<PAGE> 1
As filed with the Securities and Exchange Commission June 28, 1995
Registration No.33-91960
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
Amendment No. 5
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
COLORADO 5065 84-0819156
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
_____________________________
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
(214) 280-9675
(Address, including Zip Code, and telephone number, including area
code, of registrant's principal executive offices)
_____________________________
GEORGE K. BROADY
Chairman of the Board, Chief Executive Officer and President
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
(214) 280-9675
(Name, address, including Zip Code, and telephone number, including area
code, of registrant's agent for service)
Copies to:
RICHARD L. WAGGONER, Esq. MARK B. BARNES, Esq.
LANCE M. HARDENBURG, Esq. Leagre & Barnes
Gardere & Wynne, L.L.P. 9100 Keystone Crossing, Suite 800
3000 Thanksgiving Tower Indianapolis, Indiana 46240
Dallas, Texas 75201
Approximate date of commencement of proposed sale to the public: Upon
consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is general
compliance with General Instruction G, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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==========================================================================================================================
Proposed Proposed
Title of Each Class of Amount to be Maximum Offering Maximum Aggregate Amount of
Securities to be Registered Registered Price Per Unit(1) Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------
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Common Stock, No Par Value 700,000 shares(2) $4.78 $3,347,900 (3)
==========================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the amount of the
registration fee based upon the book value per share of the Common Stock, no
par value, of Diamond Electronics, Inc. as of March 31, 1995, pursuant to the
provisions of Rule 457(f)(2) under the Securities Act of 1933.
(2) Subject to adjustment in accordance with the Agreement and Plan
of Reorganization providing for consummation of the merger referred to herein.
(3) Previously paid.
_____________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
ULTRAK, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
Heading in
Item Number of Form S-4 Prospectus/Proxy Statement
- ----------------------- ---------------------------
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover
Page of Prospectus . . . . . . . . . . . . . . . . . . . . . . . Facing Page of Registration Statement;
Cross-Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus . . . . Inside Front and Outside Back Cover
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information . . . . . . . . . . . . . . . . . . . . . Prospectus/Proxy Statement Summary;
Risk Factors; Business of Ultrak;
Selected Financial Data of Ultrak;
Ultrak Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business of
Diamond; Selected Financial Data of
Diamond; Diamond Management's
Discussion and Analysis of Financial
Condition and Results of Operations
4. Terms of the Transaction . . . . . . . . . . . . . . . . . . . . Facing Page of Registration Statement;
Outside Front Cover Page of Prospectus;
Prospectus/Proxy Statement Summary
Merger
5. Pro Forma Financial Information . . . . . . . . . . . . . . . . Prospectus/Proxy Statement Summary; Pro
Forma Financial Information
6. Material Contracts with the Company Being Acquired . . . . . . . Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . . . . . . . . . . . . . Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 3
<TABLE>
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B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants . . . . . . . . . . Not Applicable
11. Incorporation of Certain Information by Reference . . . . . . . Not Applicable
12. Information with Respect to S-2 or S-3 Registrants . . . . . . . Not Applicable
13. Incorporation of Certain Information by Reference . . . . . . . Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants . . . . . . . . . . . . . . . . . . . . . Prospectus/Proxy Statement Summary;
Risk Factors; Business of Ultrak;
Market for Ultrak Common Stock and
Related Shareholder Matters;
Description of Ultrak's Capital Stock;
Selected Consolidated Financial Data of
Ultrak; Ultrak Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Index to
Financial Statements
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies . . . . . . . . . . . Not Applicable
16. Information with Respect to S-2 or S-3 Companies . . . . . . . . Not Applicable
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies . . . . . . . . . . . . . . . . . . . Prospectus/Proxy Statement Summary;
Business of Diamond; Market for Diamond
Common Stock and Related Shareholder
Matters; Selected Consolidated
Financial Data of Diamond; Diamond
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Index to Financial
Statements
</TABLE>
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<TABLE>
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D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations
are to be Solicited . . . . . . . . . . . . . . . . . . . . . . Special Meeting of Diamond
Shareholders; Merger-Appraisal Rights;
Principal Shareholders of Diamond;
Merger-Interests of Certain Persons in
the Merger
19. Information if Proxies, Consents or Authorizations are not to
be Solicited or in an Exchange Offer . . . . . . . . . . . . . . Not Applicable
</TABLE>
<PAGE> 5
Dear Shareholder:
I am pleased to enclose for your review the Notice of Special Meeting
and the Prospectus/Proxy Statement for the Special Meeting of Shareholders of
Diamond Electronics, Inc. that will be held at Diamond's corporate offices in
Indianapolis on July 13, 1995, at 8:00 a.m., Indianapolis time (Eastern
Standard Time, not Eastern Daylight Time).
At the Special Meeting the shareholders will be asked to approve a
merger transaction by which Diamond will become a subsidiary of Ultrak, Inc.
Detailed information regarding Ultrak, Diamond, the Special Meeting, and the
merger is provided by the enclosed Prospectus/Proxy Statement. For the reasons
set forth in the Prospectus/Proxy Statement, the Board of Directors of Diamond
unanimously recommends to the shareholders of Diamond that they vote in favor
of this proposal.
Assuming that the shareholders of Diamond approve the merger, and all
the other conditions to the merger are either satisfied or waived, Ultrak and
Diamond intend to close the merger transaction on the same day as the Special
Meeting of Shareholders. Following closing, you will receive instructions
regarding how to exchange your Diamond stock certificates for the consideration
specified by the Merger Agreement.
Sincerely yours,
/s/ John W. Biddinger
John W. Biddinger
Chairman
JWB:
Enclosure
<PAGE> 6
DIAMOND ELECTRONICS, INC.
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 13, 1995
---------------------
To the Shareholders of
DIAMOND ELECTRONICS, INC.
Notice is hereby given that a Special Meeting of Shareholders of Diamond
Electronics, Inc., an Ohio corporation ("Diamond"), has been called to be held
on July 13, 1995 beginning at 8:00 a.m., local time, at Diamond's corporate
offices, 9102 North Meridian Street, Suite 500, Indianapolis, Indiana 46260, for
the following purposes:
1. To consider and vote upon a proposal to approve and adopt that
certain Agreement and Plan of Reorganization, dated April 28, 1995, as
amended, by and among Diamond, Ultrak, Inc., a Colorado corporation
("Ultrak"), Diamond Purchasing Corp., a Texas corporation and wholly-owned
subsidiary of Ultrak ("Ultrak Subsidiary"), and the following shareholders
of Diamond: Richard M. Tompkins, John W. Biddinger, Robert N. Davies, H.
Charles Koehler, and William Muirhead, III, pursuant to which (i) Ultrak
Subsidiary would merge (the "Merger") with and into Diamond, (ii) Diamond
would become a wholly-owned subsidiary of Ultrak, and (iii) each
outstanding share of common stock, no par value, of Diamond would be
converted into the right to receive shares of common stock, no par value,
of Ultrak (or cash for small amounts of stock) pursuant to the formula
described therein; and
2. To transact any other business as may properly come before the
Special Meeting or any adjournment thereof.
Shareholders of record as of the close of business on June 12, 1995 are
entitled to notice of and to vote at the Special Meeting or any adjournment
thereof. The list of shareholders entitled to vote at the Special Meeting will
be available for inspection by any shareholder for any purpose relating to the
Special Meeting during regular business hours at Diamond's corporate offices at
9102 North Meridian Street, Suite 500, Indianapolis, Indiana 46260 prior to the
Special Meeting.
If the Merger is consummated, the holders of record of Diamond's common
stock who comply with the requirements of Section 1701.85 of the Ohio Revised
Code, which is attached as Annex B to the Prospectus/Proxy Statement, may
dissent from the Merger and exercise their dissenters' rights in accordance with
Ohio law. See "MERGER -- Rights of Dissenting Shareholders" in the attached
Prospectus/Proxy Statement for a description of the procedures which must be
followed to perfect such dissenters' rights under the Ohio Revised Code.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE MARK, SIGN,
DATE, AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE.
By Order of the Board of Directors
ROBERT N. DAVIES
Secretary
Carroll, Ohio
June 29, 1995
<PAGE> 7
PROSPECTUS/PROXY STATEMENT
PROSPECTUS
ULTRAK, INC.
700,000 SHARES
COMMON STOCK, NO PAR VALUE
---------------------
PROXY STATEMENT
DIAMOND ELECTRONICS, INC.
FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 13, 1995
This Prospectus/Proxy Statement is being furnished to shareholders of
Diamond Electronics, Inc., an Ohio corporation ("Diamond"), in connection with
the solicitation of proxies by the Board of Directors of Diamond for use at the
Special Meeting of Shareholders of Diamond (the "Special Meeting") to be held at
8:00 a.m. local time, on July 13, 1995, at Diamond's corporate offices at 9102
North Meridian Street, Suite 500, Indianapolis, Indiana 46260.
This Prospectus/Proxy Statement also relates to the Agreement and Plan of
Reorganization, dated April 28, 1995, as amended, attached hereto along with
Exhibits 1.01(a) and (b) thereto as Annex A (the "Merger Agreement"), among
Diamond, Ultrak, Inc., a Colorado corporation ("Ultrak"), Diamond Purchasing
Corp., a Texas corporation and wholly-owned subsidiary of Ultrak ("Ultrak
Subsidiary"), and the following shareholders of Diamond: Richard M. Tompkins,
John W. Biddinger, Robert N. Davies, H. Charles Koehler, and William Muirhead,
III (the "Signing Shareholders"), which provides for the merger (the "Merger")
of Ultrak Subsidiary with and into Diamond. After the Merger, the separate
corporate existence of Ultrak Subsidiary will cease, and Diamond will continue
its existence as a direct subsidiary of Ultrak. See "MERGER -- Terms of the
Merger Agreement." If the Merger is consummated, all of the outstanding shares
of common stock, no par value, of Diamond ("Diamond Common Stock"), will be
converted into the right to receive, as of the Effective Date (as defined
herein), up to an aggregate 600,000 shares of common stock, no par value, of
Ultrak ("Ultrak Common Stock") at the rate of 0.125 shares of Ultrak Common
Stock for every share of Diamond Common Stock (the "Conversion Factor"), except
that cash will be distributed in lieu of Ultrak Common Stock pursuant to the
Cash Out (as defined herein) and the exercise of dissenters' rights by the
Diamond Shareholders (as defined herein). See "MERGER -- Terms of the Merger
Agreement -- Conversion Factor" and "-- Rights of Dissenting Shareholders."
Pursuant to the Merger Agreement, Ultrak is required to issue up to 100,000
additional shares of Ultrak Common Stock to the Effective Date Shareholders (as
defined herein) unless the average closing price of Ultrak Common Stock during
both of the ten-day trading periods ending on the first trading days that are
six and twelve months, respectively, after the effective date of the Merger (the
"Effective Date") exceeds certain predetermined values. See "MERGER --
Adjustments."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS PROSPECTUS/PROXY STATEMENT
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
HOLDERS OF THE ULTRAK COMMON STOCK TO BE DISTRIBUTED PURSUANT TO THE MERGER.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE DATE OF THIS PROSPECTUS/PROXY STATEMENT IS JUNE 29, 1995
<PAGE> 8
AVAILABLE INFORMATION
Ultrak is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60601; and New York Regional
Office, 75 Park Place, Fourteenth Floor, New York, New York 10007. Copies of
such material may also be obtained at prescribed rates from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549. The Ultrak Common Stock is traded on
the Nasdaq National Market ("Nasdaq"), and reports, proxy and information
statements, and other information concerning Ultrak can be inspected at the
Nasdaq offices located at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Proxy Statement, which constitutes a part of a registration
statement (the "Registration Statement") filed by Ultrak with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), omits
certain of the information set forth in the Registration Statement. Reference is
hereby made to the Registration Statement and to the exhibits thereto for
further information with respect to Ultrak and the Ultrak Common Stock. Copies
of the Registration Statement and the exhibits thereto are on file at the
offices of the Commission and may be obtained upon payment of the fee prescribed
by the Commission, or may be examined without charge at the public reference
facilities of the Commission described above.
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS/PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ULTRAK.
THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON
STOCK TO WHICH IT RELATES OR ANY OFFER TO, OR A SOLICITATION OF, ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR ANY DISTRIBUTION MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ULTRAK OR THAT INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
2
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TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION.................................................................. 2
PROSPECTUS/PROXY STATEMENT SUMMARY..................................................... 4
PLAN OF DISTRIBUTION................................................................... 9
RISK FACTORS........................................................................... 9
SPECIAL MEETING OF DIAMOND SHAREHOLDERS................................................ 12
MERGER................................................................................. 13
ULTRAK'S REINCORPORATION IN DELAWARE................................................... 26
PRO FORMA FINANCIAL INFORMATION........................................................ 32
BUSINESS OF ULTRAK..................................................................... 37
MANAGEMENT OF ULTRAK................................................................... 40
PRINCIPAL SHAREHOLDERS OF ULTRAK....................................................... 48
DESCRIPTION OF ULTRAK'S CAPITAL STOCK.................................................. 49
MARKET FOR ULTRAK COMMON STOCK AND RELATED SHAREHOLDER
MATTERS.............................................................................. 50
SELECTED FINANCIAL DATA OF ULTRAK...................................................... 51
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 52
BUSINESS OF DIAMOND.................................................................... 56
MARKET FOR DIAMOND COMMON STOCK AND RELATED SHAREHOLDER MATTERS........................ 57
PRINCIPAL SHAREHOLDERS OF DIAMOND...................................................... 58
SELECTED FINANCIAL DATA OF DIAMOND..................................................... 59
DIAMOND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................................................................... 60
LEGAL MATTERS.......................................................................... 63
EXPERTS................................................................................ 63
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................................. F-1
ANNEXES
ANNEX A -- Merger Agreement, as amended, and Exhibits 1.01(a) and (b) thereto
ANNEX B -- Section 1701.85 of the Ohio Revised Code
ANNEX C -- Articles of Incorporation of Diamond
ANNEX D -- Code of Regulations of Diamond
ANNEX E -- Articles of Incorporation of Ultrak, as amended
ANNEX F -- Bylaws of Ultrak
ANNEX G -- Reincorporation Agreement
ANNEX H -- Certificate of Incorporation of Ultrak -- Delaware
ANNEX I -- Bylaws of Ultrak -- Delaware
ANNEX J -- Article 113 of Colorado Business Corporation Act
</TABLE>
3
<PAGE> 10
PROSPECTUS/PROXY STATEMENT SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus/Proxy Statement. The summary is necessarily incomplete and
selective and is qualified in its entirety by the more detailed information
contained in this Prospectus/Proxy Statement, including the appendices hereto.
Unless the context indicates otherwise, references in this Prospectus/Proxy
Statement to "Ultrak" and "Diamond" refer respectively to Ultrak, Inc. and its
subsidiaries and predecessors and Diamond Electronics, Inc. and its subsidiaries
and predecessors.
MATTERS TO BE VOTED UPON
At the Special Meeting, the holders of record of Diamond Common Stock as of
the Record Date (as defined herein) (the "Diamond Shareholders") will be asked
to consider and vote upon a proposal to approve and adopt the Merger Agreement
and approve the Merger and to conduct any other business that properly comes
before the Special Meeting.
ULTRAK
Ultrak designs, manufactures, markets, and services video closed circuit
television ("CCTV") products for use in security applications, general
observation, medical and dental equipment, and automated manufacturing systems.
These products include a broad line of cameras, lenses, monitors, switchers,
time lapse recorders, multiplexers, and wireless video transmission systems.
Prior to July 1993, Ultrak's Exxis Technologies, Inc. subsidiary marketed,
sold, and serviced personal computer products, including desktop and tower
computers, disk drives, CD-ROM drives, printers, and monitors sold under its
private brand name, [X] Smart Choice. Ultrak discontinued this business in July
1993. See "ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and Note I of the Notes to Ultrak's Consolidated
Financial Statements included herein.
Ultrak is a Colorado corporation which was incorporated in 1980. Ultrak
conducts its principal business operations at five locations: Carrollton
(Dallas), Texas; Broomfield (Denver), Colorado; southern California; Chicago,
Illinois; and Annapolis, Maryland; and Ultrak has additional sales offices in
New York, southern Florida, Boston, Atlanta, and Los Angeles. Ultrak's main
executive offices are located at 1220 Champion Circle, Suite 100, Carrollton,
Texas 75006, and its telephone number is (214) 280-9675.
DIAMOND
Diamond manufactures and sells high-speed commercial security and
surveillance systems used by large retailers, metropolitan surveillance systems
for traffic control, and hazardous viewing systems used by industry. Diamond's
commercial security and surveillance systems are utilized in monitoring indoor
and outdoor areas of large retailers. Diamond's industrial viewing systems are
utilized in observing furnace operation, gauge monitoring, smoke stack
monitoring, and tower plant inspection. Diamond's headquarters are housed in a
72,000 square foot building located 20 miles southeast of Columbus, Ohio.
Diamond's main executive offices are located at 4465 Coonpath Road, Carroll,
Ohio 43112, and its telephone number is (614) 756-9222.
MERGER
Terms of the Merger and Conversion Factor. Upon consummation of the Merger
in accordance with the Merger Agreement, Ultrak Subsidiary will be merged with
and into Diamond and the separate corporate existence of Ultrak Subsidiary will
cease, and Diamond will continue its existence as a wholly-owned subsidiary of
Ultrak. See "MERGER -- Terms of the Merger Agreement -- General." The Merger
Agreement provides that upon the Merger becoming effective, each outstanding
share of Diamond Common Stock will be converted into the right to receive 0.125
shares of Ultrak Common Stock, subject to subsequent adjustments in certain
circumstances, and except that cash will be distributed in lieu of Ultrak Common
Stock
4
<PAGE> 11
to the Diamond Shareholders who are subject to the Cash Out or who exercise
dissenters' rights. See "MERGER -- Terms of the Merger Agreement -- Conversion
Factor" and "-- Adjustments." Diamond Shareholders will be governed by the
corporate laws of the State of Colorado (Ultrak's state of incorporation) after
consummation of the Merger and upon their receipt of shares of Ultrak Common
Stock. Therefore, Diamond Shareholders receiving Ultrak Common Stock in the
Merger will have different rights than they had as Diamond Shareholders under
Ohio corporate law. See "MERGER -- Comparison of Rights of Holders of Diamond
Common Stock and Ultrak Common Stock." Ultrak's Board of Directors and
shareholders have approved and adopted a plan to reincorporate Ultrak in
Delaware, effective as of December 29, 1995. After that date, all persons
holding Ultrak Common Stock, including Diamond Shareholders who receive Ultrak
Common Stock in the Merger, will be governed by Delaware corporate law, unless
Ultrak's Board of Directors decides before that time to abandon the
Reincorporation. See "ULTRAK'S REINCORPORATION IN DELAWARE -- General" and
"-- Significant Differences in Corporate Law of Colorado and Delaware."
Management After the Merger. After the Merger, Diamond will become a
wholly-owned subsidiary of Ultrak and it is expected that Diamond will operate
in the same manner as prior to the Merger.
Federal Income Tax Consequences of the Merger. The consummation of the
Merger is conditioned on the receipt by Diamond and Ultrak of a tax opinion of
Leagre & Barnes to the effect that the Merger will constitute a tax-free
reorganization for purposes of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The federal income tax consequences of the Merger
to the Diamond Shareholders are summarized under "MERGER -- Certain Federal
Income Tax Consequences."
Vote Required. Not less than two-thirds of the outstanding shares of
Diamond Common Stock entitled to vote at the Special Meeting must vote in favor
of the Merger for it to be approved. As of December 31, 1994, the directors and
officers of Diamond, and those persons who may be deemed to be their respective
affiliates and associates, as a group, were entitled to vote approximately 62%
of the outstanding shares of Diamond Common Stock, and each such holder has
indicated his or her intent to vote such shares for approval of the Merger. It
is not necessary for the shareholders of Ultrak to approve the Merger; however,
Ultrak, as the sole shareholder of Ultrak Subsidiary, has approved the Merger
and the Merger Agreement. See "SPECIAL MEETING OF DIAMOND SHAREHOLDERS -- Vote
Required; Security Ownership of Diamond's Management" and "MERGER -- Background
of the Merger and Related Matters."
Rights of Dissenting Shareholders. Subject to certain other conditions, a
Diamond Shareholder who does not vote his or her shares of Diamond Common Stock
in person or by proxy in favor of the Merger will be eligible to make a written
demand on Diamond for payment to him or her of the fair cash value of his or her
Diamond Common Stock within ten days after the Special Meeting. A Diamond
Shareholder who seeks to assert dissenters' rights must take certain other steps
in the manner required by Ohio law. A vote in favor of the Merger, in person or
by proxy, or the submission of an executed but unmarked proxy that is voted at
the Special Meeting, will constitute a waiver of such dissenters' rights. See
"MERGER -- Rights of Dissenting Shareholders."
Conditions to the Merger; Termination. Consummation of the Merger is
subject to satisfaction or waiver of various conditions, including compliance
with the respective covenants and confirmation of the respective representations
and warranties of the parties in the Merger Agreement. The Merger Agreement also
provides that either party may abandon the Merger if it is not consummated on or
before June 30, 1995. See "MERGER -- Terms of the Merger Agreement -- Conditions
to the Merger" and "-- Termination."
Accounting Treatment. Ultrak intends to account for the Merger as a
purchase. See "MERGER -- Accounting Treatment."
RISK FACTORS
An investment in the Ultrak Common Stock involves the consideration of a
number of special factors and investment risks. See "RISK FACTORS" for a summary
of certain of the investment risks to be considered by the Diamond Shareholders
prior to casting their votes, in person or by proxy, for or against approval of
the Merger and the Merger Agreement.
5
<PAGE> 12
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING INFORMATION
The following tables set forth the selected financial information for
Ultrak for each of the five fiscal years in the period ended December 31, 1994
and for the three months ended March 31, 1995 and 1994, respectively, and for
Diamond for each of the five fiscal years in the period ended January 1, 1995
and for the three months ended March 31, 1995 and 1994, respectively. Such
information should be read in conjunction with the selected financial statement
information of Ultrak and Diamond and the notes thereto which are included
elsewhere herein. See "Selected Financial Data of Ultrak" and "Selected
Financial Data of Diamond."
<TABLE>
<CAPTION>
ULTRAK -- HISTORICAL
----------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED
MARCH 31, FISCAL YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ----------- ----------- ----------
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Statement of Operations
Data:
Net sales............... $21,829,162 $17,764,973 $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
Gross profit............ 5,322,078 4,172,044 19,444,003 12,858,457 7,367,629 4,613,904 2,494,659
Operating income
(loss)................ 1,608,666 1,122,619 5,109,687 3,655,020 1,278,618 694,728 (318,905)
Net income (loss) from
continuing
operations............ 781,933 628,057 2,789,512 2,638,860 543,500 470,942 (775,196)
Net Income (loss) per
common share.......... $ .11 $ .09 $ 0.39 $ 0.37 $ 0.07 $ 0.06 $ (0.15)
Weighted average shares
outstanding........... 6,821,027 6,816,955 6,818,999 6,789,872 6,845,550 5,864,399 5,286,561
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, ---------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.......................... $36,112,432 $36,352,690 $25,384,794 $16,198,851 $8,054,270 $4,567,900
Short-term debt....................... 17,882,187 18,244,183 12,875,039 7,134,701 2,218,599 1,140,000
Long-term debt........................ 0 0 0 285,000 285,000 0
Shareholders' Equity.................. 10,823,019 10,070,388 7,541,339 6,817,683 4,177,044 2,881,847
Cash dividends declared per
common share........................ 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
DIAMOND -- HISTORICAL
------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED
MARCH 31, FISCAL YEAR ENDED
------------------------ --------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales................... $2,959,586 $2,321,700 $11,774,691 $9,367,799 $8,747,964 $8,554,592 $12,861,108
Gross profit................ 941,651 730,009 3,765,223 2,940,844 2,539,546 2,389,684 3,871,562
Operating income (loss)..... 190,489 44,542 761,371 523,319 285,679 (971,207) 350,312
Net income (loss)........... 85,323 2,761 325,641 839,969 1,170,805 (1,219,647) (266,357)
Net income (loss) per common
share..................... 0.07 0.19 0.41 (0.90) (0.20)
Weighted average shares
outstanding............... 4,734,326 4,476,267 4,652,014 4,420,889 4,384,692 1,349,650 1,349,650
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF FISCAL YEAR END,
MARCH 31, ------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.............................. $6,557,552 $6,766,688 $5,648,036 $5,131,878 $5,627,012 $7,492,489
Short-term debt........................... 888,369 1,273,122 1,238,216 1,432,567 2,064,051 2,556,566
Long-term debt............................ 859,596 884,548 592,033 774,660 1,699,948 1,842,430
Stockholders' Equity...................... 3,344,572 3,218,047 3,013,410 2,150,965 (578,662) 640,985
Cash dividends declared per common
share................................... 0 0 0 0 0 0
</TABLE>
6
<PAGE> 13
ULTRAK AND DIAMOND-UNAUDITED PRO FORMA COMBINED
The summary unaudited pro forma combined information presented below
provides financial information giving effect to the Merger as a purchase for the
periods presented. The pro forma information is provided for informational
purposes only and is not necessarily indicative of actual results that would
have been achieved had the Merger been consummated at the beginning of the
periods presented or of future results. The pro forma information is derived
from the Pro Forma Financial Information appearing elsewhere herein and should
be read in conjunction with those statements. See "PRO FORMA FINANCIAL
INFORMATION."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, FISCAL YEAR ENDED
1995 DECEMBER 31, 1994
------------------ -----------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................. $ 24,788,748 $90,568,402
Gross profit.............................................. 6,263,729 23,209,226
Operating income.......................................... 1,790,508 5,638,015
Net income from continuing operations..................... 861,981 3,090,966
Fully diluted net income per common share................. .11 0.39
Fully diluted weighted average shares outstanding......... 7,945,063 7,936,985
BALANCE SHEET DATA:
Total assets.............................................. 43,731,412 44,307,331
Long-term debt, less current portion...................... 876,194 884,548
Total stockholders' equity................................ 15,073,019 14,320,388
</TABLE>
7
<PAGE> 14
COMPARATIVE PER SHARE DATA
Based upon the Conversion Factor of 0.125 shares of Ultrak Common Stock for
each outstanding share of Diamond Common Stock, the following table sets forth
per common share income from continuing operations, dividends, book value, and
market value of (i) Ultrak Common Stock; (ii) Diamond Common Stock; and (iii)
pro forma equivalent of one share of Diamond Common Stock based on the
Conversion Factor, (iv) pro forma combined information for Diamond and Ultrak;
(v) pro forma equivalent of one share of Diamond Common Stock based on the
Conversion Factor as adjusted to reflect the issuance of 50,000 additional
shares of Ultrak Common Stock pursuant to adjustments under the Merger
Agreement; and (vi) pro forma equivalent of one share of Diamond Common Stock
based on the Conversion Factor as adjusted to reflect the issuance of 100,000
additional shares of Ultrak Common Stock pursuant to adjustments under the
Merger Agreement.
<TABLE>
<CAPTION>
EQUIVALENT EQUIVALENT
PRO FORMA PRO FORMA
DIAMOND DIAMOND
(ADJUSTED (ADJUSTED
FOR FOR
ISSUANCE ISSUANCE
OF OF
50,000 100,000
SHARES OF SHARES OF
PRO EQUIVALENT ULTRAK ULTRAK
FORMA PRO FORMA COMMON COMMON
ULTRAK DIAMOND COMBINED DIAMOND STOCK) STOCK)
------ ------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations per
common share:
December 31, 1994.................. $ 0.39 $0.07 $ 0.40 $ 0.05 $ 0.05 $ 0.06
March 31, 1995..................... $ .11 $ .02 $ .11 $ .01 .01 .02
Dividends declared per common share:
December 31, 1994.................. 0 0 0 0 0 0
March 31, 1995..................... 0 0 0 0 0 0
Book value per common share as of:
December 31, 1994.................. $ 1.47 $0.68 $ 1.92 $ 0.24 $ 0.26 $ 0.28
March 31, 1995..................... $ 1.58 $ .70 $ 2.02 $ .25 $ .27 $ .29
Market value per common share as of:
December 31, 1994(1)............... $7.125 (2) (2) (2) (2) (2)
February 9, 1995(3)................ $ 6.25 (2) (2) (2) (2) (2)
March 31, 1995(4).................. $ 7.00 (2) (2) (2) (2) (2)
June 27, 1995(5)................... $ 6.38 (2) (2) (2) (2) (2)
</TABLE>
- ---------------
(1) Based on the closing price of $7.125 per share of Ultrak Common Stock as
reported on Nasdaq as of December 31, 1994.
(2) No active trading exists for Diamond Common Stock.
(3) Based on the closing price of $6.25 per share of Ultrak Common Stock as
reported on Nasdaq on the business day immediately preceding public
announcement of the proposed Merger.
(4) Based on the closing price of $7.00 per share of Ultrak Common Stock as
reported on Nasdaq as of March 31, 1995.
(5) Based on the closing price of $6.38 per share of Ultrak Common Stock as
reported on Nasdaq as of June 27, 1995.
8
<PAGE> 15
PLAN OF DISTRIBUTION
This Prospectus/Proxy Statement may be used by Ultrak for distribution of
up to 700,000 shares of Ultrak Common Stock pursuant to the Merger Agreement,
including up to 100,000 shares issuable upon the occurrence of certain
conditions requiring an adjustment of the Conversion Factor under the Merger
Agreement. See "MERGER -- Adjustments." Ultrak Common Stock issued under this
Prospectus/Proxy Statement will be freely transferable under the Securities Act,
except for shares issued to persons who may be deemed to be an "underwriter"
within the meaning of Section 2(11) of the Securities Act and Rule 145(c)
thereunder. Persons who are deemed to be "affiliates," as that term is defined
in the Securities Act, of Diamond shall be deemed to be an "underwriter" within
the meaning of Section 2(11) of the Securities Act if such persons publicly
offer or sell the shares of Ultrak Common Stock received by such persons
pursuant to the Merger Agreement, subject to the exceptions of Rule 145(d) of
the Securities Act. Generally, these are persons who are deemed to control, to
be controlled by, or to be under common control with Diamond. Thus, Ultrak
Common Stock issued in connection with the Merger to persons who constitute
"underwriters" within the meaning of Section 2(11) and Rule 145(c) may not be
publicly reoffered or resold by such persons except pursuant to an effective
registration statement under the Securities Act covering such shares or, in
certain circumstances, pursuant to Rule 145(d) or any other applicable exemption
under the Securities Act. Ultrak does not intend for such persons to be able to
resell the shares of Ultrak Common Stock they receive in the Merger pursuant to
this Prospectus/Proxy Statement, and any representation to the contrary should
be disregarded.
RISK FACTORS
DEPENDENCE ON PRODUCT SUPPLIERS
Ultrak purchases the products it markets and sells from a limited number of
non-affiliated foreign manufacturers and will continue to depend substantially
upon such manufacturers in the future. Ultrak does not itself manufacture the
products which it markets and sells. Ultrak has in the past and may in the
future experience difficulties obtaining, in a timely manner, those components
which are necessary for its finished products. The loss of any one supplier of
components or an inability of suppliers to provide Ultrak with the required
quantity or quality of components could have a material adverse effect on
Ultrak's business until such time as an alternate source of supply for such
components is found. See "BUSINESS OF ULTRAK -- Suppliers and Distribution."
CONTROL BY PRINCIPAL SHAREHOLDER
George K. Broady, the Chairman of the Board, President, Chief Executive
Officer, and principal shareholder of Ultrak, is the beneficial owner of
approximately 33% of the Ultrak Common Stock and 100% of the Series A 12%
Cumulative Convertible Preferred Stock, $5.00 par value (the "Series A Preferred
Stock"), of Ultrak. Each share of the Series A Preferred Stock has voting rights
equal to 16.667 shares of Ultrak Common Stock. Mr. Broady therefore controls
over 50% of the votes on all matters which are or may be submitted to a vote of
shareholders of Ultrak, and will continue to control at least 50% of such votes
immediately after the Effective Date. The holders of shares controlling a
majority of the votes of the shareholders of Ultrak can elect all of the
directors of Ultrak and approve or disapprove certain fundamental corporate
transactions, including mergers, liquidation, a "going private" transaction, the
sale of substantially all of Ultrak's assets, and the authorization, issuance,
and sale of new securities of Ultrak, and may delay or prevent a change in
control of Ultrak. See "PRINCIPAL SHAREHOLDERS OF ULTRAK" and "DESCRIPTION OF
ULTRAK'S CAPITAL STOCK."
PREFERRED STOCK
Ultrak's Articles of Incorporation authorize 2,000,000 shares of Preferred
Stock, $5.00 par value, of which 195,351 shares of Series A Preferred Stock are
currently issued and outstanding. Ultrak's Preferred Stock may be issued in
series from time to time with such designation, rights, preferences, and
limitations as
9
<PAGE> 16
the Board of Directors of Ultrak may determine by resolution. The potential
exists, therefore, that additional series of Ultrak's Preferred Stock might be
issued that would grant dividend preferences and liquidation preferences to
preferred shareholders over holders of Ultrak Common Stock. Unless the nature of
a particular transaction and applicable statutes require otherwise, the Board of
Directors has the authority to issue Preferred Stock without shareholder
approval. The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of Ultrak without any further action by
shareholders. See "DESCRIPTION OF ULTRAK'S CAPITAL STOCK."
DEPENDENCE UPON MANAGEMENT AND KEY PERSONNEL
The ability of Ultrak to continue profitable operations will depend
significantly upon its Chairman of the Board, Chief Executive Officer, and
President, George K. Broady; its Executive Vice President and Chief Operating
Officer, James D. Pritchett; and Tim D. Torno, Ultrak's Secretary-Treasurer and
Chief Financial Officer, and upon certain other key employees of Ultrak. The
loss of the services of Mr. Broady, Mr. Pritchett, Mr. Torno, or any of Ultrak's
other key employees could be expected to have a material adverse effect upon
Ultrak's business and operations. In addition, Ultrak's success will be
dependent upon its ability to recruit and retain qualified personnel. See
"MANAGEMENT OF ULTRAK."
COMPETITION WITH LARGER COMPANIES
CCTV systems are being manufactured by numerous concerns, many of which
have substantially greater resources than Ultrak. Moreover, the CCTV product
industry is characterized by rapid technological change, and technology may be
developed which will be more cost effective and advanced than products which are
sold by Ultrak. Ultrak competes with a number of other sellers, ranging from
small local firms to large national and international firms, many of which have
substantially greater financial, management, and marketing resources than
Ultrak. See "BUSINESS OF ULTRAK."
DEPENDENCE UPON MAJOR CUSTOMERS
Ultrak is dependent upon certain major customers. During 1994, sales to one
customer, Walmart Stores, Inc. and Sam's Wholesale Club, a division of Walmart
Stores, Inc., accounted for 21% of Ultrak's sales. During 1993, sales to the
same customer accounted for 18% of Ultrak's sales. An unexpected decline of
sales to this customer could have a material adverse effect on Ultrak. See
"BUSINESS OF ULTRAK."
NO DIVIDENDS
Ultrak has not paid any dividends on the Ultrak Common Stock since its
inception. At the present time, Ultrak does not anticipate paying dividends on
Ultrak Common Stock in the foreseeable future. Any future dividends will depend
upon the earnings of Ultrak, its financial requirements, and other factors.
Diamond Shareholders who anticipate the need for immediate dividend income
should not rely on their shares of Ultrak Common Stock obtained pursuant to the
Merger for such income. See "MARKET FOR ULTRAK COMMON STOCK AND RELATED
SHAREHOLDER MATTERS."
IMPORTATION OF PRODUCTS
The importation of products into the United States and into other
jurisdictions in which Ultrak's products are sold is subject to numerous risks
including labor strikes or shipping delays, fluctuation in currency exchange
rates, and import duties. There is no assurance that the United States, Korea,
Japan, Hong Kong, or other governments will not in the future impose trade
restrictions which could adversely affect Ultrak's operations. Currently, there
is a 3% to 6% United States duty on imported products, and there are no United
States quotas on the types of products distributed by Ultrak. However, there can
be no assurance that quotas, taxes, or further or greater duties or taxes will
not be imposed in the future. Ultrak imports approximately 60% of its products.
See "BUSINESS OF ULTRAK -- Suppliers and Distribution."
10
<PAGE> 17
TECHNOLOGICAL OBSOLESCENCE
The CCTV product industry is characterized by rapid technological change,
frequent product introductions, and worldwide research. The ability of Ultrak to
compete will depend in large part on its ability to successfully adapt to
technological changes in the industry. Although Ultrak's products are currently
based on what it considers solid processes and technology, there is no assurance
that patents, products, processes, or computer software produced by competing
companies could not supersede or make obsolete the products sold by Ultrak. The
industry is characterized by rapid technological obsolescence of products and
drastic price reductions.
MARKET CONDITIONS; POSSIBLE VOLATILITY OF STOCK PRICE
There are approximately 4.5 million shares of Ultrak Common Stock held by
public shareholders who are not "affiliates," as that term is defined under the
Securities Act, of Ultrak. The historically low trading volume of Ultrak Common
Stock makes it susceptible to substantial market price swings should volume of
any size and frequency occur in the offering, buying, or selling of shares of
Ultrak Common Stock. Ultrak is not able to predict the effect on market prices
of the distribution of the shares of Ultrak Common Stock covered by this
Prospectus/Proxy Statement. Further, factors such as new product announcements
by Ultrak or its competitors, quarterly fluctuations in Ultrak's operating
results, and general conditions in the securities markets may have a significant
impact on the market price of the Ultrak Common Stock. See "MARKET FOR ULTRAK
COMMON STOCK AND RELATED SHAREHOLDER MATTERS."
MATERIAL BENEFITS OF MERGER TO AFFILIATES OF DIAMOND
As a condition to the obligations of Ultrak and Ultrak Subsidiary under the
Merger Agreement, Richard Tompkins, the President and Chief Executive Officer of
Diamond, will enter into an employment agreement with Ultrak, which provides for
Tompkins to continue to be employed with Diamond after the Merger in the same
capacities, and under similar terms and conditions, as he had prior to the
Merger. Other than such employment agreement, the officers, directors, and other
affiliates of Diamond will not receive any material benefits from the Merger
that are not received by shareholders of Diamond in general.
FINANCING
Although Ultrak's indebtedness owed to NationsBank of Texas, N.A.
("NationsBank") and Petrus Fund, L.P., its two primary lenders, is payable on
demand, Ultrak believes it has an excellent relationship with both of its
lenders. Ultrak's indebtedness to Petrus Fund, L.P. and NationsBank has been in
existence since 1992 and 1993, respectively, and management believes that
Ultrak's lenders will not demand payment without Ultrak being in violation of
material loan covenants. At December 31, 1994, Ultrak was in violation of
certain loan covenants and both lenders granted waivers of the violations. As of
March 31, 1995, Ultrak was in compliance with all loan covenants.
EARNINGS FOR QUARTER ENDED JUNE 30, 1995
Ultrak announced in a press release on June 23 that sales for second
quarter of 1995 will be higher than both the first quarter of 1995 and the
second quarter of 1994, but less than planned. Sales were lower than planned
because of a marked slowdown in the economy; in addition, retail customers
reduced inventory levels, also contributing to temporarily lower sales.
Ultrak expects that pre-tax earnings for the second quarter of 1995 will be
at least 35 percent lower than the first quarter of 1995. Four principal reasons
for the lower earnings are: 1) the lower sales as mentioned above, 2) lower
gross profit margins due to intensely competitive market conditions and Ultrak's
commitment to continue to gain market share, 3) higher interest expense on
borrowings, and 4) much higher expenditures on engineering, product development,
and marketing as budgeted.
11
<PAGE> 18
SPECIAL MEETING OF DIAMOND SHAREHOLDERS
TIME, DATE, PLACE, AND PURPOSE
The Special Meeting will be held on July 13, 1995, at 8:00 a.m. local time,
at Diamond's corporate offices at 9102 North Meridian Street, Suite 500,
Indianapolis, Indiana 46260. At the Special Meeting, Diamond Shareholders will
be asked to consider and vote upon a proposal (the "Merger Proposal") to adopt
and approve the Merger Agreement and the Merger and to conduct any other
business that properly comes before the Special Meeting.
RECORD DATE AND SHARES ENTITLED TO VOTE
Only Diamond Shareholders at the close of business on June 12, 1995 (the
"Record Date") are entitled to notice of and to vote at the Special Meeting. As
of the Record Date, there were 4,809,219 shares of Diamond Common Stock issued
and outstanding and held by approximately 380 holders of record. The Diamond
Shareholders are entitled to one vote per share on any matter that may properly
come before the Special Meeting.
VOTE REQUIRED; SECURITY OWNERSHIP OF DIAMOND'S MANAGEMENT
The presence in person or by proxy of the holders of a majority of the
shares of Diamond Common Stock outstanding as of the Record Date is necessary to
constitute a quorum for the transaction of business at the Special Meeting. The
affirmative vote of the holders of not less than two-thirds of the shares of
Diamond Common Stock outstanding as of the Record Date voting in person or by
proxy is necessary to approve and adopt the Merger Agreement and the Merger.
Abstentions will be counted as shares that are present and entitled to vote for
purposes of determining the presence of a quorum at the Special Meeting. In
addition, abstentions with respect to the Merger Proposal, because such shares
are otherwise counted as present and entitled to vote at the Special Meeting,
will be counted as a vote against such proposal.
As of the Record Date, the executive officers and directors of Diamond
beneficially owned an aggregate of 2,978,523 shares of Diamond Common Stock,
which represents 61.9% of the Diamond Common Stock outstanding as of the Record
Date. Each of these executive officers and directors of Diamond has advised
Diamond that he intends to vote his shares of Diamond Common Stock to approve
and adopt the Merger Agreement and the Merger.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is enclosed with this Prospectus/Proxy Statement. All
shares of Diamond Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated on such proxies. If no instructions are indicated,
such shares will be voted FOR the approval and adoption of the Merger Agreement
and FOR the approval and adoption of the Merger and, in the discretion of the
proxy holder, as to any other matter which may properly come before the Special
Meeting.
Any Diamond Shareholder that has previously delivered a properly executed
proxy may revoke such proxy at any time before its exercise. A proxy may be
revoked either by (i) filing with the Secretary of Diamond prior to the Special
Meeting, at Diamond's principal executive offices, either a written revocation
of such proxy or a duly executed proxy bearing a later date or (ii) attending
the Special Meeting and voting in person. Presence at the Special Meeting will
not revoke a Diamond Shareholder's proxy unless such Diamond Shareholder votes
in person.
12
<PAGE> 19
MERGER
BACKGROUND OF THE MERGER AND RELATED MATTERS
Upon emerging from its bankruptcy proceedings in 1993, as the result of
which Diamond acquired many new shareholder accounts, the Board of Directors of
Diamond began examining its strategic alternatives for developing liquidity for
its shareholders. In view of Diamond's small size and its recent emergence from
bankruptcy proceedings, the Board of Directors determined that it might be some
time before Diamond could create a public market for the Diamond Common Stock.
Therefore, the Board of Directors was receptive to Ultrak's indication of
interest in acquiring Diamond in order to provide Diamond Shareholders with
liquidity.
During the months of December 1994 and January 1995, Ultrak and Diamond
negotiated the preliminary terms and conditions of the Merger. In general, these
terms and conditions contemplated, among other things, that Ultrak or a
subsidiary of Ultrak would acquire Diamond in a merger transaction in which the
holders of Diamond Common Stock and holders of options, warrants, and other
rights to acquire Diamond Common Stock would receive shares of newly issued and
registered Ultrak Common Stock. These terms and conditions were set forth in a
letter of intent which was executed by the parties on or about February 2, 1995.
Following the execution of the letter of intent, Ultrak and Diamond each
conducted a due diligence review of the other. Among other things, each
considered the other's financial condition and results of operations, contracts,
leases, litigation, and employee relations. On the basis of those reviews,
Ultrak and Diamond mutually concluded that there were synergistic advantages to
the Merger.
At a special meeting held on April 26, 1995, the Board of Directors of
Ultrak unanimously determined that the Merger Agreement was in the best
interests of Ultrak and its shareholders and approved and adopted the Merger
Agreement. Approval of the Merger Agreement and the Merger by the shareholders
of Ultrak is not required; however, Ultrak, as the sole shareholder of Ultrak
Subsidiary, has approved the Merger and the terms of the Merger Agreement.
Diamond's Board of Directors met on February 21, 1995, to review the
results of Diamond's special review of Ultrak's business and operations that had
been conducted by representatives of the Board and senior management of Diamond
at Ultrak's headquarters in Carrollton, Texas on February 8, 9 and 10. At that
meeting, Diamond's Board also discussed Ultrak's business and the market for the
Ultrak Common Stock with George Broady, the President of Ultrak. Diamond's Board
of Directors authorized execution of the Merger Agreement on April 10, 1995,
after considering the operating results of Ultrak and of Diamond for the first
quarter ended March 31, 1995, and the terms of the Merger Agreement. In reaching
its decision to approve and adopt the Merger Agreement and to recommend to the
Diamond Shareholders that they approve and adopt the Merger Agreement, the Board
of Directors of Diamond, without assigning any relative or specific weights,
considered a number of factors, including, among others, the following four
factors:
(i) THE HISTORICAL AND CURRENT FINANCIAL CONDITION, RESULTS OF
OPERATIONS, AND BUSINESS OF DIAMOND AND ULTRAK. The Board believed that the
businesses of Diamond and Ultrak were well matched because of (a) Diamond's
manufacturing capacity and proprietary CCTV product lines and Ultrak's
strengths in marketing and selling CCTV products purchased from non-related
manufacturers for resale; and (b) Diamond's comparatively-larger base of
plant and equipment and other tangible assets associated with its
manufacturing operations and its ability to borrow against those fixed
assets on a long-term basis, as contrasted with Ultrak's comparatively-
smaller base of tangible assets and its reliance upon short-term debt to
finance its sales. After reviewing the historical and current financial
condition and results of operations of Diamond and Ultrak, the Board of
Directors believed that, although the historical per share stockholders
equity and per share net income of the Diamond Common Stock would be
diluted by the exchange of the Ultrak Common Stock under the Merger
Agreement on a pro forma equivalent basis (see "COMPARATIVE PER SHARE
DATA"), the rapid growth of Ultrak in sales and earnings (and the potential
for increased sales and profitability of Ultrak as the result of the
perceived synergies of the acquisition of Diamond) justified the exchange
ratio included in the Merger Agreement.
13
<PAGE> 20
(ii) THE TERMS OF THE MERGER AGREEMENT, INCLUDING, AMONG OTHER THINGS,
THE CONSIDERATION TO BE RECEIVED BY THE DIAMOND SHAREHOLDERS IN THE MERGER,
THE ASSUMPTION BY ULTRAK OF THE OUTSTANDING OBLIGATIONS AND LIABILITIES OF
DIAMOND IN CONNECTION WITH THE MERGER, AND THE CONDITIONS TO THE MERGER AND
DIAMOND'S ABILITY TO SATISFY SUCH CONDITIONS. In particular, the Board
considered favorably the price protection afforded to the holders of the
Diamond Common Stock through Ultrak's agreement to issue additional shares
of Ultrak Common Stock to the Diamond Shareholders if the stock received in
the merger did not achieve certain price levels on Nasdaq during designated
time periods immediately prior to the dates that are six months and twelve
months following the Effective Date (see "MERGER -- Terms of the Merger
Agreement -- Adjustments"), the commitment of Ultrak to cause the offer and
sale of the Ultrak Common Stock to be registered under the Securities Act,
thereby making the Ultrak Common Stock freely transferable for most
non-controlling Diamond Shareholders following the Merger (see "PLAN OF
DISTRIBUTION"), and the Board's view that all of the conditions to the
obligations of Ultrak to close the Merger would likely be satisfied,
thereby minimizing the risk that Diamond might incur significant expense or
cost in connection with a terminated transaction.
(iii) THE QUALITY OF AND RISKS ASSOCIATED WITH THE ULTRAK COMMON STOCK
TO BE RECEIVED BY THE DIAMOND SHAREHOLDERS IN THE MERGER. In addition to
the Board's favorable opinion of Ultrak's historical financial condition,
results of operations, liquidity and capital resources, the Board believed
that the quality of the Ultrak Common Stock to be received by the Diamond
Shareholders in the Merger was supported by (a) the Board's favorable
impression of the quality of the executive officers of Ultrak based on the
numerous personal discussions conducted by representatives of Diamond with
them, and (b) the existence of an established public trading market for the
Ultrak Common Stock pursuant to which the non-controlling Diamond
Shareholders would have an opportunity to dispose of their Ultrak Common
Stock received in the Merger promptly following the Effective Date should
they so desire (subject to possible price volatility that could result from
such sales or other factors due to the historically low trading volume in
the shares of Ultrak), unlike the Diamond Common Stock for which there is
no established trading market and for which the Board believed there would
be no prospect of establishment of a public trading market for the
foreseeable future.
(iv) THE LIKELIHOOD THAT THE MERGER WILL BE TREATED AS A TAX-FREE
REORGANIZATION FOR FEDERAL INCOME TAX PURPOSES SO THAT GENERALLY NO GAIN OR
LOSS WILL BE RECOGNIZED BY THE DIAMOND SHAREHOLDERS IN CONNECTION WITH THE
EXCHANGE OF DIAMOND COMMON STOCK FOR ULTRAK COMMON STOCK IN THE MERGER.
Following the public announcement by Ultrak on June 23, 1995 that Ultrak's
net income for the second quarter of 1995 was expected to be substantially lower
than its net income for the quarter ended March 31, 1995 (see "RISK
FACTORS -- Earnings for Quarter Ended June 30, 1995"), representatives of
Diamond again met with senior management of Ultrak at Ultrak's headquarters in
Carrollton, Texas on June 26 and 27, 1995, and the Board of Directors of Diamond
met by conference telephone on the morning of June 28, 1995 to discuss the
results of their meetings. After considering the reasons for the expected lower
profits for the second quarter of 1995 as disclosed by Ultrak, and the rapid
technological change that has affected competition, and is expected to affect
competition in the future, in the CCTV product industry, the Diamond Board of
Directors unanimously reaffirmed their recommendation to Diamond Shareholders
that they approve and adopt the Merger Agreement. The Diamond Board also
approved an Extension Agreement to the Merger Agreement extending the date after
which either Ultrak or Diamond may terminate the Merger (if the effective date
of the Merger has not then occurred) to July 31, 1995 from June 30, 1995.
TERMS OF THE MERGER AGREEMENT
General. The Merger Agreement provides that, following approval of the
Merger Agreement by the Diamond Shareholders and the satisfaction or waiver of
the other conditions to the Merger, Ultrak Subsidiary
14
<PAGE> 21
will be merged with and into Diamond at the Effective Time in accordance with
the Ohio Revised Code (the "ORC") and the Texas Business Corporation Act (the
"TBCA"). Diamond will be the surviving corporation in the Merger. As a result of
the Merger, the separate corporate existence of Ultrak Subsidiary will cease,
and Diamond will become a wholly-owned subsidiary of Ultrak.
Conversion Factor. Except as set forth below, each share of Diamond Common
Stock issued and outstanding at the time of the Merger (other than treasury
shares and shares held by persons who perfect their appraisal rights under the
ORC) will be converted into the right to receive 0.125 shares of Ultrak Common
Stock. Cash will be paid in lieu of issuing fractional shares of Ultrak Common
Stock in an amount equal to the Determination Price (as defined herein) of
Ultrak Common Stock multiplied by the fraction of a share. Cash will also be
paid in lieu of Ultrak Common Stock to any Diamond Shareholder who would receive
ten (10) or fewer shares of Ultrak Common Stock in the Merger (the "Cash Out")
in an amount equal to the product of (i) the average closing price of Ultrak
Common Stock as reported for Nasdaq in the Wall Street Journal, Southwest
Edition, for each of the ten (10) trading days ending on the trading day which
is five (5) days prior to the Effective Date, multiplied by (ii) the number of
shares of Ultrak Common Stock that such Diamond Shareholder is entitled to
receive pursuant to the Merger Agreement. It is a condition to consummation of
the Merger that shares of Ultrak Common Stock be exchanged for at least 95% of
the Diamond Common Stock (subject to certain adjustments).
The "Determination Price" shall mean the following: (i) the Determination
Price on the Effective Date shall be the closing price, as reported for Nasdaq
in the Wall Street Journal, Southwest Edition, on the last trading day
immediately prior to the Effective Date; (ii) the Determination Price on the
First Adjustment Date (as defined herein) shall be the average closing price, as
reported for Nasdaq in the Wall Street Journal, Southwest Edition, for each of
the ten (10) trading days ending on the First Adjustment Date; and (iii) the
Determination Price on the Second Adjustment Date (as defined herein) shall be
the average closing price, as reported for Nasdaq in the Wall Street Journal,
Southwest Edition, for each of the ten (10) trading days ending on the Second
Adjustment Date.
The "Conversion Factor" shall mean 0.125, which is determined by dividing
600,000 (the aggregate number of shares of Ultrak Common Stock to be exchanged
in the Merger as of the Effective Date) by 4,809,219 (the aggregate number of
shares of Diamond Common Stock to be exchanged in the Merger).
Adjustments. If the average closing price of Ultrak Common Stock as
reported for Nasdaq in the Wall Street Journal, Southwest Edition, for each of
the ten (10) trading days ending on the first trading day (the "First Adjustment
Date") that is six (6) months from the Effective Date is less than $7.00, then
Ultrak shall issue an additional 50,000 shares of Ultrak Common Stock to the
shareholders of Diamond as of the Effective Date (the "Effective Date
Shareholders"), and each Effective Date Shareholder will receive one share of
Ultrak Common Stock for every twelve (12) shares of Ultrak Common Stock received
pursuant to the Merger on the Effective Date.
If the average closing price of Ultrak Common Stock as reported for Nasdaq
in the Wall Street Journal, Southwest Edition, for each of the ten (10) trading
days ending on the first trading day (the "Second Adjustment Date") (the First
Adjustment Date and the Second Adjustment Date are sometimes collectively
referred to herein as the "Adjustment Dates") that is twelve (12) months from
the Effective Date is less than $8.00, then Ultrak shall issue an additional
50,000 shares of Ultrak Common Stock to the Effective Date Shareholders, and
each Effective Date Shareholder will receive one share of Ultrak Common Stock
for every twelve (12) shares of Ultrak Common Stock received pursuant to the
Merger on the Effective Date.
In the event of any change in the outstanding Ultrak Common Stock by reason
of stock dividends, stock splits, share combinations, mergers, recapitalization,
exchanges of shares, or the like, between the signing date of the Merger
Agreement and an Adjustment Date, then the type of shares subject to issuance on
such Adjustment Date and the price of the Ultrak Common Stock that determines
whether any additional shares are issued on such Adjustment Date, shall be
adjusted appropriately. The right to receive any additional shares of Ultrak
Common Stock pursuant to such adjustments is a personal right of the Effective
Date Shareholders and they may not transfer or assign all or any portion of
their right to receive additional shares of Ultrak
15
<PAGE> 22
Common Stock. No person or entity, other than the Effective Date Shareholders,
shall have the right to receive any additional shares of Ultrak Common Stock
pursuant to such adjustments.
Conditions to the Merger. The obligations of Ultrak and Diamond to
consummate the Merger are subject to the satisfaction of certain conditions,
including, among others: (i) the approval and adoption of the Merger Agreement
by the Diamond Shareholders; (ii) the absence of any injunction, writ, or
preliminary restraining order or any order of any nature issued by a court or
governmental agency of competent jurisdiction to the effect that the Merger may
not be consummated as provided in the Merger Agreement and the absence of any
lawsuit or proceeding (actual or as to which written notice has been received)
by any governmental or regulatory agency for the purpose of obtaining any such
injunction, writ, or preliminary restraining order; and (iii) the effectiveness
of the Registration Statement under the Securities Act and the absence of (a)
any stop order suspending the effectiveness of the Registration Statement or any
proceedings by the Commission (actual or threatened) for such purpose and (b)
the absence of any stop order suspending the effectiveness of any exemption,
qualification, or registration of the Ultrak Common Stock under the state
securities laws or any proceeding by authorities of any such state (actual or
threatened) for such purpose.
The obligation of Ultrak to consummate the Merger is subject to certain
additional conditions, including, among others, that: (i) Diamond's
representations and warranties contained in the Merger Agreement shall be true
and correct as of the date of the Merger Agreement and as of the Effective Date;
(ii) Diamond shall have performed in all material respects all covenants and
agreements required to be performed by it under the Merger Agreement; (iii)
there shall have been no material adverse change in Diamond's business,
properties, assets, liabilities, results of operations, or condition, financial
or otherwise; (iv) Ultrak shall have received legal opinions with respect to
various matters; (v) Ultrak shall have received written evidence that an
application for a permit on behalf of Diamond for wastewater and for the paint
booth shall have been properly filed with the Ohio Environmental Protection
Agency; (vi) shares of Ultrak Common Stock shall be exchanged for at least
ninety-five percent (95%) of the Diamond Common Stock (subject to certain
adjustments); (vii) Richard Tompkins shall have executed and delivered an
employment agreement in the form attached to the Merger Agreement; (viii) each
of the officers and directors of Diamond shall have tendered to Ultrak a
resignation letter in form and substance reasonably satisfactory to Ultrak; and
(ix) Diamond shall deliver to Ultrak evidence that any and all options,
warrants, or other rights to acquire the capital stock of Diamond have been
cancelled or terminated.
The obligation of Diamond to consummate the Merger also is subject to
certain additional conditions, including, among others, that: (i) Ultrak's
representations and warranties contained in the Merger Agreement shall be true
and correct as of the date of the Merger Agreement and as of the Effective Date;
(ii) Ultrak shall have performed in all material respects all covenants and
agreements required to be performed by it under the Merger Agreement; (iii)
there shall have been no material adverse change in Ultrak's business,
properties, assets, liabilities, results of operations or condition, financial
or otherwise; (iv) Diamond shall have received legal opinions with respect to
various matters; and (v) Diamond shall have received a tax opinion of Leagre &
Barnes with respect to various matters.
Amendment. The Merger Agreement may be amended by the written agreement of
all the parties to the Merger Agreement.
Termination. The Merger Agreement may be terminated (i) by mutual written
consent of the Boards of Directors of Diamond and Ultrak, (ii) by either Diamond
or Ultrak if the Effective Date has not occurred on or before July 31, 1995,
unless such failure of consummation is due to the failure of the terminating
party to perform or observe the covenants, agreements, and conditions of the
Merger Agreement to be performed or observed by it on or before the Effective
Date, or (iii) by either Ultrak or Diamond if the conditions precedent to the
terminating party's obligations to consummate its obligations under the Merger
Agreement have not been satisfied or waived by the terminating party on or
before the Effective Date.
Fees and Expenses. Each of Ultrak and Diamond will pay its own fees and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby; provided, however, that to the extent Diamond's legal fees
and expenses in connection with the Merger Agreement and the transactions
contemplated thereby exceed $35,000, such excess shall be paid by the Signing
Shareholders.
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<PAGE> 23
Exchange of Diamond Stock Certificates. As soon as practicable after the
Effective Date, instructions and a letter of transmittal will be furnished to
the Effective Date Shareholders for use in exchanging their stock certificates
for certificates evidencing the shares of Ultrak Common Stock they will be
entitled to receive as a result of the Merger. THE DIAMOND SHAREHOLDERS SHOULD
NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE UNTIL INSTRUCTIONS AND A LETTER
OF TRANSMITTAL ARE RECEIVED.
No Solicitation. The Merger Agreement provides that until the Effective
Date or until the Merger Agreement is terminated in accordance with its terms,
neither Diamond nor its officers, directors, agents, or affiliates, will, except
as required by law or by the Merger Agreement, or by the fiduciary duties of the
Board of Directors of Diamond: (a) directly or indirectly, encourage, solicit,
or initiate discussions 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 Diamond, 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. If Diamond receives any offer or inquiry for a transaction of the
type referred to in (a) above, then the Merger Agreement provides that Diamond
will promptly inform Ultrak and Ultrak Subsidiary as to the relevant terms and
conditions of such offer.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a certificate of merger
relating thereto with the Secretary of State of Ohio and articles of merger
relating thereto with the Secretary of State of Texas. The Merger Agreement
provides that the parties thereto will cause such certificate of merger and
articles of merger to be filed as soon as practicable after each of the
conditions to consummation of the Merger has been satisfied or waived. The
Merger cannot become effective until the Diamond Shareholders have approved the
Merger Agreement and all required regulatory approvals and actions have been
obtained and taken. See "MERGER -- Terms of the Merger Agreement -- Conditions
to the Merger." Thus, there can be no assurance as to whether or when the Merger
will become effective.
RECOMMENDATION OF THE DIAMOND BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF DIAMOND HAS DETERMINED THAT THE MERGER IS IN THE
BEST INTERESTS OF DIAMOND AND THE DIAMOND SHAREHOLDERS, HAS UNANIMOUSLY APPROVED
THE MERGER AGREEMENT, AND RECOMMENDS THAT THE DIAMOND SHAREHOLDERS VOTE FOR THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE MERGER.
RIGHTS OF DISSENTING SHAREHOLDERS
Dissenters Rights. A Diamond Shareholder who does not vote in favor of the
Merger Proposal at the Diamond Special Meeting has the right under Section
1701.85 of the ORC to demand the fair cash value for his shares of Diamond
Common Stock. To perfect these dissenters' rights, the dissenting Diamond
Shareholder (the "Dissenting Shareholder") must deliver to Diamond a written
demand for payment to him of the fair cash value of his shares of Diamond Common
Stock, stating in such notice the amount claimed by him as the fair cash value
for such shares. Such written demand must be delivered to Diamond not later than
ten days after the Special Meeting.
If Diamond and the Dissenting Shareholder do not come to an agreement on
the fair cash value of the shares of Diamond Common Stock, then within three
months of the demand by the dissenting Diamond Shareholder, either party may
file a complaint in the Court of Common Pleas of Fairfield County, Ohio. Diamond
presently intends not to institute such a complaint against any Dissenting
Shareholder and Diamond is not required to do so under Section 1701.85 of the
ORC; therefore, each Dissenting Shareholder will be responsible for initiating
any such action in a timely manner and bear the related attorneys' fees and
other
17
<PAGE> 24
costs of litigation if the Dissenting Shareholder wishes to receive the fair
cash value for his or her shares of Diamond Common Stock under Section 1701.85
of the ORC. If the court finds that the dissenting Diamond Shareholder is
entitled to receive fair value for his shares of Diamond Common Stock, the court
may appoint one or more appraisers to recommend a determination of the amount of
the fair cash value. The court will then render a judgment against Diamond for
payment of the fair cash value, as determined by the court, with interest at
such rate and from such date as the court considers equitable. Court costs,
including costs of the appraisers, will be assessed or apportioned as the Court
considers equitable. Section 1701.85 of the ORC does not specify whether the
Court may assess or apportion attorneys' fees and other litigation expenses of
the Dissenting Shareholder to Diamond in any proceeding brought under Section
1701.85 by a Dissenting Shareholder against Diamond. Neither Ultrak nor Diamond
is aware of any judicial precedent under Ohio law that would permit the court in
any proceeding brought under Section 1701.85 of the ORC to assess or apportion
such attorneys' fees or other litigation expenses in a manner that varies from
the generally applicable common law principle in the United States that each
party must bear its own attorneys' fees and other litigation expenses. Diamond
would take the position in any such proceeding that the Dissenting Shareholder
would not be entitled to recover the Dissenting Shareholder's attorneys' fees or
litigation expenses incurred in connection with the bringing of any such
proceeding against Diamond.
The procedure set forth in Section 1701.85 of the ORC should be complied
with strictly. Failure to follow any of such procedures may result in the
termination or waiver of dissenters' rights. The Diamond Shareholders should
note that failure to execute and return a proxy does not perfect dissenters'
rights. In addition, neither voting against the Merger Proposal nor abstaining
from voting will constitute a demand for payment. However, voting in favor of
the Merger Proposal will waive a Diamond Shareholder's dissenters' rights. If a
Diamond Shareholder returns a signed proxy card but does not specify a vote, the
proxy will be voted in favor of the Merger Proposal which will have the effect
of waiving such Diamond Shareholder's dissenters' rights.
A condition to the obligation of Diamond to consummate the Merger is that
the shares held by the Diamond Shareholders who have dissented and demanded fair
cash value of their shares pursuant to the ORC plus shares of Diamond Common
Stock subject to the Cash Out will not represent more than five percent of the
Diamond Common Stock.
The Diamond Shareholders are advised to review Section 1701.85 of the ORC,
which is reproduced as Annex B to this Prospectus/Proxy Statement.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering whether to approve the Merger Agreement, the Diamond
Shareholders should be aware that certain executive officers and directors of
Diamond have certain interests that may present them with potential conflicts of
interests with respect to the Merger.
Ownership of Diamond Common Stock. As of the Record Date, executive
officers and directors of Diamond beneficially owned an aggregate of 2,978,523
shares of Diamond Common Stock. Subject to subsequent adjustments, the executive
officers and directors of Diamond would therefore be entitled to receive in the
Merger an aggregate of 371,600 shares of Ultrak Common Stock having an aggregate
market value of $3,019,250 (based on the closing price per share of Ultrak
Common Stock reported on Nasdaq on May 3, 1995). See "PRINCIPAL SHAREHOLDERS OF
DIAMOND."
Bonus and Employment Agreement. The Merger Agreement contemplates the
execution by Ultrak of a new employment agreement with Diamond's President,
Richard Tompkins. Diamond has paid Mr. Tompkins a bonus of $16,800 for several
reasons, including the following: (i) to recognize his services in negotiating
the terms of the Merger Agreement and (ii) to facilitate the exercise of his
stock options for shares of Diamond Common Stock prior to the execution of the
Merger Agreement.
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<PAGE> 25
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both Ultrak and Diamond to
consummate the Merger are conditioned upon receipt of all required regulatory
approvals (with certain exceptions). Other than the approval of certain state
securities commissions, Ultrak and Diamond believe that no such regulatory and
other approvals are required by applicable law.
ACCOUNTING TREATMENT
For financial reporting purposes, the Merger will be accounted for by the
purchase method of accounting in accordance with generally accepted accounting
principles. Accordingly, the purchase price will be allocated to the assets and
liabilities of Diamond acquired based on their estimated fair values with the
excess of cost over the net assets acquired being allocated to goodwill.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary of the intended material federal income
tax consequences of the Merger to the Diamond Shareholders. This summary is
supported by the opinion of Leagre & Barnes, the form of which has been filed as
an exhibit to the Registration Statement of which this Prospectus/Proxy
Statement is a part. The summary is based on the provisions of the Code, the
Treasury Regulations promulgated thereunder, and administrative and judicial
interpretations thereof, all as in effect as of the date hereof, and on the
accuracy of certain factual representations made to Leagre & Barnes by Ultrak,
Ultrak Subsidiary, Diamond, and certain shareholders of Diamond. Such laws or
interpretations may differ as of the Effective Date, and relevant facts may also
differ.
