01.
9.02. No Material Adverse Change. There shall have been no material
adverse change from the Signing Date in Ultrak's assets, liabilities, results
of operations, or condition, financial or otherwise.
9.03. Opinion. MDI shall have received the opinion of Gardere & Xxxxx,
L.L.P., dated as of the Closing Date, with respect to the matters set forth on
Exhibit 9.03.
9.04. Employment Agreement. Xxxxxxx shall have executed an Employment
Agreement in the form of Exhibit 8.04.
ARTICLE X:
TERMINATION, WAIVER, AND AMENDMENT
10.01. Termination or Abandonment. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement may be terminated and
abandoned at any time before the Effective Date, whether before or after
approval of this Agreement by the respective stockholders of MDI:
(a) by the written consent of Ultrak and MDI; or
(b) by Ultrak or MDI if the Effective Date has not occurred on
or before February 22, 1997, unless such failure of consummation is due
to the failure of the terminating party to perform or observe the
covenants, agreements, and conditions hereof to be performed or observed
by it on or before the Effective Date.
The date on which occurs any termination pursuant to this Section 10.1 is
herein referred to as the "Termination Date."
10.02. Modification, Amendment, and Waiver. No change, modification, or
amendment of this Agreement shall be valid or binding upon the parties hereto
unless such change, modification, or amendment shall be in writing and signed
by all the parties hereto. No waiver of any term or condition of this
Agreement shall be enforceable unless it shall be in writing signed by the
party against which it is sought to be changed. The waiver by any party of a
breach of any provision of this Agreement by any other shall not operate or be
construed as a waiver of any subsequent breach by such other party.
ARTICLE XI:
INDEMNIFICATION
11.01. Indemnification. Each Signing Shareholder jointly and severally
covenants and agrees to indemnify Ultrak, Newco, and MDI against any damage,
diminution in value, economic loss, harm, loss, expense, liability, taxes, VAT,
customs, or other damage, including the reasonable costs of investigation,
interest, penalties and attorneys' and accountants' fees ("Damages"), in
connection with, arising from, or attributable to (a) any breach or inaccuracy
of any representation or warranty made by MDI or any Signing Shareholder
herein; (b) any breach or failure of MDI or any Signing Shareholder to perform
any agreement or covenant herein; (c) any underpayment or nonpayment of taxes
of MDI or any penalties or interest with respect to underpayment or nonpayment
of taxes relating to events prior to the Closing Date; (d) any product
liability claim against MDI relating to events prior to the Closing
29
Date; and/or (e) any litigation or claim against MDI relating to events prior
to the Closing Date.
11.02. Threshold. No Signing Shareholder shall be required to make any
indemnification payment pursuant to Section 11.01 for any Damages for any
single claim under $100,000 until such time as the total amount of all claimed
Damages exceeds One Million Dollars ($1,000,000) in the aggregate (the
"Threshold"). At such time as the total amount of claimed Damages exceeds the
Threshold, Ultrak, Newco, or MDI shall be entitled to be indemnified against
the full amount of such Damages in excess of the Threshold (and without regard
thereafter to the $100,000 per claim minimum). The Threshold amount shall not
apply with respect to claims regarding title to the MDI Common Shares.
11.03. Maximum Indemnity. The maximum liability of the Signing
Shareholders for claims for Damages (a) asserted during the period ending on
the first anniversary of the Closing Date shall not exceed Ten Million Dollars
($10,000,000) and (b) asserted after the first anniversary of the Closing Date
and prior to the second anniversary of the Closing Date shall not exceed Five
Million Dollars ($5,000,000).
11.04. Expiration of Indemnity; Fraud. Ultrak, Newco, and MDI may not
make a claim for indemnification for Damages after the expiration of two (2)
years from the Closing Date.