The tax treatment of the Merger with respect to each Diamond Shareholder
will depend in part upon each such Diamond Shareholder's particular situation.
Special tax consequences not described below may be applicable to particular
classes of taxpayers, including financial institutions, broker-dealers, persons
who are not citizens or residents of the United States or who are legal entities
formed under the laws of jurisdictions outside the United States, and the
Diamond Shareholders who acquired their shares through the exercise of employee
stock options or otherwise as compensation. All Diamond Shareholders should
consult with their own tax advisors as to the particular tax consequences of the
Merger to them, including the applicability and effect of any state, local, and
foreign tax laws.
Opinion of Leagre & Barnes. Pursuant to the terms of the Merger Agreement,
Diamond and Ultrak will receive the opinion of Leagre & Barnes, dated as of the
Effective Date, to the effect that, subject to the assumptions, qualifications,
and limitations set forth therein, the Merger will be treated as a tax-free
reorganization for federal income tax purposes so that no gain or loss will be
recognized by the Diamond Shareholders, except in respect of cash received in
lieu of fractional shares, cash received pursuant to the Cash Out, or payments
received by the Diamond Shareholders exercising dissenters' rights. However,
although the obligations of Ultrak and Diamond to consummate the Merger are
conditioned upon the receipt of the tax opinion of Leagre & Barnes regarding the
intended federal income tax consequences of the Merger, that opinion is not
binding upon the Internal Revenue Service and no ruling has been sought from the
Internal Revenue Service regarding the tax-free nature of the Merger. If the
Merger is consummated, and it is later determined that the Merger did not
qualify as a tax-free reorganization under the Code, Diamond Shareholders would
recognize taxable gain or loss in the Merger equal to the difference between the
fair market value of the Ultrak Common Stock such Diamond Shareholder received
and such Diamond Shareholder's basis in his or her Diamond Common Stock.
TAX CONSEQUENCES TO DIAMOND SHAREHOLDERS
The following are the intended material federal income tax consequences of
the Merger to the Diamond Shareholders:
1. No gain or loss will be recognized by the Diamond Shareholders, except
in respect of cash received as described in paragraph 4 below.
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<PAGE> 26
2. The basis of the Ultrak Common Stock to be received by the Diamond
Shareholder will be the same, in each instance, as the basis of Diamond Common
Stock surrendered in exchange therefor.
3. The holding period for the Ultrak Common Stock will include the holding
period of Diamond Common Stock surrendered in exchange therefor, provided such
Diamond Common Stock was held as a capital asset on the date of the Merger.
4. Cash received in the Merger by a Diamond Shareholder in lieu of a
fractional share of Ultrak Common Stock or pursuant to the Cash Out will be
treated under Section 302 of the Code as having been received by the Diamond
Shareholder in exchange for such fractional share or shares subject to the Cash
Out, and the Diamond Shareholder generally will recognize capital gain or loss
in such exchange equal to the difference between the cash received and the
Diamond Shareholder's tax basis allocable to the fractional share or the shares
subject to the Cash Out. A Diamond Shareholder who perfects his dissenters'
rights under the ORC and who receives payment in cash for the "fair cash value"
of his Diamond Common Stock will be treated as having received such payment in a
redemption of the Diamond Common Stock subject to the provisions of Section 302
of the Code. In general, a dissenting Diamond Shareholder will recognize capital
gain or loss measured by the difference between the amount received by such
Diamond Shareholder in payment for his shares of Diamond Common Stock and the
tax basis of such shares of Diamond Common Stock. Any gain or loss recognized
will be capital gain or loss if the Diamond Common Stock or Ultrak share
interest was a capital asset in the hands of the Diamond Shareholder, and will
be long-term capital gain or loss if the Diamond Common Stock was held by such
Diamond Shareholder for more than one year. In general, the federal income tax
rates applicable to long-term capital gains and ordinary income (including
short-term capital gains) of taxpayers that are individuals may differ, while
for corporations capital gains and ordinary income are generally taxed at the
same rate. The deductibility of capital losses is subject to limitations for
both individuals and corporations.
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE STATE, LOCAL, OR
FOREIGN TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER,
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE
SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF
THIS DISCUSSION. EACH DIAMOND SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
DIAMOND SHAREHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, AND
FOREIGN TAX LAWS.
RESALE OF ULTRAK COMMON STOCK
Shares of Ultrak Common Stock to be issued to the Diamond Shareholders in
connection with the Merger will be freely transferrable under the Securities
Act, except for shares issued to the Signing Shareholders or to any person who,
as of the Effective Date, may be deemed to be an affiliate ("Affiliate") of
Diamond within the meaning of Rule 145 under the Securities Act. In general,
Affiliates of Diamond include certain of its executive officers, each member of
its board of directors, and any other person or entity who controls, is
controlled by, or is under common control with, Diamond. Rule 145, among other
things, imposes certain restrictions upon the resale of securities received by
Affiliates in connection with certain reclassifications, mergers,
consolidations, or asset transfers. Ultrak Common Stock received by Affiliates
of Diamond in the Merger will be subject to the applicable resale limitations of
Rule 145.
In the Merger Agreement, Diamond has agreed that neither any Affiliate nor
any Signing Shareholder shall (i) sell shares of Ultrak Common Stock for the
forty-five (45) day period immediately prior to the First Adjustment Date and
the Second Adjustment Date or (ii) sell, during the twelve (12) months
immediately following the Effective Date, shares of Ultrak Common Stock
constituting more than one-third of the shares of Ultrak Common Stock received
by such affiliate or Signing Shareholder in the Merger. See "The
Merger -- Adjustments."
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<PAGE> 27
Ultrak may place legends on certificates representing shares of Ultrak
Common Stock which are issued to Affiliates of Diamond in the Merger to restrict
transfers in accordance with the foregoing.
COMPARISON OF RIGHTS OF HOLDERS OF DIAMOND COMMON STOCK AND ULTRAK COMMON STOCK
Ultrak is incorporated under the laws of the State of Colorado, and Diamond
is incorporated under the laws of the State of Ohio. Diamond Shareholders'
rights are currently governed by the ORC, Diamond's Articles of Incorporation,
attached hereto as Annex C (the "Diamond Charter"), and Diamond's Code of
Regulations (the "Diamond Regulations"), attached hereto as Annex D. Upon
consummation of the Merger and to the extent they receive shares of Ultrak
Common Stock, the Diamond Shareholders will become shareholders of Ultrak, and
their rights from the Effective Date until December 29, 1995, will be governed
by the Colorado Business Corporation Act (the "CBCA"), Ultrak's Articles of
Incorporation, as amended, attached hereto as Annex E (the "Ultrak Charter"),
and the Bylaws of Ultrak (the "Ultrak Bylaws"), attached hereto as Annex F.
Effective as of December 29, 1995, Ultrak will reincorporate in Delaware by
merging with a wholly-owned subsidiary incorporated in Delaware solely for that
purpose, unless the Board of Directors of Ultrak determines that it is
inadvisable to do so. See "ULTRAK'S REINCORPORATION IN DELAWARE -- General." The
Board of Directors chose to delay the effectiveness of the Reincorporation until
that date in order to simplify the transition from Delaware to Colorado
corporate law and particularly to correspond with Ultrak's fiscal year. See
"ULTRAK'S REINCORPORATION IN DELAWARE -- Effective Date of the Reincorporation."
Upon Ultrak's reincorporation in Delaware, all persons owning Ultrak Common
Stock will be subject to Delaware corporate law rather than Colorado corporate
law. See "ULTRAK'S REINCORPORATION IN DELAWARE -- General." Therefore, although
certain significant differences between the rights of Ultrak's shareholders
before and after the Merger are discussed below, Diamond Shareholders receiving
Ultrak Common Stock in the Merger should note the differences in the charter
documents and corporate laws that will govern them as a result of the
Reincorporation discussed under the caption "ULTRAK'S REINCORPORATION IN
DELAWARE -- Significant Differences in Corporate Law of Colorado and Delaware."
Management of Ultrak and Diamond are of the opinion that, except as
described below, there are no substantial differences relating to the rights of
the holders of Diamond Common Stock and the holders of Ultrak Common Stock.
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<PAGE> 28
There are a number of significant differences between the applicable
corporate laws of the State of Ohio and the States of Colorado and Delaware.
Although no attempt has been made to summarize all differences in the corporate
laws of such states, management of Ultrak and Diamond believe the following to
be a fair summary of the significant differences in the corporate laws of those
states which would affect the Diamond Shareholders. As a result of the Merger
and the subsequent Reincorporation, Diamond Shareholders will be subject to
different rights as holders of capital stock of Ultrak, which is governed by the
laws of Colorado (and subsequently Delaware), than they have presently as
holders of Diamond Common Stock. The most significant of such changes are
outlined below and, along with several other less material changes, are
discussed in greater detail in the narrative below and under the caption
"ULTRAK'S REINCORPORATION IN DELAWARE."
<TABLE>
<CAPTION>
DELAWARE
OHIO (DIAMOND) COLORADO (ULTRAK) (ULTRAK-DELAWARE)
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
Dissenters' Rights......... Yes. Yes. Only in limited
circumstances.
Special Requirements for
Business Combinations.... Yes (both statutory No. Yes (statutory).
and under charter
documents).
Amendment of Governing
Documents................ Affirmative vote of Affirmative vote of a Affirmative vote of a
two-thirds of shares majority of shares majority of shares
entitled to vote. entitled to vote. entitled to vote.
</TABLE>
Authorized Shares. Under the Ultrak Charter, Ultrak is authorized to issue
20 million shares of Ultrak Common Stock and 2,000,000 shares of preferred
stock, $5.00 par value per share, of which 195,351 shares of Series A Preferred
Stock are currently issued and outstanding. The powers, preferences, and rights
of the Ultrak Common Stock and the Series A Preferred Stock are identical except
that holders of the Series A Preferred Stock are entitled to quarterly
preferential dividends and upon liquidation, dissolution, or winding up of
Ultrak, and the holders of the Series A Preferred Stock are entitled to receive
the original purchase price of $5.00 plus any unpaid dividends accruing to that
date. See "DESCRIPTION OF ULTRAK'S CAPITAL STOCK -- General."
Under the Diamond Charter, Diamond is authorized to issue 5,000,000 shares
of Diamond Common Stock and 100,000 shares of Preferred Stock, par value $100.00
per share. None of these shares of Preferred Stock of Diamond are presently
issued and outstanding.
Preemptive Rights. Under Colorado corporation law, shareholders of Ultrak
are permitted to have preemptive rights to purchase new shares unless prohibited
in the Certificate of Incorporation; the Ultrak Charter does not prohibit such
rights.
Under the ORC and Diamond's corporate documents, Diamond Shareholders have
no preemptive rights to purchase or subscribe for shares of any class of capital
stock of Diamond.
Amendment of Governing Documents. Under the CBCA, the affirmative vote of
two-thirds of the outstanding shares entitled to vote is required to amend a
corporation's bylaws or articles of incorporation, unless the charter or the
bylaws of a corporation provide for a lower percentage. Under Ultrak's charter
and bylaws, only a vote of a majority of the shares outstanding and entitled to
vote is required to amend either its bylaws or its articles of incorporation.
Under the ORC, a corporation's articles of incorporation may be amended by
the Board of Directors and by the affirmative vote of the holders of at least
two-thirds of the outstanding shares entitled to vote or, if the corporation's
articles of incorporation so provide, any other proportion not less than a
majority. The Diamond Charter does not specify a lesser vote to amend the
Diamond Charter, and a supermajority vote is required to amend the "fair price"
provisions of the Diamond Charter. See "-- Anti-Takeover Legislation." The
Diamond Regulations provide that they may be amended by the affirmative vote of
a majority of the shares
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<PAGE> 29
outstanding, except for amendments altering the shareholders' rights under the
"fair price" provisions of the Diamond Charter.
Dissolution. Under the CBCA, the Board of Directors of a corporation such
as Ultrak may adopt a resolution to dissolve the corporation, which must be
approved by a majority of the corporation's shareholders to become effective. As
a result of the Reincorporation, the shareholders, upon a unanimous vote, will
be empowered to cause the corporation to dissolve without the support of the
Board of Directors. See "ULTRAK'S REINCORPORATION IN DELAWARE -- Significant
Differences in Corporate Law of Colorado and Delaware -- Votes of Shareholders."
Under the ORC, a corporation may be dissolved by the vote of two-thirds of
the shares outstanding, unless a lesser percentage is permitted under the
charter documents. Diamond's charter does not provide for a lesser percentage to
approve a dissolution.
Anti-Takeover Legislation. Colorado does not have an anti-takeover statute
that attempts to prohibit a third party from effecting a takeover or a change in
control of Ultrak without the consent of the management and shareholders of
Ultrak. A significant change resulting from the Reincorporation is that
shareholders of Ultrak-Delaware will be protected by Delaware's anti-takeover
statute. See "ULTRAK'S REINCORPORATION IN DELAWARE -- Significant Differences in
Corporate Law of Colorado and Delaware -- Anti-Takeover Legislation."
Article VII of the Diamond Charter has a "fair price" provision that
restricts certain business combinations; however, such restrictions operate
differently than those under Delaware law. Diamond's "fair price" provision is
intended to provide reasonable assurances to shareholders that in the event any
shareholder or group of shareholders acquired 10% or more of the Diamond Common
Stock (an "Acquiror") and then seeks to acquire all or a part of the remaining
common stock through a merger or other transaction that would force a change or
termination of the other shareholders' ownership interests (a "Business
Combination"), such transaction must be approved (i) by the affirmative vote of
80% of all the votes entitled to be cast by all holders of Diamond Common Stock
and (ii) a majority of the votes entitled to be cast by all holders of Diamond
Common Stock held by shareholders other than the Acquiror, unless (i) the
Business Combination has been approved by two-thirds of Diamond's directors who
are unrelated to the Acquiror, (ii) the Business Combination is solely between
Diamond and a wholly-owned subsidiary, or (iii) the Acquiror complies with the
conditions of the "fair price" section of Article VII. The "fair price" section
of Article VII requires that, pursuant to a Business Combination, the
shareholders other than the Acquiror receive consideration at least equal to (i)
the highest per share price paid for its shares of Diamond Common Stock or (ii)
the fair market value of such shares as determined by the Board of Directors in
good faith. The Acquiror is also required to maintain a ratio of directors that
are independent from the Acquiror to the total number of Directors on the Board
of Directors, which is equal to or greater than the ratio of shares of Diamond
Common Stock held by persons not affiliated with the Acquiror to the total
number of shares of Diamond Common Stock outstanding.
Article VII of the Diamond Charter, which contains the "fair price"
provision, may be amended only by a vote of 80% of the votes entitled to be cast
by all holders of voting stock and a majority of the shareholders not affiliated
with the Acquiror.
Chapter 1704 of the ORC (the "Ohio Business Combination Statute") is
similar to the "fair price" provision contained in the Diamond Charter. The Ohio
Business Combination Statute prohibits an "issuing public corporation" from
engaging in a "Chapter 1704 Transaction" with an "interested shareholder" for a
period of three years following the date on which the person becomes an
interested shareholder unless, prior to such date, the directors of the issuing
public corporation approve either the Chapter 1704 Transaction or the
acquisition of shares pursuant to which such person became an interested
shareholder. After the initial three-year moratorium has expired, an issuing
public corporation may engage in a Chapter 1704 Transaction if (i) the
acquisition of shares pursuant to which the person became an interested
shareholder received the prior approval of the board of directors of the issuing
public corporation, (ii) the Chapter 1704 Transaction is approved by the
affirmative vote of the holders of shares representing at least two-thirds of
the voting power of the issuing public corporation and by the holders of at
least a majority of voting shares that are not beneficially owned by an
interested shareholder or an affiliate or associate of an interested
shareholder, or (iii) the
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Chapter 1704 Transaction meets certain statutory tests designed to ensure that
it be economically fair to all shareholders.
For purposes of the Ohio Business Combination Statute, an "issuing public
corporation" is any Ohio corporation with 50 or more shareholders that has its
principal place of business, principal executive offices or substantial assets
within the State of Ohio. Diamond currently is such an issuing public
corporation. An "interested shareholder" is any person who is the beneficial
owner of a sufficient number of shares to allow such person, directly or
indirectly, alone or with others, including affiliates and associates, to
exercise or direct the exercise of 10% of the voting power of the issuing public
corporation. A "Chapter 1704 Transaction" includes any merger, consolidation,
combination or majority share acquisition between or involving an issuing public
corporation and an interested shareholder or an affiliate or associate of an
interested shareholder. A Chapter 1704 Transaction also includes certain
transfers of property, dividends and issuance or transfers of shares, from or by
an issuing public corporation or a subsidiary of an issuing public corporation
to, with or for the benefit of an interested shareholder or an affiliate or
associate of an interested shareholder unless such transaction is in the
ordinary course of business of the issuing public corporation on terms no more
favorable to the interested shareholder than those acceptable to third parties
as demonstrated by contemporaneous transactions. Finally, Chapter 1704
Transactions include certain transactions which (i) increase the proportionate
share ownership of an interested shareholder, (ii) result in the adoption of a
plan or proposal for the dissolution, winding up of the affairs or liquidation
of the issuing public corporation if such plan is proposed by or on behalf of
the interested shareholder, or (iii) pledge or extend the credit or financial
resources of the issuing public corporation to or for the benefit of the
interested shareholder.
Special Meetings of Shareholders. Under the Ultrak Bylaws, a special
meeting of the shareholders of Ultrak may be called by the President, by order
of the Board of Directors, upon the written request of the holders of at least
10% of the outstanding shares of Ultrak Common Stock entitled to vote at such
meeting, or by legal counsel of Ultrak as last designated by resolution of the
Board of Directors.
Under the Diamond Regulations, special meetings of the Diamond Shareholders
may be called by the Chairman of the Board or by the Board of Directors, the
President, the Secretary, or by the holders of at least 25% of all shares
outstanding and entitled to vote.
Shareholder Nominations. The Ultrak Bylaws contain no restrictions on the
ability of shareholders to nominate persons for election as a director of
Ultrak. The Diamond Regulations contain no restrictions on the ability of
shareholders to nominate persons for election as a director of Diamond.
Shareholder Proposals. The Ultrak Bylaws contain no restrictions on the
ability of shareholders to make shareholder proposals. The Diamond Regulations
contain no restrictions on the ability of shareholders to make shareholder
proposals.
Board of Directors. Under the Ultrak Bylaws, the Board of Directors of
Ultrak consists of such number of directors as determined from time to time by
the Board of Directors, which cannot in any case be less than three. The Board
of Directors of Ultrak currently consists of five members, all of whom are
elected at each annual meeting of shareholders. Under the Ultrak Bylaws,
directors may be removed with or without cause at any time by the holders of a
majority of the outstanding Ultrak Common Stock entitled to vote. Under the
Diamond Regulations, the Board of Directors of Diamond consists of five
directors.
Under the Ultrak Bylaws, the presence of a majority of the total number of
directors currently comprising the Board of Directors is necessary to constitute
a quorum. Under the Diamond Regulations, a majority of the total number of
directors currently comprising the Board of Directors is necessary to constitute
a quorum.
Limitation on Personal Liability of Directors. Under Colorado law, there is
no express standard of conduct which can protect a director from liability nor
any express statute of limitations with respect to any illegal acts by a
director, and directors are not liable for illegal acts of the corporation if
they did not assent to or vote for such acts. Under the Ultrak Charter, no
director of Ultrak will be personally liable to Ultrak or its shareholders for
monetary damages for breach of fiduciary duty as a director, except in limited
circumstances.
The Diamond Charter does not address the personal responsibility of
directors of Diamond for breaches of their fiduciary duties.
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Indemnification of Directors and Officers. Under the Ultrak Charter, Ultrak
is required to indemnify, to the fullest extent permitted by the CBCA, any
person who is involved in any action, suit, or proceeding by reason of the fact
that the person is or was a director, officer, employee, or agent of Ultrak,
provided that such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the interests of Ultrak, and had no reason
to believe his conduct was unlawful. Ultrak may advance the reasonable expenses
to any such director, officer, employee, or agent of Ultrak provided that, in
the case of a director or officer of Ultrak, he or she delivers the undertaking
required by the CBCA. After the Reincorporation, Ultrak will have a much broader
right to indemnify its directors under Delaware law than it presently has under
Colorado law. See "ULTRAK'S REINCORPORATION IN DELAWARE -- Significant
Differences in Corporate Law of Colorado and Delaware -- Indemnification of
Directors and Officers."
The Diamond Regulations require that Diamond indemnify any officer or
director of Diamond, to the fullest extent permitted by the ORC, who is involved
in any action, suit, or proceeding by reason of the fact that the person is or
was a director, officer, employee, or agent of Diamond (or of another
corporation while serving at the request of Diamond). Diamond is required to
reimburse the expenses of any officer or director of Diamond who has been
successful on the merits or otherwise in defense of any action, suit, or
proceeding.
Dissenters Rights. Shareholders of Ultrak are entitled under Colorado
corporation law to receive payment for their shares if they dissent from certain
corporate actions, such as a reincorporation, consolidation, merger, or sale of
all or substantially all of Ultrak's assets. Any shareholder of Ultrak wishing
to dissent from such a transaction and obtain cash payment for his shares must
file with Ultrak, prior to the vote on such transaction, a written notice of his
intention to demand that he be paid fair compensation for his shares if the
transaction is effectuated and must refrain from voting his shares in approval
of such transaction. A shareholder who fails to demand payment or fails to
deposit his certificate for payment within 30 days of mailing of such notice by
Ultrak will have no right to receive payment for his shares but will retain all
other rights of a shareholder of Ultrak.
Subject to certain conditions contained in the ORC, holders of Diamond
Common Stock who do not vote their shares in favor of a merger or consolidation
are eligible to make a written demand on Diamond for payment of the fair cash
value of such shares within ten days after the meeting at which the proposal for
Diamond to engage in a merger or consolidation is considered. A shareholder
seeking to assert appraisal rights under Ohio law must deliver a written demand
for payment to him of the fair cash value of his shares of stock, stating in
such notice the amount claimed by him as the fair cash value for such shares.
Failure to execute and return a proxy does not perfect dissenters' rights. In
addition, if a shareholder of an Ohio corporation votes in favor of such a
proposal, then such shareholder will be deemed to have waived his dissenters'
rights. Also, if a shareholder returns a signed proxy card but does not specify
a vote, the proxy will be voted in favor of the proposal, which will have the
effect of waiving the shareholder's dissenters' rights.
After the Reincorporation, the shareholders of Ultrak, including Diamond
Shareholders that receive Ultrak Common Stock pursuant to the Merger, will have
more limited dissenters' rights than are presently available under either
Colorado or Ohio corporate law. See "ULTRAK'S REINCORPORATION IN
DELAWARE -- Significant Differences in Corporate Law of Colorado and
Delaware -- Rights of Dissenting Shareholders."
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ULTRAK'S REINCORPORATION IN DELAWARE
GENERAL
On March 10, 1995, the Board of Directors of Ultrak at a special meeting
approved a proposal to change Ultrak's state of incorporation to Delaware
effective as of December 29, 1995, and to submit such proposal to Ultrak's
shareholders. At Ultrak's May 1995 Annual Meeting, the shareholders of Ultrak
approved the proposal to change the state of incorporation of Ultrak from
Colorado to Delaware. This change will be accomplished by merging Ultrak into
Ultrak, Inc., a Delaware corporation (herein referred to as "Ultrak-Delaware" or
the "Surviving Corporation"), which is a wholly-owned Delaware subsidiary of
Ultrak formed solely for that purpose.
The merger of Ultrak into Ultrak-Delaware (the "Reincorporation") will be
effected pursuant to the Plan and Agreement of Merger (the "Reincorporation
Agreement") between Ultrak and Ultrak-Delaware attached hereto as Annex G. The
Reincorporation Agreement provides that, when the Reincorporation becomes
effective, Ultrak-Delaware will continue as the Surviving Corporation under the
name "Ultrak, Inc." The Reincorporation Agreement also provides that Ultrak and
Ultrak Delaware may terminate the Reincorporation Agreement upon mutual written
consent. Because Ultrak's Board of Directors is the same as Ultrak-Delaware's
Board of Directors, the Board of Directors effectively has the right to
terminate the Reincorporation Agreement and abandon the Reincorporation for any
reason whatsoever notwithstanding shareholder approval.
The summary of the Reincorporation contained herein accurately describes
the material effect of the Reincorporation on shareholders of Ultrak. For a
complete description of the terms of the Reorganization, shareholders of Ultrak
should refer to the Reincorporation Agreement.
Pursuant to the Reincorporation Agreement, the Board of Directors of Ultrak
will become the Board of Directors of the Surviving Corporation. The management
of Ultrak will continue as the management of the Surviving Corporation. The
Reincorporation will not involve any change in the business or properties of
Ultrak. The Surviving Corporation will succeed to all the assets and be
responsible for all the liabilities of Ultrak, including obligations under
Ultrak's 1988 Nonqualified Stock Option Plan. Although the purposes of the
Surviving Corporation set forth in its Certificate of Incorporation will permit
it in the future to enter into any lawful business activity, no change in the
present business of Ultrak is now contemplated, except as new developments and
opportunities may occur.
There are certain differences between the Certificate of Incorporation and
the By-Laws of Ultrak and the Surviving Corporation, as well as differences in
the corporate law of the States of Colorado and Delaware, which will affect
Ultrak and its shareholders. See "-- Significant Differences in Corporate Law of
Colorado and Delaware" and "-- Certificate of Incorporation and By-Laws."
The Surviving Corporation is authorized to issue 20,000,000 shares of
common stock, $0.01 par value, and 2,000,000 shares of Preferred Stock, $5.00
par value, including 195,351 shares of Series A Preferred Stock. See
"-- Certificate of Incorporation and By-Laws." Upon the Reincorporation becoming
effective, Ultrak's shareholders will become shareholders of the Surviving
Corporation, and each outstanding share of Ultrak Common Stock will become one
share of Common Stock of the Surviving Corporation and each outstanding share of
Series A Preferred Stock of Ultrak will become one share of Series A Preferred
Stock of the Surviving Corporation. The Common Stock of the Surviving
Corporation will have the same relative rights, preferences, privileges and
restrictions as the Ultrak Common Stock. The Series A Preferred Stock of the
Surviving Corporation will have the same relative rights, preferences,
privileges and restrictions as Ultrak's Series A Preferred Stock. The
Reincorporation will not cause any change in the qualification of Ultrak Common
Stock on Nasdaq. It will not be necessary for holders of Ultrak Common Stock to
exchange their existing certificates for new certificates representing Common
Stock of the Surviving Corporation. It is anticipated that delivery of the
present stock certificates of Ultrak will constitute "good delivery" for
transactions in shares of Common Stock of the Surviving Corporation after the
effective date of the Reincorporation.
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In connection with the Reincorporation, the authorized shares of Ultrak
Common Stock will be converted into shares of the Surviving Corporation's
authorized Common Stock, $0.01 par value.
Ultrak has reserved the right to abandon the Reincorporation if
circumstances arise which in the opinion of the Board of Directors make it
inadvisable to proceed.
REASONS FOR REINCORPORATION
The Board of Directors of Ultrak believes that the best interests of Ultrak
and its shareholders will be served by reincorporating in Delaware in order to
have the benefits afforded by a more flexible corporation law. Delaware has a
well-established policy of continuously reviewing and updating its corporate
laws. Consistent with this policy, the corporate laws of Delaware are frequently
revised and Delaware currently has a flexible and modern statute governing the
conduct of corporate affairs.
Thousands of corporations, including a great many of the larger
corporations in this country, are now incorporated in Delaware. The number of
corporations maintaining their domicile in Delaware over the years has resulted
in a judiciary particularly familiar with many phases of corporate matters and a
substantial body of decisions construing its laws and establishing public policy
affecting its corporations. Based on the well developed and predictable nature
of the Delaware corporate law, management believes that the ongoing operations
and business of Ultrak can be carried on to better advantage if Ultrak is
incorporated under the laws of Delaware. See "-- Significant Differences in
Corporate Law of Colorado and Delaware."
Delaware has in effect an anti-takeover statute that would, following the
Reincorporation, make it difficult for a potential acquirer to effect a takeover
or change in control of Ultrak without management's consent and the consent of
Ultrak's shareholders. Accordingly, the Reincorporation will have the effect of
making it more difficult to remove the existing management of Ultrak. Colorado
does not have a comparable statute. Management is unaware of any person
accumulating Ultrak's voting securities or seeking to take control of Ultrak,
but believes that reincorporation in Delaware is still desirable for the reasons
described above, notwithstanding the anti-takeover effect of the
Reincorporation. Since current management beneficially owns approximately 28% of
the Ultrak Common Stock and 100% of the Series A Preferred Stock, representing
approximately 52% of the votes in matters to be voted upon by the shareholders
of Ultrak, the reincorporation will not have a practical effect on the
likelihood of success of an unfriendly attempt to effect a takeover or change in
control of Ultrak.
BOARD OF DIRECTORS
The Reincorporation Agreement provides that upon the effective date of the
Reincorporation, the Board of Directors of the Surviving Corporation shall be
composed of those members of the Board of Directors of Ultrak who are elected at
the meeting.
CERTIFICATE OF INCORPORATION AND BY-LAWS
The Reincorporation Agreement provides that the Certificate of
Incorporation and the By-Laws of Ultrak-Delaware will be the Certificate of
Incorporation and the By-Laws of the Surviving Corporation. The Certificate of
Incorporation and By-Laws of Ultrak and the Certificate of Incorporation and
By-Laws of the Surviving Corporation are substantially similar; however, some
differences do exist. Among other things, the By-Laws of the Surviving
Corporation contain indemnification provisions, whereas the By-Laws of Ultrak do
not address indemnification (although the Certificate of Incorporation of each
addresses indemnification), and the By-Laws of the Surviving Corporation do not
have certain provisions contained in the By-Laws of Ultrak restricting the
officers of Ultrak from entering into certain contracts and incurring certain
indebtedness without board of director approval. See "-- Significant Differences
in Corporate Law of Colorado and Delaware -- Indemnification of Directors and
Officers." The Certificate of Incorporation and By-Laws of the Surviving
Corporation are attached hereto as Annexes H and I, respectively.
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SIGNIFICANT DIFFERENCES IN CORPORATE LAW OF COLORADO AND DELAWARE
Management is of the opinion that, except as described below (for example,
written consents of shareholders, appraisal rights of dissenting shareholders,
required vote of shareholders needed to take certain actions, anti-takeover
legislation, etc.), there are no substantial differences relating to the rights
of shareholders between the Certificate of Incorporation and By-Laws of Ultrak
and those of the Surviving Corporation.
There are a number of significant differences between the applicable
corporate laws of the States of Colorado and Delaware. Although no attempt has
been made to summarize all differences in the corporate laws of such states,
management believes the following to be a fair summary of the significant
differences in the corporate laws of the States of Colorado and Delaware which
could affect Ultrak's shareholders:
Preemptive Rights. Under Colorado corporation law, shareholders of Ultrak
are permitted to have preemptive rights to purchase new shares unless prohibited
in the Certificate of Incorporation; the Ultrak Charter does prohibit such
rights. Under Delaware corporation law, shareholders do not have such preemptive
rights unless there is a specific provision granting such rights in the
Certificate of Incorporation. The Certificate of Incorporation of the Surviving
Corporation will not contain such a provision. Accordingly, the Reincorporation
will not have a practical impact on shareholders as regards preemptive rights.
Management of Ultrak believes that not providing for mandatory preemptive rights
in the Certificate of Incorporation of the Surviving Corporation is desirable to
afford greater flexibility in possible future financings. Although the Board has
no present plans for any financing which would give rise to preemptive rights,
satisfaction of such rights would represent an undesirable impediment to the use
of such financings.
Examination of Books and Records. Under Colorado corporation law, a person
must have been a shareholder for at least three months, or be the holder of
record of at least five percent of all outstanding shares of any class of stock
of a corporation in order to examine certain records of the corporation,
including the minutes of meetings of the board of directors and board
committees, accounting records, and shareholder records. Under Delaware
corporation law, any shareholder with a proper purpose may demand inspection of
the records of the corporation.
Dividends. Under Delaware corporation law, a corporation may pay dividends
to its shareholders either out of surplus (net assets in excess of stated
capital), or in case there is no surplus, out of net profits for the then
current fiscal year and the preceding fiscal year, with certain limitations.
Under Colorado corporation law, dividends may be paid out of net assets
available after providing for satisfaction of preferential rights of
shareholders whose preferential rights are superior to those receiving the
dividend.
Votes of Shareholders. Colorado corporation law provides that because
Ultrak was in existence prior to June 30, 1994, unless the Certificate of
Incorporation provides otherwise, the vote of two-thirds of all outstanding
shares entitled to vote is required to amend the corporate charter, to dissolve
a corporation, to effect a reincorporation or consolidation, or to sell, lease
or exchange all or substantially all of the corporation's assets. The Ultrak
Charter permits such actions to be taken upon vote of a majority of the
outstanding shares entitled to vote. Under Delaware corporation law and the
Certificate of Incorporation of Ultrak-Delaware, the vote of a majority of the
outstanding stock entitled to vote is required to amend the corporate charter,
to dissolve a corporation, to effect a reincorporation or consolidation, or to
sell, lease, or exchange all or substantially all of the corporation's assets.
Under both Colorado and Delaware law, action by the Board of Directors, as well
as the shareholders, is required to amend the corporate charter, to effect a
reincorporation or consolidation, or to sell, lease, or exchange its assets.
Accordingly, the Reincorporation will not have a practical impact on
shareholders as regards the vote necessary to approve significant corporate
transactions.
Cumulative Voting. Delaware corporation law permits a corporation to
provide cumulative voting by including a provision to that effect in its
Certificate of Incorporation. The Certificate of Incorporation of the Surviving
Corporation will not have a provision permitting cumulative voting. Under
Colorado corporation law, shareholders have cumulative voting unless prohibited
in the Certificate of Incorporation. The Ultrak Charter currently so prohibits
cumulative voting; accordingly, the Reincorporation will not have a practical
impact on such rights of shareholders.
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Action by Written Consent Without a Meeting. Under Colorado corporation
law, shareholders may take action without meetings by unanimous written consent
of the shareholders entitled to vote. Under Delaware corporation law,
shareholders may take action without meetings by written consent signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Since Mr. Broady
will own in the aggregate more than a majority of the votes represented by the
Surviving Corporation's Common Stock and Series A Preferred Stock, he will have
the power to act by written consent to authorize any action which requires
shareholder approval, without the vote of any other shareholders.
Anti-Takeover Legislation. Delaware has enacted a statute which prevents a
"business combination" between an "interested shareholder" and a Delaware
corporation for a period of three years after such shareholder became an
interested shareholder, unless certain conditions are met. Colorado corporation
law does not contain a parallel provision. The Delaware statute defines a
business combination as any reincorporation or consolidation, any sale, lease,
exchange, or other disposition of 10% or more of a corporation's assets, or any
transaction (subject to certain exceptions) which results in the transfer of
stock of a corporation to the interested shareholder, increases his
proportionate ownership of a corporation's stock, or results in such interested
shareholder receiving the benefit of any loans, advances, guarantees, pledges,
or other financial benefits provided by or through the corporation. The Delaware
statute defines an interested shareholder as (subject to certain exceptions) any
person who is the owner of 15 percent or more of the outstanding voting stock of
the corporation or a person who is an affiliate or associate of the corporation
who became the owner of 15 percent or more of the outstanding voting stock of
the corporation within the three-year period prior to the date on which it is
sought to determine whether such shareholder is interested. A business
combination is exempt from the effect of the statute if, among other things,
either (i) prior to the date the shareholder became interested, the board of
directors approved either the business combination or the transaction that
resulted in the shareholder becoming interested, (ii) upon consummation of the
transaction that resulted in the shareholder becoming interested, such
shareholder owned at least 85 percent of the corporation's voting stock at the
time the transaction commenced, or (iii) on or after the date the shareholder
becomes interested, the business combination is approved by the board of
directors and authorized at an annual or special meeting of shareholders by the
affirmative vote of at least two-thirds of the outstanding voting stock not
owned by the interested shareholder.
The anti-takeover statute provides that the Certificate of Incorporation of
a Delaware corporation may provide that the corporation expressly elects not to
be governed by the statute. The Certificate of Incorporation of the Surviving
Corporation does not include such a provision.
The effect of the Reincorporation, and thereby subjecting Ultrak to the
anti-takeover statute, will make it more difficult for a person who seeks to
acquire control of Ultrak or to effect a business combination with Ultrak, such
as a tender offer, to do so without management's approval, thereby making it
more difficult to remove existing management of Ultrak. The Delaware statute
could, therefore, potentially have an adverse impact on shareholders who wish to
participate in any such tender offer or other transactions even where such
transaction may be favorable to the interests of shareholders.
The Reincorporation could have the effect of discouraging hostile tender
offers, proxy contests, or other transactions by forcing potential acquirors to
negotiate with incumbent management. The disadvantages to shareholders of the
Reincorporation in Delaware include reducing the likelihood that a hostile
tender offering a premium over market price for Ultrak's shares will be made.
The Reincorporation will have a practical effect on shareholders by making it
more difficult to remove existing management without such management's approval.
Indemnification of Directors and Officers. A significant effect of the
Reincorporation will be to broaden the indemnification protection given to
directors and officers. Delaware permits corporations to adopt much broader
rights of indemnification for management than is available under the CBCA. In
recent years, many corporations have found it increasingly difficult to attract
and retain qualified directors and senior management, due to the increased risks
of lawsuits and related liability. At the same time, it has become increasingly
difficult, and expensive, to obtain insurance protecting directors and officers
from such liabilities. As a result,
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many corporations are utilizing expanded rights of indemnification as a means to
attract, retain and protect directors and senior management. In the past, Ultrak
has encountered some difficulty in attracting and retaining qualified directors
because of Colorado's indemnification law. One current director expressed his
concern about Colorado's indemnification law before agreeing to serve as a
director. The Surviving Corporation has no present intention of entering into
separate indemnification agreements with management, but may do so in the
future.
Delaware law makes indemnification available to directors, officers,
employees, and agents of a corporation, whereas Colorado law provides
indemnification only to directors (and officers who are not directors, in
certain cases) of a corporation, although a Colorado corporation may indemnify
officers, employees, or agents of the corporation who are not directors if
provided for by its articles of incorporation, by-laws, a resolution of its
shareholders or directors, or in a contract. In addition, whereas Colorado's
indemnification provisions limit indemnification rights contained in the
articles of incorporation, by-laws, resolutions, or contracts to such rights as
are consistent with Colorado law, Delaware permits a corporation to provide by
agreement, by-law provision, vote of shareholders or disinterested directors or
otherwise, for indemnification of directors and officers not otherwise provided
by statute, which is a more permissive standard. Under Colorado law, expenses
can be advanced to a director, officer, or employee only upon, among other
things, a written affirmation of his good faith belief that he has met the
applicable standard of conduct for indemnification. Delaware law contains no
such requirements. Delaware law, unlike Colorado law, also expressly permits
indemnification and advancement of expenses to former officers, employees, or
agents of the corporation who were not directors. Colorado law requires that
shareholders be given notice of the payment of indemnification if such payment
arises out of a derivative suit. Delaware law contains no such requirement.
Colorado law limits indemnification in derivative suits to expenses only,
whereas the By-Laws of Ultrak-Delaware, as permitted by Delaware law, provide
indemnification in derivative suits for fines, judgments, and amounts paid in
settlement. Under Colorado law, a director who is adjudged liable to the
corporation for deriving an improper personal benefit can only be reimbursed for
expenses and only upon determination of a court that indemnification is proper
in Delaware. Such a director would also be indemnified for fines, judgments, and
amounts paid in settlement and a court determination is not necessary.
The Certificate of Incorporation and By-Laws of Ultrak-Delaware, like the
Ultrak Charter, contain broad indemnification provisions which (i) obligate
Ultrak-Delaware to indemnify any of its officers, directors, employees, or
agents for all expenses (including legal fees) and liabilities (including fines,
judgments, and amounts paid in settlement) incurred in connection with any
pending or completed suit, action, or proceeding, including derivative suits;
provided, however, that such person is entitled to indemnification only if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of Ultrak-Delaware and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful; (ii) provides for indemnification rights for as long as any such
person shall be subject to any possible claim or threatened suit or proceeding
by reason of the fact that such person was or is a director, officer, employee,
or agent of Ultrak-Delaware; (iii) requires Ultrak-Delaware to advance expenses
to any person entitled to indemnification provided that such person undertakes
to repay the amount advanced if it is ultimately determined that he is not
entitled to indemnification; (iv) provides for the determination of whether
indemnification is proper because the requisite standard of conduct has been met
to be made by a majority vote of a quorum of directors who were not parties to
such action, suit, or proceeding, or by independent legal counsel or by the
shareholders of Ultrak-Delaware; and (v) provides that such charter and by-law
provisions shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may legally be entitled.
Differences include, the Ultrak Charter requires the unanimous vote of each
class of shares entitled to vote to amend the indemnification provision of the
Ultrak Charter, while the Certificate of Incorporation of Ultrak-Delaware
provides that a written request for indemnification should be responded to
within 60 days. No such provision exists in the Ultrak Charter.
To the knowledge of management of Ultrak, no actions are pending or
threatened which would affect in any way the rights of any person entitled to
indemnification, whether under Colorado or Delaware law.
Dissolution. Under Colorado corporation law and the Ultrak Charter, Ultrak
can voluntarily dissolve upon its board of directors adopting a resolution
setting forth a proposal to dissolve which proposal is approved
30
<PAGE> 37
by a majority of the shareholders entitled to vote thereon. Under Delaware law,
a corporation can voluntarily dissolve if its board of directors and a majority
of the shareholders entitled to vote thereon approve the dissolution, or without
approval of the board of directors if all the shareholders entitled to vote
approve the dissolution.
Liability of Directors. Under Delaware law, directors are jointly and
severally liable to a corporation for willful or negligent violations of
statutory provisions relating to the purchase or redemption of a corporation's
own shares or the payment of dividends, for a period of six years from the date
of such unlawful act. A director who was either absent or dissented from the
taking of such action may exonerate himself from liability by causing his
dissent to be entered in the corporation's minutes. Under Colorado law,
directors are jointly and severally liable to the corporation if they vote for
or assent to acts which violate statutory provisions relating to the purchase of
a corporation's own shares, the payment of dividends, the distribution of assets
in liquidation, or any loans or guarantees made to a director, until the
repayment thereof. Under Colorado law, there is no express standard of conduct
which can protect a director from liability nor any express statute of
limitations with respect to any such illegal acts by a director, as there are
under Delaware law, and directors are not liable as long as they did not vote
for or assent to any of the illegal acts. Colorado law, unlike Delaware law,
allows a director who was present at a meeting which approved an illegal act to
avoid liability, even if he does not register his dissent in the minutes of the
meeting by voting against the illegal act.
Rights of Dissenting Shareholders. Shareholders of Ultrak are presently
entitled under Colorado corporation law to receive payment for their shares if
they dissent from certain corporate actions, such as reincorporations,
consolidations or sales of all or substantially all of Ultrak's assets. Under
Delaware corporation law, there is no such right to receive payment in a sale of
assets, and there is no such right to receive payment in a reincorporation or
consolidation if the common stock of the surviving corporation in the
reincorporation or consolidation is listed on a national securities exchange or
is held of record by 2,000 or more persons and the only consideration received
by the shareholders in the reincorporation or consolidation is stock of the
corporation resulting from the reincorporation or consolidation or stock of a
listed company with 2,000 or more shareholders, and cash in lieu of fractional
shares.
EFFECTIVE DATE OF THE REINCORPORATION
Subject to the satisfaction of the conditions of the Reincorporation, it is
contemplated that the Reincorporation will be made effective as of December 29,
1995. The Board of Directors chose this date in order to simplify the transfer
of Ultrak's books and records, and to correspond with the end of Ultrak's fiscal
year.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax law, Ultrak, Ultrak-Delaware, the
shareholders of Ultrak who did not exercise their rights as shareholders
dissenting from the Reincorporation pursuant to Section 7-113-102 of the CBCA,
and the Diamond Shareholders who own Ultrak Common Stock after the Merger (since
they are not entitled to such dissenters' rights) will not, by reason of the
Reincorporation, realize any gain or loss which will be recognized for federal
income tax purposes. With respect to each dissenting shareholder's shares of
Ultrak Common Stock, immediately after the Reincorporation, (i) the tax basis of
such shares will equal the tax basis of such shareholder's shares immediately
before the Reincorporation and (ii) the holding period for such shares will
include the shareholder's holding period for the shares before the
Reincorporation. Any gain or loss realized by shareholders of Ultrak, who
exercise their rights to appraisal, will be recognized for federal income tax
purposes. Generally, such recognized gain or loss will be equal to the
difference between a shareholder's tax basis in his shares and the amount he
receives for his shares. However, if a dissenting shareholder continues to own
an interest in Ultrak-Delaware, directly or indirectly, after the
Reincorporation then the amount received upon exercise of appraisal rights might
be taxed as a dividend.
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<PAGE> 38
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
assume the Merger is accounted for as a purchase. See "MERGER -- Terms of the
Merger and Accounting Treatment." The unaudited pro forma condensed combined
financial statements are based on the respective historical financial statements
and the notes thereto of Ultrak and Diamond, included elsewhere herein. The
unaudited pro forma condensed combined balance sheets combine Ultrak's December
31, 1994 consolidated balance sheet with Diamond's January 1, 1995 consolidated
balance sheet and Ultrak's March 31, 1995 consolidated balance sheet with
Diamond's March 31, 1995 consolidated balance sheet. The unaudited pro forma
condensed combined statements of income combine Ultrak's consolidated statement
of income for the fiscal year ended December 31, 1994 with the corresponding
Diamond consolidated statements of operations for the fifty-two weeks ended
January 1, 1995 and Ultrak's consolidated statement of income for the three
months ended March 31, 1995 with Diamond's consolidated statement of operations
for the three months ended March 31, 1995. The amounts included as Diamond
historical amounts have been reclassified to conform to classifications used by
Ultrak.
The unaudited pro forma combined information is presented for illustrative
purposes only and is not necessarily indicative of the operating results that
would have occurred if the business combination had been consummated at the
beginning of the periods presented, nor is it necessarily indicative of future
operating results or financial position.
These unaudited pro forma combined financial statements should be read in
conjunction with the historical financial statements and the related notes
thereto of Ultrak and Diamond included elsewhere herein.
32
<PAGE> 39
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
ULTRAK DIAMOND
DECEMBER 31, JANUARY 1, PRO FORMA PRO FORMA
1994 1995 ADJUSTMENTS COMBINED
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales.................................... $ 78,793,711 $11,774,691 $ 0 $90,568,402
Cost of Sales............................ 59,349,708 8,009,468 0 67,359,176
------------ ----------- ----------- -----------
Gross Profit............................. 19,444,003 3,765,223 0 23,209,226
------------ ----------- ----------- -----------
Total Operating Expenses................. 14,334,316 3,197,244 39,651(1) 17,571,211
------------ ----------- ----------- -----------
Operating Income......................... 5,109,687 567,979 (39,651) 5,638,015
------------ ----------- ----------- -----------
Total Other (Income) Expense............. 807,155 28,817 0 835,972
------------ ----------- ----------- -----------
Net Income Before Taxes From Continuing
Operations............................. 4,302,532 539,162 (39,651) 4,802,043
Income Taxes............................. 1,513,020 213,521 (15,464)(2) 1,711,077
------------ ----------- ----------- -----------
Net Income After Taxes From Continuing
Operations............................. 2,789,512 325,641 (24,187) 3,090,966
Dividend Requirements on Preferred
Stock.................................. (117,210) 0 0 (117,210)
------------ ----------- ----------- -----------
Net Income From Continuing Operations
Allocable to Common Stockholders....... $ 2,672,302 $ 325,641 $ (24,187) $ 2,973,751
========== ========== ========= ==========
Primary Net Income per Share............. $ .39 -- 0 $ .40
========== ==========
Fully Diluted Net Income per Share....... $ .39 -- 0 $ .39
========== ==========
Primary Weighted Average Shares
Outstanding............................ 6,818,999 0 700,000 7,518,999
Fully Diluted Weighted Average Shares
Outstanding............................ 7,236,985 0 700,000 7,936,985
</TABLE>
- ---------------
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(1) Adjustment to depreciate property and equipment written up to its fair value
over 30 years ($8,133) and to amortize goodwill over 25 years ($31,518).
(2) The tax effect of pro forma adjustments to earnings before taxes is based on
the estimated federal and state statutory tax rate.
33
<PAGE> 40
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
ULTRAK DIAMOND
MARCH 31, MARCH 31, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Sales...................................... $21,829,162 $2,959,586 $ $24,788,748
Cost of Sales.............................. 16,507,084 2,017,935 18,525,019
----------- ---------- ----------- -----------
Gross Profit............................... 5,322,078 941,651 6,263,729
----------- ---------- ----------- -----------
Total Operating Expenses................... 3,713,412 751,162 8,647(1) 4,473,221
----------- ---------- ----------- -----------
Operating Income........................... 1,608,666 190,489 (8,647) 1,790,508
----------- ---------- ----------- -----------
Total Other (Income) Expense............... 377,274 51,386 428,660
----------- ---------- ----------- -----------
Net Income Before Taxes From Continuing
Operations............................... 1,231,392 139,103 (8,647) 1,361,848
Income Taxes............................... 449,459 53,780 (3,372)(2) 499,867
----------- ---------- ----------- -----------
Net Income After Taxes From Continuing
Operations............................... 781,933 85,323 (5,275) 861,981
Dividend Requirements on Preferred Stock... (29,302) 0 0 (29,302)
----------- ---------- ----------- -----------
Net Income From Continuing Operations
Allocable to Common Stockholders......... $ 752,631 $ 85,323 $ (5,275) $ 832,679
========== ========= ========= ==========
Primary Net Income Per Share............... $ .11 -- $ .11
========== ==========
Fully Diluted Net Income Per Share......... $ .11 -- $ .11
========== ==========
Primary Weighted Average Shares
Outstanding.............................. 6,821,027 -- 700,000 7,521,027
Fully Diluted Weighted Average Shares
Outstanding.............................. 7,245,063 -- 700,000 7,945,063
</TABLE>
- ---------------
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(1) Adjustment to depreciate property and equipment written up to its fair value
over 30 years ($2,033) and to amortize goodwill over 25 years ($6,614).
(2) The tax effect of pro forma adjustments to earnings before taxes is based on
the estimated federal and state statutory tax rate.
34
<PAGE> 41
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF DECEMBER 31, 1994
ASSETS
<TABLE>
<CAPTION>
ULTRAK DIAMOND
DECEMBER 31, JANUARY 1, PRO FORMA PRO FORMA
1994 1995 ADJUSTMENTS COMBINED
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash.............................. $ 642,241 $ 30,549 $ 0 $ 672,790
Accounts Receivable, net.......... 10,743,091 2,203,670 0 12,946,761
Notes Receivable.................. 253,771 0 0 253,771
Prepaids and Other Current
Assets......................... 541,686 348,619 0 890,305
Inventories, net.................. 14,396,438 2,370,557 0 16,766,995
Advances for Inventory............ 5,381,437 0 0 5,381,437
------------ ---------- ----------- -----------
Total current assets........... 31,958,664 4,953,395 0 36,912,059
------------ ---------- ----------- -----------
Property and Equipment, Net......... 1,971,393 1,763,920 400,000(1) 4,135,313
Notes Receivable, Noncurrent........ 984,208 0 0 984,208
Other Assets:
Goodwill, net..................... 1,259,969 0 787,953(2) 1,891,922
Other Assets...................... 178,456 49,373 0 227,829
------------ ---------- ----------- -----------
Total other assets............. 1,438,425 49,373 787,953 2,275,751
------------ ---------- ----------- -----------
Total Assets.............. $ 36,352,690 $6,766,688 $ 1,187,953 $44,307,331
========== ========= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade Accounts Payable............ $ 6,531,779 $ 875,852 $ 0 $ 7,407,631
Notes Payable..................... 18,244,183 1,167,162 0 19,411,345
Current Portion of Long Term
Debt........................... 0 105,960 0 105,960
Accrued Liabilities............... 664,740 501,915 0 1,166,655
Other Current Liabilities......... 841,600 13,204 0 854,804
------------ ---------- ----------- -----------
Total current liabilities...... 26,282,302 2,664,093 0 28,946,395
------------ ---------- ----------- -----------
Long Term Liabilities............... 0 884,548 156,000(3) 1,040,548
Stockholders' Equity:
Preferred Stock................... 976,755 0 976,755
Common Stock...................... 73,254 3,189,084 (3,189,084)(4) 115,254
42,000(5)
Additional Paid in Capital........ 7,213,747 120,000 (120,000)(4) 11,421,747
4,208,000(5)
Retained Earnings................. 1,806,632 (91,037) 91,037(4) 1,806,632
------------ ---------- ----------- -----------
Total stockholders' equity..... 10,070,388 3,218,047 1,031,953(4) 14,320,388
------------ ---------- ----------- -----------
Total Liabilities and
Stockholders' Equity.... $ 36,352,690 $6,766,688 $ 1,187,953 $44,307,331
========== ========= =========== ==========
</TABLE>
- ---------------
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS:
(1) To reflect Diamond's building and land at appraised values.
(2) To reflect the excess of cost over identifiable assets less liabilities.
(3) To reflect a deferred income tax liability for the increase in the carrying
value of Diamond's building and land.
(4) To eliminate the historical equity of Diamond.
(5) To reflect the issuance of 600,000 shares of Ultrak Common Stock.
35
<PAGE> 42
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
AS OF MARCH 31, 1995
ASSETS
<TABLE>
<CAPTION>
ULTRAK DIAMOND
MARCH 31, MARCH 31, PRO FORMA PRO FORMA
1995 1995 ADJUSTMENTS COMBINED
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Current Assets:
Cash............................... $ 0 $ 33,791 $ $ 33,791
Accounts Receivable, net........... 11,157,231 1,687,672 12,844,903
Prepaids and Other Current
Assets.......................... 1,039,010 300,518 1,339,528
Inventories, net................... 15,545,294 2,714,360 18,259,654
Advances for Inventory............. 3,784,540 -- 3,784,540
----------- ---------- ----------- -----------
Total current assets............ 31,526,075 4,736,341 36,262,416
----------- ---------- ----------- -----------
Property and Equipment, Net.......... 2,034,403 1,775,338 400,000 (1) 4,209,741
Notes Receivable, Noncurrent......... 1,054,205 -- 1,054,205
Other Assets:
Goodwill, net...................... 1,339,819 -- 661,428 (2) 2,001,247
Other Assets....................... 157,930 45,873 203,803
----------- ---------- ----------- -----------
Total other assets.............. 1,497,749 45,873 661,428 2,205,050
----------- ---------- ----------- -----------
Total Assets............... $36,112,432 $6,557,552 $ 1,061,428 $43,731,412
========== ========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Trade Accounts Payable............. $ 5,946,711 $ 952,786 $ $ 6,899,497
Notes Payable...................... 17,882,187 782,409 18,664,596
Current Portion of Long Term
Debt............................ -- 105,960 105,960
Accrued Liabilities................ 567,314 211,425 778,739
Other Current Liabilities.......... 893,201 284,206 1,177,407
----------- ---------- ----------- -----------
Total current liabilities....... 25,289,413 2,336,786 27,626,199
----------- ---------- ----------- -----------
Long Term Liabilities................ -- 876,194 156,000 (3) 1,032,194
Stockholders' Equity:
Preferred Stock.................... 976,755 -- 976,755
Common Stock....................... 73,254 3,230,286 (3,230,286)(4) 115,254
42,000 (5)
Additional Paid in Capital......... 7,213,747 120,000 (120,000)(4) 11,421,747
4,208,000 (5)
Retained Earnings.................. 2,559,263 (5,714) 5,714 (4) 2,559,263
----------- ---------- ----------- -----------
Total stockholders' equity...... 10,823,019 3,344,572 905,428 15,073,019
----------- ---------- ----------- -----------
Total Liabilities and
Stockholders' Equity..... $36,112,432 $6,557,552 $ 1,061,428 $43,731,412
========== ========= ========== ==========
</TABLE>
- ---------------
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS:
(1) To reflect Diamond's building and land at appraised values.
(2) To reflect the excess of cost over identifiable assets less liabilities.
(3) To reflect a deferred income tax liability for the increase in the carrying
value of Diamond's building and land.
(4) To eliminate the historical equity of Diamond.
(5) To reflect the issuance of 600,000 shares of Ultrak Common Stock.
36
<PAGE> 43
BUSINESS OF ULTRAK
GENERAL
Ultrak designs, manufactures, markets, and services video CCTV products for
use in security applications, general observation, medical and dental equipment
and automated manufacturing systems. These products include a broad line of
cameras, lenses, monitors, switchers, time lapse recorders, multiplexers, and
wireless video transmission systems.
Prior to July 1993, Ultrak's Exxis Technologies, Inc. subsidiary marketed,
sold, and serviced personal computer products, including desktop and tower
computers, disk drives, CD-ROM drives, printers and monitors sold under its
private brand name [X] Smart Choice. Ultrak discontinued this business in July
1993. See "ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and Note I of Notes to Consolidated Financial
Statements.
Ultrak is a Colorado corporation incorporated in 1980. Ultrak's
headquarters are located at 1220 Champion Circle, Suite 100, Carrollton, Texas
75006. Ultrak conducts its principal business operations at five locations:
Carrollton (Dallas), Texas; Broomfield (Denver), Colorado; Annapolis, Maryland;
southern California and Chicago, Illinois and has additional sales offices in
New York, southern Florida, Boston, Atlanta, and Los Angeles.
RECENT DEVELOPMENTS
Effective April 1, 1994, Ultrak acquired a 56% interest in JAK Pacific
Video Warranty and Repair Services, Inc., a California corporation ("JAK"), for
total cash consideration of $573,000. JAK is in the business of providing
warranty and repair services for CCTV equipment for a line of products
manufactured by a Korean based company. JAK also has exclusive marketing and
sales rights for certain products in the United States. The operations of JAK
were merged with the existing operations of Ultrak's facility in southern
California. The transaction was accounted for as a purchase. Ultrak has an
option to acquire the remaining 44% of JAK for cash consideration of $500,000,
which will expire on December 31, 1995.
In July 1994, Ultrak exercised its option, in accordance with the terms of
an Option Agreement, to acquire an additional 2.2% of the outstanding stock of
Dental Vision Direct, Inc. ("DVD") from the minority shareholders of DVD,
thereby increasing Ultrak's ownership in DVD from 80% to 82.2%. DVD is in the
business of manufacturing, marketing, and selling an intraoral video hand piece
(sold under the Ultracam trade name) and related accessories used by dentists in
their practices. Effective December 30, 1994, Ultrak acquired the remaining
17.8% interest in DVD from the minority owners for total cash consideration of
$5,000.
On October 31, 1994, Ultrak's revolving line of credit with NationsBank was
increased from $12.0 million to $13.2 million. The NationsBank revolving line of
credit was further increased during February 1995 from $13.2 million to $15.0
million. On October 4, 1994, Petrus Fund, L.P., of which Perot Investments, Inc.
is the general partner, increased its revolving line of credit to Ultrak from
$6.0 million to $7.0 million and agreed to further increase Ultrak's line of
credit from $7.0 million to $8.0 million upon Ultrak's achievement of certain
net income requirements. In conjunction with the amendments to both loan
agreements, certain financial and operational covenants were modified. All other
terms and conditions of the loan agreements were unchanged.
On March 10, 1995, the Board of Directors of Ultrak approved a proposal to
change Ultrak's state of incorporation from Colorado to Delaware effective
December 29, 1995, and to submit such proposal to Ultrak's shareholders. At the
Annual Meeting of Shareholders of Ultrak held on May 25, 1995 (the "Annual
Meeting"), the shareholders of Ultrak approved the proposal to change the state
of incorporation of Ultrak from Colorado to Delaware. The change will be
accomplished by merging Ultrak into a wholly-owned subsidiary of Ultrak
incorporated in Delaware that was formed solely for the purpose of merging with
Ultrak. See "ULTRAK'S REINCORPORATION IN DELAWARE." NONE OF THE DIAMOND
SHAREHOLDERS RECEIVING SHARES OF ULTRAK COMMON STOCK PURSUANT TO THE MERGER WILL
BE ELIGIBLE TO VOTE FOR OR AGAINST THE REINCORPORATION. For a summary of certain
changes in the rights of the holders of shares of Ultrak Common Stock as a
result of the
37
<PAGE> 44
Reincorporation of Ultrak in Delaware, see "ULTRAK'S REINCORPORATION IN
DELAWARE -- Significant Differences in Corporate Law of Colorado and Delaware."
EARNINGS FOR QUARTER ENDED JUNE 30, 1995
Ultrak announced in a press release on June 23 that sales for second
quarter of 1995 will be higher than both the first quarter of 1995 and the
second quarter of 1994, but less than planned. Sales were lower than planned
because of a marked slowdown in the economy; in addition, retail customers
reduced inventory levels, also contributing to temporarily lower sales.
Ultrak expects that pre-tax earnings for the second quarter of 1995 will be
at least 35 percent lower than the first quarter of 1995. Four principal reasons
for the lower earnings are: 1) the lower sales as mentioned above, 2) lower
gross profit margins due to intensely competitive market conditions and Ultrak's
commitment to continue to gain market share, 3) higher interest expense on
borrowings, and 4) much higher expenditures on engineering, product development,
and marketing as budgeted.
PENDING ACQUISITION
On June 14, 1995, Ultrak executed a letter of intent to purchase GPS
Standard USA ("GPS") for 176,470 shares of Ultrak Common Stock. GPS manufactures
a line of surveillance camera housings, matrix switchers, pan/tilts and other
high-tech surveillance equipment. The transaction is subject to approval by the
Ultrak board of directors and execution of a definitive agreement.
CCTV PRODUCTS; INDUSTRY
Ultrak designs, manufactures, markets, and services video CCTV products for
use in security applications, general observation, medical and dental equipment,
and automated manufacturing systems. These products include a broad line of
cameras, lenses, monitors, switchers, time lapse recorders, multiplexers, and
wireless video transmission systems.
Ultrak's target markets are wholesale distributors, installing dealers,
large end-users, mass merchants (for resale), manufacturing companies, system
integrators, and dentists. Each target market is reached through a dedicated
group of telemarketing and regional sales professionals as well as through
catalogs, magazine advertising, and industry trade shows.
Approximately 70% of Ultrak's CCTV products sales carry its own brand names
(Ultrak, Exxis, [X] Smart Choice, Beck, Mobile Video Products, and Ultracam),
with the remainder having brands owned by others such as Mitsubishi, Sony,
Dedicated Micros, Panasonic, and others. Ultrak's own branded products are
manufactured to its design specifications by manufacturer suppliers located in
Korea, Japan, England, Hong Kong, Taiwan, China, and the United States.
According to a Smith Barney Shearson Electronic Security Industry Report,
dated January 25, 1994, by the year 2000, the CCTV industry is expected to be a
$755 million annual sales component of the expected $17 billion total U.S.
security industry. The CCTV segment of the security industry has experienced
rapid growth since the early 1980s. CCTV sales represent a significant portion
of the total security industry, trailing only intrusion detection devices and
fire detection apparatus in terms of sales. Included in the CCTV category are
CCTV cameras, lenses, monitors, switchers, time lapse recorders, multiplexers,
video transmission systems, and various types of peripheral equipment used for
CCTV installations. Ultrak's business is not generally seasonal in nature,
except that sales in December and January are typically 15-20% lower than other
months.
Ultrak believes that it is an important factor within the CCTV industry and
that it is one of the three largest in terms of CCTV sales in the United States.
However, many of its competitors are divisions of much larger companies.
Ultrak has trademark registration on its Ultrak, [X] Smart Choice, Beck,
Ultracam, the Witness, Video Butler, and BabyWatch trade names. In addition,
Ultrak has been issued a patent on its Ultracam intraoral hand piece and has
patents pending on a multiple operator dental system, the Witness, a security
observation system that records activity upon activation of an alarming input
signal, and several other devices.
38
<PAGE> 45
SUPPLIERS AND DISTRIBUTION
Ultrak's product development staff designs and then coordinates with its
non-affiliated suppliers to manufacture certain of its private branded products
as well as coordinates and supervises the assembly and packaging of certain
products by its own employees. Ultrak has been and will continue to be
substantially dependent upon its manufacturer suppliers. Ultrak has exclusive
and non-exclusive sales and marketing rights for certain of the CCTV products it
sells, including certain CCTV cameras and systems manufactured in Japan and
Korea. Ultrak has in the past experienced, and may in the future experience,
short-term difficulties in obtaining some products from some manufacturers. In
general, Ultrak's suppliers are constantly developing new products that advance
the state of technology in security products and offer improved value. Ultrak
has in the past issued letters of credit or placed funds on deposit with its
suppliers to attempt to insure itself a constant and consistent supply of
products.
Approximately 95% of Ultrak's purchases from its non-affiliated suppliers
are made in United States dollars with the remaining 5% purchased in Japanese
yen. To date, Ultrak has not been materially adversely affected by fluctuations
in the valuation of the Japanese yen. It is expected that the Company will
continue to purchase the vast majority of its products in United States dollars.
Ultrak believes that it has close relationships with its suppliers. In some
cases, Ultrak is the exclusive or semi-exclusive marketer of its suppliers'
products in the United States. Ultrak's trading agreements with its suppliers
are both written and oral. In most of these relationships, Ultrak believes that
the relationship is as important to the supplier as it is to Ultrak. Thus,
Ultrak believes that there is a strong, mutually advantageous basis for the
trading relationship to exist and grow.
Ultrak imports its private branded security products primarily from Korea,
Japan, England, Hong Kong, and Taiwan. Because of foreign production lead times,
Ultrak normally makes purchase commitments to these foreign suppliers three to
six months in advance. Products ordered by Ultrak and manufactured by others in
Asia are shipped to warehouses of Ultrak located in the United States for
subsequent delivery to customers of Ultrak.
Delivery times on these products to the United States vary from one week to
two months, depending on the mode of transportation used. Therefore, it is
necessary for Ultrak to commit to and carry larger levels of inventory than
would be necessary if it used strictly domestic suppliers.
The nature of Ultrak's business is to ship most orders within 24 hours of
receipt of the order. As of December 31, 1994 and 1993, Ultrak had approximately
$3,939,000 and $2,093,000, respectively, in backlog for its products which it
considers to be firm.
Ultrak can ship its CCTV products from one of five warehouse locations
operated by it: Carrollton, Texas; Broomfield, Colorado; Annapolis, Maryland;
southern California; or Chicago, Illinois. Currently over 90% of all shipments
are made from the Carrollton, Texas, centralized warehouse. Inventory, accounts
receivable, purchasing, payroll, and other corporate business functions are
controlled on Ultrak's integrated computer system located in its Carrollton
headquarters. All sales locations are linked real time through a nationwide
network which allows for orders to be entered and shipped from multiple
locations.
Approximately 21% of Ultrak's 1994 sales were to Walmart Stores, Inc. and
Sam's Wholesale Club, a division of Walmart Stores, Inc. No other single
customer accounted for more than 10% of total sales in 1994.
PROPERTY
Ultrak does not own any real property or own or operate any production
facilities. Ultrak or its subsidiaries lease office/warehouse space in
Carrollton, Texas; Broomfield, Colorado; Annapolis, Maryland; Boston,
Massachusetts; southern Florida; Atlanta, Georgia; Chicago, Illinois; and
southern California.
In January, 1994, Ultrak amended its existing lease covering approximately
69,000 square feet of office and warehouse space at its headquarters in
Carrollton, Texas. The amended lease extended the lease term until May 1999 and
provided a build out allowance of up to $75,000 to be used for office expansion
and
39
<PAGE> 46
compliance with the provisions of the Americans with Disabilities Act. Monthly
lease payments are approximately $19,600 per month.
Ultrak believes it has sufficient space to conduct its current and
anticipated future operations. Although Ultrak believes it could obtain
additional space if needed on short notice, there can be no assurance that such
space will be available at prices which Ultrak currently pays or could pay.
LEGAL PROCEEDINGS
Other than the following matter, Ultrak is not aware of any material
pending or threatened legal proceedings to which Ultrak is or may be a party.
Ultrak knows of no legal proceedings pending or threatened or judgments entered
against any director or officer of Ultrak in their capacity as such.
On July 9, 1993, a lawsuit against Ultrak, George K. Broady, and others,
styled Brokerage Services of America, Inc., Peter N. Streit, Sibylle A. Streit,
and Earnest Blank, Plaintiffs, v. James Crocco, George K. Broady, Mike DeBlock,
Ultrak, Inc. and Exxis Technologies, Inc., Defendants (Cause No. 93-07167-C),
was filed in the 68th Judicial District Court of Dallas County, Texas. The
individual Plaintiffs in this case are the principal officers of Brokerage
Services of America, Inc. ("BSA"). In 1992, these individuals held meetings with
George K. Broady to discuss a possible transaction between Ultrak and BSA. After
conducting a "due diligence" review of BSA, the officers of Ultrak decided not
to engage in any transaction with BSA. The Plaintiffs allege that the Defendants
breached an oral agreement to merge or otherwise purchase assets of the
Plaintiffs and further allege an action for civil conspiracy for negligent
misrepresentation by and between the Defendants, and for breach of fiduciary
duty. The parties to this proceeding have agreed to settle this matter, and upon
payment of the full settlement amount, the Plaintiffs will cause the case
against Defendants to be dismissed with prejudice.
EMPLOYEES
As of December 31, 1994, Ultrak had 148 full-time employees employed at
five primary locations and five field sales offices, of which 88 were sales and
support personnel, 17 were warehouse/assembly personnel, 17 were
technical/service personnel, and 26 were administrative and managerial
personnel.
MANAGEMENT OF ULTRAK
The directors and executive officers of Ultrak are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ---------------------------------
<S> <C> <C>
George K. Broady............................. 56 Chairman of the Board, Chief
Executive Officer, and
President
James D. Pritchett........................... 48 Director, Executive Vice
President and Chief Operating
Officer
William C. Lee............................... 55 Director
Charles C. Neal.............................. 36 Director
Robert F. Sexton............................. 60 Director
Tim D. Torno................................. 37 Vice President-Finance,
Secretary-Treasurer, and Chief
Financial Officer
</TABLE>
George K. Broady. Mr. Broady became President and Chief Executive Officer
of Ultrak on March 18, 1991. Prior to that date, Mr. Broady was actively
involved as the owner and president of Geneva Merchant Bankers, Dallas, Texas.
Until December 1987, he was chairman and chief executive officer of Network
Security Corporation, a company that he founded in 1970. Network Security
Corporation and the publicly held stock of its controlled subsidiary were sold
to Inspectorate International, a Swiss company, in 1987 and 1988 for $165
million. During 1988, Network Security Corporation sold its majority ownership
interest in
40
<PAGE> 47
Ultrak to Mr. Broady for $662,000 in cash. He received his BS (cum laude) from
Iowa State University in 1960. Mr. Broady devotes substantially all of his
executive time to the business and affairs of Ultrak.
James D. Pritchett. Mr. Pritchett joined Ultrak in August 1988 as Chief
Operating Officer. He was promoted to Executive Vice President in October 1991.
Mr. Pritchett was appointed to the Board of Directors of Ultrak on August 14,
1989. From October 1, 1980 to September 1, 1988, Mr. Pritchett was executive
vice president and chief operating officer of Booth, Inc., Carrollton, Texas, a
manufacturer of electronic equipment. Mr. Pritchett received his Bachelor of
Science Degree in Mechanical Engineering from the University of Texas at
Arlington in 1969, and his Masters in Mechanical Engineering in 1972 from
Southern Methodist University, Dallas, Texas. From 1969 to 1972, he was an
engineer with LTV Aerospace and from 1972 to 1978, he was product manager for
Thermalloy, Inc. He was a research and development engineer with Glitech, Inc.
from 1978 to 1980.
Tim D. Torno. Mr. Torno has been the Vice President-Finance,
Secretary-Treasurer, and Chief Financial Officer of Ultrak since August 1988.
From May 1980 to August 1988, Mr. Torno was employed by KPMG Peat Marwick in
Denver, New York, and Corpus Christi, Texas, in various capacities including
senior manager. Mr. Torno received a BBA in Accounting (cum laude) from Texas A
& M University, College Station, Texas, in 1979 and a Masters of Business
Administration (with honors) in 1993 from the University of Phoenix, Denver,
Colorado. Mr. Torno is a CPA in the States of Texas and Colorado, and is a
member of the American Institute of CPAs and the Texas Society of CPAs. He
currently serves on the Executive Board of the Distribution Resources Company
Group.
William C. Lee. Mr. Lee has served as a Director of Ultrak since June 1994.
Mr. Lee has been the Senior Vice President of the Annuity Board of the Southern
Baptist Convention of Dallas, Texas, a $4.5 billion dollar pension and insurance
management company, since July 1991. Mr. Lee served as Managing Director of
Geneva Merchant Bankers of Dallas, Texas from 1989 until 1991 and as an
executive officer of San Jacinto Savings from 1988 to 1989. Mr. Lee earned his
BBA from Texas A & M University in 1962 and his MBA from Southern Methodist
University in 1966. Mr. Lee is a CPA in the State of Texas and a member of the
American Institute of CPAs, the Texas Society of CPAs, the Financial Executives
Institute and the American Institute of Image Management.
Charles C. Neal. Mr. Neal has served as a Director of Ultrak since June
1994. Mr. Neal has been President of Chas. A. Neal & Company of Miami, Oklahoma,
a company which owns interests in oil and gas properties and in various
corporations in several industries, including banking, since 1989. From 1985 to
1989, Mr. Neal was with Merrill Lynch & Co. in New York City, performing
investment banking, general corporate finance and mergers and acquisitions
services for a variety of clients. Mr. Neal is also a director of several
privately held companies. Mr. Neal received his BA in Economics in 1981 from the
University of Oklahoma and a JD/MBA from the University of Chicago Law School
and Graduate School of Business in 1985.
Robert F. Sexton. Mr. Sexton has served as a Director of Ultrak since May
1995. Mr. Sexton has been President of Bakery Associates, Inc. of Dallas, Texas,
a company which brokers bakery packaging goods, since 1983. From 1973 to 1983,
Mr. Sexton was Executive Vice President and a director of Campbell Taggart, Inc.
of Dallas, Texas, one of the nation's largest baking companies. Campbell Taggart
was listed on the New York Stock Exchange prior to its acquisition by Anheuser
Busch in 1982. Mr. Sexton is also a director of Republic Gypsum Company, a
corporation which manufactures and distributes paperboard. Mr. Sexton earned his
BBA in industrial management in 1956 from the University of Texas.
All directors of Ultrak hold office until the next annual meeting of the
shareholders and until their successors have been elected and qualified. The
officers of Ultrak are elected by the Board of Directors at its first meeting
after each annual meeting of Ultrak's shareholders and hold office until their
successor is chosen and qualified or until their death or until they shall
resign or have been removed from office.
41
<PAGE> 48
BOARD OF DIRECTORS AND COMMITTEES
In June 1994, Ultrak established the Audit Committee of the Board of
Directors. The Audit Committee, composed of Messrs. Lee and Neal, is responsible
for (i) reviewing the scope of, and the fees for, the annual audit of Ultrak,
(ii) reviewing with the independent auditors Ultrak's corporate accounting
practices and policies, (iii) reviewing with the independent auditors their
final report, (iv) reviewing with independent auditors overall accounting and
financial controls and (v) being available to the independent auditors during
the year for consultation purposes. The Audit Committee met twice in 1994.
In June 1994, Ultrak also established the Compensation Committee of the
Board of Directors. The Compensation Committee, composed of Messrs. Lee, Neal,
and Pritchett, is responsible for determining the nature and amount of
compensation for the executive officers of Ultrak, and for granting stock
options under Ultrak's stock option plan. The Compensation Committee met three
times in 1994.
During 1994, there were three regular meetings and one special meeting of
the Board of Directors, and all directors of Ultrak attended at least 75% of all
meetings of the Board of Directors and each of the committees on which they
served.
EXECUTIVE COMPENSATION
The following summary sets forth all annual and long-term compensation paid
or accrued to Ultrak's Chief Executive Officer and each of Ultrak's executive
officers earning in excess of $100,000 during 1994 for services rendered to
Ultrak during the fiscal years ended December 31, 1994, 1993, and 1992.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------------------
----------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS (1) COMPENSATION(2)
- ------------------------------- ---- -------- ------- ------------ ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
George K. Broady, 1994 $240,000 $54,750 -- -- -- $ 1,613
Chief Executive Officer 1993 $212,762 -- -- -- -- $1,104
and President 1992 $100,000 -- -- -- -- --
James D. Pritchett, 1994 $164,000 $61,200 -- -- -- $ 2,737
Executive Vice President 1993 $154,078 $38,094 -- -- -- $1,799
1992 $125,000 $48,202 -- -- -- $ 792
Tim D. Torno, 1994 $105,000 $36,000 -- -- -- $ 1,872
Vice President -- Finance, 1993 $ 86,400 $23,700 -- -- 20,833 $1,322
Secretary, Treasurer, and 1992 $ 75,674 -- -- -- -- $ 426
Chief Financial Officer
</TABLE>
- ---------------
(1) SARs is defined as stock appreciation rights.
(2) Ultrak's contribution to employee's 401(k).
OPTION/SAR GRANTS
There were no individual grants of stock options (whether or not in tandem
with SARs) and freestanding SARs made during 1994 to the named executive
officers.
Ultrak adopted a Nonqualified Stock Option Plan (the "Plan") on April 15,
1988. A total of 833,333 shares of Ultrak Common Stock are subject to the Plan
(amended November 1, 1991 and December 28, 1993). Options to purchase such
shares may be issued to full-time employees, including officers, chosen by
Ultrak's Board of Directors (which has delegated such authority to the
Compensation Committee). The options vest based upon full-time employment with
Ultrak at the rate of 20% per year over a five-year period. The options expire
ten years from the date of grant. The option exercise price is based upon the
approximate
42
<PAGE> 49
current value of Ultrak Common Stock on the date of grant. Options which are
vested may be exercised at any time thereafter and prior to the expiration of
the option.
The options may be exercised for the entire amount of optioned shares
granted in the event (i) the optionee dies or becomes disabled, (ii) Ultrak is
merged, consolidated, or reorganized, (iii) Ultrak is dissolved or liquidated,
(iv) substantially all property and assets of Ultrak are sold, (v) if more than
50% ownership of Ultrak is transferred, or (vi) if the employee is terminated
for other than cause, and his written employment agreement so provides. Further,
if an employee is dismissed for cause, unexercised options, to the extent
vested, may be exercised for 30 days before automatically expiring.
As of December 31, 1994, options relating to 532,959 shares were
outstanding at exercise prices ranging from $1.20 per share to $7.50 per share.
Of the total outstanding options, options to purchase 313,851 shares were held
by the three executive officers of Ultrak. The option exercise price is set by
the Board of Directors on the date of grant near or at the then verifiable
market price of Ultrak Common Stock. During 1994, 47,500 options were granted to
employees of Ultrak. During 1994, 600 options were exercised by two employees.
In 1994, 14,167 options which had been granted to one former employee were
cancelled.
OPTION/SAR GRANTS, EXERCISES AND HOLDINGS
There were no exercises of stock options (or tandem SARs) and freestanding
SARs during 1994 by each of the named executive officers. The unexercised
options owned by the named executive officers as of December 31, 1994 are
presented below:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
VALUE OPTIONS/SARS AT DECEMBER OPTIONS/SARS AT DECEMBER
SHARES ACQUIRED REALIZED 31, 1994 31, 1994
NAME ON EXERCISE # ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------------- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
George K. Broady............. -- -- 83,311/55,540 $413,639/275,756
James D. Pritchett........... -- -- 110,000/6,666 $557,499/22,498
Tim D. Torno................. -- -- 39,167/16,166 $186,563/27,187
</TABLE>
REPORT ON REPRICING OF OPTIONS/SARS
There were no adjustments or amendments during 1994 to the exercise price
of any stock options or SARs previously awarded to any of the named executive
officers.
LONG-TERM INCENTIVE PLAN (LTIP) AWARDS
There were no awards made to the named executive officers during 1994 under
any LTIP. However, Ultrak has adopted a policy to compensate its executive
officers and key employees with annual bonuses. Essentially the policy is to
evaluate, on an annual basis, each officer's or key employee's entitlement, if
any, to a bonus. The Compensation Committee, in its sole discretion, may award a
bonus of up to 50% of an employee's base salary, based on achievement of certain
operating goals, asset management, employee development, and improvement in
other areas considered important and valuable to Ultrak. For 1994, an executive
officer bonus pool was established based on the weighted average of the bonuses
earned by all of Ultrak's sales managers. Once the executive officer bonus pool
was designated, bonuses were awarded to officers based on subjective informal
criteria applied by the Compensation Committee.
EMPLOYEE BENEFIT PLANS
Ultrak does not sponsor any defined benefit or actuarial plans. However,
Ultrak does sponsor a 401(k) plan for all eligible employees whereby Ultrak
matched 30% during 1994 of the employee's contribution up to a maximum matching
contribution of 6% of the employee's base salary. In 1994, Messrs. Broady,
Pritchett, and Torno received $1,613, $2,737, and $1,872, respectively, in
matching 401(k) contributions under the program.
43
<PAGE> 50
During 1994, Ultrak provided a medical insurance program for its full-time
employees of which it paid 50% of the premium. As of December 31, 1994, Ultrak
did not have any life insurance or any defined benefit retirement or pension
plans for its employees, officers, or directors other than a key-man life
insurance policy on George K. Broady in the amount of $1.0 million.
Ultrak has a policy that all loans from Ultrak or its subsidiaries to its
officers, directors, and key employees or their affiliates must be approved by a
majority of disinterested directors. There were no loans to officers, directors,
and/or key employees or their affiliates during 1994.
COMPENSATION OF DIRECTORS
Each director of Ultrak serves until the next annual meeting of Ultrak's
shareholders or until his successor is elected and qualified. Each independent
director receives a fee of $1,000 for each Board of Directors' meeting and $500
for each committee meeting attended, and officers and directors are generally
reimbursed for out-of-pocket expenses incurred in connection with attendance at
Board of Directors' and committee meetings.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. James D. Pritchett, Executive Vice President of Ultrak, and Tim D.
Torno, Secretary-Treasurer and Chief Financial Officer, have entered into
written employment agreements with Ultrak with varying terms and provisions
summarized below. Ultrak has no termination of employment or change-in-control
arrangements, except as to the substantive effect of Mr. Broady's stock
ownership and the fact that Mr. Pritchett may not be terminated without cause
except as of January 1 of a year, upon 12 months' prior written notice, after
January 1, 1997, and Mr. Torno may not be terminated without cause except as of
January 1 of a year, upon three months' prior written notice, after January 1,
1996.
Mr. Pritchett's employment agreement, dated May 25, 1995, provides for a
two-year term beginning as of January 1, 1995, but automatically extends for
one-year periods with Ultrak having the right to terminate Mr. Pritchett's
employment agreement upon 12 months' written notice prior to the beginning of a
year. Mr. Torno's employment agreement, also dated May 25, 1995 but effective as
of January 1, 1995, is for a one-year term but automatically extends for
one-year periods with Ultrak having the right to terminate Mr. Torno's
employment agreement upon three months' written notice prior to the beginning of
a year. The employment agreements set Mr. Pritchett's and Mr. Torno's base
salaries at $198,000 and $138,000, respectively.
The employment agreements also contain standard provisions relating to the
employee being entitled to participation in the Plan and participation in a
bonus program. The agreements provide that the employee is to be reimbursed for
reasonable expenses incurred in connection with Ultrak's business. The
employment agreements further provide for standard paid vacations, car
allowances, other health and accident coverage, and insurance benefits.
Ultrak may terminate the employment agreements if the employee commits a
breach of the agreement, is convicted of a criminal offense, becomes bankrupt,
grossly neglects the performance of his duties, or becomes chemically addicted
to alcohol, drugs, or any controlled substance. If terminated by Ultrak for any
of those reasons, it is considered cause, and upon termination for cause, all
benefits, including all stock options previously granted to the employee
(subject to the thirty-day permitted exercise period), are cancelled and
rendered null and void. If the employee dies or Ultrak terminates the employee
without cause or if the employee terminates as a result of a material breach by
Ultrak, then all options become exercisable for the full amount of the optioned
shares and the employee is entitled to receive within 15 days all compensation
he would otherwise have been entitled to receive under the terms of the
agreement for such year and all other benefits. If the employee terminates the
agreement for any reason (other than as a result of a material breach by
Ultrak), he is entitled to exercise only those options which have been fully
vested at the time of termination and he must exercise them within 30 days of
the date of termination.
44
<PAGE> 51
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In June 1994, the Board of Directors created a Compensation Committee of
the Board of Directors. William C. Lee, Charles C. Neal, and James D. Pritchett
are members of the Compensation Committee. Messrs. Lee and Neal are independent
directors. Mr. Pritchett is the Executive Vice President and Chief Operating
Officer of Ultrak. Prior to the creation of the Compensation Committee, the
entire Board of Directors, then composed of George K. Broady and Mr. Pritchett,
established executive salaries. Mr. Broady is the Chairman of the Board, Chief
Executive Officer, and President of Ultrak.
Since July 1993, Ultrak has provided Veravision, Inc. ("Veravision") with a
working capital line of credit in return for interest on the borrowed funds and
warrants to purchase Veravision's capital stock. On December 30, 1994, Mr.
Broady, the Chairman of the Board, Chief Executive Officer, and President of
Ultrak, guaranteed the repayment of certain indebtedness of Veravision to
Ultrak. Prior to Ultrak making the line of credit available to Veravision, Mr.
Broady had no relationship with Veravision. Prior to Mr. Broady's guarantee,
Veravision had granted Ultrak warrants to purchase 59% of Veravision's capital
stock on a fully-diluted basis. Mr. Broady guaranteed certain amounts due under
notes made by Veravision to Ultrak. At December 31, 1994, the amount guaranteed
by Mr. Broady was approximately $470,000 and the total amount of indebtedness of
Veravision to Ultrak was $900,000. In consideration of his guaranty, Ultrak
transferred warrants to purchase approximately 30% of Veravision's capital stock
to Mr. Broady. Should the amount covered by Mr. Broady's guaranty increase,
Ultrak would be obligated to transfer warrants to purchase additional shares of
Veravision stock to Mr. Broady. Veravision is a supplier of certain dental
camera products to Ultrak. Purchases by Ultrak of Veravision products totaled
$875,000 during 1994 and were made on an arms-length, negotiated basis and allow
a reasonable gross profit margin to Veravision. Other terms of the purchases
from Veravision are similar to terms of similar transactions with other,
non-affiliated entities. At present, Mr. Broady's only relationship with
Veravision is in his capacity as a guarantor of certain debt owed to Ultrak by
Veravision (as described above) and as the holder of warrants to acquire
approximately 30% of Veravision's stock. Mr. Broady is neither an officer nor
director of Veravision.
During 1994, Ultrak made purchases of approximately $265,000 from Ultrak
Electronics Limited, a Hong Kong corporation of which Mr. Broady owns
approximately 30% of the outstanding capital stock. Ultrak believes that the
purchases were made at prices and on terms at least as favorable to Ultrak as
those which could have been obtained in an arm's length transaction with an
unaffiliated party.
During 1994, Mr. Broady acted as guarantor in part on both of Ultrak's
credit facilities as well as its trade line of credit with one of its principal
domestic suppliers. As of March 31, 1995, Mr. Broady has guaranteed
approximately $9.2 million in liabilities of Ultrak. Mr. Broady receives no
consideration for his guarantees on behalf of Ultrak.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Prior to June 1994, Ultrak did not have a Compensation Committee.
Consequently, the base salary and the bonus criteria for each of Ultrak's
executive officers for 1994 were established by Ultrak's Board of Directors. At
that time, Ultrak's Board of Directors consisted of George K. Broady and James
D. Pritchett. Compensation of the Chief Executive Officer was determined by
Ultrak's Board of Directors using subjective, informal criteria which were
loosely based on Ultrak's performance, a comparison of the salary paid to chief
executive officers of corporations with revenues and assets comparable to Ultrak
based on a survey published by a big six accounting firm and limitations
provided in Ultrak's Loan Agreement with Petrus Fund, L.P. Ultrak's loan
agreement with Petrus Fund, L.P. restricts the maximum salary that may be paid
to the Chief Executive Officer of Ultrak without breaching the loan agreement to
$350,000 per annum in the aggregate, so long as there is no default under such
Loan Agreement; the maximum aggregate compensation permitted to Mr. Broady in
the event of such a default is $225,000 per annum. The increase in salaries and
bonuses for the named executive officers from 1993 to 1994, was determined by
arriving at an appropriate base salary for the Chief Executive Officer based on
a survey published by a big six accounting firm and then determining the other
officers' base salary based on a subjectively determined percentage of the Chief
Executive Officer's salary.
45
<PAGE> 52
The Board of Directors created the Compensation Committee of the Board of
Directors in June 1994 comprised of Charles C. Neal, William C. Lee, and James
D. Pritchett. The Compensation Committee views executive compensation as
consisting of three main components: base salary and benefits, annual incentives
and long-term incentives. The Compensation Committee's objective is to attract,
retain, and motivate executive officers through this combination to achieve
strategic and financial objectives and to create value for the shareholders of
Ultrak. The Compensation Committee is in the process of creating a total
compensation package which will determine compensation primarily on
performance-based, objective criteria, such as net income, net income per share,
return on equity, and returns to shareholders through long-term appreciation of
Ultrak's stock. The Compensation Committee would like to encourage ownership of
Ultrak stock by the executive officers and to tie a large portion of the
executive officers' compensation to the performance of Ultrak's stock and hence
to align executive officers' interests more closely with shareholders'
interests. The Compensation Committee also wants to have a discretionary
component to reward exceptional individual achievement.
Since June 1994, the Compensation Committee has undertaken a thorough
review of Ultrak's current levels of executive compensation in light of the
Compensation Committee's policy objectives. This review included a comprehensive
survey of compensation in comparable companies, as well as analysis of specific
Ultrak plans. In its review, the Compensation Committee relied heavily on
information provided by Towers Perrin, a nationally recognized expert in
compensation, and, to a lesser extent, on other publicly available surveys.
Based on this review, the Compensation Committee concluded that the executive
officers of Ultrak were undercompensated in 1994 by comparison with companies of
similar size, industry, and performance (the companies analyzed have no
relationship with the peer group used in the performance graph). To rectify
this, the Compensation Committee has adjusted the base salaries of the executive
officers for 1995 to bring such salaries closer to the median salaries for such
positions in comparable companies. In addition, the Compensation Committee has,
effective in 1995, revised the annual bonus program to make it more dependent on
the achievement of the budgeted net income before taxes of Ultrak. For 1994, an
executive officer bonus pool was established based on the weighted average of
the bonuses earned by all of Ultrak's sales managers. Once the executive officer
bonus pool was designated, bonuses were awarded to officers based on subjective,
informal criteria applied by the Compensation Committee. The Compensation
Committee has also requested the officers of Ultrak to recommend a long-term
incentive program for Ultrak which is based on objective criteria and which
encourages long-term ownership by executive officers of Ultrak stock.
Charles C. Neal
George K. Broady
William C. Lee
James D. Pritchett
46
<PAGE> 53
PERFORMANCE GRAPH
The following chart compares the cumulative total shareholder return on
Ultrak Common Stock during the five fiscal years ended December 31, 1994 with
the cumulative total return on the NASDAQ market index and a peer group index.
The peer group consists of all of the publicly-traded companies with the same
two digit SIC code (wholesale trade -- durable goods). A listing of the
companies in the peer group can be obtained without charge by writing Ultrak,
Inc., 1220 Champion Circle, Suite 100, Carrollton, Texas 75006, Attention:
Investor Relations. Ultrak relied upon information provided by the University of
Chicago Center for Research in Securities Prices with respect to the peer group
stock performance. Ultrak did not attempt to validate the information supplied
to it other than to review it for reasonableness. The comparison assumes $100
was invested on December 29, 1989 in Ultrak Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends, if any. Adjustments
have been made to give retroactive effect to the December 1993 one-for-six
reverse stock split.
[GRAPH]
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
Ultrak, Inc. 100 34.8 160.9 143.5 165.2 165.2
Nasdaq Stock Market (US Companies) 100 84.9 136.3 158.6 180.9 176.9
NASDAQ Stocks (SIC 5000-5099 US Companies) 100 91.3 155.8 159.6 207.1 180.6
</TABLE>
47
<PAGE> 54
PRINCIPAL SHAREHOLDERS OF ULTRAK
The following table sets forth certain information as to the number of
shares of Ultrak Common Stock beneficially owned as of December 31, 1994, by (i)
each person who is known to Ultrak to own beneficially more than five percent of
the outstanding shares of Ultrak Common Stock or the outstanding shares of
Series A Preferred Stock of Ultrak and their address, (ii) each executive
officer and director, and (iii) all officers and directors as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF ULTRAK COMMON OF SERIES A PREFERRED
STOCK(1) STOCK(1)
----------------------- ----------------------
NAME SHARES PERCENTAGE SHARES PERCENTAGE
- ------------------------------------------------ -------- ---------- ------- ----------
<S> <C> <C> <C> <C>
George K. Broady................................ 2,368,769(2) 32.55% 193,351 100%
Ultrak, Inc.
1220 Champion Circle
Suite 100
Carrollton, TX 75006
James D. Pritchett.............................. 136,396(3) 1.87 -0- -0-
William C. Lee.................................. 26,667 * -0- -0-
Director
Charles C. Neal................................. 154,908(4) 2.13 -0- -0-
Director
Robert G. Sexton................................ 103,066 1.42 -0- -0-
Director
Tim D. Torno.................................... 35,290(5) * -0- -0-
All executive officers and directors as a group
(five persons)(2)(4)(6)(7).................... 2,825,096 38.83 193,351(7) 100%
</TABLE>
- ---------------
* less than 1%
(1) Except as otherwise indicated, the persons named in the table possess sole
voting and investment power with respect to all shares shown as
beneficially owned.
(2) Includes 166,667 shares of Ultrak Common Stock held by a trust for the
benefit of members of Mr. Broady's family, of which Mr. Broady serves as
sole trustee, 138,851 shares of Ultrak Common Stock issuable upon exercise
of stock options held by Mr. Broady and 406,981 shares of Ultrak Common
Stock issuable upon conversion of shares of Series A Preferred Stock owned
by Mr. Broady. See "DESCRIPTION OF ULTRAK'S CAPITAL STOCK." Mr. Broady
disclaims beneficial ownership of the shares of Ultrak Common Stock owned
by the trust.
(3) Includes 110,000 shares of Ultrak Common Stock issuable upon exercise of
options held by Mr. Pritchett.
(4) Comprised of 9,650 shares of Ultrak Common Stock owned by Pantheon,
Incorporated, a corporation owned by Mr. Neal and his wife, and 145,258
shares of Ultrak Common Stock owned by Chas. A. Neal & Company, a
corporation of which Mr. Neal is President.
(5) Includes 35,000 shares of Ultrak Common Stock issuable upon exercise of
options held by Mr. Torno.
(6) Includes options to purchase an aggregate of 145,000 shares of Ultrak Common
Stock held by Messrs. Pritchett and Torno.
(7) The Series A Preferred Stock has 16.667 votes per share. Through ownership
of Ultrak Common Stock and Series A Preferred Stock, Mr. Broady holds 53.7%
of the voting power of all of the outstanding capital stock of Ultrak. All
of the executive officers and directors of Ultrak as a group hold 58.4% of
the voting power of all of the outstanding capital stock of Ultrak.
48
<PAGE> 55
DESCRIPTION OF ULTRAK'S CAPITAL STOCK
GENERAL
Common Stock. The Ultrak Charter authorizes 50,000,000 shares of Common
Stock with no par value. Effective as of December 28, 1993, the Ultrak Charter
was amended to, among other things, eliminate the Class A Non-Voting Stock. None
of these shares are issued and outstanding. Each record holder of shares of
Ultrak Common Stock is entitled to one vote for each share held of record on all
matters properly submitted to the shareholders of Ultrak for their vote.
Cumulative voting is not authorized by the Articles of Incorporation. A quorum
at any shareholders meeting consists of more than a majority of the stock
outstanding and entitled to vote at such meeting.
Preferred Stock. The Ultrak Charter authorizes 2,000,000 shares of
Preferred Stock, $5.00 par value. As of December 28, 1993, there was one series
of Preferred Stock designated: Series A Preferred Stock. The Series A Preferred
Stock is entitled to 16.667 votes per share. As of December 31, 1994, there were
195,351 shares of Series A Preferred Stock issued and outstanding and all of
such shares are owned by Mr. Broady. Holders of the Series A Preferred Stock are
entitled to preferential dividends payable quarterly and accruing at a rate of
12% per annum on the original purchase price of $5.00 per share. Upon
liquidation, dissolution, or winding up of Ultrak, holders of the Series A
Preferred Stock are entitled to receive the original purchase price of $5.00
plus any unpaid dividends (the "Liquidation Value") accruing to that date in
preference to holders of Ultrak Common Stock. Each share of Series A Preferred
Stock is convertible into 2.083 shares of Ultrak Common Stock at the option of
the holder. Ultrak's Preferred Stock may be issued in series from time to time
with such designation, rights, preferences, and limitations as the Board of
Directors of Ultrak may determine by resolution. The potential exists,
therefore, that additional Preferred Stock might be issued which would grant
dividend preferences and liquidation preferences to preferred shareholders over
holders of Ultrak Common Stock. Unless the nature of a particular transaction
and applicable statutes require such approval, the Board of Directors has the
authority to issue Preferred Stock without shareholder approval. The issuance of
Preferred Stock may have the effect of delaying or preventing a change in
control of Ultrak without any further action by shareholders.
DIVIDENDS
Holders of Ultrak Common Stock are entitled to receive dividends when and
as declared by Ultrak's Board of Directors out of legally available funds after
all dividends to holders of Ultrak's Preferred Stock have been paid. Any such
dividends may be paid in cash, property, or shares of Ultrak Common Stock.
MISCELLANEOUS RIGHTS AND PROVISIONS
The shares of Ultrak Common Stock have no preemptive or conversion rights,
no redemption or sinking fund provisions, and are not liable to further call or
assessment. The outstanding shares of Ultrak Common Stock are, and any shares of
Ultrak Common Stock issued pursuant to the Merger will be, fully paid and
nonassessable. Each share of Ultrak Common Stock is entitled to share ratably in
any asset available for distribution to holders of Ultrak Common Stock upon
liquidation of Ultrak after holders of Ultrak's Preferred Stock have received
the liquidation value of their shares.
REPORTS TO SHAREHOLDERS
Ultrak is subject to the reporting requirements of the Exchange Act and
therefore makes available annual reports to its shareholders containing audited
financial statements reported upon by its independent auditors. In addition to
Ultrak's reporting obligations under the Exchange Act, Ultrak intends to release
unaudited quarterly or other interim reports to its shareholders as it deems
appropriate.
TRANSFER AGENT AND REGISTRAR
Securities Transfer Corporation, 16910 Dallas Parkway, Suite 100, Dallas,
Texas 75248 is the transfer agent and registrar for Ultrak Common Stock.
49
<PAGE> 56
MARKET FOR ULTRAK COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
PRICE RANGE OF ULTRAK COMMON STOCK
Ultrak Common Stock became listed on the Nasdaq on January 18, 1994. Prior
to that time, Ultrak Common Stock was traded in the over-the-counter market and
price quotations for the two-year period shown below were reported on Nasdaq
under the symbol "ULTK." The quotations shown below, which are the range of the
high and low bid prices for 1993 and high and low closing prices thereafter,
were compiled by Ultrak from Monthly Statistical Reports supplied by Nasdaq. All
quotes for 1993 represent inter-dealer quotations, without retail markup,
mark-down, or commission and may not necessarily represent actual transactions
in the Ultrak Common Stock. All prices in 1993 have been retroactively restated
to reflect the one-for-six reverse stock split, which was effected on December
28, 1993.
<TABLE>
<CAPTION>
HIGH BID LOW BID
---------- ---------
<S> <C> <C>
1993*
First quarter........................................ $ 7.50 $4.31
Second quarter....................................... 9.75 5.64
Third quarter........................................ 9.00 5.25
Fourth quarter....................................... 7.62 5.63
</TABLE>
<TABLE>
<CAPTION>
HIGH CLOSE LOW CLOSE
---------- ---------
<S> <C> <C>
1994
First quarter........................................ $ 8.63 $5.75
Second quarter....................................... 7.13 4.50
Third quarter........................................ 7.63 6.13
Fourth quarter....................................... 8.00 6.75
1995
First quarter........................................ $ 7.13 $5.75
</TABLE>
- ---------------
* Retroactively restated to reflect the one-for-six reverse stock split, which
was effected on December 28, 1993.
The total number of holders of Ultrak Common Stock as of May 31, 1995, was
approximately 3,200, comprised of approximately 1,500 shareholders of record and
approximately 1,700 not of record.
ULTRAK'S DIVIDEND POLICY
Ultrak has never paid any dividends to its common shareholders. Currently,
it is the intention of Ultrak not to pay any dividends to the holders of Ultrak
Common Stock in the foreseeable future. Management of Ultrak intends to reinvest
earnings available to common shareholders in the development and expansion of
Ultrak's business. The declaration in the future of any cash dividends on Ultrak
Common Stock will be at the discretion of the board of directors and will depend
upon the earnings, capital requirements and financial position of Ultrak,
general economic conditions, and other pertinent factors. Ultrak's loan and
security agreements with its financial institutions require the lender's prior
written consent to Ultrak's payment of cash dividends on Ultrak Common Stock. To
the extent allowed by Ultrak's loan agreements, Ultrak does intend to pay
dividends on its shares of Series A Stock all of which are owned by George K.
Broady, the Chairman of the Board, Chief Executive Officer, and President of
Ultrak. Annual preferred stock dividends in the amount of $117,210 were paid to
Mr. Broady during each of 1994, 1993, and 1992.
50
<PAGE> 57
SELECTED FINANCIAL DATA OF ULTRAK
The following table sets forth for the periods and the dates indicated,
selected financial and operating data for Ultrak. This information should be
read in conjunction with the financial statements of Ultrak included elsewhere
in this Prospectus/Proxy Statement and "ULTRAK MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" which are included
elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------------- ----------------------------------------------------------------------
1995 1994 1994 1993 1992* 1991(1) 1990
----------- ----------- ----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Net sales................ $21,829,162 $17,764,973 $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
----------- ----------- ----------- ----------- ----------- ----------- ----------
Gross profit............. $ 5,322,078 $ 4,172,044 $19,444,003 $12,858,457 $ 7,367,629 $ 4,613,904 $2,494,659
----------- ----------- ----------- ----------- ----------- ----------- ----------
Operating income
(loss)................. $ 1,608,666 $ 1,122,619 $ 5,109,687 $ 3,655,020 $ 1,278,618 $ 694,728 $ (318,905)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Income from continuing
operations before
income taxes........... $ 1,231,392 $ 922,631 $ 4,302,532 $ 3,020,403 $ 569,843 $ 470,942 $ (775,196)
Income taxes............. 449,459 294,574 1,513,020 381,543 26,343 -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Income (loss) from
continuing
operations............. 781,933 628,057 2,789,512 2,638,860 543,500 470,942 (775,196)
Discontinued
operations............. -- -- (190,000) (1,834,370) 294,255 -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)...... 781,933 628,057 2,599,512 804,490 837,755 470,942 (775,196)
Dividend requirements on
preferred stock........ 29,302 29,302 117,210 117,210 117,210 117,210 --
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss)
allocated to common
shareholders........... $ 752,631 $ 598,755 $ 2,482,302 $ 687,280 $ 720,545 $ 353,732 $ (775,196)
========== ========== ========== ========== ========== ========== =========
Income (loss) per common
share from continuing
operations............. $ .11 $ .09 $ .39 $ .37 $ .07 $ .06 $ (0.15)
========== ========== ========== ========== ========== ========== =========
Net income (loss) per
common share........... $ .11 $ .09 $ .36 $ .10 $ .11 $ .06 $ (0.15)
========== ========== ========== ========== ========== ========== =========
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, -------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets...................................... $36,112,432 $36,352,690 $25,384,794 $16,198,851 $8,054,270
Short-term debt................................... 17,882,187 18,244,183 12,875,039 7,134,701 2,218,599
Long-term debt.................................... -- -- -- 285,000 285,000
Shareholder's equity.............................. 10,823,019 10,070,388 7,541,339 6,817,683 4,177,044
Cash dividends declared per common
share........................................... -- -- -- -- --
</TABLE>
- ---------------
* Reclassified to reflect discontinued operations; see Note I of Notes to
Consolidated Financial Statements.
(1) Effective January 1, 1991, Ultrak acquired all of the outstanding common
stock of CCTV Source, Inc. (CCTV). CCTV's sales and loss before income
taxes for the year ended December 31, 1991 were $5,716,000 and $38,000,
respectively.
51
<PAGE> 58
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
Results of Operations -- Continuing Operations:
For the three months ended March 31, 1995, net sales increased $4,064,189
(23%) over the comparable 1994 period. This growth was due primarily (90%) to
increased volume of sales of existing closed circuit television (CCTV) products
to all of the markets that Ultrak serves. New products introduced by Ultrak
during the first quarter of 1995 contributed approximately 10% of the increase
in net sales.
In comparison, for the three months ended March 31, 1995, cost of goods
sold increased $2,914,155 (21%) over the comparable 1994 period. This increase
was in virtual direct relationship to the overall CCTV increase in net sales.
The overall gross profit percentage increased to 24.38% in 1995 from 23.48%
in 1994 for the comparable three month period ended March 31, primarily because
of increased sales of Ultrak branded products that carry higher gross profit
margins and the higher margins earned on new product sales. In general, gross
profit margins on non-Ultrak branded products have decreased during 1995 due to
competition in the industry and a strategic decision by Ultrak to be the
industry value leader.
For the three months ended March 31, 1995, other operating expenses
increased $663,987 (22%) from the comparable 1994 period. This increase was
primarily due to increased sales and marketing costs including personnel, travel
and other related costs commensurate with the overall increase in sales and the
strategic plan to build the market for greater sales in the future. In addition,
new product promotion costs were incurred during the first quarter including
advertising, printing, product shows and other promotional activities.
For the three months ended March 31, 1995, other (income) expenses
increased $177,286 (89%) from the comparable 1994 period because of increased
interest expense on borrowings due to higher prime interest rates offset by
interest income on notes receivable and miscellaneous income.
Liquidity and Capital Resources:
Ultrak's cash management policy is to directly apply all cash proceeds to
offset bank debt. Ultrak had a net decrease in cash for the three month period
ended March 31, 1995 of $642,241. Net cash provided by operating activities was
$79,345, primarily because of net cash profits and reductions in advances for
inventory partially offset by significant increases in accounts and notes
receivable and inventory on hand related to higher sales during the period and
reductions in trade accounts payable.
Net cash used in investing activities for the three months ended March 31,
1995 was $330,288 primarily for capital expenditures for office and warehouse
equipment, upgrades to Ultrak's computer system and leasehold improvements.
Net cash used in financing activities for the three months ended March 31,
1995 was $391,298 from a net reduction during the quarter in borrowings on
Ultrak's two lines of credit and payment of dividends on preferred stock.
As of March 31, 1995, Ultrak had unused available lines of credit totaling
approximately $4.1 million.
On February 9, 1995, Ultrak's line of credit with NationsBank was increased
from $13.2 million to $15.0 million under the same terms and conditions.
Ultrak will continue to be dependent upon its bank and other lender
financing to fund its operations. Ultrak anticipates that its current operations
and future growth will be financed through increased lines of credit and
internally generated profits. Ultrak believes such sources of funds will be
adequate for its projected needs for the next twelve (12) months. Ultrak may
attempt to raise additional equity capital if sales increase faster than planned
or if it is otherwise deemed advantageous to do so.
52
<PAGE> 59
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Results of Operations -- Continuing Operations:
For the year ended December 31, 1994, sales from continuing operations were
$78,793,711, an increase of $26,381,740 (50%) over 1993. This growth was due
primarily (70%) to increased volume of sales of existing CCTV products to all of
the markets that Ultrak serves. New products introduced by Ultrak during 1994
contributed approximately 30% of the increase in sales.
In comparison, cost of sales were $59,349,708 for the year ended December
31, 1994, an increase of $19,796,194 (50%) over 1993. This increase was in a
virtual direct relationship to the overall CCTV increase in sales. Gross margins
on sales increased to 24.68% in 1994 from 24.53% in 1993, primarily because of
new product sales at higher margins, offset by competition in the CCTV market
and a strategic decision by Ultrak to be an industry value leader.
Marketing and sales expenses were $11,201,460 for the year ended December
31, 1994, an increase of $4,175,946 (59%) over 1993. This increase was due to
additional CCTV sales and sales support staff and related costs incurred to
support the increased level of CCTV sales, travel, and related costs and
increased marketing, advertising, and promotional costs.
General and administrative expenses were $3,132,857 for the year ended
December 31, 1994, an increase of $954,934 (44%) from 1993 due to additional
administrative staff and related costs necessary to support the increase in
sales.
Other expenses were $807,155 for the year ended December 31, 1994, an
increase of $172,538 (27%) over 1993. This increase was due primarily to
increased interest costs on borrowings offset by interest income on notes
receivable.
Results of Operations -- Discontinued Operations. On July 22, 1993, Ultrak
announced that it would discontinue its personal computer ("PC") products
business segment and concentrate its resources on the CCTV business segment. As
a result of this decision, the operations and net assets of the PC business
segment have been classified as discontinued operations for all periods
presented.
During the year ended December 31, 1994, Ultrak recorded an additional
provision of $190,000, net of income tax benefit, to reflect costs of
dissolution of the business as well as provision for expected settlement costs
of the remaining lawsuit relating to the discontinued operations.
Sales included in discontinued operations for the year ended December 31,
1994, 1993, and 1992 were $110,720, $19,232,836 and $9,677,585, respectively
(not included in net sales reported from continuing operations above).
Liquidity and Capital Resources:
Ultrak had a net increase in cash for the year ended December 31, 1994 of
approximately $142,000. Cash used in operating activities during 1994 was
approximately $3,517,000, primarily because of increases in accounts receivable,
inventory, and advances for inventory required by the significantly higher sales
volume. Cash used in investing activities was approximately $1,925,000 for
capital expenditures for furniture, fixtures, tooling, leasehold improvements,
and other fixed assets and acquisition of business. Cash provided by financing
activities was approximately $5,584,000, consisting of net borrowings from
Ultrak's bank and other lenders. It is expected that the Company should begin to
generate positive annual operating cash flows when its growth slows to a more
traditional level.
During 1994, Ultrak advanced a net total of $699,000 on notes receivable to
three parties. The largest advance ($500,000) was to Veravision, Inc., a
California corporation, for a working capital line of credit in consideration of
interest on the borrowed funds and warrants to purchase Veravision's capital
stock. Veravision, formed in 1993, is a manufacturer of dental camera products
for which Ultrak has exclusive United States marketing rights. All of the notes
have varying repayment terms, interest rates and other terms.
53
<PAGE> 60
See Note H to Notes to Consolidated Financial Statements for the years ended
December 31, 1994, 1993, and 1992.
As of December 31, 1994, Ultrak had unused available lines of credit
totaling approximately $1,956,000.
On October 31, 1994, Ultrak's revolving line of credit with NationsBank was
increased from $12.0 million to $13.2 million. The NationsBank revolving line of
credit was further increased during February 1995 from $13.2 million to $15.0
million. On October 4, 1994, Petrus Fund, L.P., of which Perot Investments,
Inc., is the general partner, increased its revolving line of credit to Ultrak
from $6.0 million to $7.0 million and provided for the further increase of the
line of credit from $7.0 million to $8.0 million upon Ultrak achieving certain
net income requirements. In conjunction with the amendments to both loan
agreements, certain financial and operational covenants were modified. All other
terms and conditions of the loan agreements were unchanged.
Concurrently with the amendment to the Petrus loan agreement, the warrant
issued to Petrus to acquire Ultrak Common Stock was amended to reflect that the
warrant exercise price was reduced from $9.00 per share to $8.00 per share, and
the number of Shares of Ultrak Common Stock subject to the warrant was increased
from 154,762 to 200,000.
Both of Ultrak's amended credit facilities contain financial covenants,
including leverage ratios, as defined, of not more than 2.75 to 1.0; current
ratios, as defined, of at least 1.20 to 1.0, working capital requirements,
limitations on capital expenditures and minimum net income requirements, among
others. Operational covenants contained in the credit agreements include
limitations on the sale of assets, prohibitions against liens on collateral,
limitations on indebtedness and contingent liabilities, prohibitions against
changes in management, payment of dividends and acquisitions of assets, among
others.
As of March 31, 1995, Ultrak was in compliance with all of its covenants
with its lenders.
Ultrak will continue to be dependent upon its bank and other lender
financing to fund its operations. Ultrak anticipates that its current operations
and future growth will be financed primarily through increased lines of credit
and internally generated profits. Ultrak believes such sources of funds will be
adequate for its projected needs for the next twelve (12) months. Ultrak may
attempt to raise additional equity capital if sales increase faster than planned
or if it is otherwise deemed advantageous to do so.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
Results of Operations -- Continuing Operations:
For the year ended December 31, 1993, sales from continuing operations were
$52,411,971, an increase of $23,547,493 (82%) over 1992. This growth was due to
increased sales of CCTV products to all of the markets that Ultrak serves.
In comparison, cost of sales were $39,553,514 for the year ended December
31, 1993, an increase of $18,056,665 (84%) over 1992. This increase was due to
overall CCTV sales increases, new product sales, and new mass retail outlet
sales. Gross margins on sales decreased to 24.5% in 1993 from 25.5% in 1992,
primarily because of competition in the CCTV market and a strategic decision by
Ultrak to be an industry value leader.
Marketing and sales expenses were $7,025,514 for the year ended December
31, 1993, an increase of $2,446,861 (53%) over 1992. This increase was due to
additional CCTV sales and sales support staff and related costs incurred to
support the increased level of CCTV sales, marketing costs to support sales, and
increased advertising and promotional costs.
General and administrative expenses were $2,177,923 for the year ended
December 31, 1993, an increase of $667,565 (44%) from 1992 due to additional
administrative staff and related costs necessary to support the increase in
sales.
Other expenses were $634,617 for the year ended December 31, 1993, a
decrease of $74,158 (10%) over 1992. This decrease was due primarily to interest
income on notes receivable offset by increased interest costs.
54
<PAGE> 61
During the fourth quarter of 1993, Ultrak determined it was more likely
than not that a portion of its deferred tax valuation allowance was realizable.
This determination was a result of the profits from continuing operations in
1993 and the forecasted profits for 1994. A deferred tax valuation allowance
still remains for deferred tax assets related to net operating loss
carryforwards, use of which are limited by Section 382 of the Code.
Liquidity and Capital Resources:
Ultrak had a net decrease in cash for the year ended December 31, 1993 of
approximately $323,000. Cash used in operating activities during 1993 was
approximately $4,394,000, primarily because of increases in accounts receivable,
inventory and advances for inventory required by the significantly higher sales
volume. Cash used in investing activities was approximately $1,309,000,
primarily for capital expenditures for furniture, fixtures and other fixed
assets and funding of notes receivable. Cash provided by financing activities
was approximately $5,380,000, consisting of net borrowings from Ultrak's bank
and other lenders.
As of December 31, 1993, Ultrak had unused available lines of credit
totaling approximately $5,410,000.
55
<PAGE> 62
BUSINESS OF DIAMOND
GENERAL
Diamond manufactures and sells high-speed commercial security and
surveillance systems used by large retailers, metropolitan surveillance systems
for traffic control, and hazardous viewing systems used by industry. Diamond's
commercial security and surveillance systems are utilized in monitoring indoor
and outdoor areas of large retailers. Diamond's industrial viewing systems are
utilized in observing furnace operation, gauge monitoring, smoke stack
monitoring and tower plant inspection. Diamond's headquarters are housed in a
72,000 square foot building located 20 miles southeast of Columbus, Ohio in
Carroll, Ohio. Diamond employs approximately 100 people.
Surveillance Systems for Large Retailers
Diamond's FastScan(TM) was the first high-speed remote-controlled pan
(sideways movement), tilt (up/down movement), and zoom product of its kind.
Their Intelli-vision(TM) System features a one-way mirrored dome housing that
conceals a variable high-speed tracking device. This device is controlled by a
joy stick and provides continuous 360 degree right and left pans, plus direct
tilt down and a wide range of zooms. During the development of the Scan family
of products, three major patents were awarded.
Surveillance Systems for Traffic Control and Crime Prevention
Diamond's high-speed camera domes are used for crime prevention in downtown
areas and for traffic observation. This system permits police or emergency
vehicles to be rapidly dispatched from a central control room monitoring the
traffic. The taped recordings from these cameras are also used in traffic
pattern studies and for risk management.
Industrial Viewing Systems
Diamond's industrial viewing systems are utilized in observing furnace
operation, gauge monitoring, smoke stack monitoring and power plant inspection.
Typically industrial viewing systems are:
- The Diamond furnace system provides an accurate and convenient means
to accomplish visual monitoring of flame inside of a furnace to ensure
proper combustion.
- Gauge Viewing Systems provide centrally located visual monitoring of
the boiler drum water and steam level enabling the continuous check of
boiler water levels to prevent tube damage in boilers.
- The StackScan(TM) System provides complete visual monitoring of all
flue gas emission stacks within the view of a single camera.
- A complete line of radiation resistant cameras, lenses, camera
housings, plans and tilts are available for nuclear inspection applications
requiring high radiation and contamination resistance.
Operations
Diamond's design/manufacturing operations are located in Carroll, Ohio.
Production areas use such contemporary equipment as the latest Hollis
wave-soldering equipment; ultrasonic vapor degreasers; axial and radial
lead-preparation machines; complete wire-harness assembly jigs; and
silkscreening equipment. Diamond's Materials Control organization ensures
excellent quality from the purchase of components to the delivery of complete
systems. Diamond's computer design facilities include all hardware and software
necessary to develop and test the computer systems and remote stations required
for any DEI security or process monitoring system.
Distribution
Diamond's surveillance products are sold to wholesale distributors (which
supply dealers that sell to the end user), and installing dealers (which deal
direct with the end user) and directly to the end user (typically
56
<PAGE> 63
large retail chains). Diamond's industrial viewing systems are nearly all sold
to the end user (such as power plants, steel mills, and paper and pulp plants)
through contracted manufacturers representatives or Diamond's sales managers.
Intellectual Property. Diamond relies upon the trademarks "FastScan,"
"SmartScan," "Intelli-vision," and "StackScan" for its products. Diamond claims
protection of key elements of its "Scan" family of products under three major
patents developed or acquired by Diamond.
Governmental Regulations. Diamond's business is not materially affected by
existing or probable government regulations on Diamond or its products.
Comparison with Ultrak's Products. Generally, Diamond's products are used
in more technical applications than Ultrak's products and are more highly
automated than Ultrak's products. As a result, the Diamond product line will
expand Ultrak's product line. There is little overlap between Ultrak's products
and Diamond's products.
EMERGENCE FROM BANKRUPTCY
During 1991 Diamond began to experience significant declines in its revenue
base ($12,861,108 -- 1990, $8,554,592 -- 1991, a $4,306,516 decline, or 33%)
primarily as the result of weakness in the market for large-scale nuclear power
plant security surveillance systems and process automation control systems. With
virtually no reduction in operating expenses during 1991, Diamond incurred a
catastrophic loss of $1,219,647 for the year. This loss adversely affected the
ability of Diamond to restructure its subordinated debt and led to its
insolvency and Chapter 11 filing in July 1991.
Just prior to its Chapter 11 filing Diamond replaced its President and
Chief Executive Officer with its current President, Richard Tompkins, who was
experienced in business turnaround management.
Diamond, under its new President, immediately began a vigorous program to
eliminate unprofitable and technologically obsolete product lines and to replace
executive management in the sales and marketing area. Nuclear security
surveillance and process automation control segments were eliminated with
accompanying cost and overhead reductions. Also at this time Diamond began to
emphasize its pan-tilt-zoom (PTZ) FastScan/SmartScan product lines which
accounts for a significant portion of total revenue. A new Vice President of
Sales and Marketing was hired in May 1992 to increase Diamond's sales back to
its pre-bankruptcy levels but only into profitable CCTV business segments. As a
result of these changes, Diamond's net sales and operating expenses have changed
since the year of the Chapter 11 filing as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1991 1992 1993 1994 1994 1995
------ ------ ------ ------- ------ ------
$(000'S)
<S> <C> <C> <C> <C> <C> <C>
Net Sales....................... $8,555 $8,748 $9,368 $11,774 $2,322 $2,960
Operating Expenses.............. 3,361 2,254 2,418 3,197 685 751
</TABLE>
MARKET FOR DIAMOND COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Diamond Common Stock is held of record by approximately 380 shareholders.
Diamond presently has no outstanding options, warrants, or other rights to
purchase shares of Diamond Common Stock. There is no established trading market
for Diamond Common Stock. Diamond has not declared any cash dividends on its
common stock since the time of acquisition of Diamond by an investor group in
1986, and it is expected by Diamond's Board of Directors that no dividends will
be declared or paid in the foreseeable future.
57
<PAGE> 64
PRINCIPAL SHAREHOLDERS OF DIAMOND
The following table sets forth certain information as to the number of
shares of Diamond Common Stock beneficially owned as of April 28, 1995, by (i)
each person who is known to Diamond to own beneficially more than five percent
of the outstanding shares of Diamond Common Stock and their address, (ii) each
executive officer and Director of Diamond, and (iii) all executive officers and
Directors of Diamond as a group.
<TABLE>
<CAPTION>
NAME SHARES PERCENTAGE
------------------------------------------------------------- -------- ----------
<S> <C> <C>
John W. Biddinger............................................ 1,018,003(1) 21.2%
Director
7491 Albert Tillinghast Drive
Sarasota, FL 34240
Computer Products, Inc.(2)................................... 625,667 13.0%
7900 Glade Road
Boca Raton, FL 33434
Robert N. Davies............................................. 367,475 7.6%
Director
3307 Bay Road
North Indianapolis, IN 46240
H. Charles Koehler........................................... 634,801 13.2%
Director
4511 Briarwood Drive
Indianapolis, IN 46250
William Muirhead, III........................................ 653,120 13.6%
Director
304 Long Cove Drive
Hilton Head, SC 29928
Richard M. Tompkins.......................................... 305,124 6.3%
Director and Executive Officer
6171 Zachary Woods Lane
Columbus, OH 43232
All Directors and Executive Officers as a Group (5
persons)................................................... 2,978,523 61.9%
</TABLE>
- ---------------
(1) Includes 637,637 shares of Diamond Common Stock owned by Mr. Biddinger's
spouse, Margaret H. Biddinger, as to which Mr. Biddinger is deemed to be the
beneficial owner under the rules and regulations of the Commission.
(2) Computer Products, Inc. is a publicly-held company which, to the best of
Diamond's knowledge based upon publicly available information, has no single
controlling person who would be in a position to direct the disposition or
voting of the shares of Diamond Common Stock owned by Computer Products,
Inc.
58
<PAGE> 65
SELECTED FINANCIAL DATA OF DIAMOND
The following table sets forth for the periods and the dates indicated,
selected financial and operating data for Diamond. This information should be
read in conjunction with the financial statements of Diamond included elsewhere
in this Prospectus/Proxy Statement and "DIAMOND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" which are included
elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED FISCAL YEAR ENDED
MARCH 31, ------------------------------------------------------------------
STATEMENT OF --------------------- JANUARY 1, JANUARY 2, JANUARY 3, DECEMBER 29, DECEMBER 30,
OPERATIONS DATA 1995 1994 1995 1994 1993 1991 1990
- --------------------------- --------- --------- ---------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales.................. $2,959,586 $2,321,700 $11,774,691 $9,367,799 $8,747,964 $ 8,554,592 $12,861,108
--------- --------- ---------- ---------- ---------- ------------ ------------
Gross Profit............... $ 941,651 $ 730,009 $3,765,223 $2,940,844 $2,539,546 $ 2,389,684 $ 3,871,562
--------- --------- ---------- ---------- ---------- ------------ ------------
Operating Income (loss).... $ 190,489 $ 44,542 $ 761,371 $ 523,319 $ 285,679 $ (971,207) $ 341,348
--------- --------- ---------- ---------- ---------- ------------ ------------
Income (loss) from
continuing operations
before income taxes...... $ 139,103 $ 4,454 $ 539,162 $ 384,145 $ (29,664) $(1,219,647) $ (266,357)
Income taxes............... 53,780 1,693 213,521 154,276 72,011 0 0
--------- --------- ---------- ---------- ---------- ------------ ------------
Income (loss) from
continuing
operations............ 85,323 2,761 325,641 229,869 (101,675) (1,219,647) (266,357)
Extraordinary items........ 0 0 0 0 1,272,480 0 0
Cumulative effect
adjustment............... 0 0 0 610,100 0 0 0
--------- --------- ---------- ---------- ---------- ------------ ------------
Net Income
(loss)......... $ 85,323 $ 2,761 $ 325,641 $ 839,969 $1,170,805 $(1,219,647) $ (266,357)
========= ========= ========== ========= ========= ========== ==========
Income (loss) per common
share from continuing
operations............... $ .02 $ .00 $ 0.07 $ 0.05 $ (0.03) $ (0.90) $ (0.20)
========= ========= ========== ========= ========= ========== ==========
Income (loss) per common
share.................... $ .02 $ .00 $ 0.07 $ 0.19 $ 0.41 $ (0.90) $ (0.20)
========= ========= ========== ========= ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF FISCAL YEAR END
MARCH 31, ---------------------------------------------------------
BALANCE SHEET DATA 1995 1994 1993 1992 1991 1990
- ---------------------------------------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total assets............................ $6,557,552 $6,766,688 $5,648,036 $5,131,878 $5,627,012 $7,492,489
Short-term debt......................... 888,369 1,273,122 1,238,216 1,432,567 2,064,051 2,556,566
Long-term debt.......................... 859,596 884,548 592,033 774,660 1,699,948 1,842,430
Stockholders' equity (deficit).......... 3,344,572 3,218,047 3,013,410 2,150,965 (578,662) 640,985
Cash dividends declared per
common share.......................... 0 0 0 0 0 0
</TABLE>
59
<PAGE> 66
DIAMOND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
Results of Operations -- Continuing Operations:
For the three months ended March 31, 1995, sales from continuing operations
were $2,959,586, an increase of $637,886 (27%) over the comparable period of
1994. The growth was mostly due to increased volume of sales to existing CCTV
markets.
Cost of goods sold for the three months ended March 31, 1995 was
$2,017,935, an increase of $426,244 (27%) over that of the same period in 1994.
This increase was almost directly proportional to the increase in sales. Gross
margin on sales increased to 31.8% in 1995 versus 31.4% in 1994. Manufacturing
efficiency improvements, better overhead absorption, and reduced warranty costs
almost directly offset cost increases due to inflation.
Sales and marketing expenses were $431,826 for the three months ended March
31, 1995, an increase of $1,309 (.3%) over that of 1994. Cost reductions related
to Diamond's termination of an unprofitable distribution channel offset
increased costs due to inflation.
General and administrative expenses were $260,791 for the three months
ended March 31, 1995, an increase of $42,960 (20%) over that of 1994. Increased
costs due to inflation and increased legal and professional fees all contributed
to the increase.
Research and development expenses were $58,545 for the three months ended
March 31, 1995, an increase of $21,426 (58%) over that of 1994. Research and
development increased on a planned basis to support future strategic product
improvement plans.
Interest expense was $43,180 for the three months ended March 31, 1995, an
increase of $3,954 (10%) over that of 1994. Increased rates of interest on the
revolving line of credit and increased borrowings on the term loan did not quite
offset reduced borrowings on the revolving line of credit.
Other (Income) Expense was $8,206 for the three months ended March 31,
1995, an increase of $7,344 over that of 1994.
Liquidity and Capital Resources:
Diamond had a net increase in cash for the three months ended March 31,
1995 of approximately $3,000. Cash provided by operating activities during the
three months ended March 31, 1995, was approximately $431,000 consisting of a
net cash inflow from net income before depreciation, amortization, and deferred
taxes of approximately $191,000 plus a cash inflow of approximately $240,000 for
decreased net working capital mostly due to an account receivable reduction and
accounts payable increase offset by higher inventory levels.
Cash used by investing activities was approximately $59,000 for capital
expenditures for machinery and equipment.
Cash used by financing activities was approximately $369,000 consisting of
net repayments to Diamond's bank and other lenders of approximately $410,000
offset by an equity issuance of approximately $41,000.
As of March 31, 1995, Diamond had an unused available line of credit on its
revolving credit facility of approximately $1,354,000 and an unused capital
expenditure note facility of $100,000. Diamond will continue to be dependent on
its bank to fund its working capital needs and to maintain the existing term
loan facility. Diamond's current operations and future sales volume expansion
will be funded by its lender and by profits. Diamond believes its sources of
financing for the next 12 months will be adequate.
60
<PAGE> 67
DIAMOND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Emergence From Bankruptcy:
During 1991 Diamond began to experience significant declines in its revenue
base ($12,861,108 -- 1990, $8,554,592 -- 1991, a $4,306,516 decline, or 33%)
primarily as the result of weakness in the market for large-scale nuclear power
plant security surveillance systems and process automation control systems. With
virtually no reduction in operating expenses during 1991 Diamond incurred a
catastrophic loss of $1,219,647 for the year. This loss adversely affected the
ability of Diamond to restructure its subordinated debt and lead(led) to its
insolvency and Chapter 11 filing in July 1991.
Just prior to its Chapter 11 filing Diamond replaced its President and
Chief Executive Officer with its current President, Richard Tompkins, who was
experienced in business turnaround management.
Diamond, under its new President, immediately began a vigorous program to
eliminate unprofitable and technologically obsolete product lines and to replace
executive management in the sales and marketing area. Nuclear security
surveillance and process automation control segments were eliminated with
accompanying cost and overhead reductions. Also at this time Diamond began to
emphasize its pan-tilt-zoom (PTZ) FastScan/SmartScan product lines which
accounts for a significant portion of total revenue. A new Vice President of
Sales and Marketing was hired in May 1992 to increase Diamond's sales back to
its pre-bankruptcy levels but only into profitable CCTV business segments. As a
result of these changes, Diamond's net sales and operating expenses have changed
since the year of the Chapter 11 filing as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH
-----------------
1991 1992 1993 1994 1994 1995
------- ------- ------- -------- ------- -------
$(000'S)
<S> <C> <C> <C> <C> <C> <C>
Net Sales........................ $ 8,555 $ 8,748 $ 9,368 $ 11,774 $ 2,322 $ 2,960
Operating Expenses............... 3,361 2,254 2,418 3,197 685 751
</TABLE>
YEAR ENDED JANUARY 1, 1995 (1994) COMPARED TO YEAR ENDED JANUARY 2, 1994 (1993)
Results of Operations -- Continuing Operations:
For the year ended January 1, 1995, sales from continuing operations were
$11,774,691, an increase of $2,406,892 (26%) over 1993. The growth was mostly
(75%) due to increased volume of sales to existing CCTV markets. The remainder
of the increase (25%) related to Diamond's penetration into new markets.
Cost of goods sold for the year ended January 1, 1995, was $8,009,468, an
increase of $1,582,513 (24.6%) over 1993. This increase was almost directly
proportional to the increase in sales. Gross margin on sales increased to 32.0%
in 1994 versus 31.4% in 1993. Higher material, labor, and certain overhead costs
due to inflation were offset by efficiency and overhead absorption improvements
due to increased sales volume. Sales and marketing expenses were $1,882,860 for
the year ended January 1, 1995 (1994), an increase of $489,020 (35%) over 1993.
This increase was due to increased personnel, travel, advertising, and
promotional activities required to support the sales volume increase.
General and administrative expenses were $936,488 for the year ended
January 1, 1995 (1994), an increase of $52,265 (6%) over 1993. Administrative
controls and systems in place allowed significant sales volume growth without a
corresponding increase in expenses.
To enable Diamond to supply competitive products to an ever more
sophisticated marketplace, research and development expenses were $184,504 for
the year ended January 1, 1995 (1994), an increase of $45,042 (32%) over 1993.
Research and development were increased on a planned basis.
Interest expense was $193,392 for the year ended January 1, 1995 (1994), a
decrease of $6,124 (3%) over 1993. Increased rates of interest on the revolving
line of credit were offset by reduced borrowings during 1994 versus 1993.