11.05. Survival of Representations; Warranties. No disclosure by MDI or
any Signing Shareholder (not contained in this Agreement or in a supplement to
a Schedule to this Agreement) and no investigation by or on behalf of Ultrak or
Newco with respect to MDI or a Signing Shareholder shall be deemed to affect
Ultrak's or Newco's reliance on the representations, warranties, covenants, or
agreements contained herein or to waive Ultrak's or Newco's rights to indemnity
as provided herein for the breach or inaccuracy or failure to perform or comply
with any representation, warranty, covenant, or agreement of the Signing
Shareholders. The indemnity obligations of each Signing Shareholder under this
Article XI (and the representations, warranties, covenants, and agreements of
each Signing Shareholder) shall survive the Closing until the expiration of the
period set forth in Section 11.04.
11.06. Insurance and Taxes. The recovery of Damages pursuant to this
Article XI shall be reduced for (a) any insurance benefits actually received by
MDI or Ultrak from insurers resulting from the event that gave rise to the
indemnification obligation, and (b) any federal income tax benefits actually
received by Ultrak or MDI resulting from the event that gave rise to the
indemnification obligation.
ARTICLE XII:
REMEDIES
12.01. Equitable Remedies. The parties hereto acknowledge that a
refusal by a party to consummate the transactions contemplated hereby will
cause irreparable harm to the other parties, for which there may be no adequate
remedy at law. A party not in default at the time of such refusal shall be
entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that refused to consummate the
transactions contemplated hereby.
12.02. Remedies of MDI. After the Closing, MDI shall have the same
rights and benefits under this Agreement as does Ultrak or Newco with respect
to the representations, warranties, and covenants of MDI and each Signing
Shareholder contained herein, as fully as if such representations, warranties,
and covenants had been made to or with MDI in lieu or in place of Ultrak or
Newco. In any
30
proceeding by MDI to assert or prosecute any claims under, or to otherwise
enforce, this Agreement, each Signing Shareholder agrees that he shall not
assert as a defense or bar to recovery by MDI, Ultrak, or Newco and hereby
waives any right to so assert such defense or bar such recovery, that (a) prior
to the Closing, MDI shall have had knowledge of the circumstances giving rise
to the claim being pursued by it, Ultrak, or Newco; (b) prior to the Closing,
MDI engaged in conduct or took action that caused or brought about the
circumstances giving rise to its, Ultrak's, or Newco's claim, or otherwise
contributed thereto; (c) MDI is estopped from asserting or recovering upon its
claim by reason of having joined in the representations, warranties, and
covenants made by any Signing Shareholder in this Agreement; or (d) such
Signing Shareholder has a right of contribution from MDI to the extent that
there is any recovery against him.
12.03. ARBITRATION. OTHER THAN THE DETERMINATION OF THE MDI NET WORTH
AND SECTION 14.01, ANY DISPUTE OR CLAIM RELATING TO THIS AGREEMENT FOLLOWING
THE PAYMENT OF THE MERGER CONSIDERATION SHALL BE FINALLY SETTLED BY ARBITRATION
IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION WHICH
RULES ARE DEEMED TO BE INCORPORATED HEREIN BY REFERENCE. THE DETERMINATION OF
THE MDI NET WORTH SHALL BE DETERMINED EXCLUSIVELY PURSUANT TO SECTION 1.06.
DISPUTES PURSUANT TO SECTION 14.01 SHALL BE DETERMINED PURSUANT TO SECTION
14.01. ANY ARBITRATION HEREUNDER SHALL BE HELD IN DALLAS, TEXAS. JUDGMENT
UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING
JURISDICTION THEREOF.
31
ARTICLE XIII:
MISCELLANEOUS
13.01. Expenses. Each party hereto shall bear its own expenses incurred
in connection with this Agreement and the consummation of the transactions
contemplated hereby; provided, however, upon consummation of the transactions
contemplated hereby, Ultrak shall pay up to an aggregate amount of $25,000 of
the legal fees and expenses of XxXxxxxxx, Will & Xxxxx in connection with this
Agreement and the transactions contemplated hereby. To the extent legal fees
and expenses of MDI exceed $25,000, then such excess shall be paid by MDI and
such excess shall not be considered in determining the MDI Net Worth. Neither
MDI nor Ultrak shall pay the legal fees and expenses of any separate counsel
engaged by any MDI Shareholder.
13.02. Counterparts. This Agreement may be executed in two or more
counterparts, all of which will be considered the same agreement and faxed
copies of manually executed signature pages to this Agreement will be fully
binding and enforceable without the need for delivery of the manually executed
signature page.