Increased borrowings on the term loan were offset by reduced interest rates
obtained on refinancing.
61
<PAGE> 68
Other expenses were $28,817 for the year ended January 1, 1995 (1994), an
increase of $89,159 over 1993.
Liquidity and Capital Resources:
Diamond had a net decrease in cash for the year ended January 1, 1995 of
approximately $8,000. Cash provided by operating activities during 1994 was
approximately $138,000, consisting of a net cash flow from net income before
depreciation and amortization of approximately $517,000 offset by a cash outflow
of approximately $379,000 for increased net working capital to support higher
sales volume. Cash used by investing activities was approximately $202,000 for
capital expenditures for machinery and equipment and other assets. Cash provided
by financing activities was approximately $56,000, consisting of net borrowings
from the Diamond's bank and other lenders of approximately $327,000 offset by a
net equity redemption of approximately $271,000.
As of January 1, 1995, Diamond had an unused available line of credit on
its revolving credit facility of approximately $1,270,000 and an unused capital
expenditure note facility of $100,000. Diamond will continue to be dependent on
its bank to fund its working capital needs and to maintain the existing term
loan facility. Diamond's current operations and future sales volume expansion
will be funded by its lender and by its operating profits. Diamond believes its
sources of financing for the next twelve (12) months will be adequate.
YEAR ENDED JANUARY 2, 1994 (1993) COMPARED TO YEAR ENDED JANUARY 3, 1993 (1992)
Results of Operations -- Continuing Operations:
For the year ended January 2, 1994, sales from continuing operations were
$9,367,799, an increase of $619,835 (7%) over that of 1992. The growth was
mostly due to increased volume of sales to existing CCTV markets.
Cost of goods sold for the year ended January 2, 1994, was $6,426,955, an
increase of $218,537 (3.5%) over that of 1992. This increase was less than the
increase in sales. Gross margin on sales increased to 31.4% in 1993 versus 29.4%
in 1992. Manufacturing efficiency improvements, better overhead absorption, and
reduced warranty costs more than offset cost increases due to inflation.
Sales and marketing expenses were $1,393,840 for the year ended January 2,
1994 (1993), an increase of $64,826 (5%) over 1992. This increase was due
primarily to increased costs due to inflation.
General and administrative expenses were $884,223 for the year ended
January 2, 1994 (1993), an increase of $108,238 (14%) over 1992. Increased cost
due to inflation, management performance bonuses, and personnel staff increases
all contributed to the increase.
Research and development expenses were $139,462 for the year ended January
2, 1994 (1993), a decrease of $9,406 (6%) over that of 1992. Research and
development decreased on a planned basis due to austerity reasons.
Interest expense was $199,516 for the year ended January 2, 1994 (1993), a
decrease of $27,890 (12%) over that of 1992. Increased rates of interest on the
revolving line of credit offset reduced borrowings during 1993 versus 1992.
Other Income was $60,342 for the year ended January 2, 1994 (1993), a
decrease of $5,651 over that of 1992.
Reorganization Item expense was $0 for this year ended January 2, 1994
(1993), a decrease of $153,930 over that of 1992. The absence of Chapter 11
legal and professional fees in 1993 caused the change.
Extraordinary Item income was $0 for the year ended January 2, 1994 (1993),
a decrease of $1,272,480 over that of 1992. This resulted from the absence of
both a $947,143 gain on Chapter 11 debt restructuring and a $325,337 tax
operating loss carryforward in 1993 that was present in 1992.
62
<PAGE> 69
Cumulative Effect Adjustment income was $610,100 for the year ended January
2, 1994 (1993), an increase of $610,100 over that of 1992. Diamond adopted the
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109) in 1993 requiring the
first time recognition of deferred tax assets.
Liquidity and Capital Resources:
Diamond had a net decrease in cash for the year ended January 2, 1994 of
approximately $294,000. Cash provided by operating activities was approximately
$120,000 consisting of a net cash inflow from net income before depreciation,
amortization and deferred taxes of approximately $553,000 offset by a net cash
outflow of approximately $433,000 for increased net working capital primarily
due to increased inventories.
Cash used by investing activities was approximately $60,000 for capital
expenditures for tooling, machinery and equipment and furniture and fixtures.
Cash used by financing activities was approximately $354,000, consisting of
net repayments to Diamond's bank and other lenders of approximately $377,000
offset by an equity issuance of approximately $23,000.
As of January 2, 1994, Diamond had an unused available line of credit on
its revolving credit facility of approximately $777,000. Diamond will continue
to be dependent on its bank to fund its working capital needs and to maintain
the existing term loan facility. Diamond's current operations and future sales
volume expansion will be funded by its lender and by its operating profits.
Diamond believes its sources of financing for the next twelve (12) months will
be adequate.
LEGAL MATTERS
The validity of the shares of Ultrak Common Stock offered hereby has been
passed upon for Ultrak by Gardere & Wynne, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements and schedules of Ultrak as of
December 31, 1994 and 1993, and for each of the years in the three-year period
ended December 31, 1994, included herein and elsewhere in the Registration
Statement, have been audited by Grant Thornton LLP, independent certified public
accountants, as set forth in their reports appearing elsewhere herein, and are
included upon the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Diamond as of January 1, 1995, and
January 2, 1994, and for each of the years in the two years ended January 1,
1995, included herein and elsewhere in the Registration Statement, have been
included in reliance upon the reports of Norman, Jones, Enlow & Co., independent
certified public accountants, appearing elsewhere herein, and given on the
authority of that firm as experts in accounting and auditing.
63
<PAGE> 70
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ULTRAK, INC. AND SUBSIDIARIES PAGE
----
<S> <C>
For the Years ended December 31, 1994, 1993 and 1992:
Report of Independent Certified Public Accountants................................. F-2
Consolidated Balance Sheets at December 31, 1994 and 1993.......................... F-3
Consolidated Statements of Income for the years ended December 31, 1994, 1993, and
1992............................................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1994, 1993, and 1992............................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1993,
and 1992........................................................................ F-6
Notes to Consolidated Financial Statements......................................... F-7
For the Three Months Ended March 31, 1995 and 1994:
Consolidated Balance Sheets at March 31, 1995 and December 31, 1994................ F-15
Consolidated Statements of Income for the three months ended March 31, 1995 and
1994............................................................................ F-16
Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and
1994............................................................................ F-17
Notes to Consolidated Financial Statements......................................... F-18
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
For the 52 Weeks ended January 1, 1995 and January 2, 1994:
Independent Auditors' Report....................................................... F-20
Consolidated Balance Sheets At January 1, 1995 and January 2, 1994................. F-21
Consolidated Statements of Income for the 52 weeks ended January 1, 1995 and the 52
weeks ended January 2, 1994..................................................... F-22
Consolidated Statements of Changes in Shareholders' Equity for the 52 weeks ended
January 1, 1995 and the 52 weeks ended January 2, 1994.......................... F-23
Consolidated Statements of Cash Flows for the 52 weeks ended January 1, 1995 and
the 52 weeks ended January 2, 1994.............................................. F-24
Notes to Consolidated Financial Statements......................................... F-25
For the Three Months ended March 31, 1995 and 1994:
Consolidated Balance Sheets as of March 31, 1995 and December 31, 1994............. F-34
Consolidated Statements of Income for the three months ended March 31, 1995 and
1994............................................................................ F-35
Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and
1994............................................................................ F-36
Notes to Consolidated Financial Statements......................................... F-37
</TABLE>
F-1
<PAGE> 71
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have audited the accompanying consolidated balance sheets of Ultrak,
Inc. and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Ultrak, Inc.
and Subsidiaries as of December 31, 1994 and 1993, and the consolidated results
of their operations and their consolidated cash flows for each of the three
years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
February 17, 1995
F-2
<PAGE> 72
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
Current Assets
Cash............................................................ $ 642,241 $ 500,106
Trade accounts receivable, less allowance for doubtful accounts
of $323,772 and $213,607 at December 31, 1994 and 1993,
respectively (Note C)........................................ 10,743,091 7,804,844
Notes receivable (Note C)....................................... 253,771 18,619
Inventories (Note C)............................................ 14,396,438 11,088,019
Advances for inventory purchases (Note C)....................... 5,381,437 2,510,096
Prepaid expenses and other current assets (Note C).............. 178,698 256,895
Deferred income taxes (Note G).................................. 362,988 434,000
Net assets of discontinued operations (Note I).................. -- 197,125
----------- -----------
Total current assets.................................... 31,958,664 22,809,704
----------- -----------
Furniture and Equipment, at cost (Note C)......................... 2,966,619 1,620,250
Less accumulated depreciation................................... (995,226) (591,675)
----------- -----------
1,971,393 1,028,575
Goodwill, net of accumulated amortization of $135,467 and $91,738
at December 31, 1994 and 1993, respectively (Note B)............ 1,259,969 669,503
Deferred Income Taxes (Note G).................................... -- 156,000
Notes Receivable (Note H)......................................... 984,208 520,000
Other Assets...................................................... 178,456 201,012
----------- -----------
$36,352,690 $25,384,794
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable -- trade....................................... $ 6,531,779 $ 4,407,294
Notes payable (Note C).......................................... 18,244,183 12,590,039
Current maturities of long-term debt (Note C)................... -- 285,000
Accrued liabilities............................................. 664,740 341,504
Other current liabilities....................................... 841,600 219,618
----------- -----------
Total current liabilities.................................... 26,282,302 17,843,455
----------- -----------
Commitments and Contingencies (Note F)............................ -- --
Stockholders' Equity (Note D)
Preferred stock, $5 par value, issuable in series; 2,000,000
shares authorized Series A, 12% cumulative convertible;
195,351 shares authorized, issued and outstanding............ 976,755 976,755
Common stock 20,000,000 shares authorized; 6,555,619 and
6,538,352 shares issued and outstanding at December 31, 1994
and 1993, respectively, at stated value...................... 73,254 72,489
Additional paid-in capital...................................... 7,213,747 7,167,765
Retained earnings (accumulated deficit)......................... 1,806,632 (675,670)
----------- -----------
Total stockholders' equity................................... 10,070,388 7,541,339
----------- -----------
$36,352,690 $25,384,794
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 73
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Net sales (Note E).................................... $78,793,711 $52,411,971 $28,864,478
Cost of sales......................................... 59,349,708 39,553,514 21,496,849
---------- ---------- ----------
Gross profit..................................... 19,444,003 12,858,457 7,367,629
---------- ---------- ----------
Other operating costs
Marketing and sales................................. 11,201,460 7,025,514 4,578,653
General and administrative.......................... 3,132,857 2,177,923 1,510,358
---------- ---------- ----------
14,334,316 9,203,437 6,089,011
---------- ---------- ----------
Operating profit................................. 5,109,687 3,655,020 1,278,618
---------- ---------- ----------
Other expense (income)
Interest expense, net............................... 1,091,400 693,655 449,523
Other, net.......................................... (284,245) (59,038) 259,252
---------- ---------- ----------
807,155 634,617 708,775
---------- ---------- ----------
Income from continuing operations before income
taxes............................................... 4,302,532 3,020,403 569,843
Income taxes (Note G)................................. 1,513,020 381,543 26,343
---------- ---------- ----------
Income from continuing operations..................... 2,789,512 2,638,860 543,500
Discontinued operations, net of tax effects (Note I)
Income (loss) from operations....................... -- (289,489) 294,255
Provision for loss on disposal...................... (190,000) (1,544,881) --
---------- ---------- ----------
(190,000) (1,834,370) 294,255
---------- ---------- ----------
Net Income.................................. 2,599,512 804,490 837,755
Dividend requirements on preferred stock (Note D)..... (117,210) (117,210) (117,210)
---------- ---------- ----------
Net income allocable to common stockholders........... $2,482,302 $ 687,280 $ 720,545
========== ========== ==========
Income per common share
Continuing operations............................... $ .39 $ .37 $ .07
========== ========== ==========
Net income.......................................... $ .36 $ .10 $ .11
========== ========== ==========
Number of weighted average common and common
equivalent shares outstanding....................... 6,818,999 6,789,872 6,845,550
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 74
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
--------- ---------- ----------
<S> <C> <C> <C>
Common Stock (Note D)
Beginning of year.................................... $ 72,489 $ 70,968 $ 40,654
Issuance of common stock in private placement
offering.......................................... -- -- 30,000
Exercise of stock options and warrants............... 765 1,521 314
---------- ----------- -----------
End of year.......................................... $ 73,254 $ 72,489 $ 70,968
========== =========== ===========
Additional Paid-In Capital (Note D)
Beginning of year.................................... $7,167,765 $ 7,132,910 $ 4,357,915
Issuance of common stock in private placement
offering,
net of costs...................................... -- -- 2,743,872
Exercise of stock options and warrants, net of
costs............................................. 45,982 34,855 31,123
---------- ----------- -----------
End of year.......................................... $7,213,747 $ 7,167,765 $ 7,132,910
========== =========== ===========
Common Stock Subscribed (Note D)
Beginning of year.................................... $ -- $ -- $ 885,215
Net proceeds of common stock subscribed.............. -- -- 1,888,657
Issuance of common stock in private placement
offering,
net of costs...................................... -- -- (2,773,872)
---------- ----------- -----------
End of year.......................................... $ -- $ -- $ --
========== =========== ===========
Retained Earnings (Accumulated Deficit) (Note D)
Beginning of year.................................... $ (675,670) $(1,362,950) $(2,083,495)
Preferred stock dividends............................ (117,210) (117,210) (117,210)
Net income........................................... 2,599,512 804,490 837,755
---------- ----------- -----------
End of year.......................................... $1,806,632 $ (675,670) $(1,362,950)
========== =========== ===========
Common Shares
Beginning of year.................................... 6,538,352 6,495,848 5,800,014
Issuance of common shares in private placement
offering.......................................... -- -- 666,667
Exercise of stock options and warrants............... 17,267 42,504 29,167
---------- ----------- -----------
6,555,619 6,538,352 6,495,848
========== =========== ===========
Preferred Shares
Beginning and end of year............................ 195,351 195,351 195,351
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 75
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.......................................... $2,599,512 $ 804,490 $ 837,755
Adjustments to reconcile net income to net cash used
in operating activities
Depreciation and amortization.................... 447,280 252,275 155,966
Provision for losses on accounts receivable...... 532,344 368,814 287,669
Provision (reduction) for inventory
obsolescence................................... 52,408 102,295 (6,252)
Deferred income taxes............................ -- (590,000) --
Changes in operating assets and liabilities
Increase in accounts and notes receivable...... (3,705,743) (3,753,654) (1,454,061)
Increase in inventories........................ (3,360,827) (5,216,355) (4,001,847)
Increase in advances for inventory purchases... (2,871,341) (182,169) (1,447,845)
Decrease in prepaid expenses and other current
assets...................................... 149,209 21,132 170,497
Increase in noncurrent notes and other
assets...................................... (341,532) (617,489) (27,420)
Increase in accounts payable................... 2,124,485 3,019,574 219,295
Decrease in other notes payable................ (285,000) (5,543) (24,356)
Increase (decrease) in accrued liabilities and
other current liabilities................... 945,218 (12,625) 368,545
Decrease (increase) in net assets of
discontinued operations..................... 197,125 642,103 (839,228)
---------- ---------- ----------
Net cash used in operating activities....... (3,516,862) (5,167,152) (5,761,282)
---------- ---------- ----------
Cash flows from investing activities
Purchases of furniture and equipment................ (1,346,369) (699,311) (254,747)
Acquisitions of businesses.......................... (578,315) -- --
(Increase) decrease in net assets of discontinued
operations....................................... -- 163,563 (163,563)
---------- ---------- ----------
Net cash used in investing activities....... (1,924,684) (535,748) (418,310)
---------- ---------- ----------
Cash flows from financing activities
Net borrowings on note payable to bank.............. 5,654,144 5,460,881 4,940,458
Net proceeds from sale or subscription of common
stock............................................ 46,747 36,376 1,920,094
Payment of preferred stock dividends................ (117,210) (117,210) (117,210)
---------- ---------- ----------
Net cash provided by financing activities... 5,583,681 5,380,047 6,743,342
---------- ---------- ----------
Net increase (decrease) in cash....................... 142,135 (322,853) 563,750
Cash at beginning of year............................. 500,106 822,959 259,209
---------- ---------- ----------
Cash at end of year................................... $ 642,241 $ 500,106 $ 822,959
========== ========== ==========
Supplemental cash flow information:
Cash paid during the year for:
Interest......................................... $1,109,361 $ 684,933 $ 450,541
========== ========== ==========
Income taxes..................................... $ 804,158 $ 91,269 $ 25,605
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 76
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1993 AND 1992
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Consolidation
The accompanying consolidated financial statements include the accounts of
Ultrak, Inc. and its subsidiaries (the Company). All significant intercompany
balances and transactions have been eliminated in consolidation.
Inventories
Inventories are comprised of goods held for resale, which are valued at the
lower of cost (first-in, first-out) or market.
Advances for Inventory
Advances for inventory represents payments in advance for goods purchased
primarily from the Far East. Upon receipt, the advances are classified as
inventories.
Furniture and Equipment and Depreciation
Furniture and equipment are carried at cost. The provision for depreciation
is computed using the straight-line method over the estimated useful lives of
the assets ranging from three to ten years.
Goodwill and Amortization
Goodwill resulting from acquisitions is being amortized using the
straight-line method over periods ranging from twenty to forty years. On an
ongoing basis, management reviews the valuation and amortization of goodwill to
determine possible impairment by comparing the carrying value to the
undiscounted future cash flows of the related business unit.
Income Taxes
Deferred income taxes are determined using the liability method, under
which deferred tax assets and liabilities are determined based on differences
between financial accounting and tax bases of assets and liabilities.
Statement of Cash Flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three months or less
to be cash equivalents. As of December 31, 1994 and 1993, there were no cash
equivalents.
Income Per Common Share
Income per common share is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding during the
period. Common equivalent shares result from the assumed issuance of shares
under the Company's incentive stock option plan, warrants and convertible
preferred stock, if dilutive.
Reclassifications
Certain reclassifications have been made to prior years to conform with the
1994 presentation.
F-7
<PAGE> 77
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- ACQUISITION OF JAK PACIFIC VIDEO WARRANTY AND REPAIR SERVICES, INC.
Effective April 1, 1994, the Company acquired 56% of the outstanding common
stock of JAK Pacific Video Warranty and Repair Services, Inc. (JAK), a
California corporation, for total cash consideration of $573,000. At the time of
the acquisition, JAK's assets approximated $44,000 and liabilities approximated
$97,000. The transaction was accounted for as a purchase. The operations of JAK
have been included in the Company's statements of income beginning April 1,
1994. JAK is engaged in sales, service and warranty repairs of closed circuit
television products.
The purchase price was allocated to the acquired assets and assumed
liabilities based upon their respective fair values. The excess of cost over the
net tangible assets acquired of approximately $626,000 is included in the
accompanying balance sheet as goodwill and is being amortized over twenty years.
The Company has an option to acquire the remaining 44% of the common stock
of JAK in increments of a minimum of 4% per month over the period from January
17, 1995 to December 31, 1995.
The cash consideration for each 4% incremental interest is $45,455 (total
aggregate of $500,000). Amounts paid after January 17, 1995 increase at a rate
of 8% per annum.
During February, 1995, the Company exercised its option to acquire an
additional 4% of the common stock of JAK.
NOTE C -- NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consist of the following notes:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
$13.2 million revolving line of credit, due upon demand or
September 27, 1995; interest at floating prime (8.25% at
December 31, 1994) plus 1/2% payable monthly;
collateralized by substantially all assets.............. $11,735,392 $ 8,649,820
$7.0 million revolving line of credit, due upon demand or
April 4, 1996; interest at the greater of 8.5% or
floating prime plus 2.0% per annum payable monthly;
collateralized by inventory............................. 6,508,791 3,940,219
----------- -----------
$18,244,183 $12,590,039
========== ==========
</TABLE>
All of the credit facilities are guaranteed in part by the principal
stockholder of the Company. The credit agreements contain certain restrictive
covenants and conditions, including debt to tangible net worth ratios, current
ratios and working capital ratios. At December 31, 1994, the Company did not
meet certain of these covenants and has obtained waivers of the violations.
As of December 31, 1994, the Company had unused available lines of credit
totaling approximately $1,956,000.
Current maturities of long-term debt at December 31, 1993 consisted of a
promissory note due to the former majority stockholder of CCTV Source, Inc. for
repayment of cash advances subsequent to the effective date of the Company's
acquisition of CCTV Source, Inc. The note was paid in full during 1994.
Subsequent to December 31, 1994, the $13.2 million revolving line of credit
was increased to $15.0 million under essentially the same terms and conditions.
The weighted average interest rate for notes payable for the years ended
December 31, 1994 and 1993 was 8.16% and 6.19%, respectively.
F-8
<PAGE> 78
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- STOCKHOLDERS' EQUITY
The stockholders of Ultrak, Inc., voting at a special meeting of
stockholders held December 17, 1993, approved, effective December 28, 1993, an
amendment to the Company's Articles of Incorporation and a concurrent
one-for-six reverse stock split of shares of the Company's common stock.
Accordingly, all share and per share amounts have been restated to reflect the
reverse stock split.
The amendment to the Company's Articles of Incorporation changed the number
of authorized shares of the Company's common stock from 50,000,000 shares
(before the reverse stock split) to 20,000,000 shares (after the reverse stock
split); eliminated the authorization of the Company's Class A Non-Voting Common
Stock, $.01 par value, Series A 8% Cumulative Convertible Preferred Stock and
Senior Series B 8% Cumulative Convertible Preferred Stock (none of which was
outstanding); amended the rights and preferences of the outstanding Series A
Preferred Stock to, among other things, increase the relative voting rights of
holders of that Series, and made other changes in the rights and preferences of
that Series to give effect to the reverse stock split.
Preferred Stock
The Company's Amended Articles of Incorporation authorize issuance in
series of up to 2,000,000 shares of $5 par value preferred stock, of which
195,351 shares have been designated as Series A, 12% cumulative convertible
preferred stock.
The Series A Preferred Stock earns dividends at the rate of 12% per annum,
beginning January 1, 1991, payable quarterly. All dividends accrue whether or
not such dividends have been declared and whether or not there are profits,
surplus, or other funds of the Company legally available for payment.
The Company may at any time redeem all or any portion of the Series A
Preferred Stock then outstanding at the liquidation value of $5 plus unpaid
dividends. A holder of Series A Preferred Stock may convert all or any of the
shares into shares of the Company's Common Stock at any time at a conversion
rate equal to the original purchase price of $5.00 plus any unpaid dividends
divided by $2.40.
Holders of Series A Preferred Stock are entitled to vote on all matters
submitted to a vote of stockholders. Each Series A Preferred Share is entitled
to voting rights equal to 16.667 shares of common stock.
Nonqualified Stock Option Plan
The 1988 Nonqualified Stock Option Plan provides for options to be granted
covering 833,334 shares of common stock. Shares under grant generally become
exercisable in five equal annual installments beginning one year after the date
of grant, and expire after ten years.
Option exercise prices are set by the Board of Directors on the date of
grant at the market price of the Company's common stock.
F-9
<PAGE> 79
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Details of stock options are as follows:
<TABLE>
<CAPTION>
NUMBER OF OPTION
SHARES PRICE
--------- -------------
<S> <C> <C>
Options outstanding -- December 31, 1992.................. 498,560 $ .60 -- $7.50
Granted................................................. 108,333 6.00
Forfeited............................................... (93,334) 2.40 -- 7.50
Exercised............................................... (13,333) .60 -- 7.50
--------- --------------
Options outstanding -- December 31, 1993.................. 500,226 1.20 -- 7.50
Granted................................................. 47,500 4.50 -- 6.88
Forfeited............................................... (14,167) 3.75 -- 6.00
Exercised............................................... (600) 2.40
--------- --------------
Options outstanding -- December 31, 1994.................. 532,959 $1.20 -- 7.50
======== ==============
Options exercisable -- December 31, 1994.................. 334,109 $1.20 -- 7.50
======== ==============
</TABLE>
Stock Warrants
In connection with the $7.0 million line of credit (Note C), the Company
granted to the lender warrants to purchase a total of 200,000 shares of
restricted common stock at a price of $8 per share, subject to certain
adjustments. The warrant agreement expires in April 1996 and no warrants have
been exercised to date.
NOTE E -- MAJOR CUSTOMERS AND SUPPLIERS
Revenue in excess of 10% of total sales was received from one customer in
each of the three years ended December 31, 1994 as follows:
<TABLE>
<S> <C>
1994........................................................... $16,279,000
1993........................................................... 9,596,000
1992........................................................... 5,633,000
</TABLE>
The Company's purchases from one vendor in Korea represented approximately
45% of total cost of goods sold in 1994.
NOTE F -- COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have entered into operating leases for
office and warehouse space and data processing equipment.
Minimum future rental payments for all long-term, noncancelable operating
leases is presented below:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1995............................................................. $ 472,000
1996............................................................. 431,000
1997............................................................. 338,000
1998............................................................. 258,000
1999............................................................. 98,000
----------
$1,597,000
=========
</TABLE>
F-10
<PAGE> 80
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total rent expense charged to operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1994............................................................. $ 473,502
=========
1993............................................................. $ 266,717
=========
1992............................................................. $ 235,501
=========
</TABLE>
The Company is a defendant in one lawsuit arising out of the ordinary
course of business. In the opinion of management, the lawsuit will not have a
material adverse effect upon the Company's business or financial position.
NOTE G -- INCOME TAXES
The provisions for taxes on income from continuing operations consists of
the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1994 1993 1992
---------- --------- -------
<S> <C> <C> <C>
Federal
Current........................................ $1,081,435 $ 613,105 $11,979
Deferred....................................... 227,012 (266,892) --
State............................................ 204,573 35,330 14,364
---------- --------- -------
$1,513,020 $ 381,543 $26,343
========= ========= =======
</TABLE>
The Company's effective income tax rate from continuing operations differed
from the Federal statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1994 1993 1992
---- ----- -----
<S> <C> <C> <C>
U.S. Federal statutory rate.................................. 34.0% 34.0% 34.0%
Reduction in deferred tax asset valuation allowance.......... (1.4) (4.5) --
Net operating loss carryforward.............................. -- (18.4) (33.5)
Other, net................................................... 2.6 1.6 4.1
---- ----- -----
35.2% 12.7% 4.6%
==== ===== =====
</TABLE>
F-11
<PAGE> 81
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1993
--------- ---------
<S> <C> <C>
Deferred tax assets
Inventory................................................. $ 156,854 $ 181,835
Bad debts................................................. 156,416 160,671
Accrual for estimated expenses............................ 98,489 103,869
Net operating loss carryforward........................... 177,026 398,123
--------- ---------
588,785 844,498
Deferred tax liabilities
Depreciation.............................................. (78,331) (47,664)
Other..................................................... (13,662) (12,240)
--------- ---------
(91,993) (59,904)
Valuation allowance......................................... (133,804) (194,594)
--------- ---------
$ 362,988 $ 590,000
========= =========
</TABLE>
As of December 31, 1994, the Company has available net operating loss
carryforwards of approximately $520,000 which are available to reduce future
taxable income by approximately $60,000 per year through 2002. A valuation
allowance of $133,804 has been recognized to offset a portion of the deferred
tax assets related to those carryforwards.
NOTE H -- NOTES RECEIVABLE
Notes receivable -- noncurrent consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
-------- --------
<S> <C> <C>
$750,000 notes receivable, principal payments due and payable
annually as follows:
July 1995, $300,000; July 1996, $100,000; July 1997, $100,000;
upon maturity July 1998, $200,000; interest payable monthly
at 10% per annum, collateralized by substantially all
assets of the maker........................................ $700,000 $420,000
$116,000 note receivable, due and payable on April 21, 1996;
interest payable quarterly at prime plus 4%, collateralized by
certain assets of the maker................................... 116,000 100,000
$200,000 note receivable, principal payments due and payable on
January 14, 1997, interest payable annually at 8%, partially
collateralized by certain assets of the maker................. 168,208 --
-------- --------
$984,208 $520,000
======== ========
</TABLE>
In connection with the $750,000 notes receivable, the Company has received
warrants to purchase up to 59% of the common stock of the maker. The Chairman of
the Board of the Company has guaranteed approximately $470,000 of the notes and
has received approximately 50% of the Company's warrants.
NOTE I -- DISCONTINUED OPERATIONS
On July 22, 1993, the Company announced that it would discontinue its
personal computers products (PC) business segment and concentrate its resources
on the CCTV business segment. As a result of this
F-12
<PAGE> 82
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
decision, the operations and net assets of the PC business segment are
classified as discontinued operations for all periods presented.
Sales included in discontinued operations for the years ended December 31,
1994, 1993 and 1992 were $110,720, $19,232,836 and $9,677,585, respectively. The
loss (income) from discontinued operations is net of tax benefits of $145,106 in
1993 and tax expense of $14,262 in 1992, and the provision for loss on disposal
in 1994 and 1993 is net of tax benefits of $98,000 and $774,368, respectively.
Net assets of discontinued operations is comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1993
-------- ---------
<S> <C> <C>
Accounts receivable, net....................................... $ 30,000 $ 241,038
Inventories, net............................................... -- 117,293
Accounts payable............................................... -- (5,306)
Other liabilities and reserves, net............................ (30,000) (155,900)
-------- ---------
Net assets of discontinued operations................ $ -- $ 197,125
======== =========
</TABLE>
NOTE J -- UNAUDITED QUARTERLY OPERATING RESULTS AND UNUSUAL ITEMS
Unaudited quarterly operating results for the years ended December 31, 1994
and 1993 are as follows:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1994
Sales............................. $17,808,683 $19,032,217 $21,524,735 $20,428,076
Gross profit...................... 4,164,245 4,928,373 5,278,902 5,072,483
Income (loss) from Continuing
operations..................... 628,057 825,511 999,428 336,516
Discontinued operations........ -- -- (190,000) --
---------- ---------- ---------- ----------
Net income................ 628,057 825,511 809,428 336,516
========== ========== ========== ==========
Net income per share...... $ .09 $ .12 $ .11 $ .04
========== ========== ========== ==========
1993 (1)
Sales............................. $10,472,526 $12,242,154 $15,670,925 $14,217,644
Gross profit...................... 2,605,022 3,120,365 3,882,816 3,192,797
Income (loss) from Continuing
operations..................... 764,848 939,503 1,113,862 (179,353)
Discontinued operations........ (26,920) (707,674) (1,758,593) 658,817
---------- ---------- ---------- ----------
Net income (loss)......... 737,928 231,829 (644,731) 479,464
========== ========== ========== ==========
Net income (loss) per
share................... $ .10 $ .03 $ (.10) $ .07
========== ========== ========== ==========
</TABLE>
- ---------------
(1) Reclassified to reflect discontinued operations; see Note I of Notes to
Consolidated Financial Statements.
During the second, third and fourth quarters of 1993, the Company made
provisions for expected losses on liquidation of its PC business segment and
incurred operating losses in the amount of $2,464,000. Net assets of
discontinued operations as of December 31, 1993 were $197,125, consisting
primarily of collectible accounts receivable and saleable inventory.
During the fourth quarter of 1993, the Company reduced its deferred tax
valuation allowance by $590,000 and recorded a tax benefit in the amount of
$329,000 related to its discontinued PC business segment and
F-13
<PAGE> 83
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
additional tax expense related to its continuing operations of $290,000. The
Company incurred a loss during the fourth quarter of 1993 in its continuing
operations primarily because of approximately $577,000 in losses associated with
delays in production of its new dental product and advance marketing and
promotion costs associated with the new dental product.
NOTE K -- SUBSEQUENT EVENT
On February 9, 1995, the Company signed a letter of intent with Diamond
Electronics, Inc. (Diamond), an Ohio corporation, to purchase 100% of the
outstanding common stock of Diamond for consideration of 600,000 shares of
registered Ultrak common stock. Diamond had unaudited revenues of $11,775,000
and unaudited net income of approximately $328,000 in 1994. The letter of intent
specifies certain conditions under which up to 100,000 additional shares of
Ultrak stock could be issued. Diamond is a manufacturer of commercial video CCTV
security and surveillance systems used by large retailers and hazardous viewing
systems used by industry and municipalities. Diamond's products include a
patented high speed dome which permits manipulation of the camera and lens from
a remote location either automatically or with a joy stick. The transaction will
be accounted for as a purchase.
F-14
<PAGE> 84
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER
MARCH 31, 31,
1995 1994
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash and cash deposits.......................................... $ 0 $ 642,241
Accounts receivable, net........................................ 11,157,231 10,743,091
Inventories, net................................................ 15,545,294 14,396,438
Advances for inventory purchases................................ 3,784,540 5,381,437
Prepaid expenses and other current assets....................... 676,022 432,469
Deferred income taxes........................................... 362,988 362,988
------------ -----------
Total Current Assets......................................... 31,526,075 31,958,664
------------ -----------
Furniture and Equipment, net...................................... 2,034,403 1,971,393
Goodwill, net..................................................... 1,339,819 1,259,969
Notes Receivable, Noncurrent (Note 2)............................. 1,054,205 984,208
Other Assets...................................................... 157,930 178,456
------------ -----------
Total Assets............................................ $36,112,432 $36,352,690
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable -- trade....................................... $ 5,946,711 $ 6,531,779
Notes payable (Note 3).......................................... 17,882,187 18,244,183
Accrued liabilities............................................. 567,314 664,740
Other current liabilities....................................... 893,201 841,600
------------ -----------
Total Current Liabilities.................................... 25,289,413 26,282,302
------------ -----------
Stockholders' Equity:
Preferred Stock, $5.00 par value, issuable in series; 2,000,000
shares authorized; Series A 12% cumulative convertible;
195,351 shares authorized, issued and outstanding............ 976,755 976,755
Common Stock, 20,000,000 shares authorized; 6,555,619 issued and
outstanding at March 31, 1995 and December 31, 1994,
respectively, at stated value................................ 73,254 73,254
Additional Paid-in Capital...................................... 7,213,747 7,213,747
Retained Earnings............................................... 2,559,263 1,806,632
------------ -----------
Total Stockholders' Equity.............................. 10,823,019 10,070,388
------------ -----------
Total Liabilities and Stockholders' Equity.............. $36,112,432 $36,352,690
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-15
<PAGE> 85
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
------------ ------------
<S> <C> <C>
Net Sales......................................................... $ 21,829,162 $ 17,764,973
Cost of Sales..................................................... 16,507,084 13,592,929
------------ ------------
Gross Profit.................................................... 5,322,078 4,172,044
------------ ------------
Other Operating Expenses.......................................... 3,713,412 3,049,425
------------ ------------
Operating Income................................................ 1,608,666 1,122,619
------------ ------------
Other (Income) Expense:
Other (Income) Expense.......................................... (19,555) (19,918)
Interest Expense................................................ 396,829 219,906
------------ ------------
Other Expenses, net.......................................... 377,274 199,988
------------ ------------
Net Income before Income Taxes.................................... 1,231,392 922,631
Income Taxes................................................. 449,459 294,574
------------ ------------
Net Income........................................................ 781,933 628,057
Dividend Requirements on Preferred Stock.......................... 29,302 29,302
------------ ------------
Net Income Allocable to Common Stockholders....................... $ 752,631 $ 598,755
========== ==========
Net Income per Common Share....................................... $ .11 $ .09
========== ==========
Number of Common Shares Used in Computation....................... 6,821,027 6,816,955
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-16
<PAGE> 86
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income...................................................... $ 781,933 $ 628,057
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization................................... 137,957 81,439
Changes in current assets and liabilities:
(Increase), decrease in accounts receivable.................. (414,140) (2,803,980)
(Increase), decrease in inventory............................ (1,148,856) 3,872,254
(Increase), decrease in advances for inventory............... 1,596,897 (1,113,094)
(Increase), decrease in prepaid expenses..................... (243,553) (167,076)
Increase, (decrease) in trade accounts payable............... (585,068) (25,350)
Increase, (decrease) in accrued liabilities.................. (45,825) 245,315
(Increase), decrease in discontinued operations.............. 0 140,692
------------ ------------
Net cash provided by operating activities....................... 79,345 858,257
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures for furniture and equipment................ (200,967) (372,644)
Investment in other assets...................................... (129,321) (78,285)
------------ ------------
Net cash used in investing activities........................... (330,288) (450,929)
------------ ------------
Cash Flows from Financing Activities:
Issuance of common stock, net................................... 0 (29,693)
Changes in notes payable........................................ (361,996) (89,103)
Payment of dividends on preferred stock......................... (29,302) (29,302)
------------ ------------
Net cash used in financing activities............................. (391,298) (148,098)
------------ ------------
Net increase (decrease) in cash................................... (642,241) 259,230
------------ ------------
Cash and Cash Equivalents at Beginning of the Period.............. 642,241 500,106
------------ ------------
Cash and Cash Equivalents at End of the Period.................... $ 0 $ 759,336
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-17
<PAGE> 87
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited interim consolidated financial statements
include the accounts of Ultrak, Inc. and its subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
The interim financial statements are prepared on an unaudited basis and do
not include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. All
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods have been made
and are of a recurring nature unless otherwise disclosed herein. The results of
operations for such interim periods are not necessarily indicative of results of
operations for a full year. For further information, refer to the notes to the
consolidated financial statements for the year ended December 31, 1994 included
in the Ultrak, Inc. Annual Report on Form 10-K.
2. NOTES RECEIVABLE-NONCURRENT:
Notes receivable-noncurrent consists of the following as of March 31, 1995:
<TABLE>
<S> <C>
$750,000 notes receivable, principal payments due and payable annually
beginning in July 1995 until July 1998; interest payable monthly at 10%
per annum, collateralized by substantially all assets of the maker..... $ 738,205
$116,000 note receivable, due and payable on April 21, 1996; interest
payable quarterly at prime plus 4%, collateralized by certain assets of
the maker.............................................................. 116,000
$200,000 note receivable, principal payments due and payable on January
14, 1997, interest payable annually at 8%, partially collateralized by
certain assets of the maker............................................ 200,000
----------
$1,054,205
=========
</TABLE>
In connection with the $750,000 notes receivable, the Company has received
warrants to purchase up to 59% of the common stock of the maker. The Chairman of
the Board of the Company has guaranteed approximately $470,000 of the notes and
has received approximately 50% of the warrants.
3. NOTES PAYABLE:
Notes payable consists of the following as of March 31, 1995:
<TABLE>
<S> <C>
$15.0 million revolving line of credit, due upon demand or September 27,
1995; interest at floating prime plus 1/2% payable monthly;
collateralized by substantially all assets............................ $11,893,796
$7.0 million revolving line of credit, due upon demand or April 4, 1996;
interest at the greater of 8.5% or floating prime plus 2.0% per annum
payable monthly; collateralized by inventory.......................... 5,988,391
-----------
$17,882,187
==========
</TABLE>
All of the credit facilities are guaranteed in part by the principal
stockholder of the Company. The credit agreements contain certain restrictive
covenants and conditions, including debt to tangible net worth ratios, current
ratios and working capital ratios. At March 31, 1995, the Company was in
compliance with all of its covenants with its lenders.
F-18
<PAGE> 88
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
At March 31, 1995, the Company had unused available lines of credit
totalling approximately $4.1 million.
4. ACQUISITION OF DIAMOND ELECTRONICS, INC.
On April 28, 1995, the Company signed an Agreement and Plan of
Reorganization (the Agreement) with Diamond Electronics, Inc. (Diamond), an Ohio
corporation, and certain significant Diamond stockholders to acquire through the
merger of a wholly-owned subsidiary of the Company all of the outstanding common
stock of Diamond in exchange for 600,000 shares of registered Ultrak common
stock. Diamond had unaudited revenues of $2,959,000 and unaudited net income of
approximately $85,000 for the quarter ended March 31, 1995. The Agreement
specifies certain conditions under which up to 100,000 additional shares of
Ultrak stock could be issued. Diamond is a manufacturer of commercial video CCTV
security and surveillance systems used by large retailers and hazardous viewing
systems used by industry and municipalities. Subject to compliance with various
closing conditions, the transaction is scheduled to close before June 30, 1995.
The transaction will be accounted for as a purchase.
F-19
<PAGE> 89
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Diamond Electronics, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Diamond
Electronics, Inc. and Subsidiary as of January 1, 1995 and January 2, 1994, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Diamond
Electronics, Inc. and Subsidiary as of January 1, 1995 and January 2, 1994, and
the consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ NORMAN, JONES, ENLOW & CO.
Columbus, Ohio
March 17, 1995
F-20
<PAGE> 90
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 1995 AND JANUARY 2, 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Current Assets
Cash.............................................................. $ 30,549 $ 38,291
Trade accounts receivable -- net.................................. 2,203,670 1,349,055
Inventories....................................................... 2,370,557 1,910,908
Prepaid expenses and other........................................ 32,529 63,492
Deferred income tax benefit....................................... 316,090 482,100
--------- ---------
Total Current Assets...................................... 4,953,395 3,843,846
Property, Plant And Equipment -- net................................ 1,763,920 1,795,405
Other Assets........................................................ 49,373 8,785
--------- ---------
Total Assets.............................................. $6,766,688 $5,648,036
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable..................................................... $1,167,162 $1,122,217
Current portion of long-term debt................................. 105,960 115,999
Accounts payable.................................................. 875,852 485,659
Accrued payroll and taxes......................................... 148,952 125,320
Accrued commissions............................................... 130,891 90,075
Accrued expenses.................................................. 222,072 83,023
--------- ---------
Total Current Liabilities................................. 2,650,889 2,022,293
Long-Term Debt, less current portion................................ 884,548 592,033
Deferred Income Taxes............................................... 13,204 20,300
--------- ---------
Total Liabilities......................................... 3,548,641 2,634,626
Shareholders' Equity
Convertible preferred stock, par value $100 per share;
authorized -- 4,000 shares, issued and outstanding -0- and
4,000 shares................................................... -- 400,000
Common stock, no par value; authorized -- 11,996,000 shares,
issued and outstanding -- 4,706,326 and 4,476,267 shares....... 3,189,084 3,010,088
Paid-in capital................................................... 120,000 20,000
Retained earnings (deficit)....................................... (91,037) (416,678)
--------- ---------
Total Shareholders' Equity................................ 3,218,047 3,013,410
--------- ---------
Total Liabilities and Shareholders' Equity................ $6,766,688 $5,648,036
========= =========
Book value per common share......................................... $ .68 $ .58
========= =========
</TABLE>
See notes to financial statements
F-21
<PAGE> 91
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 52 WEEKS ENDED JANUARY 1, 1995 AND
THE 52 WEEKS ENDED JANUARY 2, 1994
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Net Sales........................................................... $11,774,691 $9,367,799
Cost of Goods Sold.................................................. 8,009,468 6,426,955
---------- ---------
Gross Profit.............................................. 3,765,223 2,940,844
Operating Expenses
Selling........................................................... 1,882,860 1,393,840
General and administrative........................................ 936,488 884,223
Research and development.......................................... 184,504 139,462
Interest.......................................................... 193,392 199,516
---------- ---------
3,197,244 2,617,041
---------- ---------
Income From Operations.............................................. 567,979 323,803
Other Income (Expenses)............................................. (28,817) 60,342
---------- ---------
Income Before Income Taxes, and Cumulative Effect Adjustment........ 539,162 384,145
Income Taxes
Currently payable................................................. 54,622 5,976
Deferred.......................................................... 158,899 148,300
---------- ---------
213,521 154,276
---------- ---------
Income Before Cumulative Effect Adjustment.......................... 325,641 229,869
Cumulative Effect Adjustment, for the change in income tax
accounting........................................................ -- 610,100
---------- ---------
Net Income................................................ $ 325,641 $ 839,969
========== =========
Earnings per common share:
Income (loss) before cumulative effect adjustment................. $ .07 $ .05
Cumulative effect adjustment...................................... -- .14
---------- ---------
Net income................................................ $ .07 $ .19
========== =========
</TABLE>
See notes to financial statements
F-22
<PAGE> 92
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE 52 WEEKS ENDED JANUARY 1, 1995 AND
THE 52 WEEKS ENDED JANUARY 2, 1994
<TABLE>
<CAPTION>
COMMON STOCK SHAREHOLDERS'
PREFERRED COMMON PURCHASE PAID-IN ACCUMULATED EQUITY
STOCK STOCK WARRANTS CAPITAL DEFICIT (DEFICIT)
--------- --------- ------------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 29, 1991.......... $ 44,450 $1,784,340 $ 20,000 $ -- $(2,427,452) (578,662)
Common stock warrants expired
12/31/92........................ (20,000) 20,000 --
Existing preferred stock canceled
in Chapter 11 reorganization
plan............................ (44,450) (44,450)
New convertible preferred stock
issued in Chapter 11
reorganization plan............. 400,000 400,000
New common stock issued in Chapter
11 reorganization plan.......... 1,203,272 1,203,272
Net income for the year........... 1,170,805 1,170,805
--------- --------- ------------ -------- ----------- -------------
Balance January 3, 1993............. 400,000 2,987,612 -- 20,000 (1,256,647 ) 2,150,965
Issuance of common stock.......... 22,476 22,476
Net income for the year........... 839,969 839,969
--------- --------- ------------ -------- ----------- -------------
Balance January 2, 1994............. 400,000 3,010,088 -- 20,000 (416,678 ) 3,013,410
Redemption of convertible
preferred stock................. (400,000) 100,000 (300,000)
Issuance of common stock for stock
grants.......................... 29,000 29,000
Issuance of common stock.......... 149,996 149,996
Net income for the year........... 325,641 325,641
--------- --------- ------------ -------- ----------- -------------
Balance January 2, 1995............. $ -- $3,189,084 $ -- $120,000 $ (91,037 ) $3,218,047
========= ========= ============== ======== =========== ============
</TABLE>
See notes to financial statements.
F-23
<PAGE> 93
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 52 WEEKS ENDED JANUARY 1, 1995 AND
THE 52 WEEKS ENDED JANUARY 2, 1994
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities
Income less extraordinary items.................................... $ 325,641 $ 839,969
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.................................................... 174,433 174,899
Amortization.................................................... 17,000 --
Loss on sale of equipment....................................... 1,936 --
(Increase) decrease in:
Trade accounts receivable....................................... (854,615) 88,909
Inventories..................................................... (459,649) (562,974)
Other current assets............................................ 30,963 30,569
Deferred income tax benefit..................................... 166,010 (482,100)
Increase (decrease) in:
Accounts payable................................................ 390,193 86,213
Accrued payroll and taxes....................................... 23,632 53,128
Accrued commissions............................................. 40,816 (7,276)
Other current liabilities....................................... 289,045 (121,674)
Deferred income taxes........................................... (7,096) 20,300
--------- ---------
Net Cash Provided (Used) by Operating Activities..................... 138,309 119,963
--------- ---------
Cash Flows From Investing Activities
Capital expenditures............................................... (146,539) (59,769)
Acquisition of other assets........................................ (57,587) --
Proceeds from sale of equipment.................................... 1,655 --
--------- ---------
Net Cash (Used) By Investing Activities.............................. (202,471) (59,769)
--------- ---------
Cash Flows From Financing Activities
Additional borrowings (repayments) under short-term revolving line
of credit (post-petition)....................................... $ 44,945 $(146,767)
Principal payments on bank term loan............................... (93,184) (169,052)
Principal payments on other notes payable.......................... (32,429) (61,159)
Increase term loan on bank refinancing............................. 408,088 --
Issuance of common stock options and grants........................ 29,000 22,476
Redemption of convertible preferred stock.......................... (300,000) --
--------- ---------
Net Cash (Used) By Financing Activities.............................. 56,420 (354,502)
--------- ---------
Net Increase (Decrease) in Cash...................................... (7,742) (294,308)
Cash At Beginning of Year............................................ 38,291 332,599
--------- ---------
Cash At End of Year.................................................. $ 30,549 $ 38,291
========= =========
Supplemental Disclosures
Interest paid...................................................... $ 190,239 $ 193,989
========= =========
Income taxes paid.................................................. $ 17,664 $ 10,756
========= =========
</TABLE>
See notes to financial statements
F-24
<PAGE> 94
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Diamond Electronics, Inc. and Subsidiary (the Company) manufactures, sells
and installs closed circuit television (CCTV) systems. The CCTV systems are used
primarily for surveillance in retail and environmental settings.
Basis of Accounting
The Company's policy is to prepare its financial statements on the accrual
basis of accounting in accordance with generally accepted accounting principles.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the balance sheet and revenues and expenses for the period. Actual
results could differ from those estimates.
Depreciation
The cost of property, plant and equipment is depreciated over the estimated
useful lives of the related assets. Depreciation is computed on the
straight-line method for financial reporting purposes and on the Modified
Accelerated Cost Recovery System for income tax purposes.
Accounting Year
The Company determines its fiscal year on a 52-53 week basis. The fiscal
year ends on the Sunday closest to December 31.
Goodwill
Goodwill represents the excess of the cost of companies acquired over the
fair value of their net assets at dates of acquisition and is being amortized on
the straight-line method over periods of five to seven years. Amortization
expense charged to operations for the years ended January 1, 1995 and January 2,
1994 was $-0- and $-0-, respectively.
Components of goodwill are as follows:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
<S> <C> <C>
Goodwill -- Diamond.......................................... $ 103,751 $ 103,751
Goodwill -- Polymatrix....................................... 240,394 240,394
---------- ----------
344,145 344,145
Accumulated amortization..................................... (344,145) (344,145)
---------- ----------
$ -- $ --
========= =========
</TABLE>
Non-Compete Agreement
This agreement represents the amount paid for non-competition by the
sellers of Alpha Electronics, Inc. The company wrote off the original amount of
$10,000 during the period ended January 1, 1995, due to no future benefit.
Warranty Cost
The Company accrues product warranty costs based upon sales levels,
warranty terms and actual experience. Product warranty expense was $156,299 and
$29,816 for the years ended January 1, 1995 and
F-25
<PAGE> 95
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
January 2, 1994, respectively. The accrued product warranty liability was
$77,000 and $27,000 at January 1, 1995 and January 2, 1994, respectively.
Research and Development
The costs associated with new product research and development are expensed
as incurred. Research and development expense was $184,504 and $139,462 for the
years ended January 1, 1995 and January 2, 1994, respectively.
Revenue Recognition
The Company recognizes revenues on contracts as shipments are made.
Basis of Consolidation
The accompanying consolidated statements include the accounts of Diamond
Electronics, Inc. and its wholly owned subsidiary, Alpha CCTV, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
Inventories
Inventories are stated at the lower of cost (determined by first-in,
first-out method) or market.
Book Value and Earnings Per Share
Book value per share is based upon the number of common shares outstanding
at January 1, 1995 and January 2, 1994. Earnings per share are based upon the
weighted average number of common shares outstanding during the year.
2. ACCOUNTS RECEIVABLE
The following is a summary of receivables:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
<S> <C> <C>
Trade accounts.............................................. $2,337,785 $1,588,055
Allowance for doubtful accounts............................. (134,115) (239,000)
---------- ----------
$2,203,670 $1,349,055
========= =========
</TABLE>
At January 1, 1995 and January 2, 1994, all accounts receivable were
pledged as collateral in connection with bank loans.
3. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
<S> <C> <C>
Raw materials and component parts........................... $1,213,785 $ 688,633
Work in process............................................. 1,156,772 1,222,275
---------- ----------
$2,370,557 $1,910,908
========= =========
</TABLE>
F-26
<PAGE> 96
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At January 1, 1995 and January 2, 1994, all inventories were pledged as
collateral in connection with bank loans.
4. PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
----------- -----------
<S> <C> <C>
Land...................................................... $ 58,600 $ 58,600
Buildings................................................. 2,138,654 2,138,654
Machinery and equipment................................... 1,434,672 1,292,935
Furniture and fixtures.................................... 32,354 32,354
----------- -----------
3,664,280 3,522,543
Accumulated depreciation.................................. (1,900,360) (1,727,138)
----------- -----------
$ 1,763,920 $ 1,795,405
========== ==========
</TABLE>
Depreciation expense charged to operations was $174,433 and $174,899 in
1994 and 1993, respectively.
All property, plant and equipment is pledged as collateral for bank loans.
The useful lives of property, plant and equipment for purposes of computing
depreciation are:
<TABLE>
<S> <C>
Buildings.................................................... 10 -- 30 years
Machinery and equipment...................................... 3 -- 7 years
Furniture and fixtures....................................... 3 -- 7 years
</TABLE>
5. NOTES PAYABLE
Short-term notes payable consist of the following:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
----------- -----------
<S> <C> <C>
Revolving credit agreement................................ $ 1,167,162 $ 1,122,217
========== ==========
</TABLE>
The revolving credit agreement and note payable are with a bank, have the
same collateral pledged, and are subject to the same loan covenants as the note
payable to the bank as further described in note 6 with a balance of $966,667 at
January 1, 1995. The revolving credit agreement bears interest at 1/4% above
the prime rate with interest payable monthly, with the outstanding balance due
June 30, 1997. The revolving credit agreement provides for borrowings up to
$2,500,000 limited to a borrowing base. At January 1, 1995, the borrowing base
of $2,437,102 was computed as the sum of 85% of eligible receivables, plus the
lesser of $1,000,000 or a percent of inventory ranging from 25%-55%.
At January 1, 1995, the Company had $1,269,940 of unused line of credit
with a bank to be drawn upon as needed with interest at 1/4% above the prime
rate.
F-27
<PAGE> 97
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT
The following is a summary of long-term debt:
<TABLE>
<CAPTION>
JANUARY 2, JANUARY 3,
1994 1993
---------- ----------
<S> <C> <C>
Note payable to bank in monthly installments of $8,550,
including interest at 10.5% through June 1, 1994. On June
15, 1994 the unpaid balance of the note plus accrued
interest is due............................................ $ -- $ 651,762
Note payable to taxing agencies due at various dates (six
years from assessment date) in equal quarterly installments
with interest at the statutory rate........................ 23,841 56,270
Note payable to bank in monthly installments of $8,333,
including interest at prime plus 1/2% through August 1,
2001. At January 1, 1995, the prime rate was 8.5%.......... 966,667 --
---------- ----------
990,508 708,032
Current maturities included in current liabilities........... (105,960) (115,999)
---------- ----------
$ 884,548 $ 592,033
========= =========
</TABLE>
The revolving credit agreement, the note payable to bank above, and the
note payable to bank described in note 5, have the first mortgage on real estate
and substantially all other assets of the Company pledged as collateral.
Following are maturities of long-term debt for each of the next five years:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ---------
<S> <C>
1995........................................................... $ 105,960
1996........................................................... 105,960
1997........................................................... 105,960
1998........................................................... 105,961
1999........................................................... 99,996
Thereafter........................................................ 466,671
---------
$ 990,508
========
</TABLE>
7. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Previously, the Company used the Accounting Principles Board Opinion No. 11
"Accounting For Income Taxes" (APB 11) income statement approach that focused on
calculating deferred tax expense. Under APB 11, recognition of deferred tax
assets was not permitted. Effective January 4, 1993, the Company adopted SFAS
109. The cumulative effect of the change in accounting principle is included in
determining net income for the year ended January 2, 1994. Financial statements
for prior years have not been restated.
F-28
<PAGE> 98
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
1995 1994
---------- ----------
<S> <C> <C>
Inventory................................................... $ (214,746) $ (252,800)
Bad debts................................................... (51,902) (97,000)
Warranties.................................................. (39,474) (10,400)
Loss carryforwards.......................................... -- (121,600)
Other....................................................... (9,968) (300)
---------- ----------
Net current deferred tax assets............................. (316,090) (482,100)
---------- ----------
Capital lease............................................... -- (14,700)
Depreciation................................................ 13,204 35,000
---------- ----------
Net long-term deferred tax liabilities...................... 13,204 20,300
---------- ----------
$ (302,886) $ (461,800)
========= =========
</TABLE>
The information above is presented to show the composition of the deferred
tax liabilities (assets) for the years ended January 1, 1995 and January 2,
1994.
The Company's income tax expense differs from the amount computed if the
federal statutory rate were applied to income from continuing operations
primarily because of expenses deductible for financial reporting purposes that
are not deductible for tax purposes.
At January 1, 1995, the Company has available unused operating loss
carryforwards of $-0-.
8. CONVERTIBLE PREFERRED STOCK
The convertible preferred stock is noncumulative, nonparticipating and is
convertible into shares of common stock at the option of the holder. There were
4,000 shares authorized, -0- and 4,000, issued and outstanding at January 1,
1995 and January 2, 1994, respectively. The shares were redeemed during the year
by the Company.
9. COMMITMENTS AND CONTINGENCIES
Under the terms of a loan agreement with a bank, the Company is required
to:
- Maintain minimum net worth of $2,050,000, cash flow coverage ratio of 1.3
to 1 and a maximum financial leverage ratio of 1.9 to 1.
- Pay commitment fees of 1/4% each month on unused portions of debt.
In addition, the agreement provides that the Company will not, without
prior written consent from the bank:
- pay cash dividends or incur stock redemptions.
- pay loans, advances or investments of any kind greater than $20,000.
F-29
<PAGE> 99
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- merge or consolidate or be merged or consolidated.
- Encumber, mortgage or grant a security interest in any asset.
- Sell or dispose of any assets outside the normal course of business.
- Incur capital expenditures in excess of $150,000 per year.
- Enter into any sale and lease back transactions.
At January 1, 1995, the Company was in compliance with all covenants.
10. EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) salary savings plan (Plan), covering all
employees meeting certain eligibility requirements. Under the Plan, the Company
is required to contribute to the Plan amounts equal to 10% of the employee's
first 4% of voluntary contributions. The Company's contributions to the Plan
were $8,429 and $7,481 during 1994 and 1993, respectively.
11. PLAN OF REORGANIZATION
On July 30, 1991, the Company filed petitions for relief under Chapter 11
of the federal bankruptcy laws in the United States Bankruptcy Court for the
Southern District of Ohio -- Eastern Division.
On December 15, 1992, the Bankruptcy Court confirmed the Company's plan of
reorganization. The confirmed plan provided for the following:
Secured Debt
The holder of approximately $2,630,000 of secured debt (secured by a
perfected, first priority security interest in substantially all of the
Company's assets) received the following instruments in exchange for their
notes: (a) $49,691 secured note payable in monthly installments of $5,521
commencing February 1, 1993, through September 1, 1993, with interest at
prime plus 2% per annum, secured by first liens on property, plant and
equipment with the balance due on September 15, 1993, (b) $820,814 secured
note payable in monthly installments of $8,550 commencing on February 1,
1993, through June 1, 1994, with interest at 10.5% per annum, secured by
same assets as above with the balance due on June 15, 1994, (c) $1,900,000
line of credit with interest payable monthly at prime plus 2% per annum
commencing on December 1, 1992 through June 1, 1994 with the balance due
June 15, 1994.
Priority Tax Claims
Payroll, withholding and real and personal property taxes of $67,738 are
payable in equal quarterly installments commencing March 15, 1993, through
December 15, 1998 with interest at the statutory rate.
Unsecured Promissory Note
The holder of $1,000,000 unsecured promissory note received 4,000 shares of
$100 par noncumulative, nonparticipating, preferred stock, convertible into 19%
of the new outstanding stock.
General Unsecured
The holders of approximately $1,511,000 of general unsecured claims
received the following for their claims: (a) cash in the amount of $0.10 for
each dollar of their claim; or (b) shares of common stock in the amount of 1/3
share for each dollar of their claim. Total cash payable and shares issued for
these claims were $77,607 and 245,042 shares, respectively.
F-30
<PAGE> 100
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Post-petition Financing
The pledgers of $199,000 of post-petition financing received 1,990,000
shares of the new issue outstanding common stock.
Common Stock
The holders of approximately 1,350,000 outstanding shares of the Company's
existing common stock retain their shares and receive a right to buy one new
share of common stock for every share owned for $.25 per share. Each share
purchased will carry two warrants which expire December 15, 2002. The exercise
price of the warrants shall be $.50 and $.75 callable by the Company within 90
days notice at $.05 per warrant.
Preferred Stock
The holder of 2,100 outstanding shares of the Company's existing preferred
stock received 500,000 shares of the new issue outstanding common stock.
Board of Directors
The six members of the Board of Directors of the Company who have provided
services to the Company relating to the Chapter 11 case received 300,000 shares
of the new outstanding common stock and 300,000 options to buy shares of common
stock. There were no options exercised in 1993 or 1992.
Unsecured Wages and Benefits
The holders of the $48,738 unsecured wages and benefits received the
following for their claims: (a) $11,574 cash payment on December 15, 1992; (b)
$37,164 cash payment in August of 1991.
The Company did not meet the criteria for fresh start accounting.
Therefore, the Company accounted for the reorganization as follows:
- All liabilities are stated at the post-petition amount as allowed by the
Court, if applicable.
- Income, expense, realized gains and losses directly associated with the
reorganization were segregated and presented as reorganization items or
extraordinary items in the statement of operations.
12. LEASES
The Company leases office equipment, manufacturing equipment and delivery
vehicles under operating leases expiring in various years through 1996.
Minimum future rental payments under noncancelable operating leases having
remaining terms in excess of one year as of January 1, 1995, for each of the
next five years and in the aggregate are:
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
1995............................................................... $22,332
1996............................................................... 4,934
-------
Total minimum future rental payments............................... $27,266
=======
</TABLE>
Rental expense under all operating leases was $55,795 and $45,364 for 1994
and 1993, respectively.
Certain operating leases provide for renewal options for periods of one
year at their fair rental value at the time of renewal in the normal course of
business, operating leases are generally renewed or replaced by other leases.
F-31
<PAGE> 101
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. RELATED PARTY TRANSACTIONS
A certain shareholder has guaranteed bank obligations under a standby
letter of credit as follows:
<TABLE>
<CAPTION>
PERIOD
-------
<S> <C>
December 16, 1992 through June 15, 1993............................ $40,000
June 16, 1993 through December 15, 1993............................ $25,000
Thereafter......................................................... $ --
</TABLE>
A corporation which provides the Company with management services is owned
by a member of the board of directors. The Company paid management fees of
approximately $44,557 and $31,000 during 1994 and 1993, respectively.
14. SUBSEQUENT EVENT
On February 9, 1995, NASDAQ-Listed Ultrak, Inc. and Diamond Electronics,
Inc. signed a letter of intent whereby Ultrak, Inc. would acquire all the
outstanding common stock of Diamond Electronics, Inc. The purchase price would
be 600,000 shares of newly issued registered Ultrak, Inc. common stock, plus
additional shares if certain future Ultrak, Inc. closing stock prices are met.
It is intended that the stock of Diamond Electronics, Inc. be exchanged on a
tax-free basis pursuant to a reorganization described in Section 368 of the
Internal Revenue Code.
Diamond Electronics, Inc.'s Board of Directors and Shareholders are
expected to approve the transaction in order to allow both Ultrak, Inc. and
Diamond Electronics, Inc. to have executed a definitive merger agreement by
April 15, 1995.
15. STOCK WARRANTS
In connection with a rights offering in March 1993, stockholders received
two warrants for each share purchased. There are warrants to purchase 48,893
shares with an exercise price of $.50 and warrants to purchase another 48,893
shares with an exercise price of $.75. The warrant agreement expires December
2002 and no warrants have been exercised. The warrants are callable at $.05 per
warrant on a 90 day notice.
16. STOCK OPTIONS
Under the terms of its stock option plan, options to purchase shares of the
company's common stock are granted at a price equal to the market price of the
stock at the date of the grant. Following is a summary of transactions:
<TABLE>
<S> <C>
Options outstanding -- January 3, 1993
Granted during the year............................................ 71,000
Forfeited during the year.......................................... --
Exercised during the year (at a price of $.25 per share)........... (41,000)
-------
Options outstanding -- January 2, 1994............................. 30,000
Granted during the year............................................ 50,000
Forfeited during the year.......................................... --
Exercised during the year (at a price of $.58 per share)........... (50,000)
-------
Options outstanding -- January 1, 1995............................. 30,000
=======
Options exercisable -- January 1, 1995............................. 30,000
=======
</TABLE>
F-32
<PAGE> 102
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. CASH FLOWS
Cash flows from operations for the year ended January 1, 1995 not disclosed
on the face of the cash flow statement were as follows:
<TABLE>
<S> <C>
Customer deposits converted to common stock....................... $149,996
========
Cost of equipment................................................. $ 4,801
Less: accumulated depreciation.................................... (1,210)
--------
Net book value.................................................... 3,591
Proceeds from sale of equipment................................... 1,655
--------
Loss on sale of equipment......................................... $ 1,936
========
</TABLE>
F-33
<PAGE> 103
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current Assets:
Cash............................................................. $ 33,791 $ 30,549
Accounts receivable, net......................................... 1,687,672 2,203,670
Inventories, net................................................. 2,714,360 2,370,557
Prepaid expenses and other....................................... 35,678 32,529
Deferred income tax benefit...................................... 264,840 316,090
----------- ------------
Total Current Assets..................................... 4,736,341 4,953,395
Property, plant and equipment, net................................. 1,775,338 1,763,920
Other assets....................................................... 45,873 49,373
----------- ------------
Total Assets............................................. 6,557,552 6,766,688
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable.................................................... 782,409 1,167,162
Current portion of long-term debt................................ 105,960 105,960
Accounts payable................................................. 952,786 875,852
Accrued liabilities.............................................. 211,425 279,843
Other current liabilities........................................ 284,206 222,072
----------- ------------
Total Current Liabilities................................ 2,336,786 2,650,889
Long-term Debt..................................................... 859,596 884,548
Deferred Income Taxes.............................................. 16,598 13,204
Stockholders' Equity:
Common stock, no par value; authorized 11,996,000 shares; issued
and
outstanding -- 4,762,326 and 4,706,326 shares................. 3,230,286 3,189,084
Paid-in Capital.................................................. 120,000 120,000
Accumulated deficit.............................................. (5,714) (91,037)
----------- ------------
Total Stockholders' Equity............................... 3,344,572 3,218,047
----------- ------------
Total Liabilities and Stockholders' Equity............... $ 6,557,552 $6,766,688
========= ==========
</TABLE>
F-34
<PAGE> 104
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
------------ ------------
<S> <C> <C>
Net Sales......................................................... $2,959,586 $2,321,700
Cost of Sales..................................................... 2,017,935 1,591,691
------------ ------------
Gross Profit.................................................... 941,651 730,009
Operating Expenses................................................ 751,162 685,467
------------ ------------
Operating Income................................................ 190,489 44,542
------------ ------------
Other (Income) Expense:
Other (Income) Expense.......................................... 8,206 862
Interest Expense................................................ 43,180 39,226
------------ ------------
Other Expenses, net............................................. 51,386 40,088
------------ ------------
Income before Income Taxes........................................ 139,103 4,454
Income Taxes.................................................... 53,780 1,693
------------ ------------
Net Income........................................................ 85,323 2,761
Dividend Requirement on Preferred Stock........................... 0 0
------------ ------------
Net Income Allocable to Common Stockholders....................... 85,323 2,761
========== ==========
Net Income per Common Share....................................... $ 0.02 $ 0.00
========== ==========
Number of Common Shares Used in Computation....................... 4,734,326 4,476,267
========== ==========
</TABLE>
F-35
<PAGE> 105
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income...................................................... $ 85,323 $ 2,761
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 51,300 43,725
(Increase) decrease in:
Accounts receivable........................................ 515,998 (40,043)
Inventories................................................ (343,803) (712,412)
Prepaid expenses and other current assets.................. (3,149) 3,554
Deferred income tax benefit................................ 51,250 0
Increase (decrease) in:
Accounts payable........................................... 76,934 67,016
Accrued liabilities........................................ (68,418) (28,871)
Other current liabilities.................................. 62,134 532,033
Deferred income taxes...................................... 3,394 0
------------ ------------
Net Cash Provided (Used) By Operating Activities........ 430,963 (132,237)
------------ ------------
Cash Flows From Investing Activities:
Acquisition of property and equipment........................... (59,218) (39,921)
Acquisition of other assets..................................... 0 (11,409)
------------ ------------
Net Cash (Used) By Investing Activities................. (59,218) (51,330)
------------ ------------
Cash Flows From Financing Activities:
Net increase (decrease) in borrowings under revolving line of
credit....................................................... (384,753) 362,343
Principal payments on bank term loan............................ (24,952) (34,200)
Principal payments on other notes payable....................... 0 0
Issuance of common stock........................................ 41,202 0
------------ ------------
Net Cash Provided (Used) By Financing Activities........ (368,503) 328,143
------------ ------------
Net Increase (Decrease) In Cash......................... 3,242 144,576
Cash and Cash Equivalents at Beginning of Period.................. 30,549 38,291
------------ ------------
Cash and Cash Equivalents at End of Period........................ $ 33,791 $ 182,867
========== ==========
</TABLE>
F-36
<PAGE> 106
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION:
The accompanying unaudited interim consolidated financial statements
include the accounts of Diamond Electronics, Inc. and its wholly owned
subsidiary. All significant intercompany balances and transactions have been
eliminated in consolidation.
The interim financial statements are prepared on an unaudited basis and do
not include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. All
adjustments which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim periods have been made
and are of a recurring nature unless otherwise disclosed herein. The results of
operations for such interim periods are not necessarily indicative of results of
operations for a full year. For further information, refer to the Notes to the
Consolidated Financial Statements for the 52 weeks ended January 1, 1995 and
January 2, 1994 included elsewhere herein.
F-37
<PAGE> 107
ANNEXES
<TABLE>
<S> <C> <C>
ANNEX A -- Merger Agreement as amended, and Exhibits 1.01(a) and (b) thereto
ANNEX B -- Section 1701.85 of the Ohio Revised Code
ANNEX C -- Articles of Incorporation of Diamond
ANNEX D -- Code of Regulations of Diamond
ANNEX E -- Articles of Incorporation of Ultrak, as amended
ANNEX F -- Bylaws of Ultrak
ANNEX G -- Reincorporation Agreement
ANNEX H -- Certificate of Incorporation of Ultrak
ANNEX I -- Bylaws of Ultrak
ANNEX J -- Article 113 of Colorado Business Corporation Act
</TABLE>
<PAGE> 108
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as of
April 28, 1995 (the "Signing Date"), is among Diamond Electronics, Inc., an Ohio
corporation ("Diamond"), the shareholders of Diamond signing this Agreement (the
"Signing Shareholders"), Ultrak, Inc., a Colorado corporation ("Ultrak"), and
Diamond Purchasing Corp., a Texas corporation and wholly-owned subsidiary of
Ultrak ("Newco").
W I T N E S S E T H:
Recitals. The Boards of Directors of Diamond, 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
Diamond pursuant to a reorganization hereafter provided for. Diamond, the
Signing Shareholders, Ultrak, and Newco desire to set forth the terms and
conditions upon which they are willing to consummate 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. The Signing Shareholders
constitute the Board of Directors of Diamond.
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 performance of all covenants and obligations of
the parties contained herein and upon the fulfillment (or waiver) of all
conditions to the obligations of the parties contained herein, on the Effective
Date (as hereinafter defined) and pursuant to the provisions of the Texas
Business Corporation Act (the "Texas Act") and the Ohio General Corporation Law
(the "Ohio Act"), Newco will be merged with and into Diamond, which will be the
surviving corporation (the "Surviving Corporation"), in accordance with Articles
of Merger to be filed in Texas and the Certificate of Merger to be filed in Ohio
in the forms attached hereto as Exhibits 1.01(a) and 1.01(b), respectively
(collectively, the "Certificates of Merger"). As used in this Agreement, the
"Effective Date" shall mean such date as agreed upon by Diamond, Newco, and
Ultrak, on which the Certificates of Merger shall be filed in accordance with
the Texas Act and the Ohio Act, and the date the Merger will become effective in
accordance with the terms of the Certificates of Merger.
1.02. Effect on Stock. As a result of the Merger, on the Effective Date and
without any action on the part of Diamond, Ultrak, or Newco, or any holder of
any of the following securities, the following will occur:
(a) Except as provided in Sections 1.04 and 1.10 hereof, each share of
Common Stock, no par value per share, of Diamond ("Diamond Common Stock" )
issued and outstanding immediately prior to the Effective Date will cease
to be outstanding and will be converted into the right to receive such
number of fully paid and nonassessable shares of Common Stock, no par value
per share, of Ultrak (the "Ultrak Common Stock") as is equal to the
quotient of (i) 600,000 divided by (ii) the total number of issued and
outstanding shares of Diamond Common Stock as of the Effective Date. If all
shares of Diamond Common Stock issued and outstanding on the Effective Date
are converted into shares of Ultrak Common Stock, then the maximum number
of shares of Ultrak Common Stock that will be issued under this Subsection
1.02(a) will be 600,000.
(b) Any shares of Diamond Common Stock held in the treasury of Diamond
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, under this Agreement.
A-1
<PAGE> 109
(c) Each share of Common Stock, no par value, of Newco ("Newco Common
Stock") issued and outstanding immediately prior to the Effective Date will
cease to be outstanding and will be converted into the right to receive one
share of Common Stock, no par value, of the Surviving Corporation.
1.03. Adjustments.
(a) If the average closing price of Ultrak Common Stock as reported for the
National Association of Securities Dealers Automated Quotations System
("NASDAQ") in the Wall Street Journal, Southwest Edition, for each of the ten
(10) trading days ending on the first trading day (the "First Adjustment Date")
that is six (6) months from the Effective Date is less than $7.00, then Ultrak
shall issue an additional 50,000 shares of Ultrak Common Stock to the
shareholders of Diamond as of the Effective Date (the "Effective Date
Shareholders"), and each of the Effective Date Shareholders will receive one
share of Ultrak Common Stock for every twelve (12) shares of Ultrak Common Stock
received pursuant to Subsection 1.02(a).
(b) If the average closing price of Ultrak Common Stock as reported for
NASDAQ in the Wall Street Journal, Southwest Edition, for each of the ten (10)
trading days ending on the first trading day (the "Second Adjustment Date") (the
First Adjustment Date and the Second Adjustment Date are sometimes collectively
referred to herein as the "Adjustment Dates") that is twelve (12) months from
the Effective Date is less than $8.00, then Ultrak shall issue an additional
50,000 shares of Ultrak Common Stock to the Effective Date Shareholders, and
each of the Effective Date Shareholders will receive one share of Ultrak Common
Stock for every twelve (12) shares of Ultrak Common Stock received pursuant to
Subsection 1.02(a).
(c) In the event of any change in the outstanding Ultrak Common Stock by
reason of stock dividends, stock splits, share combinations, mergers,
recapitalizations, exchanges of shares or the like, between the Signing Date and
an Adjustment Date, then the type of shares subject to issuance on such
Adjustment Date and the price of the Ultrak Common Stock that determines whether
any additional shares are issued on such Adjustment Date, shall be adjusted
appropriately.
(d) The right to receive any additional shares of Ultrak Common Stock
pursuant to this Section 1.03 is a personal right of the Effective Date
Shareholders and they may not transfer or assign all or any portion of their
right to receive additional shares of Ultrak Common Stock. No person or entity,
other than the Effective Date Shareholders, shall have the right to receive any
additional shares of Ultrak Common Stock pursuant to this Section 1.03.
1.04. Diamond Common Stock Subject to Cash Out. Notwithstanding anything to
the contrary contained in this Agreement, any Shareholder (as hereinafter
defined) who would otherwise receive ten (10) or fewer shares of Ultrak Common
Stock shall receive the Diamond Price (as defined in the following sentence) per
share of Diamond Common Stock and shall not have the right to receive shares of
Ultrak Common Stock. The Diamond Price shall equal the product of (i) the
average closing price of Ultrak Common Stock as reported for NASDAQ in the Wall
Street Journal, Southwest Edition, for each of the ten (10) trading days ending
on the trading day which is five (5) days prior to the Effective Date multiplied
by the (ii) Conversion Factor.
1.05. Exchange and Cancellation of Certificates.
(a) Ultrak shall authorize Securities Transfer Corp. to serve as exchange
agent hereunder (the "Exchange Agent"). Promptly after the Effective Date,
Ultrak shall deposit or shall cause to be deposited in trust with the Exchange
Agent certificates representing the number of whole shares of Ultrak Common
Stock to which the holders of Diamond Common Stock (other than holders of
Dissenting Shares and the holders of shares subject to Section 1.04) are
entitled pursuant to this Article I, together with cash sufficient to pay for
(i) fractional shares then known to Ultrak and (ii) shares subject to Section
1.04 (such cash amounts and certificates being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable instructions
received from Ultrak, deliver the number of shares of Ultrak Common Stock and
pay the amounts of cash provided for in this Article I out of the Exchange Fund.
Additional amounts of cash, if any, needed from time to time by the Exchange
Agent to make payments for fractional shares and/or shares subject to Section
1.04 shall be provided by Ultrak and shall become part of the Exchange Fund. The
A-2
<PAGE> 110
Exchange Fund shall not be used for any other purpose, except as provided in
this Agreement, or as otherwise agreed to by Ultrak, Newco, and Diamond prior to
the Effective Date.
(b) As soon as practicable after the Effective Date, the Exchange Agent
shall mail and otherwise make available to each record holder (other than
holders of Dissenting Shares) who, as of the Effective Date, was a holder of an
outstanding certificate or certificates which immediately prior to the Effective
Date represented shares of Diamond Common Stock (the "Certificates"), a form of
letter of transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor and conversion thereof, which letter of
transmittal shall comply with all applicable rules of the NASDAQ. Delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and the form of
letter of transmittal duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor (i) one or more certificates as
requested by the holder (properly issued, executed, and countersigned, as
appropriate) representing that number of whole shares of Ultrak Common Stock to
which such holder of Diamond Common Stock shall have become entitled pursuant to
the provisions of this Article I, (ii) as to any fractional share, a check
representing the cash consideration to which such holder shall have become
entitled pursuant to Section 1.08, and the Certificates so surrendered shall
forthwith be cancelled, and (iii) as to any shares to be cashed out pursuant to
Section 1.04, a check representing the cash consideration to which such holder
shall have become entitled pursuant to Section 1.04, and the Certificates so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the cash payable upon surrender of the Certificates. Ultrak shall pay any
transfer or other taxes required by reason of the issuance of a certificate
representing shares of Ultrak Common Stock; provided, however that such
certificate is issued in the name of the person in whose name the Certificate
surrendered in exchange therefor is registered; provided further, however, that
Ultrak shall not pay any transfer or other taxes if the obligation to pay such
tax under applicable law is solely that of the Shareholder or if payment of any
such tax by Ultrak otherwise would cause the Merger to fail to qualify as a tax
free reorganization under the Internal Revenue Code of 1986, as amended (the
"Code"). If any portion of the consideration to be received pursuant to this
Article I upon exchange of a Certificate (whether a certificate representing
shares of Ultrak Common Stock or a check representing payment for a fractional
share or for shares subject to Section 1.04) is to be issued or paid to a person
other than the person in whose name the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such issuance and payment
that the Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such exchange shall pay
in advance any transfer or other taxes required by reason of the issuance of a
certificate representing shares of Ultrak Common Stock or a check representing
payment for a fractional share or for shares subject to Section 1.04 to such
other person, or establish to the satisfaction of the Exchange Agent that such
tax has been paid or that no such tax is applicable. From the Effective Date
until surrender in accordance with the provisions of this Section 1.05, each
Certificate (other than Certificates representing treasury shares of Diamond,
Certificates representing Dissenting Shares, and Certificates representing
shares subject to Section 1.04) shall represent for all purposes only the right
to receive the consideration provided in this Article I. No dividends that are
otherwise payable on Ultrak Common Stock will be paid to persons entitled to
receive Ultrak Common Stock until such persons properly surrender their
Certificates and a duly executed letter of transmittal. After such surrender,
there shall be paid to the person in whose name the Ultrak Common Stock shall be
issued any dividends on such Ultrak Common Stock that shall have a record date
on or after the Effective Date and prior to such surrender. If the payment date
for any such dividend is after the date of such surrender, such payment shall be
made on such payment date. In no event shall the persons entitled to receive
such dividends be entitled to receive interest on such dividends. All payments
in respect of shares of Diamond Common Stock that are made in accordance with
the terms hereof shall be deemed to have been made in full satisfaction of all
rights pertaining to such securities.
(c) 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 the
Exchange Agent a bond in such reasonable sum as Ultrak or the Exchange Agent may
direct as indemnity against any claim that may be made against Ultrak or the
Exchange Agent with respect to the Certificate alleged to have been lost,
mislaid, stolen, or destroyed.
A-3
<PAGE> 111
(d) After the Effective Date, there shall be no transfers on the stock
transfer books of the Surviving Corporation of the shares of Diamond Common
Stock that were outstanding immediately prior to the Effective Date. If, after
the Effective Date, Certificates are presented to the Surviving Corporation for
transfer, they shall be cancelled and exchanged for the consideration described
in this Article I.
(e) Any portion of the Exchange Fund that remains unclaimed by the
Shareholders for six (6) months after the Effective Date shall be returned to
Ultrak, upon demand by Ultrak, and any holder of Diamond Common Stock who has
not theretofore complied with this Section 1.05 shall thereafter look only to
Ultrak for issuance of the number of shares of Ultrak Common Stock and other
consideration to which such holder has become entitled pursuant to this Article
I; provided, however, that neither the Exchange Agent nor any party hereto shall
be liable to a holder of shares of Diamond Common Stock for any amount required
to be paid to a public official pursuant to any applicable abandoned property,
escheat, or similar law.
1.06. S-4 Registration Statement; Proxy Statement; Blue Sky Laws. Ultrak
and Diamond acknowledge that the transactions contemplated hereby are subject to
the provisions of the Securities Act of 1933, as amended (the "Securities Act").
Diamond, Ultrak, and their respective affiliates will (a) cooperate in the
preparation and filing of a Registration Statement on Form S-4 (the
"Registration Statement" ), which will include a proxy statement/prospectus to
be delivered to Diamond's shareholders (the "Proxy Statement") with respect to
the transactions contemplated by this Agreement, and (b) use all their
reasonable efforts to have the Registration Statement declared effective by the
Securities and Exchange Commission (the "SEC") and the Proxy Statement therein
cleared by the SEC as promptly as possible. Diamond and Ultrak will each use all
their reasonable efforts to obtain and respond to any comments of the SEC or its
staff on the Registration Statement. Each of Diamond, Ultrak, and Newco agrees
to provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the other
party or its counsel, may be required or appropriate for inclusion in the
Registration Statement, or in any amendments or supplements thereto, and to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Registration Statement. Diamond and Ultrak
agree to take all reasonable actions as may be required to be taken by them
under state blue sky or securities laws in connection with the transactions
contemplated by this Agreement. Each of the affiliates of Diamond
("Affiliates"), as the term "affiliates" is defined pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), shall be, as the case may
be, restricted by Rule 145(d) promulgated pursuant to the Securities Act in
connection with the resale of the shares of Ultrak Common Stock acquired
pursuant to the Merger. Notwithstanding anything to the contrary contained
herein, neither any Affiliate nor any Signing Shareholder shall (i) sell shares
of Ultrak Common Stock for the forty-five (45) day period immediately prior to
the First Adjustment Date and the Second Adjustment Date and/or (ii) sell,
during the twelve (12) months immediately following the Effective Date, shares
of Ultrak Common Stock constituting more than one-third of the shares of Ultrak
Common Stock received in the Merger.
1.07. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a)(2)(E) of the Code, and that
this Agreement shall constitute a "plan of reorganization" for the purposes of
Section 368 of the Code.
1.08. Fractional Shares. No scrip or fractional shares of Ultrak Common
Stock shall be issued in the Merger. All fractional shares of Ultrak Common
Stock to which a holder of Diamond Common Stock immediately prior to the
Effective Date would otherwise be entitled at the Effective Date shall be
aggregated. If a fractional share results from such aggregation, such
shareholder shall be entitled, after the Effective Date, the First Adjustment
Date, and the Second Adjustment Date, as the case may be, to receive from Ultrak
an amount in cash in lieu of such fractional share, based on the Determination
Price (as defined in Section 1.09). Ultrak will make available to the Exchange
Agent the cash necessary for the purpose of paying cash for fractional shares.
1.09. Determination Price.
(i) The Determination Price on the Effective Date shall be the closing
price, as reported for NASDAQ in the Wall Street Journal, Southwest
Edition, on the last trading day immediately prior to the Effective Date;
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(ii) The Determination Price on the First Adjustment Date shall be the
closing price, as reported for NASDAQ in the Wall Street Journal, Southwest
Edition, on the last trading day immediately prior to the First Adjustment
Date;
(iii) The Determination Price on the Second Adjustment Date shall be
the closing price, as reported for NASDAQ in the Wall Street Journal,
Southwest Edition, on the last trading day immediately prior to the Second
Adjustment Date.
1.10. Dissenting Shares. To the extent that appraisal rights are available
under the Ohio Act, shares of Diamond Common Stock that are issued and
outstanding immediately prior to the Effective Date and that have not been voted
for adoption of the Merger and with respect of which appraisal rights have been
properly demanded in accordance with the applicable provisions of the Ohio Act
("Dissenting Shares") shall not be converted into the right to receive the
consideration provided for in this Article I at or after the Effective Date
unless and until the holder of such shares withdraws his demand for such
appraisal (in accordance with the applicable provisions of the Ohio Act) or
becomes ineligible for such appraisal. If a holder of Dissenting Shares
withdraws his demand for such appraisal (in accordance with the applicable
provisions of the Ohio Act) or becomes ineligible for such appraisal, then, as
of the Effective Date or the occurrence of such 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 consideration provided for
in this Article I. If any holder of Diamond Common Stock shall assert the right
to be paid for the fair value of such Diamond Common Stock as described above,
Diamond shall give Ultrak notice thereof and Ultrak shall have the right to
participate in all negotiations and proceedings with respect to any such
demands. Diamond 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 payment. After the Effective Date, Ultrak will cause the
Surviving Corporation to pay its statutory obligations to holders of Dissenting
Shares.
1.11. Signing Shareholders' Approval. The Signing Shareholders agree to the
terms of the Merger and agree to vote all of their shares of Diamond Common
Stock in favor of the Merger.
ARTICLE II:
REPRESENTATIONS AND WARRANTIES OF DIAMOND
Diamond 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. Diamond is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio, 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. A list of all jurisdictions where Diamond
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,
Diamond does not own (nor has it ever owned) the capital stock of any
corporation, nor does it have (nor has it ever had) an equity, profit sharing,
participation, or other interest in any partnership, joint venture or other
entity. No such corporation, partnership, joint venture or other entity has any
liabilities and Diamond does not have any liabilities, contingent or otherwise,
relating to any such corporation, partnership, joint venture or other entity. No
representation set forth in this Agreement relating to Diamond would be untrue
if it related to any such corporation, partnership, joint venture or other
entity.
2.03. Corporate Records. Copies of the Articles of Incorporation and all
amendments thereto and the Bylaws of Diamond have been delivered to Ultrak and
Newco and such copies are true, correct, and complete. The minute books of
Diamond, 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
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meetings by the Board of Directors (and any committee thereof) and the
shareholders of Diamond since the formation of Diamond.
2.04. Corporate Authority Relative to This Agreement; No Violation. Diamond
has the corporate power to enter into this Agreement and the Certificates of
Merger and to carry out its obligations hereunder and thereunder. The execution
and delivery of this Agreement and the Certificates of Merger and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by Diamond's Board of Directors and, except for the
approval of the Shareholders, no other corporate proceedings on the part of
Diamond are necessary to authorize this Agreement or the Certificates of Merger
or the transactions contemplated hereby and thereby. This Agreement has been,
and the Certificates of Merger will be, duly and validly executed and delivered
by Diamond and, assuming this Agreement and the Certificates of Merger
constitute valid and binding agreements of the other parties hereto and thereto,
this Agreement and the Certificates of Merger constitute valid and binding
agreements of Diamond, enforceable against Diamond 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 Certificates of
Merger 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 Diamond, (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 Diamond is a party or by which Diamond is bound, or result
in the creation of any lien, charge or encumbrance upon the properties or assets
of Diamond 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 Diamond or its assets. Other than in connection with or in compliance
with the provisions of the Ohio Act, the Securities Act, the Exchange Act, and
the securities or blue sky laws of the various states, no authorization,
consent, or approval of, or filing with, any governmental body or authority is
necessary for the consummation by Diamond of the transactions contemplated
herein.
2.05. Capitalization.
(a) The authorized capital stock of Diamond consist of 11,996,000 shares of
Diamond Common Stock, 4,809,219 shares of which are issued and outstanding.
(b) All outstanding shares of Diamond Common Stock are duly authorized,
validly issued, fully paid and nonassessable and have been offered, issued,
sold, and delivered by Diamond in compliance with applicable federal and state
securities laws. There are no preemptive rights in respect of the capital stock
of Diamond.
(c) Except as set forth on Schedule 2.05(c) hereto, there are no
outstanding subscriptions, options, warrants, rights, or other arrangements or
commitments, whether express or implied, obligating Diamond to issue any shares
of its capital stock or securities exchangeable for or convertible into its
capital stock.
(d) Schedule 2.05(d) is a list of all of the Shareholders, the address of
each Shareholder as shown in Diamond's books and records, and the number of
shares of Diamond Common Stock owned by each Shareholder.
2.06. Diamond Financial Statements.
(a) Diamond has previously furnished to Ultrak and Newco true and complete
copies of audited balance sheets of Diamond as of January 1, 1995 and January 2,
1994, and the statements of income, shareholders' equity and cash flows for the
fiscal years then ended, including the notes thereto, in each case examined by
and accompanied by the report of Norman Jones & Company (collectively, the
"Financial Statements") fairly
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presented the financial position of Diamond 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).
2.07. Compliance with Applicable Laws. Diamond 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 Diamond, and Diamond has received no notice of any alleged violation
of any such applicable laws.
2.08. Taxes. Except as set forth on Schedule 2.08, Diamond 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 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 Diamond and the taxes of Diamond
for the periods covered thereby. Diamond is not delinquent in the payment of any
tax, assessment, or governmental charge, there is no tax deficiency or
delinquency asserted against the Diamond and there is no unpaid assessment,
proposal for additional taxes, deficiency or delinquency in the payment of any
of the taxes of Diamond that could be asserted by any taxing authority, nor of
any violation of any tax law. There are no waivers or agreements by Diamond for
the extension of time for the assessment of any tax as shown on such returns or
reports with respect to Diamond. No audit of Diamond by any governmental agency
having jurisdiction with respect to taxes imposed on Diamond or on its income,
properties, sales, franchises, or operations is pending or threatened. All
monies required to be withheld or collected by Diamond 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
Diamond 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 Diamond.
2.09. Liabilities and Obligations. The Financial Statements reflect all
material liabilities or obligations of Diamond, accrued, contingent, or
otherwise (asserted or 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 Diamond since January
1, 1995, which liabilities and obligations are not either individually or in the
aggregate, material to the condition (financial or otherwise), business or
operations of Diamond and as 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, Diamond 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 Diamond
knows of no basis for the assertion of any other claims, liabilities, or
obligations of any nature or in any amount that would be material to the
condition (financial or otherwise), business, or operations of Diamond.
2.10. Employee Benefit Plans and Arrangements; ERISA.
(a) Except for the 401(k) salary savings plan and the stock option plan
described on Schedule 2.10 hereto, and except for those other plans, agreements,
policies, or understandings that are described in Diamond's employee handbook or
have been disclosed to Ultrak in writing in connection with Ultrak's due
diligence review of Diamond, Diamond does not currently sponsor or maintain and
Diamond is not otherwise a party to, nor has it been in default under, any
accrued obligations under any "employee benefit plan" within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), (such plans being hereinafter referred to collectively as the "ERISA
Plans"), or any other pension, profit sharing, or other retirement plan, fringe
benefit plan, health, group insurance or other welfare benefit plan, or other
similar plan, agreement, policy or understanding ("Other Plans" and, together
with ERISA Plans, the "Plans"), whether formal or informal and whether legally
binding or not. Diamond does not
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have any commitment to create any such Plan. Since the time of sale by Arvin
Industries, Inc. of Columbus, Indiana ("Arvin Industries, Inc.") of Diamond,
Diamond is not now, nor has it been, a part of a controlled group of
corporations within the meaning of Section 414(b) of the Code or a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Code.
(b) Since the time of sale by Arvin Industries, Inc. of Diamond, Diamond
has never sponsored, adopted, maintained or been obligated to contribute to a
single employer, multiple employer or multiemployer defined benefit pension plan
which is, or ever was, subject to the provisions of Title IV of ERISA. Since the
time of sale by Arvin Industries, Inc. of Diamond, Diamond is not now, nor has
it sponsored, adopted, maintained, or been obligated to contribute to a Plan
which is or ever was subject to the minimum funding standards of Section 302 of
ERISA and Section 412 of the Code. Diamond does not have any obligation in
connection with any Plan pursuant to the terms of a collective bargaining
agreement.
(c) To the best of Diamond's knowledge, no Plan previously sponsored or
maintained by Diamond, or to which Diamond has otherwise been a party, has
resulted in any material liability or obligation for Diamond other than as
reflected on the Diamond Financial Statements.
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
hereto, and except for the hiring of legal counsel as authorized by Section
11.01, since January 1, 1995, Diamond 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 $10,000 or
total capital expenditures in excess of $30,000; (c) mortgaged, pledged, or
subjected to any lien, lease, security interest, or other charge or encumbrance
any of its 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 adversely affect its condition (financial or otherwise), business, or
operations; (f) except for the disposal of inventory, machinery, vehicles, and
equipment consistent with past 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 Diamond; (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 is material to the condition
(financial or otherwise), business, or operations of Diamond.
2.12. Title and Related Matters. Diamond has good and marketable title to
all assets reflected in the Financial Statements as owned by Diamond and to
those other assets reflected in Diamond'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 Diamond owns such assets
free and clear of all mortgages, liens, pledges, charges, or encumbrances of any
kind or character, except (a) statutory liens for property taxes that are not
yet delinquent and (b) as expressly stated in the Financial Statements or on
Diamond's books and records (except as they have since been affected by
transactions in the ordinary course of business and consistent with past
practices).
2.13. Insurance. Diamond is a beneficiary of policies of insurance, issued
by insurers of recognized responsibility, providing adequate coverage to insure
the properties and businesses thereof against such risks and in such amounts as
are prudent and customary in Diamond's industry. All of such policies are, and
will be maintained through the Effective Date, in full force and effect. All
premiums due thereon have been paid and no notice of cancellation has been
received with respect thereto.
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2.14. Patents, Trademarks, Copyrights, Etc.
(a) Except as set forth on Schedule 2.14, Diamond owns all patents,
technology, know-how, processes, trademarks, and copyrights, if any, necessary
to conduct its business, or possesses adequate licenses or other rights, if any,
therefor, without conflict with the rights of others (the "Proprietary Rights").
(b) Diamond has the sole and exclusive right to use the Proprietary Rights
without infringing or violating the rights of any third parties. No consent of
third parties is required for the use thereof by Diamond, and no claim has been
asserted by any person to the ownership of or right to use any Proprietary Right
or challenging or questioning the validity or effectiveness of any such license
or agreement, and Diamond 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.
(c) There is no claim that, or inquiry as to whether, any product, activity
or operation of Diamond infringes upon or involves, or has resulted in the
infringement of, any Proprietary Right of any other person, corporation or other
entity; and no proceedings have been instituted, are pending or are threatened
which challenge the rights of Diamond with respect thereto.
2.15. Consents. Diamond possesses all necessary licenses, franchises,
permits, and governmental authorizations material to the conduct of its
business, and 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 Diamond, 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) Diamond is not a party to any collective bargaining agreements with any
union and no collective bargaining agreement is currently being negotiated by
Diamond.
(b) There are no unfair labor practice charges, complaints, or proceedings
against Diamond pending or threatened before the National Labor Relations Board.
(c) Other than as set forth on Schedule 2.16(c), there are no
discrimination charges (relating to sex, age, race, national origin, handicap,
or veteran status) pending 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 Diamond and no labor
grievance has been filed.
2.17. Litigation and Claims. Except as set forth on Schedule 2.17, Diamond
is not a party to, and the business and assets of Diamond are not the subject of
or affected by, any pending or threatened suit, claim, action or litigation by
or with any party or any administrative, arbitration, or other governmental
proceeding, investigation, or inquiry. Diamond is not (a) subject to any
continuing court or administrative order, writ, injunction or decree applicable
specifically to Diamond or to its business, assets, operations or employees, or
(b) in default with respect to any such order, writ, injunction or decree.
Diamond does not know of any basis for any such action, proceeding, or
investigation.
2.18. Employees and Consultants. Diamond has no direct or indirect, express
or implied, obligation to pay severance or termination pay to any officer or
employee of Diamond, or to pay any termination or severance payments to any
consultant, agent, or other person or entity.
2.19. Books of Account. The books of account of Diamond have been kept
accurately in the ordinary course of business, the transactions entered therein
represent bona fide transactions and the revenues, expenses, assets, and
liabilities of Diamond have been properly recorded in such books in accordance
with accepted accounting practices.
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2.20. Distributions. Except as set forth on Schedule 2.20, since January 1,
1995, no distribution, payment or dividend of any kind has been declared, paid
or distributed by Diamond 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 threatened against or affecting Diamond which may result in any impairment of
the right of Diamond to use its corporate name. The use of the corporate name of
Diamond 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, no person or business entity other than Diamond is authorized,
directly or indirectly, to use the corporate name of Diamond, or any name
confusingly similar thereto.
2.22. Compliance with Environmental Laws. Diamond has provided Ultrak and
Newco with all environmental studies, records, and reports in Diamond's
possession or control conducted by independent contractors or Diamond and all
correspondence with any governmental entities concerning environmental
conditions of the Real Property, or which identify underground storage tanks, or
otherwise relate to contamination of the soil or groundwater of the Real
Property. Except as disclosed in the August Mack reports dated June 9, 1994,
August 3, 1994, and April 27, 1995:
(a) Diamond has not obtained and has not been required to have
obtained any permits, licenses or similar authorizations to occupy, operate
or use any buildings, improvements, fixtures or equipment forming a part of
any of the real property currently or heretofore owned or leased by Diamond
("Real Property") by reason of any applicable federal or state
environmental laws, rules or regulations.
(b) Diamond has no knowledge that any underground storage tanks were
placed on the Real Property by any person or entity.
(c) Diamond has not placed any asbestos-containing thermal insulation
or building products or PCB-containing products on the Real Property, and
Diamond has no knowledge that any owner, prior lessee or user has placed
any asbestos-containing thermal insulation or building products or PCB-
containing products on the Real Property.
(d) Diamond has not ever been refused, nor do they have any knowledge
of any owner, prior lessee or user ever being refused, insurance coverage,
and no insurance coverage has ever been cancelled, as a result of the
presence of hazardous waste, solid waste or hazardous substances on the
Real Property.
(e) Diamond has not installed or maintained any active or inactive
hazardous waste receptacles on the Real Property, and Diamond does not have
any knowledge that any active or inactive hazardous waste receptacles have
been installed or maintained on the Real Property by any owner, prior
lessee or user.
(f) There have been no spills, discharges or other releases of
hydrocarbons or hazardous or toxic substances onto or from the Real
Property and Diamond does not have any knowledge of any spills, discharges,
or releases by any owner, prior lessee, or user of the Real Property.
(g) There are no plans or documents, whether or not government
approved, including, but not limited to, contingency plans, closure and
post-closure plans, which impose environmental obligations specifically on
Diamond or against the Real Property, and Diamond does not have any
knowledge of any such documents prepared by any owner, prior lessee, or
user of the Real Property.
(h) There are no environmental liens or security interests against the
Real Property nor are there any environmental liens or actions pending or
threatened which would result in the creation of any lien relating to
environmental conditions of the Real Property.
2.23. Condition of Fixed Assets. Except as set forth on Schedule 2.23, all
of the fixed assets owned or leased by Diamond are in good condition and repair
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. Registration Statement; Other Information. None of the information
with respect to Diamond or the Merger supplied by Diamond to be included in the
Registration Statement or any amendments thereof or
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supplements thereto, at the time of effectiveness, at the time of the filing of
the Registration Statement and any amendments thereof or supplements thereto, at
the time of the meeting of Shareholders to be held in connection with the
transactions contemplated herein and on the Effective Date, will contain any
untrue statement of a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. No representation is made by Diamond with
respect to any forward looking information which may have been supplied to
Ultrak. Notwithstanding anything to the contrary herein, Richard Tompkins
("Tompkins") will be allowed to review the Registration Statement or any
amendments thereof or supplements thereto, prior to the filing of the
Registration Statement or any amendments thereof or supplements thereto.
2.25. Brokers and Finders. Neither Diamond 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.
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 true and correct as of the Effective Date as if made on that date:
3.01. Miscellaneous Representations. Such Signing Shareholder does not have
any actual knowledge of (i) any material error in the Financial Statements, (ii)
any material liability or obligation of Diamond that is not disclosed in the
Financial Statements or in a Schedule to this Agreement, (iii) any trend,
demand, commitment, event, or uncertainty that will materially adversely impact,
or that is reasonably likely to materially adversely impact, Diamond's
liquidity, capital resources, and/or results of operations, (iv) any pending or
threatened suit, claim, action, proceeding, investigation, or inquiry against
Diamond that is reasonably likely to be material to the condition (financial or
otherwise), business, or operations of Diamond, and/or (v) any customer or
supplier material to the condition (financial or otherwise), business, or
operations of Diamond that has indicated it will no longer purchase from or sell
to Diamond. None of the Signing Shareholders, other than Tompkins, shall have
any duty independently to investigate or verify the accuracy or adequacy of
disclosures provided to Ultrak by Diamond pursuant to the Disclosure Schedule or
this Agreement; provided, however, Tompkins' duty to investigate shall not
include a duty to investigate matters or events occurring prior to May 15, 1991,
and shall not include Schedule 2.05(d). Notwithstanding anything to the contrary
herein, Tompkins shall be the only Signing Shareholder with any responsibility
under this Section 3.01 for responsibility with respect to Section 2.22 and
Tompkins' responsibility with respect to Section 2.22 shall only be with respect
to events or occurrences after May 15, 1991. Tompkins' duty to investigate shall
only require him to conduct a reasonable inquiry, based on his actual knowledge,
of material matters or events.
3.02. Stock Ownership. As of the date hereof, such Signing Shareholder is
the lawful record and beneficial owner of the shares of Diamond Common Stock set
forth by his name on Schedule 3.02 hereto, free and clear of all proxies,
claims, voting agreements, options, and rights of first refusal of any kind.
The representations and warranties of the Signing Shareholders will survive
for one year from the Effective Date.
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ARTICLE IV:
REPRESENTATIONS AND WARRANTIES OF
ULTRAK AND NEWCO
Each of Ultrak and Newco jointly and severally represents and warrants to
Diamond 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 Colorado, 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 Articles of Incorporation and
all amendments thereto and the Bylaws of both Ultrak and Newco that have been
delivered to Diamond are true, correct, and complete copies thereof. The minute
books of Ultrak and Newco, copies of which have been delivered to Diamond,
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 Ultrak and Newco
since the formation of both Ultrak and Newco.
4.03. Capitalization of Ultrak.
(a) 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 31,
1994, there were issued and outstanding 6,555,619 shares of Ultrak Common Stock
and 195,351 shares of Series A Preferred Stock.
(b) All outstanding shares of Ultrak Common Stock are duly authorized,
validly issued, fully paid and nonassessable and have been offered, issued,
sold, and delivered by Ultrak in compliance with applicable federal and state
securities laws. There are no preemptive rights in respect of the capital stock
of Ultrak.
(c) All outstanding shares of capital stock of Newco are validly issued,
fully paid and nonassessable and are owned by Ultrak directly, free and clear of
all liens, claims, charges, or encumbrances.
(d) As of December 31, 1994, there were options and warrants outstanding
(the "Outstanding Options") entitling the holders thereof to acquire 732,959
shares of Ultrak Common Stock. The Outstanding Options are set forth in the
Annual Report (as hereinafter defined).
(e) Except for the Outstanding Options, there are no outstanding
subscriptions, options, warrants, rights, or other arrangements or commitments,
whether express or implied, obligating Ultrak to issue any shares of its capital
stock or securities exchangeable for or convertible into its capital stock.
There are no outstanding subscriptions, options, warrants, rights or other
arrangements or commitments whether express or implied, obligating Newco to
issue any shares of its capital stock or securities exchangeable for or
convertible into its capital stock.
4.04. Corporate Authority Relative to This Agreement; No Violation. Ultrak
and Newco have the corporate power to enter into this Agreement and the
Certificates of Merger and to carry out their respective obligations hereunder
and thereunder. The execution and delivery of this Agreement and the
Certificates of Merger and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by Ultrak's and Newco's
Boards of Directors and no other corporate proceedings on the part of Ultrak or
Newco are necessary to authorize this Agreement or the Certificates of Merger or
the transactions contemplated hereby and thereby. This Agreement and the
Certificates of Merger have been duly and validly executed and delivered by
Ultrak and Newco and, assuming this Agreement and the Certificates of Merger
constitute valid and binding agreements of the other parties hereto and thereto,
this Agreement and the
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Certificates of Merger constitute valid and binding agreements of Ultrak and
Newco, enforceable against Ultrak 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 Certificates of Merger 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 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 Texas Act, the Ohio Act, the Securities Act, the Exchange Act, and the
securities or blue sky laws of the various states, 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 Diamond 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, 1993;
(ii) Ultrak's quarterly reports on Form 10-Q filed with the SEC for
the quarters ended March 31, 1994, June 30, 1994, and September 30, 1994;
(iii) Ultrak's definitive proxy statement filed with the SEC with
respect to the Annual Meeting of Ultrak's stockholders on June 3, 1994; and
(iv) Ultrak's annual report on Form 10-K filed with the SEC for the
year ended December 31, 1994 (the "Annual Report").
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). Ultrak has
timely filed all reports, registration statements and other filings required to
be filed with the SEC under the rules and regulations of the SEC.
4.06. Compliance with Applicable Laws. Each of Ultrak and Newco, to its
knowledge, 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 Ultrak or Newco, as the case may
be, and neither Ultrak nor Newco has received notice of any alleged violation of
any such applicable laws.
4.07. Liabilities and Obligations. The Ultrak Financials reflect all
material liabilities or obligations of Ultrak, accrued, contingent or otherwise
(asserted or unasserted), arising out of transactions effected or events
occurring on or prior to the date hereof, other than liabilities and obligations
incurred in the ordinary course of business of Ultrak since December 31, 1994,
which liabilities and obligations are not either individually or in the
aggregate, material to the condition (financial or otherwise), business or
operations of Ultrak. All reserves shown in the Ultrak Financials are
appropriate, reasonable, and sufficient to provide for the losses thereby
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contemplated. Except as set forth in the Ultrak Financials, Ultrak 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 Ultrak knows of no basis for the assertion of any
other claims, liabilities or obligations of any nature or in any amount that
would be material to the condition (financial or otherwise), business or
operations of Ultrak.
4.08. Absence of Certain Changes. Except as otherwise contemplated by or
provided for or permitted in this Agreement or as set forth on Schedule 4.08
hereto, since December 31, 1994, Ultrak 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 $50,000 or total capital expenditures in excess of $150,000; (c) mortgaged,
pledged, or subjected to any material lien, lease, security interest, or other
charge or encumbrance any of its 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 materially adversely affect its condition
(financial or otherwise), business, or operations; (f) except for the disposal
of inventory, machinery, vehicles, and equipment consistent with past practices,
acquired or disposed of any material 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 Ultrak; (h) entered into, terminated or agreed to any
modifications or amendments to any agreements, leases or commitments material to
the conditions (financial or otherwise), business, or operations of Ultrak; (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 employee benefit plan; or (k)
entered into or terminated any other commitment or transaction or experienced
any other event that is material to the condition (financial or otherwise),
business or operations of Ultrak.
4.09. Title and Related Matters. Ultrak has good and marketable title to
all assets reflected in the Ultrak Financial as owned by Ultrak and to those
other assets reflected in Ultrak'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 Ultrak owns such assets free and clear
of all mortgages, liens, pledges, charges, or encumbrances of any kind or
character, except (a) statutory liens for property taxes that are not yet
delinquent; and (b) as expressly stated in the Ultrak Financials.
4.10. Consents. Ultrak possesses all necessary licenses, franchises,
permits, and governmental authorizations material to the conduct of its
business, and 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 Ultrak or Newco.
4.11. Registration Statement; Other Information. None of the information
with respect to Ultrak, Newco or the Merger to be included in the Registration
Statement or any amendments thereof or supplements thereto, at the time of
effectiveness, at the time of the filing of the Registration Statement and any
amendments thereof or supplements thereto, will contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made by Ultrak with
respect to information supplied by Diamond. No representation is made by Ultrak
with respect to any forward looking information which may have been supplied to
Diamond.
4.12. 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.
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ARTICLE V:
JOINT COVENANTS OF ULTRAK AND DIAMOND
5.01. Access. Each of Ultrak and Diamond 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 and, in the case of Ultrak
also Newco's, 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 employee medical examinations and
condition and those filed or received by it pursuant to the requirements of the
federal or state securities laws) 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 and, in
the case of Ultrak, also Newco's, 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 Diamond, 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 Newco) or Diamond, 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 Diamond will: (a) cooperate with one another
in determining whether any filings 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 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 any disclosure of information required to be disclosed in the
Registration Statement or that is required to be disclosed by applicable state
blue sky statutes or other applicable law in connection with the transactions
described in the Registration Statement.
5.05. No Solicitation. Until the Termination Date, Diamond covenants that
neither it nor its officers, directors, agents, or affiliates, will, except as
required by law or by this Agreement, or by the fiduciary duties of the Board of
Directors of Diamond: (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
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involving Diamond, 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 Diamond receives
any offer or inquiry for a transaction of the type referred to in (a) above,
such party will promptly inform Ultrak and Newco as to any such offer.
5.06. Public Announcements. Other than the Press Releases dated on or about
February 10, 1995, on or about February 22, 1995, and on or about April 21,
1995, Ultrak and Diamond 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.
5.07. Issuance of Stock or Rights Below Market. Between the date hereof and
the Effective Date, Ultrak shall not, without the prior written consent of
Diamond, issue (or commit to issue) (i) warrants, options, or other rights to
acquire Ultrak Common Stock by purchase, exchange, conversion, or otherwise
(collectively, "Convertible Securities") or (ii) shares of Ultrak Common Stock
at a price per share of Ultrak Common Stock that is less than the market price
of Ultrak Common Stock on the date of issue of such Convertible Securities or
Ultrak Common Stock or the date of entering into the commitment to issue such
Convertible Securities or Ultrak Common Stock. Notwithstanding the preceding
sentence, Ultrak may issue shares of Ultrak Common Stock without Diamond's
consent upon conversion or exercise of Convertible Securities outstanding on the
date hereof and/or issue Convertible Securities representing the unexercised or
unconverted balance of Convertible Securities outstanding on the date hereof
that are converted or exercised.
ARTICLE VI:
COVENANTS OF DIAMOND
6.01 Conduct of Business by Diamond. Prior to the Effective Date or, if
earlier, the Termination Date, and except as may be permitted, required or
contemplated pursuant to this Agreement or as specifically or as may be
consented to in writing by Ultrak, Diamond:
(a) will conduct its operations in the ordinary and usual course of
business consistent with past and current practices, and will use all its
reasonable efforts to maintain and preserve intact its 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;
(b) will not declare or pay any dividends on its outstanding shares of
capital stock;
(c) will not propose or adopt any amendments to its Articles of
Incorporation or Bylaws;
(d) will not issue any shares of its capital stock or effect any stock
split or otherwise change its current capitalization except pursuant to
existing stock options described on Schedule 2.05(c);
(e) 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;
(f) will not purchase or redeem any shares of its capital stock;
and/or
(g) unless otherwise required by law, will not agree to take any
action that would make any representation or warranty in Article II hereof
untrue or incorrect.
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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 Diamond 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. The stockholders of Diamond shall have duly
approved the Merger and the Certificates of Merger, in accordance with the
applicable provisions of the Texas Act or the Ohio Act, as the case may be.
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
Newco and Ultrak after the Merger.
7.03. Effectiveness of Registration Statement; Distribution of Proxy
Statement; No Stop Order. The Registration Statement shall have been declared
effective and the Proxy Statement contained therein will have been distributed
to the Diamond stockholders in accordance with the Ohio Act and the rules and
regulations promulgated under the Exchange Act and no stop order shall have been
issued with respect thereto.
7.04 Shares Exchanged. There will be Ultrak Common Stock exchanged for at
least ninety-five percent (95%) of the Diamond Common Stock on the Effective
Date (after giving effect to Sections 1.05, 1.09, and 1.11).
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 Effective Date of each of the following conditions:
8.01. Representations and Warranties; Compliance. The representations and
warranties of Diamond 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 Effective Date as
though made on and as of the Effective Date, and the covenants and agreements of
Diamond in this Agreement shall have been complied with in all material
respects. On the Effective Date, Diamond 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 in Diamond's business, properties, assets, liabilities, results of
operations or condition, financial or otherwise.
8.03. Opinion. Ultrak shall have received the opinion of Dagger, Johnston,
Miller, Ogilvie & Hampson, counsel for Diamond, dated as of the Effective Date,
in substantially the form attached hereto as Exhibit 8.03.
8.04. Environmental Permit Filing. Ultrak shall have received written
evidence that an application for a permit on behalf of Diamond for wastewater
and for the paintbooth shall have been properly filed with the Ohio
Environmental Protection Agency.
8.05. Employment Agreement. Richard Tompkins shall have executed an
Employment Agreement with Ultrak in the form attached as Exhibit 8.05.
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8.06. Resignations. Each of the officers and directors of Diamond shall
have tendered to Ultrak a resignation letter in form and substance reasonably
satisfactory to Ultrak; provided, however, John Biddinger shall not be required
to resign as a director of Diamond and Tompkins shall not be required to resign
as President and as a director of Diamond.
ARTICLE IX:
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF DIAMOND
The obligations of Diamond to consummate the transactions contemplated by
this Agreement will be subject to the satisfaction on or before the Effective
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 Effective Date as though made on and as of the
Effective Date, and the covenants and agreements of Ultrak in this Agreement
shall have been complied with in all material respects. On the Effective Date,
Ultrak will provide Diamond with a Certificate of Compliance to such effect in a
form reasonably satisfactory to Diamond.
9.02. No Material Adverse Change. There shall have been no material adverse
change in Ultrak's assets, liabilities, results of operations or condition,
financial or otherwise.
9.03. Opinion. Diamond shall have received the opinion of Gardere & Wynne,
L.L.P., dated as of the Effective Date, in substantially the form attached
hereto as Exhibit 9.03.
9.04. Tax Opinion. Diamond shall have received the opinion of Leagre &
Barnes, dated as of the Effective Date, to the effect that, if the Merger is
consummated in accordance with the terms set forth in this Agreement, (a) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code; (b) no gain or loss will be recognized to the holders of shares of
Diamond Common Stock upon receipt of the Merger consideration (except for cash
received in lieu of fractional shares or pursuant to the cash out of Section
1.04); (c) the basis of the Ultrak Common Stock received by the Shareholders
will be the same as the basis of Diamond Common exchanged therefor; and (d) the
holding period of the shares of Ultrak Common Stock received by the Shareholders
will include the holding period of the shares of Diamond Common Stock exchanged
therefor, provided such shares were held as capital assets as of the Effective
Date.
9.05. Diamond Options and Warrants. To the extent rights to acquire stock
of Diamond are not exercised within two (2) business days prior to the Effective
Date, Diamond shall deliver to Ultrak evidence that such options, warrants, or
other rights to acquire stock of Diamond have been cancelled or terminated.
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 Diamond:
(a) by the written consent of Ultrak and Diamond;
(b) by Ultrak or Diamond if the Effective Date has not occurred on or
before June 30, 1995, 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; or
(c) by either Ultrak or Diamond if the conditions precedent to its
obligations to consummate its obligations under this Agreement have not
been satisfied or waived by it on or before the Effective Date.
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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:
MISCELLANEOUS
11.01. 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, Diamond's legal fees and expenses in
connection with this Agreement and the transactions contemplated hereby shall
not exceed $35,000. To the extent legal fees and expenses of Diamond exceed
$35,000, then such excess shall be paid by the Signing Shareholders.
11.02. 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.
11.03. Governing Law. This Agreement will be governed by and construed in
accordance with the internal laws of the State of Texas.
11.04. 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.
11.05. 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.
11.06. Assignments. This Agreement shall not be assignable by operation of
law or otherwise. Any attempted assignment of this Agreement shall be void.
11.07. 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.
11.08. 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" or similar terms refer to this Agreement as
a whole.
[Signatures on the following page]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
<TABLE>
<S> <C>
ULTRAK, INC.
1220 Champion Circle By: /s/ GEORGE K. BROADY
Suite 100 George K. Broady,
Carrollton, Texas 75006 President and CEO
Attn: George K. Broady
DIAMOND ELECTRONICS, INC.
4465 Coonpath Road By: /s/ JOHN W. BIDDINGER
Carroll, Ohio 43112 John W. Biddinger,
Attn: John W. Biddinger Chairman of the Board
DIAMOND PURCHASING CORP.
1220 Champion Circle By: /s/ GEORGE K. BROADY
Suite 100 George K. Broady,
Carrollton, Texas 75006 President
Attn: George K. Broady
Address for each Signing
Shareholder:
2124 Creekview Court By: /s/ RICHARD M. TOMPKINS
Reynoldsburg, Ohio 43068 Richard M. Tompkins
c/o Servaas, Inc. By: /s/ ROBERT N. DAVIES
1000 Waterway Boulevard Robert N. Davies
Indianapolis, Indiana 46202
7491 Albert Tillinghast Drive By: /s/ JOHN W. BIDDINGER
Sarasota, Florida 34240 John W. Biddinger
9102 N. Meridian, Suite 500 By: /s/ H. CHARLES KOEHLER
Indianapolis, Indiana 46260 H. Charles Koehler
304 Long Cove Drive By: /s/ WILLIAM MUIRHEAD, III
Hilton Head Island, William Muirhead, III
South Carolina 29928
</TABLE>
I hereby agree to the terms of the Merger and agree to vote all of my
shares of Diamond Common Stock in favor of the Merger.
/s/ MARGARET BIDDINGER
Margaret Biddinger
A-20
<PAGE> 128
EXTENSION AGREEMENT
This Extension Agreement (this "Agreement"), dated June 28, 1995, is among
Diamond Electronics, Inc., an Ohio corporation ("Diamond"), the shareholders of
Diamond signing this Agreement (the "Signing Shareholders"), Ultrak, Inc., a
Colorado corporation ("Ultrak"), and Diamond Purchasing Corp., a Texas
corporation and wholly-owned subsidiary of Ultrak ("Ultrak Subsidiary").
Recital. The parties hereto previously executed that certain Agreement and
Plan of Reorganization, dated April 28, 1995 (the "Merger Agreement"), which
they now desire to amend pursuant to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the provisions of
this Agreement, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby covenant and agree as
follows:
1. The parties hereby amend and restate Section 10.01(b) of the Merger
Agreement to read as follows:
"(b) by Ultrak or Diamond if the Effective Date has not occurred on or
before July 31, 1995, 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; or"
2. Except as specifically amended as set forth above, the parties
hereto agree that the Merger Agreement shall remain in full force and
effect as written.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first written above.
[SIGNATURES ON THE FOLLOWING PAGE].
A-21
<PAGE> 129
<TABLE>
<S> <C>
DIAMOND ELECTRONICS. INC. ULTRAK, INC.
By: /s/ JOHN W. BIDDINGER By: /s/ GEORGE K. BROADY
John W. Biddinger, Chairman of the Board George K. Broady, President and CEO
/s/ RICHARD M. TOMPKINS DIAMOND PURCHASING CORP.
Richard M. Tompkins
/s/ ROBERT N. DAVIES By: /s/ GEORGE K. BROADY
Robert N. Davies George K. Broady, President
/s/ JOHN W. BIDDINGER
John W. Biddinger
/s/ H. CHARLES KOEHLER
H. Charles Koehler
/s/ WILLIAM MUIRHEAD, III
William Muirhead, III
</TABLE>
I hereby agree to the terms of this Agreement and confirm my agreement to
vote all of my shares of Diamond Common Stock (as defined in the Merger
Agreement) in favor of the Merger (as defined in the Merger Agreement).
/s/ MARGARET BIDDINGER
Margaret Biddinger
A-22
<PAGE> 130
EXHIBIT 1.01(A)
ARTICLES OF MERGER (TEXAS)
<PAGE> 131
CERTIFICATE AND ARTICLES OF MERGER OF
BUSINESS CORPORATIONS
Pursuant to Article 5.04 of the Texas Business Corporation Act, as amended,
the undersigned corporations hereby adopt the following Certificate and Articles
of Merger for the purpose of merging them into one of such corporation:
1. The names of the undersigned corporations are as follows:
Name of Corporation
Diamond Electronics, Inc. ("Diamond")
Diamond Purchasing Corp. ("Newco")
2. The name of the surviving corporation after the merger shall be Diamond
Electronics, Inc., an Ohio corporation, and it shall be governed by the laws of
the State of Ohio. The registered agent of the surviving corporation after the
merger shall be , and the registered office of the surviving
corporation after the merger shall be .
3. The Agreement and Plan of Reorganization dated as of April 28, 1995 (the
"Plan"), a copy of which is attached as Exhibit A hereto, was approved by the
shareholders of Newco in the manner prescribed by the Texas Business Corporation
Act, as amended and was approved by the shareholders of Diamond in the manner
prescribed by the Ohio General Corporation Law, as amended.
4. As to each of the undersigned corporations, the numbers of shares
outstanding and entitled to vote on the Plan are:
<TABLE>
<CAPTION>
CORPORATION NO. OF SHARES ENTITLED
NAME OUTSTANDING TO VOTE
--------------------------------------------------------------- ------------- --------
<S> <C> <C>
Diamond........................................................ 4,809,219 --
Newco.......................................................... 1,000 1,000
</TABLE>
Each of the undersigned corporations has only one class of capital stock
outstanding.
5. As to each of the undersigned corporations, the numbers of shares voted
for and against the Plan, respectively, are:
<TABLE>
<CAPTION>
NAME VOTED FOR VOTED AGAINST
------------------------------------------------------------- --------- -------------
<S> <C> <C>
Diamond...................................................... -- --
Newco........................................................ 1,000 0
</TABLE>
No shares of either of the undersigned corporations were entitled to vote as a
class or a series with respects to the Plan.
<PAGE> 132
IN WITNESS WHEREOF, each of the undersigned corporations has caused these
Certificate and Articles of Merger to be executed by and on its behalf and in
its corporate name as of , 1995.
DIAMOND ELECTRONICS, INC.,
an Ohio corporation
By:______________________________
John W. Biddinger, Chairman
of the Board
DIAMOND PURCHASING CORP.,
a Texas corporation
By:______________________________
George K. Broady, President
<PAGE> 133
EXHIBIT 1.01(B)
CERTIFICATE OF MERGER (OHIO)
<PAGE> 134
<TABLE>
<S> <C>
Prescribed by Approved _______
Bob Taft, Secretary of State Date ___________
30 East Broad Street, 14th Floor Fee ____________
Columbus, Ohio 43266-0418
From MER (July 1994)
</TABLE>
CERTIFICATE OF MERGER
In accordance with the requirements of Ohio law, the undersigned
corporations, limited liability companies and/or limited partnerships, desiring
to effect a merger, set forth the following facts:
I. SURVIVING ENTITY
A. The name of the entity surviving the merger is:
________________________________________________________________________________
________________________________________________________________________________
(IF THE SURVIVING ENTITY IS AN OHIO LIMITED PARTNERSHIP OR QUALIFIED FOREIGN
LIMITED PARTNERSHIP, ITS REGISTRATION NUMBER MUST BE PROVIDED)
B. Name change: As a result of this merger, the name of the surviving entity
has been changed to the following: (COMPLETE
ONLY IF THE NAME OF SURVIVING ENTITY IS CHANGING THROUGH THE MERGER)
C. The surviving entity is a: (Please check the appropriate box and fill in
the appropriate blanks)
<TABLE>
<S> <C>
[ ] Domestic (Ohio) corporation
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of the state/country of
_________________________ and licensed to transact business in the state of Ohio.
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of the state/country of
_________________________, and NOT licensed to transact business in the state of
Ohio.
[ ] Domestic (Ohio) limited liability company
[ ] Foreign (Non-Ohio) limited liability company organized under the laws of the
state/country of _________________________, and registered to do business in the
state of Ohio.
[ ] Foreign (Non-Ohio) limited liability company organized under the laws of the
state/country of _________________________, and NOT registered to do business in the
state of Ohio.
[ ] Domestic (Ohio) limited partnership, registration number
[ ] Foreign (Non-Ohio) limited partnership organized under the laws of the state/country
of _________________________, and registered to do business in the state of Ohio,
under registration number
[ ] Foreign (Non-Ohio) limited partnership organized under the laws of the state/country
of _________________________, and NOT registered to do business in the state of Ohio.
</TABLE>
II. MERGING ENTITIES
The name, type of entity, and state/country of incorporation or
organization, respectively, of each entity, other than the survivor, which is a
party to the merger are as follows: (IF INSUFFICIENT SPACE TO COVER THIS ITEM,
PLEASE ATTACH A SEPARATE SHEET LISTING THE MERGING ENTITIES; OHIO REGISTERED OR
FOREIGN QUALIFIED LIMITED PARTNERSHIPS MUST INCLUDE REGISTRATION NUMBER)
<PAGE> 135
<TABLE>
<CAPTION>
STATE/COUNTRY
NAME OF ORGANIZATION TYPE OF ENTITY
<S> <C> <C>
______________________________ _________________________ ______________________________
______________________________ _________________________ ______________________________
______________________________ _________________________ ______________________________
______________________________ _________________________ ______________________________
______________________________ _________________________ ______________________________
</TABLE>
III. MERGER AGREEMENT ON FILE
The name and mailing address of the person or entity from whom/which
eligible persons may obtain a copy of the agreement of merger upon written
request:
<TABLE>
<CAPTION>
NAME ADDRESS
<C> <S>
______________________________ ____________________________________________________________________________
(street and number)
____________________________________________________________________________
(city, village or township) (state) (zip code)
</TABLE>
IV. EFFECTIVE DATE OF MERGER
This merger is to be effective:
On _______________ (if a date is specified, the date must be a date on or
after the date of filing; the effective date of the merger cannot be earlier
than the date of filing; if no date is specified, the date of filing will be the
effective date of the merger).
V. MERGER AUTHORIZED
The laws of the state or country under which each constituent entity
exists, permits this merger.
This merger was adopted, approved and authorized by each of the constituent
entities in compliance with the laws of the state under which it is organized,
and the persons signing this certificate on behalf of each of the constituent
entities are duly authorized to do so.
VI. STATUTORY AGENT
The name and address of the surviving entity's statutory agent upon whom
any process, notice or demand may be served is:
<TABLE>
<S> <C>
NAME ADDRESS
________________________ ______________________________________________________________________________________
(complete street address)
______________________________________________________________________________________
(city, village or township) (state) (zip code)
</TABLE>
(This item MUST be completed if the surviving entity is a foreign entity which
is not licensed, registered or otherwise authorized to conduct or transact
business in that State of Ohio)
Acceptance of Agent
The undersigned, named herein as the statutory agent for the above
referenced surviving entity, hereby acknowledges and accepts the appointment of
statutory agent for said entity.
________________________________________
Signature of Agent
<PAGE> 136
(The acceptance of agent must be completed by domestic surviving entities if
through this merger the statutory agent for the surviving entity has changed, or
the named agent differs in any way from the name reflected on the Secretary of
State's records.)
VII. STATEMENT OF MERGER
Upon filing, or upon such later date as specified herein, the merging
entity/entities listed herein shall merge into the listed surviving entity.
VIII. AMENDMENTS
The articles of incorporation, articles of organization or certificate of
limited partnership (strike the inapplicable terms) of the surviving domestic
entity herein, are amended as set forth in the attached "Exhibit A"
(Please note that any amendments to articles of incorporation, articles of
organization or to a certificate of limited partnership MUST be attached if the
surviving entity is a DOMESTIC corporation, limited liability company, or
limited partnership.)
IX. QUALIFICATION OR LICENSURE OF FOREIGN SURVIVING ENTITY
A. The listed surviving foreign corporation, limited liability company, or
limited partnership desires to transact business in Ohio as a foreign
corporation, foreign limited liability company, or foreign limited partnership,
and hereby appoints the following as its statutory agent upon whom process,
notice or demand against the entity may be served in the State of Ohio. The name
and complete address of the statutory agent is:
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
(name) (street and number)
- -------------------------------------------------------------------- , Ohio ------------------
(city, village or township) (zip code)
</TABLE>
The subject surviving foreign corporation, limited liability company or
limited partnership irrevocably consents to service of process on the statutory
agent listed above as long as the authority of the agent continues, and to
service of process upon the Secretary of State if the agent cannot be found, if
the corporation, limited liability company or limited partnership fails to
designate another agent when required to do so, or if the corporation's, limited
liability company's, or limited partnership's license or registration to do
business in Ohio expires or is canceled.
<PAGE> 137
B. The qualifying entity also states as follows: (complete only if
applicable)
<TABLE>
<C> <S>
1. Foreign Qualifying Limited Liability Company (If the qualifying entity is a foreign
limited liability company, the following information must be completed)
a. The name of the limited liability company in its state of
organization/registration is ____________________________________________________________
_________________________________________________________________________________________
b. The name under which the limited liability company desires to transact
business in Ohio is _____________________________________________________________________
_________________________________________________________________________________________
c. The limited liability company was organized or registered on ____________________________
month day year
under the laws of the state/country of __________________________________________________.
d. The address to which interested persons may direct request for copies of the
articles of organization, operating agreement, bylaws, or other charter
documents of the company is:
_________________________________________________________________________________________
2. FOREIGN QUALIFYING LIMITED PARTNERSHIP
(If the qualifying entity is a foreign limited partnership, the following
information must be completed)
a. The name of limited partnership is ______________________________________________________
b. The limited partnership was formed on ____________________________ under the laws of the
month day year
state/country of ________________________________________________________________________
c. The address of the office of the limited partnership in its state/country of
organization is _________________________________________________________________________
d. The limited partnership's principal office address is
_________________________________________________________________________________________
e. The names and business or residence addresses of the GENERAL partners of the
partnership are as follows:
Name Address
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
(If insufficient space to cover this item, please attach a separate sheet
listing the general partners and their respective addresses)
f. The address of the office where a list of the names and business or residence
addresses of the limited partners and their respective capital contributions
is to be maintained is:
_________________________________________________________________________________________
_________________________________________________________________________________________
The limited partnership hereby certifies that it shall maintain said records
until the registration of the limited partnership in Ohio is cancelled or
withdrawn.
</TABLE>
<PAGE> 138
The undersigned constituent entities have caused this certificate of merger
to be signed by its duly authorized officers, partners and representatives on
the date(s) stated below.
<TABLE>
<S> <C>
- --------------------------------------------- ---------------------------------------------
exact name of entity exact name of entity
By:__________________________________________ By:__________________________________________
Its:_________________________________________ Its:_________________________________________
Date:________________________________________ Date:________________________________________
- --------------------------------------------- ---------------------------------------------
exact name of entity exact name of entity
By:__________________________________________ By:__________________________________________
Its:_________________________________________ Its:_________________________________________
Date:________________________________________ Date:________________________________________
- --------------------------------------------- ---------------------------------------------
exact name of entity exact name of entity
By:__________________________________________ By:__________________________________________
Its:_________________________________________ Its:_________________________________________
Date:________________________________________ Date:________________________________________
- --------------------------------------------- ---------------------------------------------
exact name of entity exact name of entity
By:__________________________________________ By:__________________________________________
Its:_________________________________________ Its:_________________________________________
Date:________________________________________ Date:________________________________________
- --------------------------------------------- ---------------------------------------------
exact name of entity exact name of entity
By:__________________________________________ By:__________________________________________
Its:_________________________________________ Its:_________________________________________
Date:________________________________________ Date:________________________________________
</TABLE>
(Please note that the chairman of the board, the president, vice president,
secretary or an assistant secretary must sign on behalf of each constituent
corporation, and at least on general partner must sign on behalf of each
constituent limited partnership; If insufficient space for signature, a separate
sheet should be attached continuing such signatures)
<PAGE> 139
ANNEX B
OHIO REVISED CODE SECTION 1.701.85
DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF SHARES.
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in Sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
Section 1701.84 of the Revised Code in the case of a merger pursuant to Section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of Section 1701.84 of the Revised Code in the case of a
merger pursuant to Section 1701.801 [1701.80.1] of the Revised Code shall be a
record holder of the shares of the corporation as to which he seeks relief as of
the date on which the agreement of merger was adopted by the directors of that
corporation. Within twenty days after he has been sent the notice provided in
Section 1701.80 or 1701.801 [1701.80.1] of the Revised Code, the dissenting
shareholder shall deliver to the corporation a written demand for payment with
the same information as that provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity whether served before, on, or after the effective date of the merger or
consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months of the service of the demand by the dissenting
shareholder, may file a complaint in the court of
B-1
<PAGE> 140
common pleas of the county in which the principal office of the corporation that
issued the shares is located, or was located at the time when the proposal was
adopted by the shareholders of the corporation, or, if the proposal was not
required to be submitted to the shareholders, was approved by the directors.