13.03. GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
13.04. Notices. All notices and other communications hereunder will be
in writing and will be deemed given if delivered by hand or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other addresses for a party as will be
specified by like notice) and will be deemed given on the date on which so
hand-delivered or on the third business day following the date on which so
mailed to the address set forth opposite the name and signature block for each
party to this Agreement.
13.05. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance; and in lieu
of such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
13.06. Assignments. This Agreement shall not be assignable by operation
of law or otherwise, except that Newco may assign its rights hereunder to
another wholly-owned subsidiary of Ultrak (whether now existing or hereafter
created). Any other assignment of this Agreement shall be void.
13.07. Entire Agreement. This Agreement, the Schedules attached hereto,
and the Exhibits attached hereto constitute the entire agreement, and supersede
all other prior agreements and understandings, both written and oral, between
the parties, or any of them, with respect to the subject matter hereof. All
Schedules, Exhibits, and documents and agreements referred to herein or
attached hereto are fully and completely incorporated herein effective as of
the first reference herein.
13.08. Headings. The headings contained in this Agreement are for
reference purposes and will not affect in any way the meaning or interpretation
of this Agreement. Use of "herein," "hereof,"
32
"hereby," or similar terms refer to this Agreement as a whole unless the
context clearly requires otherwise.
13.09. Relocation. Ultrak agrees that it will not, for a period of
three (3) years from the Closing Date, relocate MDI's offices more than thirty
(30) miles from their present location.
ARTICLE XIV:
NONCOMPETE
14.01. Noncompetition Agreement. (a) Xxxxxxx acknowledges and agrees
that the proprietary information Xxxxxxx has acquired regarding MDI and will
acquire regarding MDI and Ultrak will enable Xxxxxxx to injure MDI and Ultrak
and diminish the value of Ultrak's investment in MDI if Xxxxxxx should compete
with MDI and/or Ultrak. Therefore, Xxxxxxx hereby agrees that, without the
prior written consent of MDI, Xxxxxxx shall not, during the term of his
employment with MDI and/or Ultrak (the "Term") and for a period of two (2)
years thereafter, directly or indirectly (through an affiliate of Xxxxxxx or
other entity), as a director, officer, agent, employee, consultant, independent
contractor, or in any other capacity, (i) invest (other than passive
investments in publicly-owned companies which constitute not more than five
percent (5%) of the voting securities of any such company) or engage in any
business or activity that is competitive with the Business within the United
States; (ii) accept employment with or render services to any other company
engaged in the Business as all or any part of such other company's business; or
(iii) contact, solicit, or attempt to solicit or accept business that is
competitive with the Business (A) from any customer of MDI or Ultrak during the
Term, or (B) from any person or entity whose business MDI or Ultrak was
soliciting during the Term. If Xxxxxxx'x Employment Agreement pursuant to
Section 8.04 is terminated by MDI without Just Cause (as defined in the
Employment Agreement) or if MDI breaches and does not remedy (within ten (10)
days after written notice from Xxxxxxx) a material provision of the Employment
Agreement, then the post-employment noncompetition provisions of this Section
14.01(a) shall not apply.
(b) If any provision contain in Section 14.01(a) shall, for
any reason, be held to be excessively restrictive by reason of the geographic
or business scope or duration thereof so as to be unenforceable, such provision
or provisions shall be construed by an appropriate judicial or arbitral body by
limiting and reducing it or them, so that Section 14.01(a) shall be enforceable
to the maximum extent compatible with the applicable law as it shall then
appear.
33
(c) Xxxxxxx acknowledges and recognizes that a violation or
threatened violation by Xxxxxxx of the restrictions, agreements, or covenants
contained in Section 14.01(a) will cause irreparable damage to MDI and that MDI
will have no adequate remedy at law for such violation or threatened violation.
Accordingly, Xxxxxxx agrees that MDI shall also be entitled, in addition to any
other rights or remedies existing in MDI's favor, to obtain specific
performance or injunctive relief in order to enforce this Agreement or prevent
a breach or further breach of any provision hereof. Such right to specific
performance or injunction shall be in addition to MDI's right to bring an
action for damages actually sustained by MDI or to exercise any other right or
remedy available to MDI as a result of any breach hereunder.
[Signatures on the following pages]
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
ULTRAK, INC.
0000 Xxxxxxxx Xxxxxx By:
Suite 100 -----------------------------
Xxxxxxxxxx, XX 00000 Xxx Xxxxxxxxx, Executive
Attn: Xxxxxx X. Xxxxxx Vice President
By:
with a copy (which shall not constitute -----------------------------
notice) to: Xxx X. Xxxxx, Secretary
Gardere & Xxxxx, L.L.P.
0000 Xxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
MONITOR DYNAMICS, INC.
0000 Xxxxx Xxxxxx By:
Xxxxxx Xxxxxxxxx, XX 00000 -----------------------------
Attn: Xxxxx Xxxx Xxxxxxx Xxxxx Xxxx Xxxxxxx,
President
with a copy (which shall not constitute
notice) to: By:
-----------------------------
XxXxxxxxx, Will & Xxxxx Xxxxxx Xxx Xxxxxxx,
0000 Xxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxx X. Xxxxx, Esq.
MDI ACQUISITION CORP.
By:
0000 Xxxxxxxx Xxxxxx -----------------------------
Suite 100 Xxx Xxxxxxxxx, Executive
Xxxxxxxxxx, XX 00000 Vice President
Attn: Xxxxxx X. Xxxxxx
By:
-----------------------------
Xxx X. Xxxxx, Secretary
35
Address for each Signing Shareholder:
0000 Xxxxx Xxxxxx --------------------------------
Xxxxxx Xxxxxxxxx, XX 00000 Xxxxx Xxxx Xxxxxxx
0000 Xxxxx Xxxxxx --------------------------------
Xxxxxx Xxxxxxxxx, XX 00000 Xxxxxxx X. Xxxxxxx
0000 Xxxxx Xxxxxx
Xxxxxx Xxxxxxxxx, XX 00000
--------------------------------
Xxxxx X. Xxxxxx
I.O.M. INVESTMENTS, L.P.
0000 Xxxxx Xxxxxx By:
Xxxxxx Xxxxxxxxx, XX 00000 -----------------------------
Xxxx Xxxxxxx, General Partner
By:
-----------------------------
Xxxxxx Xxxxxxx, General
Partner
0000 Xxxxx Xxxxxx --------------------------------
Xxxxxx Xxxxxxxxx, XX 00000 Xxxxx St. Pierre
36
The calculation of MDI Net Worth shall be adjusted in the manner set
forth below to the extent the items identified below would otherwise be taken
into account when calculating MDI Net Worth. In such instances, MDI Net Worth
shall be calculated by:
(1) excluding the impact of all Merger expenses, payments, and
adjustments, including any increased depreciation or
amortization expenses attributable to any write-up of
assets resulting from purchase accounting resulting from
the transactions contemplated by this Agreement;
(2) excluding the impact of any Merger expenses, including
accounting fees and expenses and legal fees and expenses
paid pursuant to Section 13.01 of this Agreement;
(3) excluding the impact of all amounts paid by Ultrak or any
of its affiliates by way of management, head or back
office, or similar charge or expense; provided, however,
that any such agreement, head or back office, or similar
charge may be considered as a deduction when calculating
MDI Net Worth to the extent such amount is at Ultrak's
direct cost and such charges are directly and specifically
incurred on behalf of MDI at the request of the Board,
which amounts shall be approved in advance by the Board;
(4) excluding the impact of advertising and research and
development expenses incurred by Ultrak;
(5) adding back any out-of-pocket costs of meeting accounting
requirements imposed on MDI by Ultrak as a result of the
financial reporting obligations required to be satisfied,
whether under applicable law, stock exchange listing
requirements, contractual obligations, or otherwise, by
virtue of MDI's status as a wholly owned subsidiary of
Ultrak;
(6) excluding the impact of any interest expense incurred by
MDI or any of its subsidiaries with respect to borrowings
obtained to finance the transactions contemplated by this
Agreement; and
(7) excluding travel expenses for MDI employees when such
travel is requested by Ultrak.