Other dissenting shareholders, within that three-month period, may join as
plaintiffs, or may be joined as defendants in any such proceeding, and any two
or more such proceedings may be consolidated. The complaint shall contain a
brief statement of the facts, including the vote and the facts entitling the
dissenting shareholder to the relief demanded. No answer to such a complaint is
required. Upon the filing of such a complaint, the court, on motion of the
petitioner, shall enter an order fixing a date for a hearing on the complaint
and requiring that a copy of the complaint and a notice of the filing and of the
date for hearing be given to the respondent or defendant in the manner in which
summons is required to be served or substituted service is required to be made
in other cases. On the day fixed for the hearing on the complaint or any
adjournment of it, the court shall determine from the complaint and from such
evidence as is submitted by either party whether the dissenting shareholder is
entitled to be paid the fair cash value of any shares and, if so, the number and
class of such shares. If the court finds that the dissenting shareholder is so
entitled, the court may appoint one or more persons as appraisers to receive
evidence and to recommend a decision on the amount of the fair cash value. The
appraisers have such power and authority as is specified in the order of their
appointment. The court thereupon shall make a finding as to the fair cash value
of a share, and shall render judgment against the corporation for payment of it,
with interest at such rate and from such dated as the court considers equitable.
The costs of the proceeding, including reasonable compensation to the appraisers
to be fixed by the court, shall be assessed or apportioned as the court
considers equitable. The proceeding is a special proceeding, and final orders in
it may be vacated, modified, or reversed on appeal pursuant to the rules of
appellate procedure and, to the extent not in conflict with those rules, Chapter
2505 of the Revised Code. If, during the pendency of any proceeding instituted
under this section, a suit or proceeding is or has been instituted to enjoin or
otherwise to prevent the carrying out of the action as to which the shareholder
has dissented, the proceeding instituted under this section shall be stayed
until the final determination of the other suit or proceeding. Unless any
provision in division (D) of this section is applicable, the fair cash value of
the shares that is agreed upon by the parties or fixed under this section shall
be paid within thirty days after the date of final determination of such value
under this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to Section 1701.80 or 1701.801 [1701.80.1] of the
Revised Code, fair cash value as to the shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of the
agreement of merger by the directors of the particular subsidiary corporation.
The fair cash value of a share for the purposes of this section is the amount
that a willing seller who is under no compulsion to sell, would be willing to
accept and that a willing buyer who is under no compulsion to purchase would be
willing to pay, but in no event shall the fair cash value of a share exceed the
amount specified in the demand of the particular shareholder. In computing such
fair cash value, any appreciation or depreciation in market value resulting from
the proposal submitted to the directors or to the shareholders shall be
excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
(a) The shareholder has not complied with this section, unless the
corporation by its directors waives such failure;
(b) The corporation abandons the action involved, or is finally
enjoined or prevented from carrying out, or the shareholders rescind their
adoption of the action involved;
B-2
<PAGE> 141
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B)
of this section within the period provided in that Division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholders giving of the demand until
either the termination of the rights and obligations arising from it or the
purchase of the shares by the corporation, all other rights accruing from such
shares, including voting or dividend or distribution rights, are suspended. If
during the suspension, any dividend or distribution is paid in money upon shares
of such class or any dividend, distribution, or interest is paid in money upon
any securities issued in extinguishment of or in substitution for such shares,
an amount equal to the dividend, distribution, or interest which, except for the
suspension, would have been payable upon such shares or securities, shall be
paid to the holder of record as a credit upon the fair cash value of the shares.
If the right to receive fair cash value is terminated other than by the purchase
of the shares by the corporation, all rights of the holder shall be restored and
all distributions which, except for the suspension, would have been made shall
be made to the holder of record of the shares at the time of termination.
History: 133 v Section 158 (Eff 7-17-70); 135 v Section 158 (Eff 9-30-74); 140 v
H 250 (Eff 7-30-84); 140 v Section 283 (Eff 9-20-84); 141 v H 902 (Eff
11-22-86); 141 v H 412 (Eff 3-17-87); 141 v H 428 (Eff 12-23-86); 142 v H 708
(eff 4-19-68); 145 v S 74. Eff 7-1-94.
Analogous to former RC Section 1701.85 (126 v; 412; 130 v Section 121),
repealed 133 v Section 158, eff 7-17-70.
Analogous to former RC Section 1701.85 (126 v 432; 130 v Section 121),
repealed 133 v Section 158, eff 7-17-70.
NOTES:
1986 COMMITTEE COMMENT
Division (A)(3) and Division (C) are amended to include shareholders
entitled to dissenters' rights under new Sec. 1701.84(E) in connection with
mergers under new Sec. 1701.801.
1970 COMMITTEE REPORT
Finally, the committee proposes a rather extensively amended section
1701.85, revising the procedures for perfecting the rights of dissenting
shareholders. The time limitations for perfecting the rights have been altered
somewhat (compare old (A)(1) and (2) with new (A)(2) and (3)); the requirement
in division (3) that the court appoint three appraisers has been optional; the
present provision (division (B)) requiring that in certain circumstances the
corporation is bound to pay the amount demanded by the dissenting shareholder
has been omitted; and the procedure to be followed when no agreement has been
reached and neither party has filed suit has been changed (new (D)(4)). The
definition of fair cash value has not been basically changed.
B-3
<PAGE> 142
ANNEX C
ARTICLES OF INCORPORATION
OF
DIAMOND ELECTRONICS, INC.
ARTICLE I
NAME
The name of the Corporation is Diamond Electronics, Inc.
ARTICLE II
PRINCIPAL OFFICE
The place in Ohio where its principal office is to be located is 1465 Coon
Path Road, Carroll, Fairfield County, Ohio 43112.
ARTICLE III
PURPOSES
The purpose for which the Corporation is formed is to engage in any lawful
act or activity for which corporations may be formed under Sections 1701.01 to
1701.98 of the Ohio Revised Code.
ARTICLE IV
SHARES
The authorized number of shares of the Corporation shall be 5,100,000, of
which 5,000,000 shall be common shares, each without par value, and 100,000
shall be preferred shares, each with par value of $100 per share.
Dividends may be declared by the Board of Directors and paid in preferred
shares to the holders of common shares without the approval of the holders of
the preferred shares or any series thereof in which payment is to be made.
Preferred shares shall be issuable in series having distinctive
designations. The Board of Directors of the Corporation shall determine whether
preferred shares shall be issued as a part of a preexisting series or as a part
of a new series. Subject to the limitations set forth in the General Corporation
Law of Ohio, the Board of Directors of the Corporation shall, by resolution
adopted prior to the issuance of any shares thereof, determine the relative
rights, preferences, limitations and restrictions of each such series of
preferred shares, including without limitation the authority to (a) determine
the dividend rate, if any, for the shares of such series, (b) provide terms for
the redemption of the shares of such series, including the redemption price and
date of a sinking fund, if any, and (c) provide terms, conditions and a ratio of
exchange upon which the shares of such series may be converted into shares of
any other class of shares of the Corporation. Each share of each series of
preferred shares shall have the same relative rights as, and be identical in all
respects with, all the other shares of the same series.
No dividends shall be declared or paid at any time upon any common shares
of the Corporation unless and until all dividends upon the preferred shares then
accrued and unpaid have been paid in full.
Outstanding preferred shares may be subject to redemption at the option of
the Corporation by resolution of its Board of Directors at such redemption price
as shall have been fixed by the Board of Directors with regard to each such
series at or before the time of issue of any shares thereof, together with all
dividends accumulated or accrued and unpaid to the date of redemption. Not less
than thirty (30) days' notice of a call and redemption pursuant to this
paragraph shall be given by mail to each holder of record at his post office
C-1
<PAGE> 143
address appearing upon the books of the Corporation, but any failure on the part
of any holder of such shares to receive such notice shall not render any such
redemption invalid or ineffectual. Upon the date fixed for redemption, payment
for the shares redeemed shall be made to the holders of record at the principal
office of the Corporation and in such other place as may be determined by the
Board of Directors and specified in the notice, upon presentation and surrender
of their share certificates, duly endorsed for transfer.
In any application of the funds and assets of the Corporation to the
repayment of its outstanding capital shares in liquidation (other than by
redemption or purchase as otherwise provided in this Article) whether voluntary
or involuntary, holders of preferred shares shall be entitled to be paid in full
the par value of their shares and accrued and unpaid dividends thereon before
any payment shall be made to the holders of the common shares, and thereafter
the remaining assets of the Corporation shall be distributed pro rata among the
holders of the common shares.
When payment of the consideration for which a capital share was authorized
to be issued shall have been received by the Corporation, said share shall be
deemed to be fully paid and not liable to any further call or assessment, and
the holder thereof shall not be liable for any further payments.
Except as otherwise provided in the General Corporation Law of Ohio,
preferred shares shall not confer any voting rights or powers upon the holders
thereof.
ARTICLE V
DIRECTORS
The Directors of the Corporation shall have the power to cause the
Corporation from time to time and at any time to purchase, hold, sell, transfer
or otherwise deal with (A) shares of any class or series issued by it, (B) any
security or other obligation of the Corporation which may confer upon the holder
thereof the right to convert the same into shares of any class or series
authorized by the Articles of the Corporation and (C) any security or other
obligation which may confer upon the holder thereof the right to purchase shares
of any class or series authorized by the Articles of the Corporation. The
Corporation shall have the right to repurchase, if and when any shareholder
desires to sell, or on the happening of any event is required to sell, shares of
any class or series issued by the Corporation. The authority granted in this
Article V of these Articles shall not limit the plenary authority of the
Directors to purchase, hold, sell, transfer or otherwise deal with shares of any
class or series, securities, or other obligations issued by the Corporation or
authorized by its Articles.
ARTICLE VI
PREEMPTIVE RIGHTS
No shareholder of the Corporation shall have, as a matter of right, the
preemptive right to purchase or subscribe for shares of any class, now or
hereafter authorized, or to purchase or subscribe for securities or other
obligations convertible into or exchangeable for such shares or which by warrant
or otherwise entitle the holders thereof to subscribe for or purchase any such
share.
ARTICLE VII
APPROVAL OF BUSINESS COMBINATIONS
Section 1. Supermajority Vote. Except as provided in Sections 2 and 3 of
this Article VII, neither the Corporation nor any of its Subsidiaries shall
become party to any Business Combination with a Related Person without the prior
affirmative vote at a meeting of the Corporation's shareholders.
(a) By the holders of not less than 80% of the outstanding shares of
all classes of the Corporation considered for purposes of this Article VII
as a single class, and
(b) By an Independent Majority of Shareholders.
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Such favorable votes shall be in addition to any shareholder vote that
would be required without reference to this Section 1 and shall be required
notwithstanding the fact that no vote may be required, or that some lesser
percentage may be specified by law or in other Articles of these Articles of
Incorporation or the Regulations of the Corporation or otherwise.
Section 2. Fair Price Exception. The provisions of Section 1 shall not
apply to a Business Combination if all of the conditions set forth in
subsections (a) through (d) are satisfied.
(a) The fair market value of the property, securities or other
consideration to be received per share by holders of each class or series
of capital shares of the Corporation in the Business Combination is not
less, as of the date of the consummation of the Business Combination (the
"Consummation Date") than the higher of the following: (i) the highest per
share price (with appropriate adjustments for recapitalizations and for
share splits, share dividends and like distributions) including brokerage
commissions and solicitation fees paid by the Related Person in acquiring
any of its holdings of such class or series of capital shares within the
two year period immediately prior to the first public announcement of the
proposed Business Combination ("Announcement Date") plus interest
compounded annually, from the date that the Related Person became a Related
Person (the "Determination Date"), or if later from a date two years before
the Consummation Date, through the Consummation Date, at the rate publicly
announced as the "prime rate" of interest of Citibank, N.A. (or of such
other major bank headquartered in New York as may be selected by a majority
of the Continuing Directors) from time to time in effect, less the
aggregate amount of any cash dividends paid and the fair market value of
any dividends paid in other than cash on each share from the date from
which interest accrues under the preceding clause through the Consummation
Date up to but not exceeding the amount of interest so payable per share;
OR (ii) the fair market value per share of such class or series on the
Announcement Date as determined by the highest closing sale price during
the 30-day period immediately preceding the Announcement Date if such share
is listed on a securities exchange registered under the Securities Exchange
Act of 1934 or, if such share is not listed on any such exchange, the
highest closing bid quotation with respect to such share during the 30-day
period preceding the Announcement Date on the National Association of
Securities Dealers, Inc. Automated Quotation System or any similar system
then in use, or if no such quotations are available, the fair market value
of such share immediately prior to the first public announcement of the
proposed Business Combination as determined by the Board of Directors in
good faith. In the event of a Business Combination upon consummation of
which the Corporation would be the surviving corporation or company or
would continue to exist (unless it is provided, contemplated or intended
that as part of such Business Combination or within one year after
consummation thereof a plan of liquidation or dissolution of the
Corporation will be effected), the term "other consideration to be
received" shall include (without limitation) common shares and/or the share
of any other class of shares retained by shareholders of the Corporation
other than Related Persons who are parties to such Business Combination;
(b) The consideration to be received in such Business Combination by
holders of each class or series of capital shares other than the Related
Person involved shall, except to the extent that a shareholder agrees
otherwise as to all or part of the shares which he or she owns, be in the
same form and of the same kind as the consideration paid by the Related
Person in acquiring the majority of the capital shares of such class or
series already Beneficially Owned by it;
(c) After such Related Person became a Related Person and prior to the
consummation of such Business Combination: (i) such Related Person shall
have taken steps to insure that the Board of Directors of the Corporation
included at all times representation by Continuing Directors proportionate
to the ratio that the number of Voting Shares of the Corporation from time
to time owned by shareholders who are not Related Persons bears to all
Voting Shares of the Corporation outstanding at the time in question (with
a Continuing Director to occupy any resulting fractional position among the
directors); (ii) such Related Person shall not have acquired from the
Corporation, directly or indirectly, any shares of the Corporation (except
upon conversion of convertible securities acquired by it prior to becoming
a Related Person or as a result of a pro rata share dividend, share split
or division of shares or in a transaction which satisfied all applicable
requirements of this Article VII); (iii) such Related Person
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shall not have acquired any additional Voting Shares of the Corporation or
securities convertible into or exchangeable for Voting Shares except as a
part of the transaction which resulted in such Related Person's becoming a
Related Person; and (iv) such Related Person shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other financial assistance
or tax credits provided by the Corporation or any Subsidiary, or made any
major change in the Corporation's business or equity capital structure
entered into any contract, arrangement or understanding with the
Corporation except any such change, contract, arrangement or understanding
as may have been approved by the favorable vote of not less than a majority
of the Continuing Directors of the Corporation; and
(d) A proxy statement complying with the requirements of the
Securities Exchange Act of 1934 and the rules and regulations of the
Securities and Exchange Commission thereunder, as then in force for
corporations subject to the requirements of Section 14 of such Act (even if
the Corporation is not otherwise subject to Section 14 of such Act), shall
have been mailed to all holders of capital shares of the Corporation
entitled to vote with respect to such Business Combination. Such proxy
statement shall contain on the face page thereof, in a prominent place, any
recommendations as to the advisability (or inadvisability) of the Business
Combination which the Continuing Directors, or any of them, may have
furnished in writing and, if deemed advisable by a majority of the
Continuing Directors, a fair summary of an opinion of a reputable
investment banking firm addressed to the Corporation as to the fairness (or
lack of fairness) of the terms of such Business Combination from the point
of view of the holders of Voting Shares other than any Related Person (such
investment banking firm to be selected by a majority of the Continuing
Directors, to be furnished with all information it reasonably requests, and
to be paid a reasonable fee for its services upon receipt by the
Corporation of such opinion).
Section 3. Director Approval Exception. The provisions of Section 3 shall
not apply to a Business Combination if:
(a) The Continuing Directors of the Corporation by a two-thirds vote
(i) have expressly approved a memorandum of understanding with the Related
Person with respect to the Business Combination prior to the time that the
Related Person became a Related Person and the Business Combination is
effected by substantially the same terms and conditions as are provided by
the memorandum of understanding, or (ii) have otherwise approved the
Business Combination (this provision is incapable of satisfaction unless
there is at least one Continuing Director); or
(b) The Business Combination is solely between the Corporation and
another corporation, one hundred percent of the Voting Shares of which is
owned directly or indirectly by the Corporation.
Section 4. Definitions. For the purpose of this Article VII:
(a) A "Business Combination" means:
(i) the sale, exchange, lease, transfer or other disposition to or
with a Related Person or any Affiliate or Associate of such Related
Person by the Corporation or any of its Subsidiaries (in a single
transaction or a Series of Related Transactions) of all or substantially
all, or any Substantial Part, of its or their assets or businesses
(including, without limitation, any securities issued by a Subsidiary);
(ii) The purchase, exchange, lease or other acquisition by the
Corporation or any of its Subsidiaries (in a single transaction or a
Series of Related Transactions) of all or substantially all, or any
Substantial Part, of the assets or business of a Related Person or any
Affiliate or Associate of such Related Person;
(iii) Any merger or consolidation of the Corporation or any
Subsidiary thereof into or with a Related Person or any Affiliate or
Associate of such Related Person or into or with another Person which,
after such merger or consolidation, would be an Affiliate or an
Associate of a Related Person, in each case irrespective of which Person
is the surviving entity in such merger or consolidation;
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(iv) Any reclassification of securities, recapitalization or other
transaction (other than a redemption in accordance with the terms of the
security redeemed) which has the effect, directly or indirectly, of
increasing the proportionate amount of Voting Shares of the Corporation
or any Subsidiary thereof which are Beneficially Owned by a Related
Person, or any partial or complete liquidation, spinoff, splitoff or
splitup of the Corporation or any Subsidiary thereof; provided, however,
that this Section 4(a)(iv) shall not relate to any transaction that has
been approved by a majority of the Continuing Directors; or
(v) The acquisition upon the issuance thereof of Beneficial
Ownership by a Related Person of Voting Shares or securities convertible
into Voting Shares or any voting securities or securities convertible
into voting securities of any Subsidiary of the Corporation, or the
acquisition upon the issuance thereof of Beneficial Ownership by a
Related Person of any rights, warrants or options to acquire any of the
foregoing or any combination of the foregoing voting Shares or voting
securities of a Subsidiary.
(b) A "Series of Related Transactions" shall be deemed to include not
only a series of transactions with the same Related Person but also a
series of separate transactions with a Related Person or any Affiliate or
Associate of such Related Person.
(c) A "Person" shall mean any individual, firm, corporation or other
entity and any partnership, syndicate or other group.
(d) "Related Person" shall mean any Person (other than the Corporation
or any of the Corporation's Subsidiaries or the Continuing Directors,
singly or as a group) who or that at any time described in the last
sentence of this subsection (d):
(i) is the Beneficial Owner, directly or indirectly, of more than
ten percent (10%) of the voting power of the outstanding Voting Shares
and who has not been the Beneficial Owner, directly or indirectly, of
more than ten percent (10%) of the voting power of the outstanding
Voting Shares for a continuous period of two years prior to the date in
question; or
(ii) is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question (but not
continuously during such two-year period) was the Beneficial Owner,
directly, of ten percent (10%) or more of the voting power of the then
outstanding Voting Shares; or
(iii) is an assignee of or has otherwise succeeded to any Voting
Shares which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Related Person,
if such assignment or succession shall have occurred in the course of a
transaction or series of transactions not involving a public offering
within the meaning of the Securities Act of 1933.
A Related Person shall be deemed to have acquired a share of the Corporation at
the time when such Related Person became the Beneficial Owner thereof. For the
purposes of determining whether a Person is the Beneficial Owner of ten percent
or more of the voting power of the then outstanding Voting Shares, the
outstanding Voting Shares shall be deemed to include any Voting Shares that may
be issuable to such Person Pursuant to a right to acquire such Voting Shares and
that is therefore deemed to be Beneficially owned by such Person pursuant to
Section 4(e)(ii)(a). A Person who is a Related Person at (i) the time any
definitive agreement relating to a Business Combination is entered into, (ii)
the record date for the determination of shareholders entitled to notice of and
to vote on a Business Combination, or (iii) the time immediately prior to the
consummation of a Business Combination, shall be deemed a Related Person.
(e) A Person shall be a "Beneficial Owner" of any Voting Shares:
(i) which such Person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
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(ii) which such Person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by any
other Person with which such Person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any Voting Shares.
(f) An "Affiliate" of, or a person Affiliated with, a specific person,
means a Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, the Person specified.
(g) The term "Associate" used to indicate a relationship with any
Person, means (i) any corporation or organization (other than this
Corporation or a majority-owned Subsidiary of this Corporation) of which
such Person is an officer or partner or is, directly or indirectly, the
Beneficial Owner of five percent or more of any class of equity securities,
(ii) any trust or other estate in which such Person has a substantial
beneficial interest or as to which such Person serves as trustee or in a
similar fiduciary capacity, (iii) any relative or spouse of such Person, or
any relative of such spouse, who has the same home as such person, or (iv)
any investment company registered under the Investment Company Act of 1940,
for which such Person or any Affiliate of such Person serves as investment
advisor.
(h) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Related Person set forth in paragraph (d) of this Section 4, the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(i) "Continuing Director" means any member of the Board of directors
of the Corporation (the "Board") who is not associated with the Related
Person and was a member of the Board prior to the time that the Related
Person became a Related person, and any successor of a Continuing Director
who is not associated with the Related person and is recommended to succeed
the Continuing Director by not less than two-thirds of the Continuing
Directors then on the Board.
(j) "Independent Majority of Shareholders" shall mean the holders of a
majority of the outstanding Voting shares that are not Beneficially Owned
or controlled, directly or indirectly, by a Related person.
(k) "Voting Share" shall mean all outstanding capital shares of the
Corporation or another corporation entitled to vote generally in the
election of directors, and each reference to a proportion of Voting Shares
shall refer to such proportion of Voting Shares shall refer to such
proportion of the votes entitled to be cast by such shares.
(l) "Substantial Part" means properties and assets involved in any
single transaction or a Series of Related Transactions having an aggregate
fair market value of more than ten percent of the total consolidated assets
of the Person in question as determined immediately prior to such
transaction or Series of related Transactions.
Section 5. Director Determinations. A majority of the Continuing Directors
shall have the power to determine for the purposes of this Article VII, on the
basis of information known to them: (i) the number of Voting Shares of which any
Person is the Beneficial Owner, (ii) whether a Person is an Affiliate or
Associate of another, (iii) whether a Person has an agreement, arrangement or
understanding with another as to the matters referred to in the definition of
"Beneficial Owner," (iv) whether the assets subject to any Business Combination
constitute a Substantial part, (v) whether two or more transactions constitute a
Series of Related Transactions, and (vi) such other matters with respect to
which a determination is required under this Article VII.
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Section 6. Amendment of Article VII. Any amendment, change or repeal of
this Article VII or any other amendment of these Articles of Incorporation which
would have the effect of modifying or permitting circumvention of this Article
VII, shall require the affirmative vote, at a meeting of shareholders of the
Corporation, as to all shares held:
(a) By the holders of at least 80% of the outstanding Voting Shares of
all classes of the Corporation considered for purposes of this Article VII
as a single class; and
(b) By an Independent Majority of Shareholders;
Provided, however, that this Section 6 shall not apply to, and such vote
shall not be required for, any such amendment, change or repeal recommended to
shareholders by the favorable vote of not less than two-thirds of the Directors
who then qualify as Continuing Directors with respect to all Related Persons and
any such amendment, change or repeal so recommended shall require only the vote,
if any, required under the applicable provisions of the law.
Section 7. Fiduciary Obligations Unaffected. Nothing in this Article VII
shall be construed to relieve any Related Person from any fiduciary duty imposed
by law.
ARTICLE VIII
CUMULATIVE VOTING
No shareholder shall have the right to cumulate such voting power as he
possesses in the election of any Director of the Corporation unless cumulative
voting is required by law.
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ANNEX D
REGULATIONS
OF
DIAMOND ELECTRONICS, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
SECTION CAPTION NO.
- ------- ------------------------------------------------------------------------------- ----
<C> <S> <C>
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
1.01 Annual Meetings................................................................
1.02 Call of Meetings...............................................................
1.03 Place of Meetings..............................................................
1.04 Notice of Meetings.............................................................
1.05 Waiver of Notice...............................................................
1.06 Quorum.........................................................................
1.07 Votes Required.................................................................
1.08 Order of Business..............................................................
1.09 Shareholders Entitled to Vote..................................................
1.10 Cumulative Voting..............................................................
1.11 Proxies........................................................................
1.12 Inspectors of Election.........................................................
ARTICLE TWO
DIRECTORS
2.01 Authority and Qualifications...................................................
2.02 Number of Directors and Term of Office.........................................
2.03 Election.......................................................................
2.04 Removal........................................................................
2.05 Vacancies......................................................................
2.06 Meetings.......................................................................
2.07 Notice of Meetings.............................................................
2.08 Waiver of Notice...............................................................
2.09 Quorum.........................................................................
2.10 Executive Committee............................................................
2.11 Compensation...................................................................
2.12 Bylaws.........................................................................
ARTICLE THREE
OFFICERS
3.01 Officers.......................................................................
3.02 Tenure of Office...............................................................
3.03 Duties of the Chairman of the Board............................................
3.04 Duties of the Vice Chairman of the Board.......................................
3.05 Duties of the President........................................................
3.06 Duties of the Vice Presidents..................................................
3.07 Duties of the Secretary........................................................
3.08 Duties of the Treasurer........................................................
</TABLE>
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<TABLE>
<CAPTION>
PAGE
SECTION CAPTION NO.
- ------- ------------------------------------------------------------------------------- ----
<C> <S> <C>
ARTICLE FOUR SHARES
4.01 Certificates...................................................................
4.02 Transfers......................................................................
4.03 Transfer Agents and Registrars.................................................
4.04 Lost, Wrongfully Taken or Destroyed Certificates...............................
ARTICLE FIVE INDEMNIFICATION AND INSURANCE
5.01 Mandatory Indemnification......................................................
5.02 Court-Approved Indemnification.................................................
5.03 Indemnification for Expenses...................................................
5.04 Determination Required.........................................................
5.05 Advances for Expenses..........................................................
5.06 Article Five Not Exclusive.....................................................
5.07 Insurance......................................................................
5.08 Certain Definitions............................................................
5.09 Venue..........................................................................
ARTICLE SIX MISCELLANEOUS
6.01 Amendments.....................................................................
6.02 Action by Shareholders or Directors Without a Meeting..........................
</TABLE>
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CODE OF REGULATIONS
OF
DIAMOND ELECTRONICS, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.01. Annual Meetings. The annual meetings of the shareholders for
the election of directors, for the consideration of reports to be laid before
such meeting and for the transaction of such other business as may properly come
before such meeting, shall be held on the third Thursday in April in each year
or on such other date as may be fixed from time to time by the directors.
Section 1.02. Calling of Meetings. Meetings of the shareholders may be
called only by the chairman of the board, or, in the case of the chairman's
absence, death, or disability, the vice chairman of the board, the president,
or, in the case of the president's absence, death, or disability, the vice
president authorized to exercise the authority of the president; the secretary;
the directors by action at a meeting, or a majority of the directors acting
without a meeting; or the holders of at least 25 percent of all shares
outstanding and entitled to vote on any proposal to be submitted thereat.
Section 1.03. Place of Meetings. All meetings of shareholders shall be held
at the principal office of the corporation, unless otherwise provided by action
of the directors. Meetings of shareholders may be held at any place within or
without the State of Ohio.
Section 1.04. Notice of Meetings.
(A) Written notice stating the time, place and purposes of a meeting of the
shareholders shall be given either by personal delivery or by mail not less than
seven nor more than 60 days before the date of the meeting, (1) to each
shareholder of record entitled to notice of the meeting, (2) by or at the
direction of the president or the secretary. If mailed, such notice shall be
addressed to the shareholder at his address as it appears on the records of the
corporation. Notice of adjournment of a meeting need not be given if the time
and place to which it is adjourned are fixed and announced at such meeting. In
the event of a transfer of shares after the record date for determining the
shareholders who are entitled to receive notice of a meeting of shareholders, it
shall not be necessary to give notice to the transferee. Nothing herein
contained shall prevent the setting of a record date in the manner provided by
law, the Articles or the Regulations for the determination of shareholders who
are entitled to receive notice of or to vote at any meeting of shareholders or
for any purpose required or permitted by law.
(B) The board of directors shall no later than 45 days following receipt by
the president or the secretary of a request in writing, specifying the purpose
or purposes for which the persons properly making such request have called a
meeting of the shareholders, delivered either in person or by registered or
certified mail, return receipt requested, to such officer by any persons
entitled to call a meeting of shareholders, set the date, time and place of such
meeting and fix a record date for determining the shareholders entitled to vote
at the meeting and to receive notice thereof. The secretary shall thereafter
cause to be given to the shareholders entitled thereto notice of such meeting in
the manner provided by the law no later than the sixtieth day after the
corporation's receipt of such notice. Such meeting shall be held not less than
fifteen nor more than ninety days after the receipt of such request.
Section 1.05. Waiver of Notice. Notice of the time, place and purpose or
purposes of any meeting of shareholders may be waived in writing, either before
or after the holding of such meeting, by any shareholders, which writing shall
be filed with or entered upon the records of such meeting. The attendance of any
shareholder, in person or by proxy, at any such meeting without protesting the
lack of proper notice, prior to or at the commencement of the meeting, shall be
deemed to be a waiver by such shareholder of notice of such meeting.
Section 1.06. Quorum. At any meeting of shareholders, the holders of a
majority of the voting shares of the corporation then outstanding and entitled
to vote thereat, present in person or by proxy, shall constitute a quorum for
such meeting, except as otherwise provided by law, the Articles or Regulations.
The holders of a
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majority of the voting shares represented at a meeting, whether or not a quorum
is present, or the chairman of the board, the president, or the officer of the
corporation acting as chairman of the meeting, may adjourn such meeting from
time to time, and if a quorum is present at such adjourned meeting any business
may be transacted as if the meeting had been held as originally called.
Section 1.07. Votes Required. Any matter submitted to the shareholders for
their vote shall be decided by the vote of a majority of those present at the
meeting or such greater proportion of the shares, or of any class of shares, or
of each class, as is otherwise required by law, the Articles or the Regulations.
Section 1.08. Order of Business. The order of business at any meeting of
shareholders shall be determined by the officer of the corporation acting as
chairman of such meeting unless otherwise determined by a vote of the holders of
a majority of the voting shares of the corporation then outstanding, present in
person or by proxy, and entitled to vote at such meeting.
Section 1.09. Shareholders Entitled to Vote. Each shareholder of record on
the books of the corporation on the record date for determining the shareholders
who are entitled to vote at a meeting of shareholders shall be entitled at such
meeting to one vote for each share of the corporation standing in his name on
the books of the corporation on such record date. The directors may fix a record
date for the determination of the shareholders who are entitled to receive
notice of and to vote at a meeting of shareholders, which record date shall not
be a date earlier than the date on which the record date is fixed and which
record date may be a maximum of sixty days preceding the date of the meeting of
shareholders.
Section 1.10. Cumulative Voting. If notice in writing shall be given by a
shareholder to the president, a vice president or the secretary of the
corporation, not less than forty-eight hours before the time fixed for holding a
meeting of the shareholders for the purpose of electing directors if notice of
such meeting shall have been given at least ten days prior thereto, and
otherwise not less than twenty-four hours before such time, that such
shareholder desires that the voting at such election shall be cumulative, and if
an announcement of the giving of such notice is made upon the convening of the
meeting by the chairman or secretary or by or on behalf of the shareholder
giving such notice, each shareholder shall have the right to cumulate such
voting power as he possesses and to give one candidate as many votes as is
determined by multiplying the number of directors to be elected by the number of
votes to which such shareholder is entitled, or to distribute such number of
votes on the same principle among two or more candidates, as he sees fit.
Section 1.11. Proxies. At meetings of the shareholders any shareholder of
record entitled to vote thereat may be represented and may vote by a proxy or
proxies appointed by an instrument in writing signed by such shareholder, but
such instrument shall be filed with the secretary of the meeting before the
person holding such proxy shall be allowed to vote thereunder. No proxy shall be
valid after the expiration of eleven months after the date of its execution,
unless the shareholder executing it shall have specified therein the length of
time it is to continue in force.
Section 1.12. Inspectors of Election. In advance of any meeting of
shareholders, the directors may appoint inspectors of election to act at such
meeting or any adjournment thereof; if inspectors are not so appointed, the
officer of the corporation acting as chairman of any such meeting may make such
appointment. In case any person appointed as inspector fails to appear or act,
the vacancy may be filled only by appointment made by the directors in advance
of such meeting or, if not so filled, at the meeting by the officer of the
corporation acting as chairman of such meeting. No other person or persons may
appoint or require the appointment of inspectors of election.
ARTICLE II
DIRECTORS
Section 2.01. Authority and Qualifications. Except where the law, the
Articles or the Regulations otherwise provide, all authority of the corporation
shall be vested in and exercised by its directors. Directors need not be
shareholders of the corporation.
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Section 2.02. Number of Directors and Term of Office.
(A) Until changed in accordance with the provisions of the
Regulations, the number of directors of the corporation shall be five. Each
director shall be elected to serve until the next annual meeting of
shareholders and until his successor is duly elected and qualified or until
his earlier resignation, removal from office, or death.
(B) The number of directors may be fixed or changed at a meeting of
the shareholders called for the purpose of electing directors at which a
quorum is present, only by the affirmative vote of the holders of not less
than a majority of the voting shares which are represented at the meeting,
in person or by proxy, and entitled to vote on such proposal, unless
otherwise provided by law, the Articles or the Regulations.
(C) The directors may fix or change the number of directors, unless
otherwise provided by law, the Articles or the Regulations, and may fill
any director's office that is created by an increase in the number of
directors; provided, however, that the directors may not increase the
number of directors to more than fifteen nor reduce the number of directors
to less than three.
(D) No reduction in the number of directors shall of itself have the
effect of shortening the term of any incumbent director.
Section 2.03. Election. At each annual meeting of shareholders for the
election of directors, the successors to the directors whose term shall expire
in that year shall be elected, but if the annual meeting is not held or if one
or more of such directors are not elected thereat, they may be elected at a
special meeting called for that purpose. The election of directors shall be by
ballot whenever requested by the presiding officer of the meeting or by the
holders of a majority of the voting shares outstanding, entitled to vote at such
meeting and present in person or by proxy, but unless such request is made, the
election shall be viva voce.
Section 2.04. Removal. A director or directors may be removed from office,
for good cause, only by the vote of the holders of shares entitling them to
exercise not less than 80 percent of the voting power of the corporation to
elect directors in place of those to be removed, unless otherwise provided by
law, the Articles or the Regulations. Provided that unless all the directors, or
all the directors of a particular class (if the directors of the corporation are
divided into classes), are removed, no individual director shall be removed in
case the votes of a sufficient number of shares are cast against his removal
which, if cumulatively voted at an election of all directors, or all the
directors of a particular class, as the case may be, would be sufficient to
elect at least one director. In the case of any such removal, a new director may
be elected at the same meeting for the unexpired term of each director removed.
Failure to elect a director to fill the unexpired term of any director removed
shall be deemed to create a vacancy in the board.
Section 2.05. Vacancies. The remaining directors, though less than a
majority of the whole authorized number of directors, may, by the vote of a
majority of their number, fill any vacancy in the board for the unexpired term.
A vacancy in the board exists within the meaning of this Section 2.05 in case
the shareholders increase the authorized number of directors but fail at the
meeting at which such increase is authorized, or an adjournment thereof, to
elect the additional directors provided for, or in case the shareholders fail at
any time to elect the whole authorized number of directors.
Section 2.06. Meetings. A meeting of the directors shall be held
immediately following the adjournment of each annual meeting of shareholders at
which directors are elected, and notice of such meeting need not be given. The
directors shall hold such other meetings as may from time to time be called, and
such other meetings of directors may be called only by the chairman of the
board, the president, or any two directors. All meetings of directors shall be
held at the principal office of the corporation or at such other place within or
without the State of Ohio, as the directors may from time to time determine by a
resolution. Meetings of the directors may be held through any communications
equipment if all persons participating can hear each other and participation in
a meeting pursuant to this provision shall constitute presence at such meeting.
Section 2.07. Notice of Meetings. Notice of the time and place of each
meeting of directors for which such notice is required by law, the Articles, the
Regulations or the Bylaws shall be given to each of the directors by at least
one of the following methods:
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A. In writing mailed not less than three days before such meeting and
addressed to the residence or usual place of business of a director, as
such address appears on the records of the corporation; or
B. By telegraph, cable, radio, wireless or a writing sent or delivered
to the residence or usual place of business of a director as the same
appears on the records of the corporation, not later than the day before
the date on which such meeting is to be held; or
C. Personally or by telephone not later than the day before the date
on which such meeting is to be held.
Notice given to a director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
directors need not be uniform. Notice of any meeting of directors may be given
only by the chairman of the board, the president or the secretary of the
corporation. Any such notice need not specify the purpose or purposes of the
meeting. Notice of adjournment of a meeting of directors need not be given if
the time and place to which it is adjourned are fixed and announced at such
meeting.
Section 2.08. Waiver of Notice. Notice of any meeting of directors may be
waived in writing, either before or after the holding of such meeting, by any
director, which writing shall be filed with or entered upon the records of the
meeting. The attendance of any director at any meeting of directors without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice, shall be deemed to be a waiver by him of notice of such meeting.
Section 2.09. Quorum. A majority of the whole authorized number of
directors shall be necessary to constitute a quorum for a meeting of directors,
except that a majority of the directors in office shall constitute a quorum for
filling a vacancy in the board. The act of a majority of the directors present
at a meeting at which a quorum is present is the act of the board, except as
otherwise provided by law, the Articles or the Regulations.
Section 2.10. Executive Committee. The directors may create an executive
committee or any other committee of directors, to consist of not less than three
directors, and may authorize the delegation to such executive committee or other
committees of any of the authority of the directors, however conferred, other
than that of filling vacancies among the directors or in the executive committee
or in any other committee of the directors.
Such executive committee or any other committee of directors shall serve at
the pleasure of the directors, shall act only in the intervals between meetings
of the directors, and shall be subject to the control and direction of the
directors. Such executive committee or other committee of directors may act by a
majority of its members at a meeting or by a writing or writings signed by all
of its members.
Any act or authorization of any act by the executive committee or any other
committee within the authority delegated to it shall be as effective for all
purposes as the act or authorization of the directors. No notice of a meeting of
the executive committee or of any other committee of directors shall be
required. A meeting of the executive committee or of any other committee of
directors may be called only by the president or by a member of such executive
or other committee of directors. Meetings of the executive committee or of any
other committee of directors may be held through any communications equipment if
all persons participating can hear each other and participation in such a
meeting shall constitute presence thereat.
Section 2.11. Compensation. Directors shall be entitled to receive a
compensation for services rendered and expenses incurred as directors in such
amounts as the directors may determine.
Section 2.12. Bylaws. The directors may adopt, and amend from time to time,
Bylaws for their own government, which Bylaws shall not be inconsistent with the
law, the Articles or the Regulations.
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ARTICLE THREE
OFFICERS
Section 3.01. Officers. The officers of the corporation to be elected by
the directors shall be a chairman of the board and a vice chairman of the board,
who must be directors, a president, a secretary, a treasurer, and, if desired,
one or more vice presidents and such other officers and assistant officers as
the directors may from time to time elect. Officers need not be shareholders of
the corporation, and may be paid such compensation as the board of directors may
determine. Any two or more officers may be held by the same person, but no
officer shall execute, acknowledge, or verify any instrument in more than one
capacity if such instrument is required by law, the Articles, the Regulations or
the Bylaws to be executed, acknowledged or verified by two or more officers.
Section 3.02. Tenure of Office. The officers of the corporation shall hold
office at the pleasure of the directors. Any officer of the corporation may be
removed, either with or without cause, at any time, by the affirmative vote of a
majority of all the directors then in office; such removal, however, shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 3.03. Duties of the Chairman of the Board. The chairman of the
board shall be the chief executive officer and shall preside at all meetings of
the directors. He shall have such other powers and duties as the directors shall
from time to time assign to him.
Section 3.04. Duties of the Vice Chairman of the Board. In the absence of
the chairman of the board or in the event of his inability or refusal to act,
the vice chairman of the board, if any, shall perform the duties of the chairman
of the board, and when so acting, shall have all the powers of and be subject to
all restrictions upon the chairman of the board. The vice chairman of the board
shall perform such other duties and have such other powers as the directors may
from time to time prescribe.
Section 3.05. Duties of the President. The president shall be the chief
operating officer of the corporation and shall exercise supervision over the
business of the corporation and shall have, among such additional powers and
duties as the directors may from time to time assign to him, the power and
authority to sign all certificates evidencing shares of the corporation and all
deeds, mortgages, bonds, contracts, notes and other instruments requiring the
signature of the president of the corporation.
Section 3.06. Duties of the Vice Presidents. In the absence of the
president or in the event of his inability or refusal to act, the vice
president, if any (or in the event there be more than one vice president, the
vice presidents in the order designated, or in the absence of any designation,
then in the order of their election), shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all
restrictions upon the president. The vice presidents shall perform such other
duties and have such other powers as the directors may from time to time
prescribe.
Section 3.07. Duties of the Secretary. It shall be the duty of the
secretary, or of an assistant secretary, if any, in case of the absence or
inability to act of the secretary, to keep minutes of all the proceedings of the
shareholders and the directors and to make a proper record of the same; to
perform such other duties as may be required by law, the Articles or the
Regulations; to perform such other and further duties as may from time to time
be assigned to him by the directors or the president; and to deliver all books,
papers and property of the corporation in his possession to his successor, or to
the president.
Section 3.08. Duties of the Treasurer. The treasurer, or an assistant
treasurer, if any, in case of the absence or inability to act of the treasurer,
shall receive and safely keep in charge all money, bills, notes, choses in
action, securities and similar property belonging to the corporation, and shall
do with or disburse the same as directed by the president or the directors;
shall keep an accurate account of the finances and business of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, stated capital and shares, together with such other accounts as may be
required and hold the same open for inspection and examination by the directors;
shall give bond in such sum with such security as the directors may require for
the faithful performance of his duties; shall, upon the expiration of his term
of office, deliver
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all money and other property of the corporation in his possession or custody to
his successor or the president; and shall perform such other duties as from time
to time may be assigned to him by the directors.
ARTICLE FOUR
SHARES
Section 4.01. Certificates. Certificates evidencing ownership of shares of
the corporation shall be issued to those entitled to them. Each certificate
evidencing shares of the corporation shall bear a distinguishing number; the
signatures of the chairman of the board, the president, or a vice president, and
of the secretary or an assistant secretary (except that when any such
certificate is countersigned by an incorporated transfer agent or registrar,
such signatures may be facsimile, engraved, stamped or printed); and such
recitals as may be required by law. Certificates evidencing shares of the
corporation shall be of such tenor and design as the directors may from time to
time adopt and may bear such recitals as are permitted by law.
Section 4.02. Transfers. Where a certificate evidencing a share or shares
of the corporation is presented to the corporation or its proper agents with a
request to register transfer, the transfer shall be registered as requested if:
(1) An appropriate person signs on each certificate so presented or
signs on a separate document an assignment or transfer of shares evidenced
by each such certificate, or signs a power to assign or transfer such
shares, or when the signature of an appropriate person is written without
more on the back of each such certificate; and
(2) Reasonable assurance is given that the indorsement of each
appropriate person is genuine and effective; the corporation or its agents
may refuse to register a transfer of shares unless the signature of each
appropriate person is guaranteed by a commercial bank or trust company
having an office or a correspondent in the City of New York or by a firm
having membership in the New York Stock Exchange; and
(3) All applicable laws relating to the collection of transfer or
other taxes have been complied with; and
(4) The corporation or its agents are not otherwise required or
permitted to refuse to register such transfer.
Section 4.03. Transfer Agents and Registrars. The directors may appoint one
or more agents to transfer or to register shares of the corporation, or both.
Section 4.04. Lost, Wrongfully Taken or Destroyed Certificates. Except as
otherwise provided by law, where the owner of a certificate evidencing shares of
the corporation claims that such certificate has been lost, destroyed or
wrongfully taken, the directors must cause the corporation to issue a new
certificate in place of the original certificate if the owner:
(1) So requests before the corporation has notice that such original
certificate has been acquired by a bona fide purchaser; and
(2) Files with the corporation, unless waived by the directors, an
indemnity bond, with surety or sureties satisfactory to the corporation, in
such sums as the directors may, in their discretion, deem reasonably
sufficient as indemnity against any loss or liability that the corporation
may incur by reason of the issuance of each such new certificate; and
(3) Satisfies any other reasonable requirements which may be imposed
by the directors, in their discretion.
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ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
Section 5.01. Mandatory Indemnification. The corporation shall indemnify
any officer or director of the corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, any action threatened or instituted by or in the
right of the corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit), partnership,
joint venture, trust or other enterprise, against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was unlawful. A
person claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for indemnification, to
have acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal matter, to have had no reasonable cause to believe his conduct was
unlawful, and the termination of any action, suit or proceeding by judgment,
order, settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, rebut such presumption.
Section 5.02. Court-Approved Indemnification. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or director of the
corporation who was a party to any completed action or suit instituted by
or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, in respect of any claim, issue or matter
asserted in such action or suit as to which he shall have been adjudged to
be liable for gross negligence or misconduct (other than negligence) in the
performance of his duty to the corporation unless and only to the extent
that the Court of Common Pleas of Fairfield County, Ohio or the court in
which such action or suit was brought shall determine upon application
that, despite such adjudication of liability, and in view of all the
circumstances of the case, he is fairly and reasonably entitled to such
indemnity as such Court of Common Pleas or such other court shall deem
proper; and
(B) the corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as contemplated by
this Section 5.02.
Section 5.03. Indemnification for Expenses. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding, to the extent that an
officer or director of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
Section 5.04. Determination Required. Any indemnification required under
Section 5.01 and not precluded under Section 5.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written opinion
by independent legal counsel other than an attorney, or a firm having associated
with it an attorney, who has been retained by or who has performed services for
the
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corporation, or any person to be indemnified, within the past five years, or (C)
by the shareholders, or (D) by the Court of Common Pleas of Fairfield County,
Ohio or (if the corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be made by a
court under division (D) of this Section 5.04 at any time [including, without
limitation, any time before, during or after the time when any such
determination may be requested of, be under consideration by or have been denied
or disregarded by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by the shareholders under
division (C) of this Section 5.04]; and no failure for any reason to make any
such determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by shareholders under division
(C) of this Section 5.04 shall be evidence in rebuttal of the presumption
recited in Section 5.01. Any determination made by the disinterested directors
under division (A) or by independent legal counsel under division (B) of this
Section 5.04 to make indemnification in respect of any claim, issue or matter
asserted in an action or suit threatened or brought by or in the right of the
corporation shall be promptly communicated to the person who threatened or
brought such action or suit, and within ten (10) days after receipt of such
notification such person shall have the right to petition the Court of Common
Pleas of Fairfield County, Ohio or the court in which such action or suit was
brought, if any, to review the reasonableness of such determination.
Section 5.05. Advances for Expenses. Expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding to or on behalf of the officer or
director promptly as such expenses are incurred by him, but only if such officer
or director shall first agree, in writing, to repay all amounts so paid in
respect of any claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the merits
or otherwise:
(A) unless it shall ultimately be determined as provided in Section
5.04 that he is entitled to be indemnified by the corporation as provided
under Section 5.01; or
(B) if, in respect of any claim, issue or other matter asserted by or
in the right of the corporation in such action or suit, he shall have been
adjudged to be liable for gross negligence or misconduct (other than
negligence) in the performance of his duty to the corporation, unless and
only to the extent that the Court of Common Pleas of Fairfield County, Ohio
or the court in which such action was brought shall determine upon
application that, despite such adjudication of liability, and in view of
all the circumstances, he is fairly and reasonably entitled to all or part
of such indemnification.
Section 5.06. Article Five Not Exclusive. The indemnification provided by
this Article Five shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under the Articles or the
Regulations or any agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be an officer or director of the corporation and shall inure
to the benefit of the heirs, executors, and administrators of such a person.
Section 5.07. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article Five.
Section 5.08. Certain Definitions. For purposes of this Article Five, and
as examples and not by way of limitation:
(A) A person claiming indemnification under this Article 5 shall be
deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 5.01, or in
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defense of any claim, issue or other matter therein, if such action, suit
or proceeding shall be terminated as to such person, with or without
prejudice, without the entry of a judgment or order against him, without a
conviction of him, without the imposition of a fine upon him and without
his payment or agreement to pay any amount in settlement thereof (whether
or not any such termination is based upon a judicial or other determination
of the lack of merit of the claims made against him or otherwise results in
a vindication of him); and
(B) References to an "other enterprise" shall include employee benefit
plans; references to a "fine" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to
be in the best interests of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" within the meaning of
that term as used in this Article Five.
Section 5.09. Venue. Any action, suit or proceeding to determine a claim
for indemnification under this Article Five may be maintained by the person
claiming such indemnification, or by the corporation, in the Court of Common
Pleas of Fairfield County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Fairfield County, Ohio in any
such action, suit or proceeding.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Amendments. The Regulations may be amended, or new
regulations may be adopted, at a meeting of shareholders held for such purpose,
only by the affirmative vote of the holders of shares entitling them to exercise
not less than a majority of the voting power of the corporation on such
proposal, unless otherwise provided by law, the Articles or the Regulations, or
without a meeting by the written consent of the holders of shares entitling them
to exercise not less than a majority of the voting power of the corporation on
such proposal, unless otherwise provided by law, the Articles or the
Regulations.
Provided that, any amendment, change or repeal of the Regulations which
would have the effect of modifying or permitting circumvention of Article VII of
the Articles of Incorporation of the Company, shall require the affirmative
vote, at a meeting of shareholders of the corporation or without a meeting, by
written consent of the shareholders, as to all shares held:
(a) By the holders of at least 80 percent of the outstanding Voting
Shares of all classes of the corporation considered for purposes of Article
VII as a single class; and
(b) By an Independent Majority of Shareholders (as defined in Article
VII, Section 4(j) of the Articles of Incorporation);
Provided, however, that this paragraph shall not apply to, and such vote shall
not be required for, any such amendment, change or repeal recommended to
shareholders by the favorable vote of not less than two-thirds of the Directors
who then qualify as Continuing Directors (as defined by Article VII Section 4(i)
of the Articles of Incorporation) with respect to all Related Persons and any
such amendment, change or repeal so recommended shall require only the vote, if
any, required under paragraph 1 of this Section 6.01.
Section 6.02. Action by Shareholders or Directors Without a Meeting.
Anything contained in the Regulations to the contrary notwithstanding, except as
provided in Section 6.01, any action which may be authorized or taken at a
meeting of the shareholders or of the directors or of a committee of the
directors, as the case may be, may be authorized or taken without a meeting with
the affirmative vote or approval of, and in a writing or writings signed by, all
the shareholders who would be entitled to notice of a meeting of the
shareholders held for such purpose, or all the directors, or all the members of
such committee of the directors, respectively, which writings shall be filed
with or entered upon the records of the corporation.
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ANNEX E
ARTICLES OF INCORPORATION
OF
ULTRACOM INC.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned incorporator being a
natural person of the age of eighteen years or more and desiring to form a body
corporate under the laws of the State of Colorado does hereby adopt and deliver
in duplicate to the Secretary of State of the State of Colorado, these Articles
of Incorporation.
ARTICLE I
NAME
The name of the corporation shall be: ULTRACOM INC.
ARTICLE II
PERIOD OF DURATION
The corporation shall exist in perpetuity, from and after the date of
filing these Articles of Incorporation with the Secretary of State of the State
of Colorado unless dissolved according to law.
ARTICLE III
PURPOSES AND POWERS
1. Purposes. Except as restricted by the Articles of Incorporation, the
corporation is organized for the purpose of transacting all lawful business for
which corporations may be incorporated pursuant to the Colorado Corporation
Code.
2. General Powers. Except as restricted by the Articles of Incorporation,
the corporation may exercise all powers which a corporation may exercise legally
pursuant to the Colorado Corporation Code including the following:
(a) To buy, sell, trade, manufacture, deal in and deal with goods,
wares and merchandise of every kind and nature, and to carry on such
business as wholesalers, retailers, importers and exporters; to acquire all
such merchandise, supplies, materials and other articles as shall be
necessary or incidental to such business; and to have any and all powers
above set forth as fully as natural persons, whether as principals, agents
or otherwise.
(b) To take, hold and acquire by purchase, lease, exchange, merger, or
otherwise, and to sell, lease, mortgage, pledge, exchange or otherwise deal
in, real property and personal property of every kind, nature, and
description and any and all interest therein and wherever situated.
(c) To construct buildings or other improvements upon its land or upon
the lands of others, and to furnish, manage or operate the same.
(d) To act as agent, nominee, contractor or otherwise, either alone or
in company with others, as fully and to the same extent as natural persons
might or could do.
(e) To impose restriction upon the transfer of its own shares in the
manner permitted and upon compliance with limitations imposed by law, and
upon such terms as its board of directors may direct.
(f) In general to carry on any lawful business or activity and to have
and exercise all of the powers and rights conferred by the laws of the
State of Colorado upon corporations formed under such laws.
The foregoing clauses shall be construed as objects, purposes and powers,
and the matters expressed in each clause shall be in no wise limited by
reference or inference from the terms of any other clause, but shall
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be regarded as independent objects, purposes and powers; the enumeration of
specific objects, purposes and powers shall not be construed to limit or
restrict in any manner the general powers and rights of the corporation as
provided by law, nor shall the expression of one object, purpose or power be
determined to exclude another, although it be of like nature but not expressed.
3. Partial Liquidations. The board of directors of the corporation may
distribute, from time to time, to its shareholders in partial liquidation, out
of stated capital or capital surplus of the corporation, a portion of its assets
in cash or property.
4. Issuance of Shares. The board of directors of the corporation may divide
and issue any class of stock of the corporation in series pursuant to a
resolution properly filed with the Secretary of State of Colorado.
ARTICLE IV
CAPITAL STOCK
The aggregate number of shares which this corporation shall authority to
issue is thirty million (30,000,000) shares of no par value ($0.00) each, which
shares shall be designated "Common Stock".
This corporation shall also have authority to issue ten million
(10,000,000) shares of one cent par value ($0.01) each, which shares shall be
designated as "Class "A" Non-Voting Common Stock".
1. Dividends. Dividends in cash, property or shares of the corporation may
be paid upon the Common Stock, as and when declared by the board of directors,
out of funds of the corporation to the extent and in the manner permitted by
law.
2. Distribution in Liquidation. Upon any liquidation, dissolution or
winding up of the corporation, and after paying or adequately providing for the
payment of all its obligations, the remainder of the assets of the corporation
shall be distributed, either in cash or in kind, pro rata to the holders of the
Common Stock.
3. Voting Rights; Cumulative Voting. Each outstanding share of Common Stock
shall be entitled to one vote and each fractional share of Common Stock shall be
entitled to a corresponding fractional vote on each matter submitted to a vote
of shareholders. Cumulative voting shall not be allowed in the election of
directors of the corporation.
4. Denial of Preemptive Rights. No holder of any shares of the corporation,
whether now or hereafter authorized, shall have any preemptive or preferential
right to acquire any shares or securities of the corporation, including shares
or securities held in the treasury of the corporation.
5. "Class "A" Non-Voting Common Stock" shall be identical, in all rights
and privileges to and subject to the same restrictions as, the corporation's
Common Stock except such "Class "A" Non-Voting Common Stock shall not have
voting rights.
ARTICLE V
RIGHT OF DIRECTORS TO CONTRACT WITH CORPORATION
No contract or other transaction between the corporation and one or more of
its directors or any other corporation, firm, association, or entity in which
one or more of its directors are directors or officers or are financially
interested shall be either void or voidable solely because of such relationship
or interest or solely because such directors are present at the meeting of the
board of directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction or solely because their votes are counted
for such purpose if:
(a) The fact of such relationship or interest is disclosed or known to
the board of directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors; or
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(b) The fact of such relationship or interests disclosed or known to
the shareholders entitled to vote and they authorize, approve, or ratify
such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to the
corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the board of directors or a committee thereof which
authorities, approves, or ratifies such contract or transaction.
ARTICLE VI
CORPORATE OPPORTUNITY
The officers, directors and other members of management of this corporation
shall be subject to the doctrine of "corporate opportunities" only insofar as it
applies to business opportunities in which this corporation has expressed an
interest as determined from time to time by this corporation's board of
directors as evidenced by resolutions appearing in the corporation's minutes.
Once such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
directors, and other members of management of this corporation shall be
disclosed promptly to this corporation and made available to it. The board of
directors may reject any business opportunity presented to it and thereafter any
officer, director or other member of management may avail himself of such
opportunity. Until such time as this corporation, through its board of
directors, has designated an area of interest, the officers, directors and other
members of management of this corporation shall be free to engage in such areas
of interest on their own and this doctrine shall not limit the rights of any
officer, director or other member of management of this corporation to continue
a business existing prior to the time that such area of interest is designated
by the corporation. This provision shall not be construed to release any
employee of this corporation (other than an officer, director or member of
management) from any duties which he may have to this corporation.
ARTICLE VII
INDEMNIFICATION
DIRECTORS AND OTHERS
1. The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees), judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in the best interests
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, or conviction or
upon a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in the best interests of the corporation and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
2. The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the corporation; but no
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indemnification shall be made in respect of any claim, issue, or matter as to
which such person has been adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation unless and only to the extent
that the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which such court deems proper.
3. To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits in defense of any action, suit, or
proceeding referred to in this article or in defense of any claim, issue, or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
4. Any indemnification under paragraph 1 or 2 of this article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in said paragraphs 1 or 2. Such
determination shall be made by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit, or
proceeding, or, if such a quorum is not obtainable or even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or by the shareholders.
5. Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
paragraph 4 of this article upon receipt of an undertaking by or on behalf of
the director, officer, employee, or agent to repay such amount unless it is
ultimately determined that he is entitled to be indemnified by the corporation
as authorized in this article.
6. The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
the Articles of Incorporation, any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, and any procedure provided for by any of
the foregoing, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of heirs, executors, and administrators of such a person.
7. The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation
or who is or was serving at the request of the corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this article.
8. A unanimous vote of each class of shares entitled to vote shall be
required to amend this article.
ARTICLE VIII
SHAREHOLDER VOTING
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders.
When, with respect to any action to be taken by shareholders of this
Corporation, the laws of Colorado require the vote or concurrence of the holders
of two-thirds of the outstanding shares, of the shares entitled to vote thereon,
or of any class or series, such action may be taken by the vote or concurrence
of a majority of such shares or class or series thereof.
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<PAGE> 164
ARTICLE IX
ADOPTION AND AMENDMENT OF BYLAWS
The initial Bylaws of the corporation shall be adopted by its board of
directors. The power to alter or amend or repeal the Bylaws or adopt new Bylaws
shall be vested in the board of directors, but the holders of common stock may
also alter, amend or repeal the Bylaws or adopt new Bylaws. The Bylaws may
contain any provisions for the regulation and management of the affairs of the
corporation not inconsistent with law or these Articles of Incorporation.
ARTICLE X
REGISTERED OFFICE AND REGISTERED AGENT
The address of the initial registered office of the corporation is 890
South Coors Drive, Lakewood, Colorado 80228, and the name of the initial
registered agent at such address is Theodore A. Waibel, Jr. Either the
registered office or the registered agent may be changed in the manner permitted
by law.
ARTICLE XI
INITIAL BOARD OF DIRECTORS
The number of directors of the corporation shall be fixed by the Bylaws of
the corporation, except the initial board of directors of the corporation shall
consist of five directors. The names and addresses of the persons who shall
serve as directors until the first annual meeting of shareholders and until
their first annual meeting of shareholders and until their successors are
elected and shall qualify are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---------------------------------- -------------------------------------------------
<S> <C>
Theodore A. Waibel, Jr............ 890 South Coors Drive
Lakewood, Colorado 80229
Kenneth R. Hackett................ 2782 Bella Vista Lane
Denver, Colorado 80302
Ronald J. Gustas.................. 7533 East Bates Drive
Denver, Colorado 80232
Lessing E. Gold................... 8500 Wilshire Boulevard
Beverly Hills, California 90211
Vincent J. Stefanich.............. 459 South Figway
Lakewood, Colorado 80228
</TABLE>
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---------------------------------- -------------------------------------------------
<S> <C>
Paul H. Metzinger................. 2600 Energy Center
717 Seventeenth Street
Denver, Colorado 80202
</TABLE>
IN WITNESS WHEREOF, the above-named incorporator has signed these Articles
of Incorporation this 8th day of April, 1980.
/s/ Paul H. Metzinger
Paul H. Metzinger
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<PAGE> 165
STATE OF COLORADO
ss.
CITY AND COUNTY OF DENVER
I, the undersigned, a Notary Public, hereby certify that on the 8th day of
April, 1980, personally appeared before me, Paul H. Metzinger who being by me
first duly swore, declared that he is the person who signed the foregoing
document as incorporator, that it was his free and voluntary act and deed, and
that the statements therein contained are true.
WITNESS my hand and official seal.
My Commission expires: My commission expires March 8, 1987
/s/ PAUL H. METZINGER
Notary Public
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ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Act, the undersigned
corporation adopts the following Articles of Amendment to its Articles of
Incorporation:
FIRST: The name of the corporation is Ultracom Inc.
SECOND: The following amendment to Article I of the Articles of
Incorporation was adopted by the shareholders of the corporation in the manner
prescribed by the Colorado Corporation Act on July 3, 1980:
The name of the Corporation shall be: Ultrak, Inc.
THIRD: The number of outstanding shares of the corporation at the time of
such adoption was 10,500,000 and the number of shares entitled to vote thereon
was 10,500,000.
FOURTH: The number of shares voted for such amendment was 10,500,000 and
the number of shares voted against such amendment was 0.
Dated: July 7, 1980
ULTRACOM, INC.
By /s/ THEODORE A. WAIBEL, JR.
President
By /s/ Assistant Secretary
Assistant Secretary
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<PAGE> 167
VERIFICATION
STATE OF COLORADO
ss.
CITY AND COUNTY OF DENVER
I, the undersigned, a Notary Public, hereby certify that on the 7th day of
July, 1980, personally appeared before me, Theodore A. Waibel, Jr., who being by
me first duly sworn, declared that he is the President of Ultracom, Inc., that
he signed the foregoing Articles of Amendment to the Articles of Incorporation,
that it was his free and voluntary act and deed, and that the statements therein
contained are true.
WITNESS my hand and official seal.
My Commission expires: 9-17-83
/s/ LEWIS R. TAYLOR
Notary Public
(NOTARIAL SEAL)
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[STATE SEAL]
STATE OF COLORADO
DEPARTMENT OF STATE
I hereby certify that this is a true and complete copy of the document as
filed in this office and admitted to record in File No 06885.
DATED: 10/7/1982
[illegible]
Secretary of State
BY Murry Sears
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<PAGE> 169
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
ULTRAK, INC.
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Ultrak, Inc.
SECOND: The following amendment to Article IV of the Articles of
Incorporation was adopted by the shareholders of the corporation in the manner
prescribed by the Colorado Corporation Code on the 30th day of September, 1982.
The Articles of Incorporation shall be amended by changing Article IV in
its entirety to read as follows:
ARTICLE IV
CAPITAL STOCK
The aggregate number of voting common shares which this corporation shall
have authority to issue is thirty million (30,000,000) shares of no par value
($0.00) each, which shares shall be designated "Common Stock".
This corporation also shall have authority to issue ten million
(10,000,000) shares of one cent par value ($0.01) each, which shares shall be
designated as "Class "A" Non-Voting Common Stock".
This corporation also shall have the authority to issue two million
(2,000,000) shares with a par value of Five Dollars ($5.00) each, which shares
shall be designated "Preferred Stock".
1. Shares of Preferred Stock may be issued from time to time in one or
more series, each such series to have distinctive serial designations, as
shall hereafter be determined in the resolution or resolutions providing
for the issue of such Preferred Stock from time to time adopted by the
Board of Directors pursuant to authority so to do which is hereby vested in
the Board of Directors, which resolutions shall be filed with the Secretary
of State of the State of Colorado as required by law.
2. Each series of Preferred Stock
(a) may have such number of shares;
(b) may have such voting powers, full or limited, or may be without
voting powers;
(c) may be subject to redemption at such time or times and at such
prices;
(d) may be entitled to receive dividends (which may be cumulative
or noncumulative) at such rate or rates, on such conditions, from such
date or dates, and at such times, and payable in preference to, or in
such relation to, the dividends payable on any other class or classes or
series of stock;
(e) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation;
(f) may be made convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same or any
other class or classes of stock of the corporation at such price or
prices or at such rates of exchange, and with such adjustments;
(g) may be entitled to the benefit of a sinking fund or purchase
fund to be applied to the purchase or redemption of shares of such
series in such amount or amounts;
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(h) may be entitled to the benefit of conditions and restrictions
upon the creation of indebtedness of this corporation or any subsidiary,
upon the issue of any additional stock (including additional shares of
such series or of any other series), and upon the payment of dividends
or the making of other distributions on, and the purchase, redemption or
other acquisition by this corporation or any subsidiary of any
outstanding stock of this corporation; and
(i) may have such other relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof;
all as shall be stated in said resolution or resolutions providing for the
issue of such Preferred Stock. Except where otherwise set forth in the
resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of Preferred Stock, the number of shares comprising
such series may be increased or decreased (but not below the number of
shares then outstanding) from time to time by like action of the Board of
Directors.
3. Shares of any series of Preferred Stock which have been redeemed
(whether through the operation of a sinking fund or otherwise) or purchased
by the corporation, or which, if convertible or exchangeable, have been
converted into or exchanged for shares of stock of any other class or
classes shall have the status of authorized and unissued shares of
Preferred Stock and may be reissued as a part of the series of which they
were originally a part or may be reclassified and reissued as part of a new
series of Preferred Stock to be created by resolution or resolutions of the
Board of Directors or as part of any other series of Preferred Stock, all
subject to the conditions or restrictions on issuance set forth in the
resolution or resolutions adopted by the Board of Directors providing for
the issue of any series of Preferred Stock and to any filing required by
law.
4. If the corporation declares or pays a dividend upon any class of
Common Stock payable otherwise than in cash out of earnings or earned
surplus (determined in accordance with generally accepted accounting
principles, consistently applied), except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the corporation
will pay to the holders of Preferred Stock convertible into shares of such
class of Common Stock at the time of payment thereof the Liquidating
Dividends which would have been paid on the Common Stock had the Preferred
Stock been converted immediately prior to the date on which a record is
taken, or, if no such record is taken, the date as of which the record
holders of Common Stock entitled to such dividends are to be determined.
5. If at any time the corporation grants, issues or sells any Option,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock
(the "Purchase Rights"), then each holder of Preferred Stock convertible
into shares of such class of Common Stock will be entitled to acquire, upon
the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon conversion of such holder's
Preferred Stock immediately before the date on which a record is taken for
the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
6. Dividends in cash, property or shares of the corporation may be
paid upon the Common Stock, as and when declared by the Board of Directors,
out of funds of the corporation to the extent and in the manner permitted
by law, except that no Common Stock dividend shall be paid for any year
unless the holders of Preferred Stock, if any, shall receive the maximum
allowable Preferred Stock dividend for such year, plus any required
dividends accumulated from prior years.
7. Upon any liquidation, dissolution or winding up of the corporation,
and after paying or adequately providing for the payment of all its
obligations, the remainder of the assets of the corporation shall be
distributed, either in cash or in kind, first pro rata to the holders of
Preferred Stock until the required amount to be distributed to the
Preferred Stock has been distributed, and the remainder pro rata to the
holders of the Common Stock.
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<PAGE> 171
8. Each outstanding share of Common Stock shall be entitled to one
vote and each fractional share of Common Stock shall be entitled to a
corresponding fractional vote on each matter submitted to a vote of
shareholders. Cumulative voting shall not be allowed in the election of
directors of the corporation. "Class "A" Non-Voting Common Stock" shall be
identical in all rights and privileges to and subject to the same
restrictions as, the corporation's Common Stock except such "Class "A"
Non-Voting Common Stock" shall not have voting rights, except as required
by law, in which case each share of "Class "A" Non-Voting Common Stock"
shall be entitled to one vote. Shares of Preferred Stock shall not be
entitled to any vote, except as required by law, in which case each share
of Preferred Stock shall be entitled to one vote, or except as otherwise
provided by the resolution or resolutions of the Board of Directors
providing for the issue of any series of the Preferred Stock.
9. No holder of any shares of the corporation, whether now or
hereafter authorized, shall have any preemptive or preferential right to
acquire any shares or securities of the corporation, including shares or
securities held in the treasury of the corporation.
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<PAGE> 172
ARTICLES OF AMENDMENT
TO THE
AMENDED ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Act, the undersigned
corporation adopts the following Articles of Amendment to its Amended Articles
of Incorporation:
FIRST: The name of the corporation is Ultrak, Inc.
SECOND: The following amendment was adopted by the shareholders of the
corporation in the manner prescribed by the Colorado Corporation Act on December
22, 1986.
The Articles of Incorporation shall be amended by amending the first
paragraph of Article IV to read as follows:
The aggregate number of voting common shares which this Corporation shall
have authority to issue is fifty million (50,000,000) shares of no par
value ($0.00) each, which shares shall be designated "Common Stock.")
THIRD: The number of outstanding shares of the corporation at the time of
such adoption was 20,370,937 and the number of shares entitled to vote thereon
was 20,370,937.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows:
<TABLE>
<CAPTION>
CLASS NUMBER OF SHARES
--------------------------------------------- ----------------
<S> <C>
Common....................................... -0-
</TABLE>
FIFTH: The number of shares voted for such amendment was 15,620,000 and the
number of shares voted against such amendment was -0-.
SIXTH: The number of shares of each class entitled to vote thereon as a
class voted for and against such amendment, respectively, was zero.
SEVENTH: The manner, if not set forth in such amendment, in which the
issued shares provided for in the amendment, shall be effected, is as follows:
The 20,370,937 common no par value shares issued and outstanding are hereby
reversed split 5 for 1 to reduce issued and outstanding common shares to
4,074,187.
EIGHTH: The manner in which such amendment effects a change in the amount
of stated capital, and the amount of stated capital as changed by such
amendment, are as follows:
No Change
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<PAGE> 173
The undersigned officers hereby verify that these Articles of Amendment
have been properly adopted by the undersigned corporation; that the statements
contained herein are true; that they signed these Articles of Amendment for and
on behalf of the corporation as President and Secretary of the corporation,
respectively; and they hereby acknowledge that it was their free and voluntary
act and deed.
DATED: December 22, 1986
ULTRAK, INC.
By: /s/ THEODORE A. WAIBEL, JR.
Theodore A. Waibel, Jr., President
By: /s/ DANIEL P. MURPHY
Daniel P. Murphy, Secretary
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<PAGE> 174
STATE OF COLORADO
ss.
CITY AND COUNTY OF DENVER
I, a Notary Public in and for the said County and State, hereby certify
that on the 22nd day of December, 1986, personally appeared before me Theodore
A. Waibel, Jr. and Daniel P. Murphy, who being by me first duly sworn, declared
that they are the persons who signed the foregoing document as President and
Secretary, respectively, that the statements therein contained are true, and
they acknowledged that it was their free and voluntary act and deed.
WITNESS my hand and official seal.
My commission expires: Nov. 20, 1989
/s/ PAUL H. METZINGER
Notary Public
Address: 2410S
600-17th Street
Denver, Colorado 80202
(SEAL)
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<PAGE> 175
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
ULTRAK, INC.
Effective as of December 28, 1993 (the "Effective Date"), pursuant to the
provisions of Section 7-2-109 of the Colorado Corporation Code, Ultrak, Inc.
(the "corporation"), hereby adopts the following Articles of Amendment to its
Articles of Incorporation to (i) change the number of authorized shares of its
Common Stock, no par value ("Common Stock"), (ii) eliminate the authorization of
its Class A Non-Voting Common Stock, $.01 par value, the authorization of its
Series A 8% Cumulative Convertible Preferred Stock and the authorization of its
Senior, Series B 8% Cumulative Convertible Preferred Stock, (iii) amend the
rights and preferences of the outstanding Series A 12% Cumulative Convertible
Preferred Stock to, among other things, increase the voting rights of holders of
such Series A Preferred Stock and make other changes to give effect to the
reverse stock split referred to in clause (iv) below and paragraph FOURTH of
these Articles of Amendment; and (iv) accomplish a reverse stock split of the
corporation's Common Stock in the form of a reclassification of the outstanding
Common Stock as provided in paragraph FOURTH of these Articles of Amendment.
FIRST. The name of the corporation is Ultrak, Inc.
SECOND. The following amendment to the Articles of Incorporation was
adopted by the shareholders of the corporation on December 17, 1993 to be
effective as of the Effective Date:
Article IV of the Articles of Incorporation and all Statements of
Rights and Designations heretofore filed with the Secretary of State,
designating series of shares of Preferred Stock thereunder, shall be
amended and restated to read as an entirety as follows:
ARTICLE IV
CAPITAL STOCK
1. Common Stock.
The aggregate number of common shares which this corporation shall have
authority to issue is Twenty Million (20,000,000) shares of no par value each,
which shares shall be designated "Common Stock".
2. Preferred Stock.
The aggregate number of preferred shares which this corporation shall have
authority to issue is Two Million (2,000,000) shares with a par value of Five
Dollars ($5.00) each, which shares shall be designated "Preferred Stock".
Included in such number of shares of Preferred Stock are 195,351 shares which
have been designated as "Series "A" 12% Cumulative Convertible Preferred Stock,"
the rights and preferences of which are set forth in full or referred to in
paragraph 8 of this Article IV.
Shares of Preferred Stock may be issued from time to time in one or more
series, each such series to have distinctive serial designations (other than a
designation containing the term "Series A") as shall after December 28, 1993 be
determined in the resolution or resolutions providing for the issue of such
Preferred Stock from time to time adopted by the Board of Directors pursuant to
authority so to do which is hereby vested in the Board of Directors, which
resolutions shall be filed with the Secretary of State of the State of Colorado
as required by law.
Each series of Preferred Stock as shall after December 28, 1993 be
established by the Board of Directors
(a) may have such number of shares;
(b) may have such voting powers, full or limited, or may be without
voting powers;
(c) may be subject to redemption at such time or times and at such
prices;
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<PAGE> 176
(d) may be entitled to receive dividends (which may be cumulative or
noncumulative) at such rate or rates, on such conditions, from such date or
dates, and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or series of stock;
(e) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the corporation;
(f) may be made convertible into, or exchangeable for, shares of any
other class or classes or of any other series of the same or any other
class or classes of stock of the corporation at such price or prices or at
such rates of exchange, and with such adjustments;
(g) may be entitled to the benefit of a sinking fund or purchase fund
to be applied to the purchase or redemption of shares of such series in
such amount or amounts;
(h) may be entitled to the benefit of conditions and restrictions upon
the creation of indebtedness of this corporation or any subsidiary, upon
the issue of any additional stock (including additional shares of such
series or of any other series), and upon the payment of dividends or the
making of other distributions on, and the purchase, redemption or other
acquisition by this corporation or any subsidiary of any outstanding stock
of this corporation; and
(i) may have such other relative, participating, optional or other
special rights, qualifications, limitations or restrictions thereof;
all as shall be stated in said resolution or resolutions providing for the issue
of such Preferred Stock.
3. Treasury Shares.
Shares of any series of Preferred Stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
corporation, or which, if convertible or exchangeable, have been converted into
or exchanged for shares of stock of any other class or classes, shall have the
status of authorized and unissued shares of Preferred Stock and may be reissued
as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors or as part of any
other series of Preferred Stock, all subject to the conditions or restrictions
on issuance set forth in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any series of Preferred Stock and to any
filing required by law.
4. Dividends.
Dividends in cash, property or shares of the corporation may be paid upon
the Common Stock as and when declared by the Board of Directors, out of funds of
the corporation to the extent and in the manner permitted by law, except that no
Common Stock dividend shall be paid for any year unless the holders of Preferred
Stock, if any, shall receive the maximum allowable Preferred Stock dividend for
such year applicable to each respective series, plus any required dividends
accumulated from prior years.
5. Distribution Upon Liquidation.
Except as otherwise provided by the resolution or resolutions of the Board
of Directors providing for the issue of any series of Preferred Stock, upon any
liquidation, dissolution or winding up of the corporation, and after paying or
adequately providing for the payment of all its obligations, the remainder of
the assets of the corporation shall be distributed, either in cash or in kind,
first pro rata to the holders of Preferred Stock until the required amount to be
distributed to the Preferred Stock has been distributed, and the remainder pro
rata to the holders of the Common Stock.
6. Voting.
Each outstanding share of Common Stock shall be entitled to one vote and
each fractional share of Common Stock shall be entitled to a fractional vote on
each matter submitted to a vote of shareholders. Cumulative voting shall not be
allowed in the election of directors of the corporation. Except as provided in
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paragraph 8 of this Article IV with respect to Series A Cumulative Convertible
Preferred Stock, shares of Preferred Stock shall not be entitled to any vote,
except as required by law, in which case each share of Preferred Stock shall be
entitled to one vote, or except as otherwise provided by the resolution or
resolutions of the Board of Directors providing for the issue of any series of
the Preferred Stock.
7. Preemptive Rights.
Except as otherwise provided by the resolution or resolutions of the Board
of Directors providing for the issue of any series of Preferred Stock, no holder
of any shares of the corporation, whether now or hereafter authorized, shall
have any preemptive or preferential right to acquire any shares or securities of
the corporation, including shares or securities held in the treasury of the
corporation.
8. Series A 12% Cumulative Convertible Preferred Stock.
One Hundred Ninety-five Thousand Three Hundred Fifty-one (195,351) shares
of the corporation's Preferred Stock shall be designated as "Series "A" 12%
Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock") and
shall have the rights and preferences set forth or referred to in this paragraph
8. Certain other capitalized terms used in this paragraph 8 are defined in
subparagraph g of this paragraph 8.
a. Dividends.
(i) When and as declared by the Board of Directors of the corporation and
to the extent permitted under the Colorado Corporation Code, the corporation
will pay preferential dividends to the holders of Series A Preferred Stock.
Except as otherwise provided herein, dividends on each share of Series A
Preferred Stock will accrue, from and after January 1, 1991, cumulatively at the
rate of $0.15 per fiscal quarter to and including the earlier of (A) the date on
which the Redemption Price of such share is paid if such share is redeemed, or
(B) the date on which such share is converted or (C) the date upon which any
dissolution, liquidation or winding up of the corporation is effected. Dividends
will be payable commencing March 31, 1991, and on each subsequent March 31, June
30, September 30 and December 31. All dividends will accrue whether or not such
dividends have been declared and whether or not there are profits, surplus or
other funds of the corporation legally available for the payment of dividends.
The date on which the corporation initially issues any share of Series A
Preferred Stock will be deemed to be its "date of issuance" regardless of the
number of times a transfer of such share is made on the stock records maintained
by or for the corporation and regardless of the number of certificates which may
be issued to evidence such share.
(ii) To the extent not paid on each March 31, June 30, September 30 and
December 31, beginning January 1, 1991, all dividends which have accrued on each
share of Series A Preferred Stock then outstanding during the three-month period
ending upon such date will be added to the Liquidation Value of such share and
will remain a part thereof until such dividends are paid.
(iii) If at any time the corporation pays less than the total amount of
dividends then accrued with respect to the Series A Preferred Stock, such
payment will be distributed among the holders of the Series A Preferred Stock so
that an equal amount will be paid with respect to each outstanding share of
Series A Preferred Stock.
b. Liquidation.
Upon any liquidation, dissolution or winding up of the corporation, the
holders of Series A Preferred Stock will be entitled to be paid, before any
distribution or payment is made upon any other equity securities of the
corporation, an amount in cash equal to the sum of the aggregate Liquidation
Value of all shares of Series A Preferred Stock outstanding, and the holders of
Series A Preferred Stock will not be entitled to any further payment. If upon
any such liquidation, dissolution or winding up, the assets of the corporation
to be distributed among the holders of the Series A Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid, then the entire assets to be distributed will be
distributed ratably among such holders based upon the aggregate Liquidation
Value of the Series A Preferred Stock held by such holder. The corporation will
mail written notice of such liquidation, dissolution or winding up, not less
than 60 days prior to the payment date stated therein, to each record holder of
Series A
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Preferred Stock. Neither the consolidation or merger of the corporation into or
with any other corporation or corporations, nor the sale or transfer by the
corporation of all or any part of its assets, nor the reduction of the capital
stock of the corporation, will be deemed to be a liquidation, dissolution or
winding up of the corporation within the meaning of this subparagraph b.
c. Redemptions.
(i) Upon resolution of the Board of Directors, the corporation may redeem
shares of Series A Preferred Stock. For each such share which may be redeemed,
if any, the corporation will be obligated to pay to the holder thereof the
Redemption Price.
(ii) In the event of redemption the corporation will mail, unless waived by
the holders, written notice (the "Notice of Redemption") of each such redemption
to each record holder not less than 10 days prior to the date on which such
redemption is to be made. Upon mailing any Notice of Redemption, the corporation
will become obligated (A) to redeem from each holder the number of shares of
Series A Preferred Stock, as stated in the Notice of Redemption, to be redeemed
from such holder, and (B) to send each record holder a cashier's or certified
check in an amount equal to the Redemption Price of such number of shares of
Series A Preferred Stock at least five business days prior to the date specified
for redemption in the notice. Upon receipt of such check, the record holder of
the shares of Series A Preferred Stock to be redeemed will become obligated to
surrender the certificates representing such number of shares on or before the
date specified for redemption in the Notice of Redemption. In case fewer than
the total number of shares represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares will be issued to the
record holder thereof in such holder's or such holder's nominee's name, without
cost to such holder.
(iii) No share of Series A Preferred Stock is entitled to any dividends
accruing after redemption. On redemption all rights of the holder of such share
will cease, and such share will not be deemed to be outstanding.
(iv) Any shares of Series A Preferred Stock which are redeemed or otherwise
acquired by the corporation will be cancelled and will not be reissued, sold or
transferred.
(v) Neither the corporation nor any Subsidiary will redeem or otherwise
acquire any Series A Preferred Stock, except as expressly authorized herein or
pursuant to a purchase offer made pro rata to all holders of Series A Preferred
Stock on the basis of the number of shares of such class owned by each such
holder.
d. Conversion.
(i) Any holder of Series A Preferred Stock may convert all or any of such
shares held by such holder into shares of Common Stock: (A) at any time
subsequent to January 1, 1991, or (B) at any time prior to redemption as
referred to in subparagraph c(i) hereof, after receipt of Notice of Redemption.
The number of shares of Common Stock which any such holder will receive in
return for the shares converted by such holder will be 2.083.
(ii) Each conversion of Series A Preferred Stock will be deemed to have
been effected as of the close of business on the date on which the certificate
or certificates representing the shares of Series A Preferred Stock to be
converted have been surrendered at the principal office of the corporation. At
such time as such conversion has been effected, the rights of the holder of such
Series A Preferred Stock as such holder will cease and the Person or Persons in
whose name or names any certificate or certificates for shares of Common Stock
are to be issued upon such conversion will be deemed to have become the holder
or holders of record of the shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has been effected, the
corporation will deliver to the converting holder:
(A) a certificate or certificates representing the number of shares of
Common Stock issuable by reason of such conversion in such name or names
and such denomination or denominations as the converting holder has
specified;
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(B) payment in an amount equal to all accrued dividends with respect
to such shares of Series A Preferred Stock converted, which have not been
paid prior thereto; and
(C) a certificate representing any shares of Series A Preferred Stock
which were represented by the certificate or certificates delivered to the
corporation in connection with such conversion but which were not
converted.
(iv) If for any reason the corporation is unable to pay any accrued
dividends on the Series A Preferred Stock being converted, the corporation will
pay such dividends to the converting holder as soon thereafter as funds of the
corporation are legally available for such payment and such obligation will be
evidenced by the corporation's promissory note payable to such holder and
bearing interest at the prime rate of interest at the United Bank of Denver,
N.A. as in effect during the time such note is outstanding.
(v) The issuance of certificates for shares of Common Stock upon conversion
of Series A Preferred Stock will be made without charge to the holders of such
Series A Preferred Stock for any issuance tax in respect thereof or other cost
incurred by the corporation in connection with such conversion and the related
issuance of shares of Common Stock.
(vi) The corporation will not close its books against the transfer of
Series A Preferred Stock or of Common Stock issued or issuable upon conversion
of Series A Preferred Stock in any manner which interferes with the timely
conversion of Series A Preferred Stock.
(vii) The conversion Price for the Common Stock will be $2.40 per share of
Common Stock and will not be subject to adjustment except as otherwise
specifically set forth herein.
(viii) Prior to the consummation of any Organic Change, the corporation
will make appropriate provisions (in form and substance satisfactory to the
holders of a majority of the Series A Preferred Stock then outstanding) to
insure that each of the holders of Series A Preferred Stock will thereafter have
the right to acquire and receive in lieu of or in addition to the shares of
Common Stock immediately theretofore acquirable and receivable upon the
conversion of such holder's Series A Preferred Stock, such shares of stock,
securities or assets as such holder would have received in connection with such
Organic Change if such holder had converted his Series A Preferred Stock
immediately prior to such Organic Change. In any such case appropriate
provisions (in form and substance satisfactory to the holders of a majority of
the Series A Preferred Stock then outstanding) will be made to insure that the
provisions of this subparagraph d(viii) will thereafter be applicable to Series
A Preferred Stock (including, in the case of any such consolidation, merger or
sale in which the successor corporation or purchasing corporation is other than
the corporation, an immediate adjustment of the Conversion Price to the value
for the Common Stock reflected by the terms of such consolidation, merger or
sale, and a corresponding immediate adjustment in the number of shares of Common
Stock acquirable and receivable upon conversion of Series A Preferred Stock, if
the value so reflected is less than the Conversion Price in effect immediately
prior to such consolidation, merger or sale). The corporation will not effect
any such consolidation, merger or sale, unless prior to the consummation
thereof, the successor corporation (if other than the corporation) resulting
from such consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form reasonably satisfactory to the holders of
a majority of the Series A Preferred Stock then outstanding), the obligation to
deliver to each such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
acquire.
(ix) if the corporation at any time after December 28, 1993 subdivides (by
any stock split, stock dividend or otherwise) one or more classes of its
outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision will be
proportionately reduced, and if the corporation at any time after December 28,
1993 combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
(x) The corporation will send written notice to all holders of Series A
Preferred Stock at least 20 days prior to the date on which the corporation
closes its books or takes a record for determining rights to vote with respect
to any Organic Change, dissolution or liquidation. The corporation will also
give to the holders of
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shares of Series A Preferred Stock at least 30 days prior written notice of the
date on which any Organic Change, dissolution or liquidation will take place.
e. Voting Rights.
Holders of shares of Series A Preferred Stock will be entitled to vote on
all matters which are or may be submitted to a vote of shareholders of the
corporation permitted under the laws of the State of Colorado. Each share, until
redeemed or converted, shall have voting rights equal to 16.667 shares of Common
Stock. Holders of the shares of Series A Preferred Stock shall further have the
same rights accorded to holders of Common Stock on all matters relating to the
voting of such Common Stock provided by the laws of the State of Colorado.
f. Purchase Rights.
If at any time the corporation grants, issues or sells any options,
convertible securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of Common Stock (the "Purchase
Rights"), then each holder of Series A Preferred Stock will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
Series A Preferred Stock immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of Purchase Rights.
g. Definitions.
"Conversion Price" means $2.40, subject to adjustment as provided in
subparagraph d(ix) of this paragraph 8.
"Liquidation Value" of any share of Series A Preferred Stock as of any
particular date will be equal to $5.00 plus any unpaid dividends on such share
of Series A Preferred Stock; and, in the event of any liquidation, dissolution
or winding up of the corporation or the redemption of such share of Series A
Preferred Stock, unpaid dividends on such share of Series A Preferred Stock,
regardless of whether they have become payable, will be added to the Liquidation
Value of such share of Series A Preferred Stock, on the payment date in any
liquidation, dissolution or winding up, or on the Redemption Date, as the case
may be, accrued to the close of business on such payment date or Redemption
Date.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger or any sale of all or substantially all of the
corporation's assets to another Person which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock.
"Redemption Date" as to any share of Series A Preferred Stock means the
date specified in the Notice of any Redemption provided that no such date will
be a Redemption Date unless the applicable Redemption Price is actually paid in
full on or before such date, and if not so paid in full, the Redemption Date
will be the date on which such Redemption Price is fully paid. If, however, the
full Redemption Price is not paid on the Redemption Date solely because a holder
has not surrendered his certificate(s) at the corporation's principal office as
provided in subparagraph c(ii) hereof, then as to such holder the date specified
herein for the scheduled redemption shall be the Redemption Date.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization or a government or any
department or agency thereof.
"Redemption Price" means an amount equal to the Liquidation Value.
"Subsidiary" means any corporation of which shares of stock having at least
a majority of the ordinary voting power in electing the board of directors, is,
at the time as of which any determination is being made, owned by the
corporation either directly or indirectly through one or more Subsidiaries.
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h. Miscellaneous
(i) The corporation will keep at its principal office a register for the
registration of Series A Preferred Stock. Upon the surrender of any certificate
representing Series A Preferred Stock at such place, the corporation will, at
the request of the record holder of such certificate, execute and deliver (at
the corporation's expense) a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares represented by the
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of Series A Preferred Stock as is
requested by the holder of the surrendered certificate and will be substantially
identical in form to the surrendered certificate, and dividends will accrue on
the Series A Preferred Stock represented by such new certificate from the date
to which dividends have been fully paid on such Series A Preferred Stock
represented by the surrendered certificate.
(ii) Upon receipt of evidence and an agreement to indemnify reasonably
satisfactory to the corporation (an affidavit of the registered holder, without
bond, will be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing one or more shares of Series A
Preferred Stock the corporation will (at its expense) execute and deliver in
lieu of such certificate a new certificate representing the number of shares of
Series A Preferred Stock represented by such lost, stolen, destroyed or
mutilated certificate, and dividends will accrue on the Series A Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
(iii) Amendments, modifications or waivers of any of the terms hereof will
be binding and effective if the prior written consent of holders of at least 75%
of the Series A Preferred Stock outstanding at the time such action is taken is
obtained; provided that no such action will change (A) the rate of which or the
manner in which dividends on the Series A Preferred Stock accrue or the times at
which such dividends become payable or the amount payable on redemption of the
Series A Preferred Stock are to occur, unless the prior written consent of the
holders of at least 90% of the Series A Preferred Stock then outstanding is
obtained, (B) except as set forth in subparagraph d(ix) of this paragraph 8, the
Conversion Price of the Series A Preferred Stock or the number of shares or
class of stock into which the Series A Preferred Stock is convertible, unless
the prior written consent of the holders of at least 90% of the Series A
Preferred Stock then outstanding is obtained or (C) the percentage required to
approve any change described in clauses (A) and (B) above, unless the prior
written consent of the holders of at least 90% of the Series A Preferred Stock
then outstanding is obtained; and provided further that no such change in the
terms hereof may be accomplished by merger or consolidation of the corporation
with another corporation unless the corporation has obtained the prior written
consent of the holders of the applicable percentage of the Series A Preferred
Stock.
(iv) All notices referred to herein, except as otherwise expressly
provided, will be hand delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, and will be deemed to have been given
when so hand delivered or mailed.
(v) The Board of Directors shall not have any authority to increase the
number of authorized shares of Series A Preferred Stock.
(vii) Except as expressly authorized in this paragraph 8, the shares of
Series A Preferred Stock, and the holders thereof, shall be subject to the
provisions of paragraphs 3, 4, 5, 6, and 7 of this Article IV.
THIRD. The number of shares of Common Stock and the number of shares of
Preferred Stock, voting as a class, voted for this amendment were sufficient for
approval.
FOURTH. Effective as of the Effective Date, each share of the corporation's
Common Stock issued before the Effective Date will be reclassified, changed and
converted so that, from and after the Effective Date, each one share of the
outstanding Common Stock shall be deemed to represent 0.1667 of a share of
Common Stock, such reclassification to be effected without change in the par
value of the Common Stock or in the stated capital of the corporation. Holders
of shares of Common Stock issued before the Effective Date will be asked to
surrender the certificates representing such shares for new certificates
representing the number of shares held by them after the Effective Date. No
holders will be issued a fractional share of Common Stock,
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instead, any fraction of a share shall be rounded to the next highest whole
share, based upon shares owned of record as reflected on the stock records of
the corporation.
DATED as of the 17th day of December, 1993.
/s/ GEORGE K. BROADY
George K. Broady, President
/s/ TIM D. TORNO
Tim D. Torno, Secretary
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ANNEX F
BYLAWS
OF
ULTRAK, INC.
ARTICLE I
PRINCIPAL OFFICE AND CORPORATE SEAL
Section 1. The principal office and place of business of the Corporation in
the State of Colorado shall be 660 Compton Street, Broomfield, Colorado 80020.
Other offices and places of business may be established from time to time by
resolution of the board of directors or as the business of the corporation may
require.
Section 2. The seal of the corporation shall have inscribed thereon the
name of the corporation and shall be in such form as may be approved by the
board of directors, which shall have power to alter the same at pleasure. The
corporation may use the seal by causing it, or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
ARTICLE II
SHARES AND TRANSFER THEREOF
Section 1 -- Certificates. The shares of this corporation shall be
represented by certificates signed by the president or a vice president and the
secretary or an assistant secretary of the corporation, and may be sealed with
the seal of the corporation or a facsimile thereof. The signatures of the
president or vice president and the secretary or assistant secretary upon a
certificate may be facsimiles if the certificate is countersigned by a transfer
agent, or registered by a registrar, other than the corporation itself or an
employee of the corporation. In case any officer who has signed a certificate
shall have ceased to be such officer before such certificate is issued, it may
be issued by the corporation with the same effect as if he were such officer at
the date of its issue.
Section 2 -- New Certificates. No new certificates evidencing shares shall
be issued unless and until the old certificate or certificates, in lieu of which
the new certificate is issued, shall be surrendered for cancellation, except as
provided in Section 3 of this Article II.
Section 3 -- Loss or Destruction. In case of loss or destruction of any
certificate of shares, another certificate may be issued in its place upon
satisfactory proof of such loss or destruction and, at the discretion of the
corporation, upon giving to the corporation a satisfactory bond of indemnity
issued by a corporate surety in an amount and for a period satisfactory to the
board of directors.
Section 4 -- Transfer Agent. Unless otherwise specified by the board of
directors by resolution, the secretary of the corporation shall act as transfer
agent of the certificates representing the shares of stock of the corporation.
He shall maintain a stock transfer book, the stubs in which shall set forth
among other things, the names and addresses of the holders of all issued shares
of the corporation, the number of shares held by each, the certificate numbers
representing such shares, the date of issue of the certificates representing
such shares, and whether or not such shares originate from original issue or
from transfer. Subject to Section 5, the names and addresses of the shareholders
as they appear on the stubs of the stock transfer book shall be conclusive
evidence as to who are the shareholders of record and as such entitled to
receive notice of the meetings of shareholders; to vote at such meetings; to
examine the list of the shareholders entitled to vote at meetings; to receive
dividends; and to own, enjoy and exercise any other property or rights deriving
from such shares against the corporation. Each shareholder shall be responsible
for notifying the secretary in writing of any change in his name or address and
failure so to do will relieve the corporation, its directors, officers, from
liability for failure to direct notices or other documents, or pay over or
transfer dividends or other property or rights, to a name or address other than
the name and address appearing on the stub of the stock transfer book.
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Section 5 -- Close of Transfer Book and Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors may provide that the stock transfer books
shall be closed for a stated period, but not to exceed in any case fifty days.
If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of, or to vote at a meeting of shareholders,
such books shall be closed for at least ten days immediately preceding such
meeting. In lieu of closing the stock transfer books, the board of directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than fifty days and, in case
of a meeting of shareholders, not less than ten days prior to the date on which
the particular action requiring such determination of shareholders is to be
taken. If the board of directors does not order the stock transfer books closed,
or fix in advance a record date, as above provided, then the record date for the
determination of shareholders entitled to notice of, or to vote at any meeting
of shareholders, or any adjournment thereof, or entitled to receive payment of
any dividend, or for the determination of shareholders for any proper purpose
shall be thirty days prior to the date on which the particular action requiring
such determination of shareholders is to be taken.
ARTICLE III
SHAREHOLDERS AND MEETINGS THEREOF
Section 1 -- Shareholders of Record. Only shareholders of record on the
books of the corporation shall be entitled to be treated by the corporation as
holders in fact of the shares standing in their respective names, and the
corporation shall not be bound to recognize any equitable or other claim to, or
interest in, any shares on the part of any other person, firm or corporation,
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of Colorado.
Section 2 -- Meetings. Meetings of shareholders shall be held at the
principal office of the corporation, or at such other place as specified from
time to time by the board of directors. If the board of directors shall specify
another location such change shall be recorded on the notice calling such
meeting.
Section 3 -- Annual Meeting. In the absence of a resolution of the board of
directors providing otherwise, the annual meeting of shareholders of the
corporation for the election of directors, and for the transaction of such other
business as may properly come before the meeting, shall be held on the first day
of the fifth month in each fiscal year, if the same be not a legal holiday, and
if a legal holiday, then on the next succeeding business day, at 9:00 o'clock
a.m.
Section 4 -- Special Meetings. Special meetings of the shareholders may be
called by the president, the board of directors, the holders of not less than
one-tenth of all the shares entitled to vote at the meeting, or legal counsel of
the corporation as last designated by resolution of the board of directors.
Section 5 -- Notice. Written notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten days nor more than fifty
days before the date of the meeting, either personally or by mail, by or at the
direction of the president, the secretary, or the officer or person calling the
meeting to each shareholder of record entitled to vote at such meeting; except
that, if the authorized shares are to be increased, at least thirty days' notice
shall be given.
Notice to shareholders of record, if mailed, shall be deemed given as to
any shareholder of record, when deposited in the United States mail, addressed
to the shareholder at his address as it appears on the stock transfer books of
the corporation, with postage thereon prepaid, but if three successive letters
mailed to the last-known address of any shareholder of record are returned as
undeliverable, no further notices to such shareholder shall be necessary, until
another address for such shareholder is made known to the corporation.
Section 6 -- Shareholder Record. The officer or agent having charge of the
stock transfer books for shares of this corporation shall make, at least ten
days before each meeting of shareholders, a complete record of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical
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order, with the address of and the number of shares held by each, which record,
for a period of ten days before such meeting, shall be kept on file at the
principal office of the corporation, whether within or outside Colorado, and
shall be subject to inspection by any shareholder for any purpose germane to the
meeting at any time during usual business hours. Such record shall also be
produced and kept open at the time and place of the meeting and shall be subject
to the inspection of any shareholder for any purpose germane to the meeting
during the whole time of the meeting. The original stock transfer books shall be
prima facie evidence as to who are the shareholders entitled to examine such
record or transfer books or to vote at any meeting of shareholders.
Section 7 -- Quorum and Adjournment. At any meeting of the shareholders the
presence, in person or by proxy of the holders of more than a majority of the
shares outstanding and entitled to vote shall constitute a quorum. In the
absence of a quorum, the meeting may be adjourned by any officer entitled to
preside at, or act as secretary of such meeting, or by a majority in interest of
those shareholders present in person or by proxy.
Section 8 -- Voting. A shareholder may vote either in person or by proxy
executed in writing by the shareholder or by his duly authorized attorney in
fact. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
At all meetings of the shareholders, a quorum being present, all matters
shall be decided by a simple majority vote of the then eligible shares, except
as otherwise provided by statute, by the Articles of Incorporation of the
corporation, or by these Bylaws. The vote on any matter need not be by ballot
unless required by statute or requested by a shareholder, in person or by proxy,
who is entitled to vote at the meeting.
Section 9 -- Conduct of Meetings. Each meeting of the shareholders shall be
presided over by the president, or if the president shall not be present, by the
vice president. If both the president and vice president are absent, a chairman
shall be chosen by a majority in voting interest of those shareholders present
or represented by proxy. The secretary of the corporation shall act as secretary
of each meeting of the shareholders. If he shall not be present the chairman of
the meeting shall appoint a secretary.
ARTICLE IV
DIRECTORS, POWERS AND MEETINGS
Section 1 -- Board of Directors. The business and affairs of the
corporation shall be managed by a board of three directors who need not be
shareholders of the corporation or residents of the State of Colorado and who
shall be elected at the annual meeting of shareholders or some adjournment
thereof. Directors shall hold office until the next succeeding annual meeting of
shareholders and until their successors shall have been elected and shall
qualify. The board of directors may increase or decrease, to not less than
three, the number of directors by resolution.
Section 2 -- Regular Meetings. The annual meeting of the board of directors
shall be held at the same place as, and immediately after, the annual meeting of
shareholders, and no notice shall be required in connection therewith. The
annual meeting of the board of directors shall be for the purpose of electing
officers and the transaction of such other business as may come before the
meeting. Regular meetings of the board of directors may be held without notice
as determined by resolution adopted by the board.
Section 3 -- Special Meetings. Special meetings of the board of directors
or any committee designated by said board may be called at any time by the
president or by any director, and may be held within or outside the State of
Colorado at such time and place as the notice or waiver thereof may specify.
Notice of such meetings shall be mailed or telegraphed to the last known address
of each director at least five days, or shall be given to a director in person
or by telephone at least forty-eight hours, prior to the date or time fixed for
the meeting. special meetings of the board of directors may be held at any time
that all directors are present in person, and presence of any director at a
meeting shall constitute waiver of notice of such meeting except as otherwise
provided by law. Unless specifically required by law, the Articles of
Incorporation or these Bylaws, neither the business to be transacted at, nor the
purpose of, any meeting of the board of directors or any committee designated by
said board need be specified in the notice or waiver of notice of such meeting.
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Section 4 -- Special Attendance. Except as may be otherwise provided by the
Articles of Incorporation or Bylaws, members of the board of directors of any
committee designated by such board may participate in a meeting of the board or
committee by means of conference telephone or similar communications equipment
by which all persons participating in the meeting can hear each other at the
same time. Such participation shall constitute presence in person at the
meeting.
Attendance of a director at a meeting shall constitute a waiver of notice
of such meeting except where a director attends a meeting for the express
purpose of objecting to the transaction of business because the meeting is not
lawfully called or convened.
Section 5 -- Quorum and Voting. A quorum at all meetings of the board of
directors shall consist of a majority of the number of directors then holding
office, but a smaller number may adjourn from time to time without further
notice, until a quorum is secured. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless the act of a greater number is required by the laws of the
State of Colorado or by the Articles of Incorporation or these Bylaws.
Section 6 -- Organization. The president of the corporation, or in his
absence, the vice president, shall preside at each meeting of the board of
directors. The secretary, or in his absence, any person appointed by the
chairman of the meeting, shall act as secretary of the meeting.
Section 7 -- Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors at which action or any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 8 -- Vacancies. Any vacancy occurring in the board of directors may
be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the board of directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office,
and shall hold such office until his successor is duly elected and shall
qualify. Any directorship to be filled by reason of an increase in the number of
directors shall be filled by the affirmative vote of a majority of the directors
then in office or by an election at an annual meeting, or at a special meeting
of shareholders called for that purpose. A director chosen to fill a position
resulting from an increase in the number of directors shall hold office until
the next annual meeting of shareholders and until his successor shall have been
elected and shall qualify.
Section 9 -- Compensation. Directors may receive such compensation and
reimbursement for expenses as may be established by appropriate resolution of
the board of directors and in addition thereto, shall receive reasonable
traveling expense, if any is required, or attendance at such meetings. A
director may serve the corporation in a capacity other than that of a director
and receive compensation for the services rendered in that capacity.
Section 10 -- Executive Committees. The board of directors, by resolution
adopted by a majority of the number of directors may designate from among its
members an executive committee, and one or more other committees each of which,
to the extent provided in the resolution shall have all of the authority of the
board of directors; but no such committee shall have the authority of the board
of directors in reference to amending the Articles of Incorporation, adopting a
plan of merger or consolidation, recommending to the shareholders the sale,
lease, exchange or other disposition of all or substantially all of the property
and assets of the corporation otherwise than in the usual and regular course of
its business, recommending to the shareholders a voluntary dissolution of the
corporation or a revocation thereof, or amending the Bylaws of the corporation.
the designation of such committees and the delegation thereto of authority shall
not operate to relieve the board of directors, or any member thereof, of any
responsibility imposed by law.
Section 11 -- Removal of Directors. The shareholders may, at a meeting
called for the express purpose of removing directors, by a majority vote of the
shares entitled to vote at an election of directors, remove the entire board of
directors or any lesser number, with or without cause.
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Section 12 -- Resignations. A director of the corporation may resign at any
time by giving written notice to the board of directors, president or secretary
of the corporation. The resignation shall take effect upon the date of receipt
of such notice, or at any later period of time specified therein. The acceptance
of such resignation shall not be necessary to make it effective, unless the
resignation requires it to be effective as such.
Section 13 -- General Powers. The business and affairs of the corporation
shall be managed by the board of directors which may exercise all such powers of
the corporation and do all such lawful acts and things as are not by statute or
by the Articles of Incorporation or by these Bylaws directed or required to be
exercised or done by the shareholders. The directors shall pass upon any and all
bills or claims of officers for salaries or other compensation and, if deemed
advisable, shall contract with officers, employees, directors, attorneys,
accountants, and other persons to render services to the corporation.
ARTICLE V
WAIVER OF NOTICE
Notwithstanding any notices required by law or these Bylaws to be given to
any shareholder or director of the corporation, a waiver thereof in writing
signed by the person entitled to such notice, whether before, at, or after the
time stated therein shall be the equivalent to the giving of such notice.
ARTICLE VI
ACTION WITHOUT A MEETING
Any action required to be taken at a meeting of the directors, executive
committee, or other committee of the directors, or shareholders of this
corporation, or any action which may be taken at a meeting of directors,
executive committee, or other committee of the directors, or shareholders, may
be taken without a meeting if a consent in writing, setting forth the action so
taken shall be signed by all of the directors, executive or other committee
members or shareholders entitled to vote with respect to the subject matter
thereof.
Such consent shall have the same force and effect as a unanimous vote of
the directors, executive committee or other committee members or shareholders,
as the case may be and may be stated as such in any articles or document filed
with the Secretary of State of Colorado.
ARTICLE VII
OFFICERS
Section 1 -- Term and Compensation. The elective officers of the
corporation shall consist of at least a president, a secretary and a treasurer
each of whom shall be eighteen years or older and who shall be elected by the
board of directors at its annual meeting. Unless removed in accordance with
procedures established by law and these Bylaws, the said officers shall serve
until the next succeeding annual meeting of the board of directors and until
their respective successors are elected and shall qualify. Any two offices, but
not more than two, may be held by the same person at the same time, except that
one person may not simultaneously hold the offices of president and secretary.
The board may elect or appoint such other officers and agents as it may deem
advisable, who shall hold office during the pleasure of the board. All officers
shall be paid such compensation as may be directed by the board.
Section 2 -- Powers. The officers of the corporation shall exercise and
perform the respective powers, duties and functions as are stated below, and as
may be assigned to them by the board of directors.
(a) The president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors,
have general supervision, direction and control of the business and
officers of the corporation. He shall preside at all meetings of the
shareholders and of the board of directors. The president or a vice
president, unless some other person is specifically authorized by the board
of directors, shall sign all stock certificates, bonds, deeds, mortgages,
leases and contracts of the
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corporation. The president shall perform all the duties commonly incident
to his office and such other duties as the board of directors shall
designate.
(b) In the absence or disability of the president, the vice president
or vice president, if any, in order of their rank as fixed by the board of
directors, and if not ranked, the vice presidents in the order designated
by the board of directors, shall perform all the duties of the president,
and when so acting shall have all the powers of, and be subject to all the
restrictions on the president. Each vice president shall have such other
powers and preform such other duties as may from time to time be assigned
to him by the president.
(c) The secretary shall keep accurate minutes of all meetings of the
shareholders and the board of directors. He shall keep, or cause to be kept
a record of the shareholders of the corporation and shall be responsible
for the giving of notice of meetings of the shareholders or the board of
directors. The secretary shall be custodian of the records and of the seal
of the corporation and shall attest the affixing of the seal of the
corporation when so authorized. The secretary or assistant secretary shall
sign all stock certificates. The secretary shall perform all duties
commonly incident to his office and such other duties as may from time to
time be assigned to him by the president.
(d) An assistant secretary may, at the request of the secretary, or in
the absence or disability of the secretary, perform all of the duties of
the secretary. He shall perform such other duties as may be assigned to him
by the president or by the secretary.
(e) The treasurer, subject to the order of the board of directors,
shall have the care and custody of the money, funds, valuable papers and
documents of the corporation. He shall keep accurate books of accounts of
the corporation's transactions, which shall be the property of the
corporation, and shall render financial reports and statements of condition
of the corporation when so requested by the board of directors or
president. The treasurer shall perform all duties commonly incident to his
office and such other duties as may from time to time be assigned to him by
the president. In the absence or disability of the president and vice
president or vice presidents, the treasurer shall perform the duties of the
president.
(f) An assistant treasurer may, at the request of the treasurer, or in
the absence or disability of the treasurer, perform all of the duties of
the treasurer. He shall perform such other duties as may be assigned to him
by the president or by the treasurer.
Section 3 -- Compensation. All officers of the corporation may receive
salaries or other compensation if so ordered and fixed by the board of
directors. The board shall have authority to fix salaries in advance for stated
periods or render the same retroactive as the board may deem advisable.
Section 4 -- Delegation of Duties. In the event of absence or inability of
any officer to act, the board of directors may delegate the powers or duties of
such officer to any other officer, director or person whom it may select.
Section 5 -- Removal. Any officer or agent may be removed by the board of
directors or by the executive committee, if any, whenever in its judgment the
best interest of the corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not, of itself, create
contract rights.
ARTICLE VIII
FINANCE
Section 1 -- Reserve Funds. The board of directors, in its uncontrolled
discretion, may set aside from time to time, out of the net profits or earned
surplus of the corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the corporation, and for any other purpose.
Section 2 -- Banking. The moneys of the corporation shall be deposited in
the name of the corporation in such bank or banks or trust company or trust
companies, as the board of directors shall designate, and may be
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drawn out only on checks signed in the name of the corporation by such person or
persons as the board of directors by appropriate resolution may direct. Notes
and commercial paper, when authorized by the board, shall be signed in the name
of the corporation by such officer or officers or agent or agents as shall
thereunto be authorized from time to time.
Section 3 -- Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the board of directors.
ARTICLE IX
DIVIDENDS
Subject to the provisions of the Articles of Incorporation and the laws of
the State of Colorado, the board of directors may declare dividends whenever,
and in such amounts, as in the board's opinion the condition of the affairs of
the corporation shall render such advisable.
ARTICLE X
CONTRACTS, LOANS AND CHECKS
Section 1 -- Execution of Contracts. Except as otherwise provided by
statute or by these Bylaws, the board of directors may authorize any officer or
agent of the corporation to enter into any contract, or execute and deliver any
instrument in the name of, and on behalf of the corporation. Such authority may
be general or confined to specific instances and, unless so authorized, no
officer, agent or employee shall have any power to bind the corporation for any
purpose, except as may be necessary to enable the corporation to carry on its
normal and ordinary course of business.
Section 2 -- Loans. No loans shall be contracted on behalf of the
corporation and no negotiable paper shall be issued in its name unless
authorized by the board of directors. When so authorized, any officer or agent
of the corporation may effect loans and advances at any time for the corporation
from any bank, trust company or institution, firm, corporation or individual. An
agent so authorized may make and deliver promissory notes or other evidence of
indebtedness of the corporation and may mortgage, pledge, hypothecate or
transfer any real or personal property held by the corporation as security for
the payment of such loans. Such authority, in the board of directors discretion,
may be general or confined to specific instances.
Section 3 -- Checks. Checks, notes, drafts and demands for money issued in
the name of the corporation shall be signed by such person or persons as
designated by the board of directors and in the manner the board of directors
prescribes.
ARTICLE XI
AMENDMENTS
Subject to repeal or change by action of the shareholders, these Bylaws may
be altered, amended or repealed at the annual meeting of the board of directors
or at any special meeting of the board called for that purpose.
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ARTICLE XII
GENDER
Whenever in these Bylaws the masculine gender is used, it shall be deemed
to include the feminine gender.
The above Bylaws approved and adopted by the Board of Directors on April
21, 1980.
/s/ Vincent J. Shanovich
Secretary
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ANNEX G
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is executed as of , 1995, by
and between Ultrak, Inc., a Colorado corporation ("Parent"), and Ultrak, Inc., a
Delaware corporation ("Subsidiary").
WITNESSETH:
WHEREAS, the authorized capital stock of Subsidiary consists of 20,000,000
shares of Common Stock, $0.01 par value ("Subsidiary Common Stock"), and
2,000,000 shares of Preferred Stock, $5.00 par value ("Subsidiary Preferred
Stock"), 195,351 shares of which have been designated Series A 12% Cumulative
Convertible Preferred Stock ("Subsidiary Series A Preferred Stock"), of which
1,000 shares of Subsidiary Common Stock are issued and outstanding and owned by
Parent; and
WHEREAS, the authorized capital stock of Parent consists of 20,000,000
shares of Common Stock, no par value ("Parent Common Stock") and 2,000,000
shares of Preferred Stock, $5.00 par value ("Parent Preferred Stock"), 195,351
shares of which have been designated Series A 12% Cumulative Convertible
Preferred Stock ("Parent Series A Preferred Stock"), of which approximately
6,560,000 shares of Parent Common Stock and 195,351 shares of Parent Series A
Preferred Stock are issued and outstanding; and
WHEREAS, the respective boards of directors and shareholders of Parent and
Subsidiary deem it to be desirable and in the best interest of the respective
corporations that the two corporations merge into a single corporation (the
"Merger"), and, pursuant to resolutions duly adopted, such boards of directors
and shareholders have approved and adopted this Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements and covenants contained herein, the parties hereto agree as follows:
ARTICLE I
Section 1.1. In accordance with the provisions of the Colorado Business
Corporation Act and the Delaware General Corporation Law at the Effective Time
(defined below) of the Merger, Parent shall be merged into Subsidiary, which
shall be the surviving corporation (in its capacity as such surviving
corporation Subsidiary is hereinafter sometimes referred to as the "Surviving
Corporation", and Parent and Subsidiary are hereinafter sometimes referred to
collectively as the "Constituent Corporations"), and as such Subsidiary shall
continue to be governed by the laws of the State of Delaware.
Section 1.2. The Merger shall become effective on December 29, 1995 or such
later date as the Articles of Merger, executed, adopted and approved in
accordance with the Delaware General Corporation Law, shall have been filed with
the Secretary of State of Delaware. The time when the Merger shall become
effective is herein called the "Effective Time." The actions described above
shall be conclusive evidence, for all purposes of this Agreement, of compliance
with all conditions precedent.
Section 1.3. Except as may otherwise be set forth herein, at the Effective
Time, the corporate existence and identity of Subsidiary, with all its purposes,
powers, franchises, privileges, rights and immunities shall continue under the
laws of the State of Delaware, unaffected and unimpaired by the Merger, and the
corporate existence and identity of Parent, with all its purposes, powers,
franchises, privileges, rights and immunities, shall be merged with and into
Subsidiary and the Surviving Corporation shall be vested fully therewith, and
the separate corporate existence and identity of Parent shall thereafter cease,
except to the extent continued by applicable law. At the Effective Time, the
Surviving Corporation shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights, privileges,
immunities and powers, and shall be subject to all of the duties and
liabilities, of a corporation organized under the laws of the State of
Delaware.
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(b) The Surviving Corporation shall succeed to, without other
transfer, and shall possess and enjoy, all of the rights, privileges,
immunities, powers, purposes and franchises, of both a public and private
nature, of the Constituent Corporations and all property, real, personal
and mixed, and all debts due to either of the Constituent Corporations on
whatever account and all other choses in action, and every other interest
of or belonging to either of the Constituent Corporations shall be deemed
to be transferred to and vested in the Surviving Corporation without
further act or deed, and shall thereafter be the property of the Surviving
Corporation as they were of the respective Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of said
Constituent Corporations shall not revert or be in any way impaired by
reason of the Merger.
(c) The Surviving Corporation shall thenceforth be responsible and
liable for all debts, liabilities, obligations and duties of either of the
Constituent Corporations, and any claim existing or action or proceeding
pending by or against either Constituent Corporation may be prosecuted as
if the Merger had not occurred, or the Surviving Corporation may be
substituted in its place. Neither the rights of creditors nor any liens
upon the property of either Constituent Corporation shall be impaired by
the Merger.
Section 1.4. If at any time the Surviving Corporation shall deem or be
advised that any further transfers, assignments, conveyances, assurances in law
or other acts or things are necessary or desirable to vest or confirm in the
Surviving Corporation the title to any property or assets of either of the
Constituent Corporations, each Constituent Corporation and its proper officers
and directors shall execute and deliver any and all such proper transfers,
assignments, conveyances and assurances in law, and shall do all other acts and
things as are necessary or proper to vest or confirm title to such property and
assets in the Surviving Corporation and to otherwise carry out the purposes and
intent of this Agreement.
ARTICLE II
Section 2.1. The Certificate of Incorporation of Subsidiary in effect at
the Effective Time shall constitute the Articles of Incorporation of the
Surviving Corporation until amended, altered or repealed in the manner provided
by law.
Section 2.2. The By-Laws of Subsidiary in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation, until amended, altered or
repealed.
Section 2.3. The directors of Subsidiary at the Effective Time shall be the
directors of the Surviving Corporation and shall hold office in accordance with
the By-Laws of the Surviving Corporation until the next annual meeting of
shareholders of the Surviving Corporation or until their respective successors
are elected and qualified.
Section 2.4. The officers of Subsidiary at the Effective Time shall be the
officers of the Surviving Corporation and shall hold office subject to the
Bylaws of the Surviving Corporation.
ARTICLE III
Section 3.1. At the Effective Time, the manner of exchanging the
outstanding Common Stock of the Constituent Corporations shall be as follows:
(a) Each share of Parent Common Stock outstanding immediately prior to
the Effective Time, except all shares of Parent Common Stock held by Parent
in its treasury, which shall be cancelled and no shares issued in respect
thereof, shall, at the Effective Time, by virtue of the Merger and without
action on the part of the holder thereof, be converted into one share of
the Subsidiary Common Stock.
(b) Each share of Parent Series A Preferred Stock outstanding
immediately prior to the Effective Time shall, at the Effective Time, by
virtue of the Merger and without action on the part of the holder thereof,
be converted into one share of the Subsidiary Series A Preferred Stock,
which is identical in all respects, including rights, preferences and
designations, to the Parent Series A Preferred Stock.
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(c) Each share of Subsidiary Common Stock outstanding immediately
prior to the Effective Time shall, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, be
cancelled and returned to the status of authorized but unissued stock of
the Surviving Corporation.
(d) No fractional shares of Subsidiary Common Stock or Subsidiary
Series A Preferred Stock and no certificates or scrip certificates therefor
shall be issued.
(e) All of the shares of Subsidiary Common Stock and Subsidiary Series
A Preferred Stock, when delivered pursuant to the provisions of this
Agreement, shall be validly issued, fully paid and nonassessable.
(f) If any stock certificate evidencing shares of Subsidiary Common
Stock and/or Subsidiary Series A Preferred Stock is requested to be issued
in a name other than that in which the surrendered Parent stock certificate
is registered, it shall be a condition of such issuance that the
surrendered stock certificate shall be properly endorsed in blank or
otherwise in proper form for transfer and that the person requesting such
exchange pay to the Surviving Corporation any applicable transfer or other
taxes or establish to the satisfaction of the Surviving Corporation that
any such tax has been paid or is not payable.
ARTICLE IV
Section 4.1. This Agreement may be executed by the parties hereto in
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one instrument.
Section 4.2. Subject to applicable law, this Agreement may be amended,
modified or supplemented only by written agreement of Parent and Subsidiary at
any time prior to the Effective Time.
Section 4.3. This Agreement may be terminated at any time prior to the
Effective Time by mutual agreement of the parties hereto.
IN WITNESS WHEREOF, each of the Constituent Corporations has caused this
Agreement to be executed on its behalf by its respective officers hereunto duly
authorized as of the date first above written.
ULTRAK, INC.
a Colorado corporation
By:______________________________
George K. Broady, President
ULTRAK, INC.,
a Delaware corporation
By:______________________________
George K. Broady, President
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ANNEX H
CERTIFICATE OF INCORPORATION
OF
ULTRAK, INC.
1. The name of the Corporation is Ultrak, Inc.
2. The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Corporation Trust Center, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
3. The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
4. Capital Stock
A. Common Stock.
The aggregate number of common shares which this Corporation shall
have authority to issue is Twenty Million (20,000,000) shares with a par
value of One Cent ($0.01) each, which shares shall be designated "Common
Stock".
B. Preferred Stock.
The aggregate number of preferred shares which this Corporation shall
have authority to issue is Two Million (2,000,000) shares with a par value
of Five Dollars ($5.00) each, which shares shall be designated "Preferred
Stock". Included in such number of shares of Preferred Stock are 195,351
shares which have been designated as "Series "A" 12% Cumulative Convertible
Preferred Stock," the rights and preferences of which are set forth in full
or referred to in paragraph H of this Article 4.
Shares of Preferred Stock may be issued from time to time in one or
more series, each such series to have distinctive serial designations
(other than a designation containing the term "Series A") as shall be
determined in the resolution or resolutions providing for the issue of such
Preferred Stock from time to time adopted by the Board of Directors
pursuant to authority so to do which is hereby vested in the Board of
Directors, which resolutions shall be filed with the Secretary of State of
the State of Delaware as required by law.
Each series of Preferred Stock as shall be established by the Board of
Directors
(a) may have such number of shares;
(b) may have such voting powers, full or limited, or may be without
voting powers;
(c) may be subject to redemption at such time or times and at such
prices;
(d) may be entitled to receive dividends (which may be cumulative
or noncumulative) at such rate or rates, on such conditions, from such
date or dates, and at such times, and payable in preference to, or in
such relation to, the dividends payable on any other class or classes or
series of stock;
(e) may have such rights upon the dissolution of, or upon any
distribution of the assets of, the Corporation;
(f) may be made convertible into, or exchangeable for, shares of
any other class or classes or of any other series of the same or any
other class or classes of stock of the Corporation at such price or
prices or at such rates of exchange, and with such adjustments;
(g) may be entitled to the benefit of a sinking fund or purchase
fund to be applied to the purchase or redemption of shares of such
series in such amount or amounts;
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(h) may be entitled to the benefit of conditions and restrictions upon
the creation of indebtedness of this Corporation or any subsidiary, upon
the issue of any additional stock (including additional shares of such
series or of any other series), and upon the payment of dividends or the
making of other distributions on, and the purchase, redemption or other
acquisition by this Corporation or any subsidiary of any outstanding stock
of this Corporation; and
(i) may have such other relative, participating, optional or other
special rights, qualifications, limitations or restrictions thereof;
all as shall be stated in said resolution or resolutions providing for the
issue of such Preferred Stock.
C. Treasury Shares.
Shares of any series of Preferred Stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or which, if convertible or exchangeable, have been converted into
or exchanged for shares of stock of any other class or classes, shall have the
status of authorized and unissued shares of Preferred Stock and may be reissued
as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors or as part of any
other series of Preferred Stock, all subject to the conditions or restrictions
on issuance set forth in the resolution or resolutions adopted by the Board of
Directors providing for the issue of any series of Preferred Stock and to any
filing required by law.
D. Dividends.
Dividends in cash, property or shares of the Corporation may be paid upon
the Common Stock as and when declared by the Board of Directors, out of funds of
the Corporation to the extent and in the manner permitted by law, except that no
Common Stock dividend shall be paid for any year unless the holders of Preferred
Stock, if any, shall receive the maximum allowable Preferred Stock dividend for
such year applicable to each respective series, plus any required dividends
accumulated from prior years.
E. Distribution Upon Liquidation.
Except as otherwise provided by the resolution or resolutions of the Board
of Directors providing for the issue of any series of Preferred Stock, upon any
liquidation, dissolution or winding up of the Corporation, and after paying or
adequately providing for the payment of all its obligations, the remainder of
the assets of the Corporation shall be distributed, either in cash or in kind,
first pro rata to the holders of Preferred Stock until the required amount to be
distributed to the Preferred Stock has been distributed, and the remainder pro
rata to the holders of the Common Stock.
F. Voting.
Each outstanding share of Common Stock shall be entitled to one vote.
Cumulative voting shall not be allowed in the election of directors of the
Corporation. Except as provided in paragraph H of this Article 4 with respect to
Series A Cumulative Convertible Preferred Stock, shares of Preferred Stock shall
not be entitled to any vote, except as required by law, in which case each share
of Preferred Stock shall be entitled to one vote, or except as otherwise
provided by the resolution or resolutions of the Board of Directors providing
for the issue of any series of the Preferred Stock.
G. Preemptive Rights.
Except as otherwise provided by the resolution or resolutions of the Board
of Directors providing for the issue of any series of Preferred Stock, no holder
of any shares of the Corporation, whether now or hereafter authorized, shall
have any preemptive or preferential right to acquire any shares or securities of
the Corporation, including shares or securities held in the treasury of the
Corporation.
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H. Series A 12% Cumulative Convertible Preferred Stock.
One Hundred Ninety-five Thousand Three Hundred Fifty-one (195,351) shares
of the Corporation's Preferred Stock shall be designated as "Series "A" 12%
Cumulative Convertible Preferred Stock" (the "Series A Preferred Stock") and
shall have the rights and preferences set forth or referred to in this paragraph
H. Certain other capitalized terms used in this paragraph H are defined in
subparagraph 7 of this paragraph H.
1. Dividends.
(a) When and as declared by the Board of Directors of the Corporation and
to the extent permitted under the General Corporation Law of Delaware, the
Corporation will pay preferential dividends to the holders of Series A Preferred
Stock. Except as otherwise provided herein, dividends on each share of Series A
Preferred Stock will accrue cumulatively at the rate of $0.15 per fiscal quarter
to and including the earlier of (i) the date on which the Redemption Price of
such share is paid if such share is redeemed, or (ii) the date on which such
share is converted or (iii) the date upon which any dissolution, liquidation or
winding up of the Corporation is effected. Dividends will be payable on each
March 31, June 30, September 30 and December 31. All dividends will accrue
whether or not such dividends have been declared and whether or not there are
profits, surplus or other funds of the Corporation legally available for the
payment of dividends. The date on which the Corporation initially issues any
share of Series A Preferred Stock will be deemed to be its "date of issuance"
regardless of the number of times a transfer of such share is made on the stock
records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share.
(b) To the extent not paid on each March 31, June 30, September 30 and
December 31, all dividends which have accrued on each share of Series A
Preferred Stock then outstanding during the three-month period ending upon such
date will be added to the Liquidation Value of such share and will remain a part
thereof until such dividends are paid.
(c) If at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Series A Preferred Stock, such
payment will be distributed among the holders of the Series A Preferred Stock so
that an equal amount will be paid with respect to each outstanding share of
Series A Preferred Stock.
2. Liquidation.
Upon any liquidation, dissolution or winding up of the Corporation, the
holders of Series A Preferred Stock will be entitled to be paid, before any
distribution or payment is made upon any other equity securities of the
Corporation, an amount in cash equal to the sum of the aggregate Liquidation
Value of all shares of Series A Preferred Stock outstanding, and the holders of
Series A Preferred Stock will not be entitled to any further payment. If upon
any such liquidation, dissolution or winding up, the assets of the Corporation
to be distributed among the holders of the Series A Preferred Stock are
insufficient to permit payment to such holders of the aggregate amount which
they are entitled to be paid, then the entire assets to be distributed will be
distributed ratably among such holders based upon the aggregate Liquidation
Value of the Series A Preferred Stock held by such holder. The Corporation will
mail written notice of such liquidation, dissolution or winding up, not less
than 60 days prior to the payment date stated therein, to each record holder of
Series A Preferred Stock. Neither the consolidation or merger of the Corporation
into or with any other Corporation or Corporations, nor the sale or transfer by
the Corporation of all or any part of its assets, nor the reduction of the
capital stock of the Corporation, will be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of this
subparagraph b.
3. Redemptions.
(a) Upon resolution of the Board of Directors, the Corporation may redeem
shares of Series A Preferred Stock. For each such share which may be redeemed,
if any, the Corporation will be obligated to pay to the holder thereof the
Redemption Price.
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(b) In the event of redemption the Corporation will mail, unless waived by
the holders, written notice (the "Notice of Redemption") of each such redemption
to each record holder not less than 10 days prior to the date on which such
redemption is to be made. Upon mailing any Notice of Redemption, the Corporation
will become obligated (i) to redeem from each holder the number of shares of
Series A Preferred Stock, as stated in the Notice of Redemption, to be redeemed
from such holder, and (ii) to send each record holder a cashier's or certified
check in an amount equal to the Redemption Price of such number of shares of
Series A Preferred Stock at least five business days prior to the date specified
for redemption in the notice. Upon receipt of such check, the record holder of
the shares of Series A Preferred Stock to be redeemed will become obligated to
surrender the certificates representing such number of shares on or before the
date specified for redemption in the Notice of Redemption. In case fewer than
the total number of shares represented by any certificate are redeemed, a new
certificate representing the number of unredeemed shares will be issued to the
record holder thereof in such holder's or such holder's nominee's name, without
cost to such holder.
(c) No share of Series A Preferred Stock is entitled to any dividends
accruing after redemption. On redemption all rights of the holder of such share
will cease, and such share will not be deemed to be outstanding.
(d) Any shares of Series A Preferred Stock which are redeemed or otherwise
acquired by the Corporation will be cancelled and will not be reissued, sold or
transferred.
(e) Neither the Corporation nor any Subsidiary will redeem or otherwise
acquire any Series A Preferred Stock, except as expressly authorized herein or
pursuant to a purchase offer made pro rata to all holders of Series A Preferred
Stock on the basis of the number of shares of such class owned by each such
holder.
4. Conversion.
(a) Any holder of Series A Preferred Stock may convert all or any of such
shares held by such holder into shares of Common Stock at any time prior to
redemption as referred to in subparagraph 3(a) of this paragraph 6, after
receipt of Notice of Redemption. The number of shares of Common Stock which any
such holder will receive in return for the shares converted by such holder will
be 2.083.
(b) Each conversion of Series A Preferred Stock will be deemed to have been
effected as of the close of business on the date on which the certificate or
certificates representing the shares of Series A Preferred Stock to be converted
have been surrendered at the principal office of the Corporation. At such time
as such conversion has been effected, the rights of the holder of such Series A
Preferred Stock as such holder will cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock are to
be issued upon such conversion will be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
(c) As soon as possible after a conversion has been effected, the
Corporation will deliver to the converting holder:
(i) a certificate or certificates representing the number of shares of
Common Stock issuable by reason of such conversion in such name or names
and such denomination or denominations as the converting holder has
specified;
(ii) payment in an amount equal to all accrued dividends with respect
to such shares of Series A Preferred Stock converted, which have not been
paid prior thereto; and
(iii) a certificate representing any shares of Series A Preferred
Stock which were represented by the certificate or certificates delivered
to the Corporation in connection with such conversion but which were not
converted.
(d) If for any reason the Corporation is unable to pay any accrued
dividends on the Series A Preferred Stock being converted, the Corporation will
pay such dividends to the converting holder as soon thereafter as funds of the
Corporation are legally available for such payment and such obligation will be
evidenced by the
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Corporation's promissory note payable to such holder and bearing interest at the
prime rate of interest at the United Bank of Denver, N.A., or a successor
thereto, as in effect during the time such note is outstanding.
(e) The issuance of certificates for shares of Common Stock upon conversion
of Series A Preferred Stock will be made without charge to the holders of such
Series A Preferred Stock for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Common Stock.
(f) The Corporation will not close its books against the transfer of Series
A Preferred Stock or of Common Stock issued or issuable upon conversion of
Series A Preferred Stock in any manner which interferes with the timely
conversion of Series A Preferred Stock.
(g) The Conversion Price for the Common Stock will be $2.40 per share of
Common Stock and will not be subject to adjustment except as otherwise
specifically set forth herein.
(h) Prior to the consummation of any Organic Change, the Corporation will
make appropriate provisions (in form and substance satisfactory to the holders
of a majority of the Series A Preferred Stock then outstanding) to insure that
each of the holders of Series A Preferred Stock will thereafter have the right
to acquire and receive in lieu of or in addition to the shares of Common Stock
immediately theretofore acquirable and receivable upon the conversion of such
holder's Series A Preferred Stock, such shares of stock, securities or assets as
such holder would have received in connection with such Organic Change if such
holder had converted his Series A Preferred Stock immediately prior to such
Organic Change. In any such case appropriate provisions (in form and substance
satisfactory to the holders of a majority of the Series A Preferred Stock then
outstanding) will be made to insure that the provisions of this subparagraph
4(h) will thereafter be applicable to Series A Preferred Stock (including, in
the case of any such consolidation, merger or sale in which the successor
Corporation or purchasing Corporation is other than the Corporation, an
immediate adjustment of the Conversion Price to the value for the Common Stock
reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series A Preferred Stock, if the
value so reflected is less than the Conversion Price in effect immediately prior
to such consolidation, merger or sale). The Corporation will not effect any such
consolidation, merger or sale, unless prior to the consummation thereof, the
successor corporation (if other than the Corporation) resulting from such
consolidation or merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the holders of a majority
of the Series A Preferred Stock then outstanding), the obligation to deliver to
each such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
(i) If the Corporation subdivides (by any stock split, stock dividend or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior to
such subdivision will be proportionately reduced, and if the Corporation
combines (by reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination will be
proportionately increased.
(j) The Corporation will send written notice to all holders of Series A
Preferred Stock at least 20 days prior to the date on which the Corporation
closes its books or takes a record for determining rights to vote with respect
to any Organic Change, dissolution or liquidation. The Corporation will also
give to the holders of shares of Series A Preferred Stock at least 30 days prior
written notice of the date on which any Organic Change, dissolution or
liquidation will take place.
5. Voting Rights.
Holders of shares of Series A Preferred Stock will be entitled to vote on
all matters which are or may be submitted to a vote of shareholders of the
Corporation permitted under the laws of the State of Delaware. Each share, until
redeemed or converted, shall have voting rights equal to 16.667 shares of Common
Stock. Holders of the shares of Series A Preferred Stock shall further have the
same rights accorded to holders of
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Common Stock on all matters relating to the voting of such Common Stock provided
by the laws of the State of Delaware.
6. Purchase Rights.
If at any time the Corporation grants, issues or sells any options,
convertible securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of Common Stock (the "Purchase
Rights"), then each holder of Series A Preferred Stock will be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such holder could have acquired if such holder had held
the number of shares of Common Stock acquirable upon conversion of such holder's
Series A Preferred Stock immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of Purchase Rights.
7. Definitions.
"Conversion Price" means $2.40, subject to adjustment as provided in
subparagraph 4(i) of this paragraph H.
"Liquidation Value" of any share of Series A Preferred Stock as of any
particular date will be equal to $5.00 plus any unpaid dividends on such share
of Series A Preferred Stock; and, in the event of any liquidation, dissolution
or winding up of the Corporation or the redemption of such share of Series A
Preferred Stock, unpaid dividends on such share of Series A Preferred Stock,
regardless of whether they have become payable, will be added to the Liquidation
Value of such share of Series A Preferred Stock, on the payment date in any
liquidation, dissolution or winding up, or on the Redemption Date, as the case
may be, accrued to the close of business on such payment date or Redemption
Date.
"Organic Change" means any capital reorganization, reclassification,
consolidation, merger or any sale of all or substantially all of the
Corporation's assets to another Person which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock.
"Redemption Date" as to any share of Series A Preferred Stock means the
date specified in the Notice of any Redemption provided that no such date will
be a Redemption Date unless the applicable Redemption Price is actually paid in
full on or before such date, and if not so paid in full, the Redemption Date
will be the date on which such Redemption Price is fully paid. If, however, the
full Redemption Price is not paid on the Redemption Date solely because a holder
has not surrendered his certificate(s) at the Corporation's principal office as
provided in subparagraph 3(b) of this paragraph H, then as to such holder the
date specified herein for the scheduled redemption shall be the Redemption Date.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization or a government or any
department or agency thereof.
"Redemption Price" means an amount equal to the Liquidation Value.
"Subsidiary" means any corporation of which shares of stock having at least
a majority of the ordinary voting power in electing the board of directors, is,
at the time as of which any determination is being made, owned by the
Corporation either directly or indirectly through one or more Subsidiaries.
8. Miscellaneous
(a) The Corporation will keep at its principal office a register for the
registration of Series A Preferred Stock. Upon the surrender of any certificate
representing Series A Preferred Stock at such place, the Corporation will, at
the request of the record holder of such certificate, execute and deliver (at
the Corporation's expense) a new certificate or certificates in exchange
therefor representing in the aggregate the number of shares represented by the
surrendered certificate. Each such new certificate will be registered in such
name and will represent such number of shares of Series A Preferred Stock as is
requested by the holder
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of the surrendered certificate and will be substantially identical in form to
the surrendered certificate, and dividends will accrue on the Series A Preferred
Stock represented by such new certificate from the date to which dividends have
been fully paid on such Series A Preferred Stock represented by the surrendered
certificate.
(b) Upon receipt of evidence and an agreement to indemnify reasonably
satisfactory to the Corporation (an affidavit of the registered holder, without
bond, will be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing one or more shares of Series A
Preferred Stock the Corporation will (at its expense) execute and deliver in
lieu of such certificate a new certificate representing the number of shares of
Series A Preferred Stock represented by such lost, stolen, destroyed or
mutilated certificate, and dividends will accrue on the Series A Preferred Stock
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
(c) Amendments, modifications or waivers of any of the terms hereof will be
binding and effective if the prior written consent of holders of at least 75% of
the Series A Preferred Stock outstanding at the time such action is taken is
obtained; provided that no such action will change (i) the rate of or the manner
in which dividends on the Series A Preferred Stock accrue or the times at which
such dividends become payable or the amount payable on redemption of the Series
A Preferred Stock, unless the prior written consent of the holders of at least
90% of the Series A Preferred Stock then outstanding is obtained, (ii) except as
set forth in subparagraph 4(i) of this paragraph 8, the Conversion Price of the
Series A Preferred Stock or the number of shares or class of stock into which
the Series A Preferred Stock is convertible, unless the prior written consent of
the holders of at least 90% of the Series A Preferred Stock then outstanding is
obtained or (iii) the percentage required to approve any change described in
clauses (i) and (ii) above, unless the prior written consent of the holders of
at least 90% of the Series A Preferred Stock then outstanding is obtained; and
provided further that no such change in the terms hereof may be accomplished by
merger or consolidation of the Corporation with another corporation unless the
Corporation has obtained the prior written consent of the holders of the
applicable percentage of the Series A Preferred Stock.
(d) All notices referred to herein, except as otherwise expressly provided,
will be hand delivered or mailed by registered or certified mail, return receipt
requested, postage prepaid, and will be deemed to have been given when so hand
delivered or mailed.
(e) The Board of Directors shall not have any authority to increase the
number of authorized shares of Series A Preferred Stock.
(f) Except as expressly authorized in this paragraph H, the shares of
Series A Preferred Stock, and the holders thereof, shall be subject to the
provisions of paragraphs C, D, E, F, and G of this Article 4.
5. The name and mailing address of the incorporator is:
Timothy K. Skipworth
Gardere & Wynne, L.L.P.
Suite 3000
1601 Elm Street
Dallas, Texas 75201.
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6. The number of directors of the Corporation shall be fixed in the manner
provided in the Bylaws of the Corporation, and until changed in the manner
provided in the Bylaws shall be five (5). The names and mailing addresses of
the persons who are to serve as directors until the first annual meeting of
shareholders or until their successors are elected and qualified are as
follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---------------------------------- ---------------------------------
<S> <C>
George K. Broady.................. 1220 Champion Circle, Suite 100
Carrollton, Texas 75006
William C. Lee.................... 1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Charles C. Neal................... 1220 Champion Circle, Suite 100
Carrollton, Texas 75006
James D. Pritchett................ 1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Robert F. Sexton.................. 1220 Champion Circle, Suite 100
Carrollton, Texas 75006
</TABLE>
7. Indemnification
A. Actions Other Than by or in the Right of the Corporation
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the Corporation
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise (all of such persons being hereafter referred to in this
Article as a "Corporate Functionary"), against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation or, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
B. Actions by or in the Right of the Corporation.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Corporate Functionary against expenses
(including attorneys' fees) judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation, unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
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C. Determination of Right to Indemnification.
Any indemnification under paragraphs A or B of this Article 7 (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the Corporate
Functionary is proper in the circumstances because he has met the applicable
standard of conduct set forth in paragraphs A or B of this Article 7. Such
determination shall be made (i) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(ii) if there are no such directors, or if such directors so direct, by
independent legal counsel in a written opinion or (iii) by the shareholders.
D. Right to Indemnification.
Notwithstanding the other provisions of this Article 7, to the extent that
a Corporate Functionary has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in paragraphs A or B of
this Article 7 (including the dismissal of a proceeding without prejudice or the
settlement of a proceeding without admission of liability), or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
E. Prepaid Expenses.
Expenses incurred by a Corporate Functionary in defending a civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding, upon receipt of an undertaking by or on behalf of the Corporate
Functionary to repay such amount if it shall ultimately be determined he is not
entitled to be indemnified by the Corporation as authorized in this Article 7.
F. Right to Indemnification upon Application; Procedure upon Application.
Any indemnification of a Corporate Functionary under paragraphs B, C or D,
or any advance of expenses under paragraph E, of this Article 7 shall be made
promptly upon, and in any event within 60 days after, the written request of the
Corporate Functionary, unless with respect to applications under paragraphs B,
C, or D of this Article 7, a determination is reasonably and promptly made by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, that such Corporate Functionary
acted in a manner set forth in such paragraphs as to justify the Corporation in
not indemnifying or making an advance of expenses to the Corporate Functionary.
If there are no such directors, the Board of Directors shall promptly direct
that independent legal counsel shall decide whether the Corporate Functionary
acted in a manner set forth in such paragraphs as to justify the Corporation's
not indemnifying or making an advance of expenses to the Corporate Functionary.
The right to indemnification or advance of expenses granted by this Article 7
shall be enforceable by the Corporate Functionary in any court of competent
jurisdiction if the Board of Directors or independent legal counsel denies his
claim, in whole or in part, or if no disposition of such claim is made within 60
days. The expenses of the Corporate Functionary incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation.
G. Other Rights and Remedies.
The indemnification and advancement of expenses provided by or granted
pursuant to this Article 7 shall not be deemed exclusive of any other rights to
which any person seeking indemnification and/or advancement of expenses may be
entitled under any other provision of this Certificate of Incorporation, or any
agreement, vote of shareholders or disinterested directors, or otherwise, both
as to action in his official capacity and as to action in another capacity while
holding such office, and shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a Corporate Functionary
and shall inure to the benefit of the heirs, executors and administrators of
such a person. Any repeal or modification of this Certificate of Incorporation
or relevant provisions of the General Corporation Law of Delaware and other
applicable law, if
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any, shall not affect any then existing rights of a Corporate Functionary to
indemnification or advancement of expenses.
H. Insurance.
Upon resolution passed by the Board of Directors, the Corporation may
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article 7 or the General Corporation Law of Delaware.
I. Mergers.
For purposes of this Article 7, references to "the Corporation" shall
include, in addition to the resulting or surviving corporation, constituent
corporations (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article 7 with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
J. Savings Provision.
If this Article 7 or any portion hereof shall be invalidated on any ground
by a court of competent jurisdiction, the Corporation shall nevertheless
indemnify each Corporate Functionary as to expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
including a grand jury proceeding or action or suit brought by or in the right
of the Corporation, to the full extent permitted by any applicable portion of
this Article 7 that shall not have been invalidated.
8. The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner
prescribed by statute, and all rights conferred upon shareholders herein are
granted subject to this reservation.
9. A director of the Corporation shall not, to the fullest extent permitted by
the General Corporation Law of Delaware as the same exists or may hereafter
be amended, be liable to the Corporation or its shareholders for monetary
damages for breach of his or her fiduciary duty to the Corporation or its
shareholders.
10. No contract or other transaction between the Corporation and one or more of
its directors or any other corporation, firm, association or entity in which
one or more of its directors are directors or officers or are financially
interested shall be either void or voidable solely because of such
relationship or interest or solely because such directors are present at the
meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction or solely because their
votes are counted for such purpose if:
(a) The fact of such relationship or interest is disclosed or known to
the Board of Directors or committee which authorizes, approves or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or ratify
such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to the
Corporation.
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Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or a committee thereof
which authorizes, approves or ratifies such contract or transaction.
The undersigned, being the incorporator named above, for the purpose of
forming a corporation pursuant to the General Corporation Law of Delaware, does
make this certificate, hereby declaring and certifying that this is his act and
deed and the facts herein stated are true, and accordingly has hereunto set his
hand this day of , 19 .
Timothy K. Skipworth
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<PAGE> 205
ANNEX I
BY-LAWS
OF
ULTRAK, INC.
(A DELAWARE CORPORATION)
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<PAGE> 206
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
OFFICES
Section 1. Registered Office...........................................................
Section 2. Other Offices...............................................................
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Time and Place of Meetings..................................................
Section 2. Annual Meetings.............................................................
Section 3. Notice of Annual Meetings...................................................
Section 4. Special Meetings............................................................
Section 5. Notice of Special Meetings..................................................
Section 6. Quorum......................................................................
Section 7. Organization................................................................
Section 8. Voting......................................................................
Section 9. List of Shareholders........................................................
Section 10. Inspectors of Votes.........................................................
Section 11. Actions Without a Meeting...................................................
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers......................................................................
Section 2. Number, Qualification, and Term of Office...................................
Section 3. Resignations................................................................
Section 4. Removal of Directors........................................................
Section 5. Vacancies...................................................................
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings...........................................................
Section 7. Annual Meetings.............................................................
Section 8. Regular Meetings............................................................
Section 9. Special Meetings; Notice....................................................
Section 10. Quorum and Manner of Acting.................................................
Section 11. Remuneration................................................................
COMMITTEES OF DIRECTORS
Section 12. Executive Committee; How Constituted and Powers.............................
Section 13. Organization................................................................
Section 14. Meetings....................................................................
Section 15. Quorum and Manner of Acting.................................................
Section 16. Other Committees............................................................
Section 17. Alternate Members of Committees.............................................
Section 18. Minutes of Committees.......................................................
GENERAL
Section 19. Actions Without a Meeting...................................................
Section 20. Presence at Meetings by Means of Communications Equipment...................
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ARTICLE IV
NOTICES
Section 1. Type of Notice..............................................................
Section 2. Waiver of Notice............................................................
Section 3. When Notice Unnecessary.....................................................
ARTICLE V
OFFICERS
Section 1. General.....................................................................
Section 2. Election or Appointment.....................................................
Section 3. Salaries of Elected Officers................................................
Section 4. Term........................................................................
Section 5. Chairman of the Board.......................................................
Section 6. President...................................................................
Section 7. Vice Presidents.............................................................
Section 8. Assistant Vice Presidents...................................................
Section 9. Secretary...................................................................
Section 10. Assistant Secretaries.......................................................
Section 11. Treasurer...................................................................
Section 12. Assistant Treasurers........................................................
Section 13. Controller..................................................................
Section 14. Assistant Controllers.......................................................
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation....................
Section 2. Actions by or in the Right of the Corporation...............................
Section 3. Determination of Right to Indemnification...................................
Section 4. Right to Indemnification....................................................
Section 5. Prepaid Expenses............................................................
Section 6. Right to Indemnification upon Application; Procedure upon Application.......
Section 7. Other Rights and Remedies...................................................
Section 8. Insurance...................................................................
Section 9. Mergers.....................................................................
Section 10. Savings Provision...........................................................
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate........................................................
Section 2. Facsimile Signatures........................................................
Section 3. New Certificates............................................................
Section 4. Transfers...................................................................
Section 5. Record Date.................................................................
Section 6. Registered Shareholders.....................................................
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ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends...................................................................
Section 2. Reserves....................................................................
Section 3. Annual Statement............................................................
Section 4. Checks......................................................................
Section 5. Fiscal Year.................................................................
Section 6. Corporate Seal..............................................................
ARTICLE IX
Amendments ..............................................................................
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ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the Corporation
shall be in the City of Wilmington, County of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices at such
other place or places, both within and without the State of Delaware, as the
Board of Directors may from time to time determine or the business of the
Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Time and Place of Meetings. All meetings of the shareholders for
the election of directors shall be held at such time and place, either within or
without the State of Delaware, as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. Meetings of
shareholders for any other purpose may be held at such time and place, within or
without the State of Delaware, as shall be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of shareholders shall be held
on such date and at such time as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting, at which meeting the
shareholders shall elect by a plurality vote a Board of Directors and transact
such other business as may properly be brought before the meeting.
Section 3. Notice of Annual Meetings. Written notice of the annual meeting,
stating the place, date, and hour of the meeting, shall be given to each
shareholder of record entitled to vote at such meeting not less than 10 or more
than 50 days before the date of the meeting.
Section 4. Special Meetings. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called at any time by order of the Board of
Directors and shall be called by the President, the Board of Directors or at the
request in writing of the holders of not less than ten percent (10%) of the
voting power represented by all the shares issued, outstanding and entitled to
be voted at the proposed special meeting, unless the Certificate of
Incorporation provides for a different percentage, in which event such provision
of the Certificate of Incorporation shall govern. Such request shall state the
purpose or purposes of the proposed special meeting. Business transacted at any
special meeting of shareholders shall be limited to the purposes stated in the
notice.
Section 5. Notice of Special Meetings. Written notice of a special meeting,
stating the place, date, and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given to each shareholder of record
entitled to vote at such meeting not less than 10 or more than 50 days before
the date of the meeting, except that if the authorized shares are to be
increased, at least 30 days notice shall be given.
Section 6. Quorum. Except as otherwise provided by statute or the
Certificate of Incorporation, the holders of stock having a majority of the
voting power of the stock entitled to be voted thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business
at all meetings of the shareholders. If, however, such quorum shall not be
present or represented at any meeting of the shareholders, the shareholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time without notice (other than
announcement at the meeting at which the adjournment is taken of the time and
place of the adjourned meeting) until a quorum shall be present or represented.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, notice of
the adjourned meeting shall be given to each shareholder of record entitled to
vote at the meeting.
Section 7. Organization. At each meeting of the shareholders, the Chairman
of the Board or the President, determined as provided in Article V of these
By-Laws, or if those officers shall be absent therefrom,
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another officer of the Corporation chosen as chairman present in person or by
proxy and entitled to vote thereat, or if all the officers of the Corporation
shall be absent therefrom, a shareholder holding of record shares of stock of
the Corporation so chosen, shall act as chairman of the meeting and preside
thereat. The Secretary, or if he shall be absent from such meeting or shall be
required pursuant to the provisions of this Section 7 to act as chairman of such
meeting, the person (who shall be an Assistant Secretary, if an Assistant
Secretary shall be present thereat) whom the chairman of such meeting shall
appoint, shall act as secretary of such meeting and keep the minutes thereof.
Section 8. Voting. Except as otherwise provided in the Certificate of
Incorporation, each shareholder shall, at each meeting of the shareholders, be
entitled to one vote in person or by proxy for each share of stock of the
Corporation held by him and registered in his name on the books of the
Corporation on the date fixed pursuant to the provisions of Section 5 of Article
VII of these By-Laws as the record date for the determination of shareholders
who shall be entitled to notice of and to vote at such meeting. Shares of its
own stock belonging to the Corporation or to another corporation, if a majority
of the shares entitled to vote in the election of directors of such other
corporation is held directly or indirectly by the Corporation, shall not be
entitled to vote. Any vote by stock of the Corporation may be given at any
meeting of the shareholders by the shareholder entitled thereto, in person or by
his proxy appointed by an instrument in writing subscribed by such shareholder
or by his attorney thereunto duly authorized and delivered to the Secretary of
the Corporation or to the secretary of the meeting; provided, however, that no
proxy shall be voted or acted upon after three years from its date, unless said
proxy shall provide for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and unless otherwise made
irrevocable by law. At all meetings of the shareholders all matters, except
where other provision is made by law, the Certificate of Incorporation, or these
By-Laws, shall be decided by the vote of a majority of the votes cast by the
shareholders present in person or by proxy and entitled to vote thereat, a
quorum being present. Unless demanded by a shareholder of the Corporation
present in person or by proxy at any meeting of the shareholders and entitled to
vote thereat, or so directed by the chairman of the meeting, the vote thereat on
any question other than the election or removal of directors need not be by
written ballot. Upon a demand of any such shareholder for a vote by written
ballot on any question or at the direction of such chairman that a vote by
written ballot be taken on any question, such vote shall be taken by written
ballot. On a vote by written ballot, each ballot shall be signed by the
shareholder voting, or by his proxy, if there be such proxy, and shall state the
number of shares voted.
Section 9. List of Shareholders. It shall be the duty of the Secretary or
other officer of the Corporation who shall have charge of its stock ledger,
either directly or through another officer of the Corporation designated by him
or through a transfer agent appointed by the Board of Directors, to prepare and
make, at least 10 days before every meeting of the shareholders, a complete list
of the shareholders entitled to vote thereat, arranged in alphabetical order,
and showing the address of each shareholder and the number of shares registered
in the name of each shareholder. Such list shall be open to the examination of
any shareholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days before said meeting, either at
a place within the city where said meeting is to be held, which place shall be
specified in the notice of said meeting, or, if not so specified, at the place
where said meeting is to be held. The list shall also be produced and kept at
the time and place of said meeting during the whole time thereof, and may be
inspected by any shareholder of record who shall be present thereat. The stock
ledger shall be the only evidence as to who are the shareholders entitled to
examine the stock ledger, such list or the books of the Corporation, or to vote
in person or by proxy at any meeting of shareholders.
Section 10. Inspectors of Votes. At each meeting of the shareholders, the
chairman of such meeting may appoint two Inspectors of Votes to act thereat,
unless the Board of Directors shall have theretofore made such appointments.
Each Inspector of Votes so appointed shall first subscribe an oath or
affirmation faithfully to execute the duties of an Inspector of Votes at such
meeting with strict impartiality and according to the best of his ability. Such
Inspectors of Votes, if any, shall take charge of the ballots, if any, at such
meeting and, after the balloting thereat on any question, shall count the
ballots cast thereon and shall make a report in writing to the secretary of such
meeting of the results thereof. An Inspector of Votes need not be a shareholder
of the Corporation, and any officer of the Corporation may be an Inspector of
Votes on any question other than a
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vote for or against his election to any position with the Corporation or on any
other question in which he may be directly interested.
Section 11. Actions Without a Meeting. Any action required to be taken at
any annual or special meeting of shareholders of the Corporation, or any action
which may be taken at any annual or special meeting of shareholders, may be
taken without a meeting, without prior notice, and without a vote if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereat were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those shareholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors, which shall have and may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute, the Certificate of Incorporation, or these By-Laws directed or required
to be exercised or done by the shareholders.
Section 2. Number, Qualification, and Term of Office. The number of
directors which shall constitute the whole Board of Directors shall not be less
than two (2). Within the limits above specified, the number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors. Directors need not be shareholders. The directors
shall be elected at the annual meeting of the shareholders, except as provided
in Sections 4 and 5 of this Article III, and each director elected shall hold
office until the annual meeting next after his election and until his successor
is duly elected and qualified, or until his death or retirement or until he
resigns or is removed in the manner hereinafter provided. Directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote on the election of directors at any
annual or special meeting of shareholders. Such election shall be by written
ballot.
Section 3. Resignations. Any director may resign at any time by giving
written notice of his resignation to the Corporation. Any such resignation shall
take effect at the time specified therein, or if the time when it shall become
effective shall not be specified therein, then it shall take effect immediately
upon its receipt by the Secretary. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
Section 4. Removal of Directors. Any director may be removed, either with
or without cause, at any time, by the affirmative vote by written ballot of a
majority in voting interest of the shareholders of record of the Corporation
entitled to vote, given at an annual meeting or at a special meeting of the
shareholders called for that purpose. The vacancy in the Board of Directors
caused by any such removal shall be filled by the shareholders at such meeting
or, if not so filled, by the Board of Directors as provided in Section 5 of this
Article III.
Section 5. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may be filled by a
majority of the directors then in office though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the
annual meeting next after their election and until their successors are elected
and qualified, unless sooner displaced. If there are no directors in office,
then an election of directors may be held in the manner provided by statute.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware.
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Section 7. Annual Meetings. The first meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
shareholders, and no notice of such meeting to the newly elected directors shall
be necessary in order legally to constitute the meeting, provided a quorum shall
be present. In the event such meeting is not held immediately following the
annual meeting of shareholders, the meeting may be held at such time and place
as shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such time and at such place as shall from time to time
be determined by the Board of Directors.
Section 9. Special Meetings; Notice. Special meetings of the Board of
Directors may be called by the Chairman of the Board, the President, or the
Secretary on 48 hours' notice to each director, either personally or by
telephone or by mail, telegraph, telex, cable, wireless, or other form of
recorded communication; special meetings shall be called by the President or on
the written request of any director. Notice of any such meeting need not be
given to any director, however, if waived by him in writing or by telegraph,
telex, cable, wireless, or other form of recorded communication, or if he shall
be present at such meeting.
Section 10. Quorum and Manner of Acting. At all meetings of the Board of
Directors, a majority of the directors at the time in office (but not less than
one-third of the whole Board of Directors) shall constitute a quorum for the
transaction of business, and the act of a majority of the directors present at
any meeting at which a quorum is present shall be the act of the Board of
Directors, except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation. If a quorum shall not be present at any meeting of
the Board of Directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present. A director of the Corporation who is present at a
meeting of the Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the Secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation after such adjournment of
the meeting. Such right to dissent shall not apply to a director who voted in
favor of such action.
Section 11. Remuneration. The Board of Directors may at any time and from
time to time by resolution provide that a specified sum shall be paid to any
director of the Corporation, either as his annual remuneration as such director
or member of any committee of the Board of Directors or as remuneration for his
attendance at each meeting of the Board of Directors or any such committee.
Further, the Corporation shall reimburse each director for any expenses paid by
him on account of his attendance at any meeting. Nothing in this Section 11
shall be construed to preclude any director from serving the Corporation in any
other capacity and receiving remuneration therefor.
COMMITTEES OF DIRECTORS
Section 12. Executive Committee; How Constituted and Powers. The Board of
Directors may in its discretion, by resolution passed by a majority of the whole
Board of Directors, designate an Executive Committee consisting of one or more
of the directors of the Corporation. Subject to the provisions of Section 141 of
the General Corporation Law of the State of Delaware, the Certificate of
Incorporation, and these By-Laws, the Executive Committee shall have and may
exercise, when the Board of Directors is not in session, all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have the power to authorize the seal of
the Corporation to be affixed to all papers which may require it; but the
Executive Committee shall not have the power to fill vacancies in the Board of
Directors, the Executive Committee, or any other committee of directors or to
elect or approve officers of the Corporation. The Executive Committee shall have
the power and authority to authorize the issuance of common stock and grant and
authorize options and other rights with respect to such issuance. The Board of
Directors shall have the power at any time, by resolution passed by a majority
of the whole Board of Directors, to change the membership of the Executive
Committee, to fill all vacancies in it, or to dissolve it, either with or
without cause.
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Section 13. Organization. The Chairman of the Executive Committee, to be
selected by the Board of Directors, shall act as chairman at all meetings of the
Executive Committee and the Secretary shall act as secretary thereof. In case of
the absence from any meeting of the Executive Committee of the Chairman of the
Executive Committee or the Secretary, the Executive Committee may appoint a
chairman or secretary, as the case may be, of the meeting.
Section 14. Meetings. Regular meetings of the Executive Committee, of which
no notice shall be necessary, may be held on such days and at such places,
within or without the State of Delaware, as shall be fixed by resolution adopted
by a majority of the Executive Committee and communicated in writing to all its
members. Special meetings of the Executive Committee shall be held whenever
called by the Chairman of the Executive Committee or by any member of the
Executive Committee then in office. Notice of each special meeting of the
Executive Committee shall be given by mail, telegraph, telex, cable, wireless,
or other form of recorded communication or be delivered personally or by
telephone to each member of the Executive Committee not later than the day
before the day on which such meeting is to be held. Notice of any such meeting
need not be given to any member of the Executive Committee, however, if waived
by him in writing or by telegraph, telex, cable, wireless, or other form of
recorded communication, or if he shall be present at such meeting; and any
meeting of the Executive Committee shall be a legal meeting without any notice
thereof having been given, if all the members of the Executive Committee shall
be present thereat. Subject to the provisions of this Article III, the Executive
Committee, by resolution adopted by a majority of the whole Executive Committee,
shall fix its own rules of procedure.
Section 15. Quorum and Manner of Acting. A majority of the Executive
Committee shall constitute a quorum for the transaction of business, and the act
of a majority of those present at a meeting thereof at which a quorum is present
shall be the act of the Executive Committee.
Section 16. Other Committees. The Board of Directors may, by resolution or
resolutions passed by a majority of the whole Board of Directors, designate one
or more other committees consisting of one or more directors of the Corporation,
which, to the extent provided in said resolution or resolutions, shall have and
may exercise, subject to the provisions of Section 141 of the Delaware General
Corporation Law, and the Certificate of Incorporation and these By-Laws, the
powers and authority of the Board of Directors in the management of the business
and affairs of the Corporation, and shall have the power to authorize the seal
of the Corporation to be affixed to all papers which may require it; but no such
committee shall have the power to fill vacancies in the Board of Directors, the
Executive Committee, or any other committee or in their respective membership,
to appoint or remove officers of the Corporation, or to authorize the issuance
of shares of the capital stock of the Corporation, except that such a committee
may, to the extent provided in said resolutions, grant and authorize options and
other rights with respect to the common stock of the Corporation pursuant to and
in accordance with any plan approved by the Board of Directors. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution adopted by the Board of Directors. A majority of all the
members of any such committee may determine its action and fix the time and
place of its meetings and specify what notice thereof, if any, shall be given,
unless the Board of Directors shall otherwise provide. The Board of Directors
shall have power to change the members of any such committee at any time to fill
vacancies, and to discharge any such committee, either with or without cause, at
any time.
Section 17. Alternate Members of Committees. The Board of Directors may
designate one or more directors as alternate members of the Executive Committee
or any other committee, who may replace any absent or disqualified member at any
meeting of the committee, or if none be so appointed, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 18. Minutes of Committees. Each committee shall keep regular
minutes of its meetings and proceedings and report the same to the Board of
Directors at the next meeting thereof.
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GENERAL
Section 19. Actions Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
the committee.
Section 20. Presence at Meetings by Means of Communications
Equipment. Members of the Board of Directors, or of any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors
or such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting conducted pursuant to this Section 20
shall constitute presence in person at such meeting.
ARTICLE IV
NOTICES
Section 1. Type of Notice. Whenever, under the provisions of any applicable
statute, the Certificate of Incorporation, or these By-Laws, notice is required
to be given to any director or shareholder, it shall not be construed to mean
personal notice, but such notice may be given in writing, in person or by mail,
addressed to such director or shareholder, at his address as it appears on the
records of the Corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given in any manner permitted by
Article III hereof and shall be deemed to be given at the time when first
transmitted by the method of communication so permitted.
Section 2. Waiver of Notice. Whenever any notice is required to be given
under the provisions of any applicable statute, the Certificate of
Incorporation, or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto, and transmission of a waiver
of notice by a director or shareholder by mail, telegraph, telex, cable,
wireless, or other form of recorded communication may constitute such a waiver.
Section 3. When Notice Unnecessary. Whenever, under the provisions of the
Delaware General Corporation Law, the Certificate of Incorporation or these
By-Laws, any notice is required to be given to any shareholder, such notice need
not be given to the shareholder if:
(a) notice of two consecutive annual meetings and all notices of
meetings held during the period between those annual meetings, if any, or
(b) all (but in no event less than two) payments (if sent by first
class mail) of distributions or interest on securities during a 12-month
period, have been mailed to that person, addressed at his address as shown
on the records of the Corporation, and have been returned undeliverable.
Any action or meeting taken or held without notice to such a person shall
have the same force and effect as if the notice had been duly given. If
such a person delivers to the Corporation a written notice setting forth
his then current address, the requirement that notice be given to that
person shall be reinstated.
ARTICLE V
OFFICERS
Section 1. General. The elected officers of the Corporation shall be a
President, a Secretary and a Treasurer. The Board of Directors may also elect or
appoint a Chairman of the Board, one or more Vice Presidents, one or more
Assistant Vice Presidents, one or more Assistant Secretaries, a Treasurer, one
or more Assistant Treasurers, a Controller, one or more Assistant Controllers,
and such other officers and agents as may be deemed necessary or advisable from
time to time, all of whom shall also be officers. Two offices may be held by the
same person.
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Section 2. Election or Appointment. The Board of Directors at its annual
meeting shall elect or appoint, as the case may be, the officers to fill the
positions designated in or pursuant to Section 1 of this Article V. Officers of
the Corporation may also be elected or appointed, as the case may be, at any
other time.
Section 3. Salaries of Elected Officers. The salaries of all elected
officers of the Corporation shall be fixed by the Board of Directors.
Section 4. Term. Each officer of the Corporation shall hold his office
until his successor is duly elected or appointed and qualified or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. Any officer elected or appointed by the Board of
Directors or the Executive Committee may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal, or
otherwise may be filled by the Board of Directors or the appropriate committee
thereof.
Section 5. Chairman of the Board. The Chairman of the Board, if one be
elected, shall be the chief executive officer of the Corporation and shall
preside when present at all meetings of the Board of Directors and, with the
approval of the President, may preside at meetings of the shareholders. He shall
advise and counsel the President and other officers of the Corporation, and
shall exercise such powers and perform such duties as shall be assigned to or
required of him from time to time by the Board of Directors.
Section 6. President. In the absence of a Chairman of the Board, the
President shall be the ranking and chief executive officer of the Corporation
and shall have the duties and responsibilities, and the authority and power, of
the Chairman of the Board. The President shall be the chief operating officer of
the Corporation and, subject to the provisions of these By-Laws, shall have
general supervision of the affairs of the Corporation and shall have general and
active control of all its business. He shall preside, when present, at all
meetings of shareholders, except when the Chairman of the Board presides with
the approval of the President and as may otherwise be provided by statute, and,
in the absence of any other person designated thereto by these By-Laws, at all
meetings of the Board of Directors. He shall see that all orders and resolutions
of the Board of Directors and the shareholders are carried into effect. He shall
have general authority to execute bonds, deeds, and contracts in the name of the
Corporation and affix the corporate seal thereto; to sign stock certificates; to
cause the employment or appointment of such employees and agents of the
Corporation as the proper conduct of operations may require, and to fix their
compensation, subject to the provisions of these By-Laws; to remove or suspend
any employee or agent who shall have been employed or appointed under his
authority or under authority of an officer subordinate to him; to suspend for
cause, pending final action by the authority which shall have elected or
appointed him, any officer subordinate to the President; and, in general, to
exercise all the powers and authority usually appertaining to the chief
operating officer of a corporation, except as otherwise provided in these
By-Laws.
Section 7. Vice Presidents. In the absence of the President or in the event
of his inability or refusal to act, the Vice President (or in the event there be
more than one Vice President, the Vice Presidents in the order designated, or in
the absence of any designation, then in the order of their election) shall
perform the duties of the President and, when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Directors or the President may from time to time prescribe.
Section 8. Assistant Vice Presidents. In the absence of a Vice President or
in the event of his inability or refusal to act, the Assistant Vice President
(or in the event there shall be more than one, the Assistant Vice Presidents in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
and exercise the powers of that Vice President, and shall perform such other
duties and have such other powers as the Board of Directors, the President, or
the Vice President under whose supervision he is appointed may from time to time
prescribe.
Section 9. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the shareholders and record all the proceedings
of the meetings of the Corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the Executive Committee
or other standing committees when required. He shall give, or cause to be given,
notice of all meetings of the
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shareholders and special meetings of the Board of Directors, and shall perform
such other duties as may be prescribed by the Board of Directors or the
President, under whose supervision he shall be. He shall have custody of the
corporate seal of the Corporation, and he, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it, and when so affixed,
it may be attested by his signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by his
signature. The Secretary shall keep and account for all books, documents,
papers, and records of the Corporation, except those for which some other
officer or agent is properly accountable. He shall have authority to sign stock
certificates and shall generally perform all the duties usually appertaining to
the office of the secretary of a corporation.
Section 10. Assistant Secretaries. In the absence of the Secretary or in
the event of his inability or refusal to act, the Assistant Secretary (or, if
there shall be more than one, the Assistant Secretaries in the order designated
by the Board of Directors, or in the absence of any designation, then in the
order of their appointment) shall perform the duties and exercise the powers of
the Secretary and shall perform such other duties and have such other powers as
the Board of Directors, the President, or the Secretary may from time to time
prescribe.
Section 11. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond (which shall be renewed
every six years) in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement, or removal from office, of all books, papers,
vouchers, money, and other property of whatever kind in his possession or under
his control belonging to the Corporation. The Treasurer shall be under the
supervision of the Vice President in charge of finance, if one is so designated,
and he shall perform such other duties as may be prescribed by the Board of
Directors, the President, or any such Vice President in charge of finance.
Section 12. Assistant Treasurers. The Assistant Treasurer or Assistant
Treasurers shall assist the Treasurer, and in the absence of the Treasurer or in
the event of his inability or refusal to act, the Assistant Treasurer (or in the
event there shall be more than one, the Assistant Treasurers in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their appointment) shall perform the duties and exercise the
powers of the Treasurer and shall perform such other duties and have such other
powers as the Board of Directors, the President, or the Treasurer may from time
to time prescribe.
Section 13. Controller. The Controller, if one is appointed, shall have
supervision of the accounting practices of the Corporation and shall prescribe
the duties and powers of any other accounting personnel of the Corporation. He
shall cause to be maintained an adequate system of financial control through a
program of budgets and interpretive reports. He shall initiate and enforce
measures and procedures whereby the business of the Corporation shall be
conducted with the maximum efficiency and economy. If required, he shall prepare
a monthly report covering the operating results of the Corporation. The
Controller shall be under the supervision of the Vice President in charge of
finance, if one is so designated, and he shall perform such other duties as may
be prescribed by the Board of Directors, the President, or any such Vice
President in charge of finance.
Section 14. Assistant Controllers. The Assistant Controller or Assistant
Controllers shall assist the Controller, and in the absence of the Controller or
in the event of his inability or refusal to act, the Assistant Controller (or,
if there shall be more than one, the Assistant Controllers in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their appointment) shall perform the
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duties and exercise the powers of the Controller and perform such other duties
and have such other powers as the Board of Directors, the President, or the
Controller may from time to time prescribe.
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation), by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise (all of such persons being hereafter referred to in this Article as a
"Corporate Functionary"), against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a Corporate Functionary against expenses (including attorneys'
fees) judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit, if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation,
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 3. Determination of Right to Indemnification. Any indemnification
under Sections 1 or 2 of this Article VI (unless ordered by a court) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of a Corporate Functionary is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 1 or 2 of this Article VI. Such determination shall be made (i) by a
majority vote of the directors who are not parties to such action, suit, or
proceeding, even though less than a quorum, or (ii) if there are no such
directors, or if such directors so direct, by independent legal counsel in a
written opinion or (iii) by the shareholders.
Section 4. Right to Indemnification. Notwithstanding the other provisions
of this Article VI, to the extent that a Corporate Functionary has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 or 2 of this Article VI (including the
dismissal of a proceeding without prejudice or the settlement of a proceeding
without admission of liability), or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 5. Prepaid Expenses. Expenses incurred by a Corporate Functionary
in defending a civil, criminal, administrative or investigative action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding, upon receipt of an undertaking by or on
behalf of the Corporate Functionary to repay such amount if it shall ultimately
be determined he is not entitled to be indemnified by the Corporation as
authorized in this Article VI.
Section 6. Right to Indemnification upon Application; Procedure upon
Application. Any indemnification of a Corporate Functionary under Sections 2, 3
or 4, or any advance of expenses under Section 5, of this Article VI shall be
made promptly upon, and in any event within 60 days after, the written request
of the
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Corporate Functionary, unless with respect to applications under Sections 2, 3
or 5 of this Article VI, a determination is reasonably and promptly made by the
Board of Directors by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, that such
Corporate Functionary acted in a manner set forth in such Sections as to justify
the Corporation in not indemnifying or making an advance of expenses to the
Corporate Functionary. If there are no such directors, the Board of Directors
shall promptly direct that independent legal counsel shall decide whether the
Corporate Functionary acted in a manner set forth in such Sections as to justify
the Corporation's not indemnifying or making an advance of expenses to the
Corporate Functionary. The right to indemnification or advance of expenses
granted by this Article VI shall be enforceable by the Corporate Functionary in
any court of competent jurisdiction if the Board of Directors or independent
legal counsel denies his claim, in whole or in part, or if no disposition of
such claim is made within 60 days. The expenses of the Corporate Functionary
incurred in connection with successfully establishing his right to
indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
Section 7. Other Rights and Remedies. The indemnification and advancement
of expenses provided by or granted pursuant to this Article VI shall not be
deemed exclusive of any other rights to which any person seeking indemnification
and/or advancement of expenses may be entitled under any other provision of
these By-Laws, or any agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a Corporate Functionary and shall inure to the benefit of the
heirs, executors, and administrators of such a person. Any repeal or
modification of these By-Laws or relevant provisions of the Delaware General
Corporation Law and other applicable law, if any, shall not affect any then
existing rights of a Corporate Functionary to indemnification or advancement of
expenses.
Section 8. Insurance. Upon resolution passed by the Board of Directors, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VI or the Delaware General Corporation Law.
Section 9. Mergers. For purposes of this Article VI, references to "the
Corporation" shall include, in addition to the resulting or surviving
corporation, constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise shall stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
Section 10. Savings Provision. If this Article VI or any portion hereof
shall be invalidated on any ground by a court of competent jurisdiction, the
Corporation shall nevertheless indemnify each Corporate Functionary as to
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit, proceeding or investigation,
whether civil, criminal or administrative, including a grand jury proceeding or
action or suit brought by or in the right of the Corporation, to the full extent
permitted by any applicable portion of this Article VI that shall not have been
invalidated.
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ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman of the Board, the President or a Vice President and
by the Secretary or an Assistant Secretary of the Corporation, certifying the
number of shares owned by him in the Corporation. If the Corporation shall be
authorized to issue more than one class of stock or more than one series of any
class, the powers, designations, preferences, and relative, participating,
optional, or other special rights of each class of stock or series thereof and
the qualifications, limitations, or restrictions of such preferences or rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock;
provided, that, except as otherwise provided in Section 202 of the Delaware
General Corporation Law, in lieu of the foregoing requirements, there may be set
forth on the face or back of the certificate which the Corporation shall issue
to represent such class or series of stock a statement that the Corporation will
furnish without charge to each shareholder who so requests the powers,
designations, preferences, and relative, participating, optional, or other
special rights of each class of stock or series thereof and the qualifications,
limitations, or restrictions of such preferences or rights.
Section 2. Facsimile Signatures. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
Section 3. New Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation and alleged to have been
lost, stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen, or destroyed
or the issuance of such new certificate.
Section 4. Transfers. Upon surrender to the Corporation or the transfer
agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation, or authority to
transfer, it shall be the duty of the Corporation, subject to any proper
restrictions on transfer, to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
Section 5. Record Date. The Board of Directors may fix in advance a date,
not preceding the date on which the resolution fixing the record date is
adopted, and
(i) not more than 50 days nor less than 10 days preceding the date of
any meeting of shareholders, as a record date for the determination of the
shareholders entitled to notice of, and to vote at, any such meeting and
any adjournment thereof,
(ii) not more than 10 days after the date on which the resolution
fixing the record date is adopted, as a record date in connection with
obtaining a consent of the shareholders in writing to corporate action
without a meeting, or
(iii) not more than 50 days before the date for payment of any
dividend or distribution, or the date for the allotment of rights, or the
date when any change, or conversion or exchange of capital stock shall go
into effect, or the date on which any other lawful action shall be taken,
as the record date for determining the shareholders entitled to receive
payment of any such dividend or distribution, or to receive any such
allotment of rights, or to exercise the rights in respect of any such
change, conversion or exchange of capital stock or other lawful action of
the corporation,
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and in such case such shareholders and only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to such notice of,
and to vote at, any such meeting and any adjournment thereof (provided, however,
that the Board of Directors may fix a new record date for an adjourned meeting),
or to give such consent, or to receive payment of such dividend or distribution,
or to receive such allotment of rights, or to exercise such rights, as the case
may be, notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid. If the Board of
Directors does not order the stock transfer books closed, or fix in advance a
record date, as above provided, then the record date for the determination of
shareholders entitled to notice of, or to vote at any meeting of shareholders,
or any adjournment thereof, or entitled to receive payment of any dividend, or
for the determination of shareholders for any proper purpose shall be 30 days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken.
Section 6. Registered Shareholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
provided by the laws of the State of Delaware.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the Corporation,
if any, subject to the provisions of the Certificate of Incorporation, may be
declared by the Board of Directors (but not any committee thereof) at any
regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation.
Section 2. Reserves. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors from time to time, in their absolute discretion, thinks
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
Section 3. Annual Statement. The Board of Directors shall present at each
annual meeting, and at any special meeting of the shareholders when called for
by vote of the shareholders, a full and clear statement of the business and
condition of the Corporation.
Section 4. Checks. All checks or demands for money and promissory notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time prescribe.
Section 5. Fiscal Year. The fiscal year of the Corporation shall be
determined by the Board of Directors.
Section 6. Corporate Seal. The corporate seal shall have inscribed thereon
the name of the Corporation, the year of its organization, and the word
"Delaware." The seal may be used by causing it or a facsimile thereof to be
impressed, affixed, reproduced, or otherwise.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended, or repealed or new By-Laws may be
adopted by the Board of Directors at any regular meeting of the Board of
Directors or at any special meeting of the Board of Directors if notice of such
alteration, amendment, repeal, or adoption of new By-Laws be contained in the
notice of such special meeting.
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CERTIFICATION
I, Tim D. Torno, Secretary of the Corporation, hereby certify that the
foregoing is a true, accurate and complete copy of the By-Laws of Ultrak, Inc.
adopted by its Board of Directors as of , 1995.
Tim D. Torno, Secretary
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ANNEX J
ARTICLE 113
DISSENTERS' RIGHTS
PART I
RIGHT OF DISSENT -- PAYMENT FOR SHARES
7-113-101 DEFINITIONS. -- For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in a
voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action, or the surviving or acquiring domestic or foreign
corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right at the
time and in the manner required by part 2 of this article.
(4) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action except to the extent that exclusion would
be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at the legal rate as
specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
7-113-102 RIGHT TO DISSENT. -- (1) A shareholder, whether or not entitled
to vote, is entitled to dissent and obtain payment of the fair value of his or
her shares in the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation, or
(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired.
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote
upon the consent of the corporation to the disposition pursuant to section
7-112-102(2).
(2) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in the event
of:
(a) An amendment to the articles of incorporation that materially and
adversely affects rights in respect of the shares because it:
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(I) Alters or abolishes a preferential right of the shares; or
(II) Creates, alters, or abolishes a right in respect of redemption
of the shares, including a provision respecting a sinking fund for their
redemption or repurchase; or
(b) An amendment to the articles of incorporation that affects rights
in respect of the shares because it:
(I) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or
(II) Reduces the number of shares owned by the shareholder to a
fraction of a share or to scrip if the fractional share or scrip so
created is to be acquired for cash or the scrip is to be voided under
section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action to the
extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS. -- (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the record shareholder's name only if the record shareholder
dissents with respect to all shares beneficially owned by any one person and
causes the corporation to receive written notice which states such dissent and
the name, address, and federal taxpayer identification number, if any, of each
person on whose behalf the record shareholder asserts dissenters' rights. The
rights of a record shareholder under this subsection (1) are determined as if
the shares as to which the record shareholder dissents and the other shares of
the record shareholder were registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the shares
held on the beneficial shareholder's behalf only if;
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
such beneficial shareholder must certify to the corporation that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such requirement
shall be stated in the dissenters' notice given pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS. -- (1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to a
vote at a shareholders' meeting, the notice of the meeting shall be given to all
shareholders, whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this article and the materials, if
any, that under articles 101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as provided by
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this subsection (1) to shareholders not entitled to vote shall not affect any
action taken at the shareholders' meeting for which the notice was to have been
given.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this subsection (2)
to shareholders not entitled to vote shall not affect any action taken pursuant
to section 7-107-104 for which the notice was to have been given.
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT. -- (1) If a proposed
corporate action creating dissenters' rights under section 7-113-102 is
submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, a shareholder who wishes to assert dissenters' rights shall
not execute a writing consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the shareholder's
shares under this article.
7-113-203 DISSENTERS' NOTICE. -- (1) If a proposed corporate action
creating dissenters' rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section shall
be given no later than ten days after the effective date of the corporate action
creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated
shares must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be
less than thirty days after the date the notice required by subsection (1)
of this section is given;
(f) State the requirement contemplated in section 7-113-103 (3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT. -- (1) A shareholder who is given a
dissenters' notice pursuant to section 7-113-203 and who wishes to assert
dissenters' rights shall, in accordance with the terms of the dissenters'
notice:
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<PAGE> 225
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-102(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to transfer
the shares, until the effective date of the proposed corporate action giving
rise to the shareholder's exercise of dissenters' rights and has only the right
to receive payment for the shares after the effective date of such corporate
action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the Shareholder's
share certificates as required by the date or dates set in the dissenters'
notice is not entitled to payment for the shares under this article.
7-113-205 UNCERTIFICATED SHARES. -- (1) Upon receipt of a demand for
payment under section 7-113-204 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT. -- (1) Except as provided in section 7-113-208, upon
the effective date of the corporate action creating dissenters' rights under
section 7-113-102 or upon receipt of a payment demand pursuant to section
7-113-204, whichever is later, the corporation shall pay each dissenter who
complied with section 7-113-204, at the address stated in the payment demand, or
if no such address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, the amount the corporation estimates to be the fair
value of the dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's balance sheet
as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the
corporation customarily provides such statements to shareholders, a
statement of changes in shareholders' equity for that year and a statement
of cash flow for that year, which balance sheet and statements shall have
been audited if the corporation customarily provides audited financial
statements to shareholders, as well as the latest available financial
statements, if any, for the interim or full-year period, which financial
statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION. -- (1) If the effective date of the
corporate action creating dissenters' rights under section 7-113-102 does not
occur within sixty days after the date set by the corporation by which the
corporation must receive the payment demand as provided in section 7-113-203,
the corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the date set by
the corporation by which the corporation must receive the payment
J-4
<PAGE> 226
demand as provided in section 7-113-203, then the corporation shall send a new
dissenters' notice, as provided in section 7-113-203, and the provisions of
sections 7-113-204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION. -- (1) The corporation may, in or
with the dissenters' notice given pursuant to section 7-113-203, state the date
of the first announcement to news media or to shareholders of the terms of the
proposed corporate action creating dissenters' rights under section 7-113-102
and state that the dissenter shall certify in writing, in or with the
dissenter's payment demand under section 7-113-204, whether or not the dissenter
(or the person on whose behalf dissenters' rights are asserted) acquired
beneficial ownership of the shares before that date. With respect to any
dissenter who does not so certify in writing, in or with the payment demand,
that the dissenter or the person on whose behalf the dissenter asserts
dissenters' rights acquired beneficial ownership of the shares before such date,
the corporation may, in lieu of making the payment provided in section
7-113-206, offer to make such payment if the dissenter agrees to accept it in
full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section 7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT OR
OFFER. -- (1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any payment
made under section 7-113-206, or reject the corporation's offer under section
7-113-208 and demand payment of the fair value of the shares and interest due,
if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of
the shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated shares as
required by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice required
by subsection (1) of this section within thirty days after the corporation
made or offered payment for the dissenter's shares.
PART 3
JUDICIAL APPRAISAL OF SHARES
7-113-301 COURT ACTION. -- (1) If a demand for payment under section
7-113-209 remains unresolved, the corporation may, within sixty days after
receiving the payment demand, commence a proceeding and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay to
each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state where the
corporation's principal office is located or, if it has no principal office in
this state, in the district court of the county in which its registered office
is located. If the corporation is a foreign corporation without a registered
office in this state, it shall commence the proceeding in the county in this
state where the registered office of the domestic corporation merged into, or
whose shares were acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding commenced
under subsection (2) of this section as in an action against their shares, and
all parties shall be served with a copy of the petition. Service on each
dissenter shall be by registered or certified mail, to the address stated in
such dissenter's payment demand, or if no such
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<PAGE> 227
address is stated in the payment demand, at the address shown on the
corporation's current record of shareholders for the record shareholder holding
the dissenter's shares, or as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend a
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to such order. The parties to
the proceeding are entitled to the same discovery rights as parties in other
civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount, if any,
by which the court finds the fair value of the dissenter's shares, plus
interest, exceeds the amount paid by the corporation, or for the fair value,
plus interest, of the dissenter's shares for which the corporation elected to
withhold payment under section 7-113-208.
7-113-302 COURT COSTS AND COUNSEL FEES. -- (1) The court in an appraisal
proceeding commenced under section 7-311-301 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation; except that the court may assess costs against all or some of the
dissenters, in amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in favor
of any other party, if the court finds that the party against whom the fees
and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to said counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefitted.
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<PAGE> 228
PROXY
The undersigned hereby (1) acknowledges receipt of the Notice of the Special
Meeting of Shareholders of Diamond Electronics, Inc. (herein sometimes called
the "Company") to be held on July 13, 1995 at 9102 North Meridian Street, Suite
500, Indianapolis, Indiana 46260, at 8:00 a.m., local time; and (2) appoints H.
Charles Koehler and William Muirhead, III, and each of them, with power of
substitution, as his proxies to vote upon and act with respect to all of the
shares of Common Stock of the Company standing in the name of the undersigned or
with respect to which the undersigned is entitled to vote and act, at the
Special Meeting and at any adjournment thereof, and the undersigned directs that
this proxy be voted as follows:
a. A proposal to approve and adopt that certain Agreement and Plan of
Reorganization, dated April 28, 1995, as amended, by and among the Company,
Ultrak, Inc., a Colorado corporation ("Ultrak"), Diamond Purchasing Corp., a
Texas corporation and wholly-owned subsidiary of Ultrak ("Ultrak Subsidiary"),
and the following shareholders of the Company: Richard M. Tompkins, John W.
Biddinger, Robert N. Davies, H. Charles Koehler, and William Muirhead, III,
pursuant to which (i) Ultrak Subsidiary would merge (the "Merger") with and into
the Company, (ii) the Company would become a wholly-owned subsidiary of Ultrak,
and (iii) each outstanding share of common stock, no par value, of the Company
would be converted into the right to receive shares of common stock, no par
value, of Ultrak (or cash for small amounts of stock) pursuant to the formula
described therein.
/ / FOR / / AGAINST / / ABSTAIN
b. In the discretion of the proxies, as to any other business that may
properly come before the Special Meeting or any adjournment thereof.
(continued and to be signed on the reverse side)
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE
MATTERS SPECIFICALLY REFERRED TO ABOVE
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such Common Stock and hereby ratifies and confirms
all that the proxies appointed herein, their substitutes, or any of them, may
lawfully do by virtue hereof.
THIS PROXY MAY BE SUBMITTED BY TELECOPY, TELEGRAM, OR CABLEGRAM TO THE
COMPANY. THE COMPANY'S TELECOPY NUMBER IS 317-848-8973.
A vote in favor of the Merger, in person or by proxy, or the submission of
an executed but unmarked proxy, will constitute a waiver of a shareholder's
dissenter's rights under Ohio law.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
Dated:
_______________ , 1995 ______________________________
______________________________
(Print Name and Title, if
applicable)
Please date this Proxy and sign
your name exactly as it appears
on your stock certificate. Where
there is more than one owner,
each should sign. When signing
as an attorney, administrator,
executor, guardian or trustee,
please add your title as such.
If executed by a corporation,
this Proxy should be signed by a
duly authorized officer.
Please date, sign, and mail this
Proxy in the enclosed envelope.
As noted above, you may also
submit your proxy by telecopy,
telegram, or cablegram.
<PAGE> 229
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS/PROXY STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 3-101.5 of the Colorado Corporation Code provides that any
director, officer, employee or agent of a Colorado corporation may be
indemnified against judgments, settlements, penalties, fines and reasonable
expenses actually incurred by him in connection with or in defending any
action, suit or proceeding in which he is a party by reason of his position.
With respect to any proceeding arising from actions taken in his official
capacity as a director or officer, he may be indemnified so long as it shall be
determined that he conducted himself in good faith and that he reasonably
believed that such conduct was in the corporation's best interests. In cases
not concerning conduct in his official capacity as a director or officer, he
may be indemnified as long as he reasonably believed that his conduct was not
opposed to the corporation's best interests. In the case of any criminal
proceeding, a director or officer may be indemnified if he had no reasonable
cause to believe his conduct was unlawful. If a director or officer is wholly
successful, on the merits or otherwise, in connection with such a proceeding,
such indemnification is mandatory. The Registrant's Articles of Incorporation
provide for indemnification of its present and former directors, employees and
agents to the fullest extent provided by Article 3-101.5.
Colorado corporations are also authorized to obtain insurance to protect
a person who is or was a director, officer, employee, fiduciary, or agent of a
Colorado corporation from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors, officers, employees, or
agents.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Item
- ----------- ----
<S> <C>
**2.1 Agreement and Plan of Reorganization dated April 28, 1995 (the
"Agreement"), among Ultrak, Inc. ("Ultrak"), Diamond
Electronics, Inc. ("Diamond"), Diamond Purchasing Corp., and
certain shareholders (the "Shareholders") of Diamond (the
Agreement and Exhibits 1.01(a) and (b) thereto are included as
Annex A to the Prospectus/Proxy Statement)
*2.2 Extension Agreement, dated June 28, 1995 among Ultrak, Diamond,
and the Shareholders.
**3.1 Articles of Incorporation of Ultrak, as amended through December
17, 1993 (included as Annex E to the Prospectus/Proxy Statement)
**3.2 Bylaws of Ultrak, as amended through March 10, 1995 (included as
Annex F to the Prospectus/ Proxy Statement)
**5.1 Legal opinion of Gardere & Wynne, L.L.P.
**8.1 Legal opinion of Leagre & Barnes
**10.1 Loan Agreement, dated as of July 20, 1992, between Ultrak, CCTV
Source International, Inc. and Loss Prevention Electronics
Corporation and Petrus Fund, L.P.
**10.2 Financing and Security Agreement, dated as of September 24,
1993, by and among NationsBank of Texas, N.A., Ultrak, Loss
Prevention Electronics Corporation, CCTV Source International,
Inc., and Dental Vision Direct, Inc. (with Guaranty by
Individual executed by George K. Broady, for the benefit of
NationsBank of Texas, N.A.)
**10.3 First Amendment to Loan Agreement, dated as of October 4, 1993,
between Ultrak, CCTV Source International, Inc. and Loss
Prevention Electronics Corporation, and Petrus Fund, L.P. (with
related Restated Revolving Credit Note)
**10.4 Second Amendment to Warrant Purchase Agreement, dated as of
October 4, 1993, between Ultrak, George K. Broady, and Petrus
Fund, L.P.
</TABLE>
II-1
<PAGE> 230
<TABLE>
<S> <C>
**10.5 Security Agreement, dated as of October 4, 1993, between Exxis
Technologies, Inc. and Petrus Fund, L.P.
**10.6 Security Agreement, dated as of October 4, 1993, between Dental
Vision Direct, Inc. and Petrus Fund, L.P.
**10.7 Ultrak 1988 Non-Qualified Stock Option Agreement
**10.8 Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option
Plan
**10.9 Warrant Purchase Agreement, dated as of July 20, 1992, between
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.10 Warrant to Purchase Ultrak Common Stock issued to Judith A.
Schindler
**10.11 First Amendment to Financing and Security Agreement, dated
effective October 31, 1994, by and among NationsBank of Texas,
N.A., Ultrak, Loss Prevention Electronics Corporation, CCTV
Source International, Inc. and Dental Vision Direct, Inc.
**10.12 Second Amendment to Loan Agreement, executed November 11, 1994,
to be effective as of October 4, 1994, by and between Ultrak and
Petrus Fund, L.P.
**10.13 Third Amendment to Warrant Purchase Agreement, executed November
11, 1994 to be effective as of October 4, 1994, by and among
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.14 Letter Agreement among Ultrak, Risheq and JAK Pacific Video
Warranty and Repair Services, Inc. ("JAK") regarding Ultrak's
purchase and option to purchase JAK's common stock, dated as of
April 5, 1994
**10.15 Employment Agreement between Ultrak and James D. Pritchett
**10.16 Employment Agreement between Ultrak and Tim D. Torno
**11 Computation of Per Share Data
**21 List of Ultrak's Subsidiaries
*23.1 Consent of Grant Thornton, LLP, dated June 22, 1995
*23.2 Consent of Norman, Jones, Enlow & Co., dated June 22, 1995
**23.3 Consent of Gardere & Wynne, L.L.P. (to be included in Exhibit
5.1)
*23.4 Consent of Leagre & Barnes
</TABLE>
_______________
* Filed herewith
** Filed previously
II-2
<PAGE> 231
(b) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedules of Ultrak are
included in Part II of this Registration Statement:
Report of Independent Accountants to Financial Statement
Schedules
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are inapplicable or
the information is included in Ultrak's Consolidated Financial Statements or
Notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement; and
(iii) To include any material information with respect
to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions set forth or described in
Item 20 of the Registration Statement, or otherwise, the Registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any
action, suit, or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
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<PAGE> 232
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Amendment No. 5 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Dallas, State of Texas on
the 28th day of June, 1995.
ULTRAK, INC.
By: /s/ George K. Broady George K.
Broady, Chief Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 5 to the Registration Statement has been signed below by the
following persons and in the capacities indicated on June 28, 1995.
<TABLE>
<S> <C>
/s/ George K. Broady Chairman of the Board, Chief Executive
George K. Broady Officer, President, and Director (Principal
Executive Officer)
* Executive Vice President, Chief Operating
James D. Pritchett Officer, and Director
* Secretary-Treasurer and Chief Financial
Tim D. Torno Officer (Principal Financial Officer and
Principal Accounting Officer)
* Director
William C. Lee
_______________________ Director
Charles C. Neal
_______________________ Director
Robert F. Sexton
</TABLE>
*By: /s/ GEORGE K. BROADY
George K. Broady
Attorney-In-Fact
II-4
<PAGE> 233
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULES
Board of Directors
Ultrak, Inc.
In connection with our audits of the consolidated financial statements
of Ultrak, Inc. and Subsidiaries referred to in our report dated February 17,
1995, we have also audited Schedule II for the three years in the period ended
December 31, 1994. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
GRANT THORNTON LLP
Dallas, Texas
February 17, 1995
S-1
<PAGE> 234
SCHEDULE II
ULTRAK, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Balance at Balance at
beginning Charge to end
Description of period operations Deductions(1) of period
----------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . $213,607 $532,344 $(422,179) $323,772
======== ======== ========= ========
Year ended December 31, 1993
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . $135,105 $228,814 $(150,312) $213,607
======== ======== ========= ========
Year ended December 31, 1992
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . $ 61,976 $287,669 $(214,540) $135,105
======== ======== ========= ========
</TABLE>
Notes
- -----
(1) Accounts written off.
S-2
<PAGE> 235
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Item
- ----------- ----
<S> <C>
**2.1 Agreement and Plan of Reorganization dated April 28, 1995 (the
"Agreement"), among Ultrak, Inc. ("Ultrak"), Diamond
Electronics, Inc. ("Diamond"), Diamond Purchasing Corp., and
certain shareholders (the "Shareholders") of Diamond (the
Agreement and Exhibits 1.01(a) and (b) thereto are included as
Annex A to the Prospectus/Proxy Statement)
*2.2 Extension Agreement, dated June 28, 1995, among Ultrak, Diamond,
and the Shareholders.
**3.1 Articles of Incorporation of Ultrak, as amended through December
17, 1993 (included as Annex E to the Prospectus/Proxy Statement)
**3.2 Bylaws of Ultrak, as amended through March 10, 1995 (included as
Annex F to the Prospectus/ Proxy Statement)
**5.1 Legal opinion of Gardere & Wynne, L.L.P.
**8.1 Legal opinion of Leagre & Barnes
**10.1 Loan Agreement, dated as of July 20, 1992, between Ultrak, CCTV
Source International, Inc. and Loss Prevention Electronics
Corporation and Petrus Fund, L.P.
**10.2 Financing and Security Agreement, dated as of September 24,
1993, by and among NationsBank of Texas, N.A., Ultrak, Loss
Prevention Electronics Corporation, CCTV Source International,
Inc., and Dental Vision Direct, Inc. (with Guaranty by
Individual executed by George K. Broady, for the benefit of
NationsBank of Texas, N.A.)
**10.3 First Amendment to Loan Agreement, dated as of October 4, 1993,
between Ultrak, CCTV Source International, Inc. and Loss
Prevention Electronics Corporation, and Petrus Fund, L.P. (with
related Restated Revolving Credit Note)
**10.4 Second Amendment to Warrant Purchase Agreement, dated as of
October 4, 1993, between Ultrak, George K. Broady, and Petrus
Fund, L.P.
**10.5 Security Agreement, dated as of October 4, 1993, between Exxis
Technologies, Inc. and Petrus Fund, L.P.
**10.6 Security Agreement, dated as of October 4, 1993, between Dental
Vision Direct, Inc. and Petrus Fund, L.P.
**10.7 Ultrak 1988 Non-Qualified Stock Option Agreement
**10.8 Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option
Plan
**10.9 Warrant Purchase Agreement, dated as of July 20, 1992, between
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.10 Warrant to Purchase Ultrak Common Stock issued to Judith A.
Schindler
**10.11 First Amendment to Financing and Security Agreement, dated
effective October 31, 1994, by and among NationsBank of Texas,
N.A., Ultrak, Loss Prevention Electronics Corporation, CCTV
Source International, Inc. and Dental Vision Direct, Inc.
**10.12 Second Amendment to Loan Agreement, executed November 11, 1994,
to be effective as of October 4, 1994, by and between Ultrak and
Petrus Fund, L.P.
**10.13 Third Amendment to Warrant Purchase Agreement, executed November
11, 1994 to be effective as of October 4, 1994, by and among
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.14 Letter Agreement among Ultrak, Risheq and JAK Pacific Video
Warranty and Repair Services, Inc. ("JAK") regarding Ultrak's
purchase and option to purchase JAK's common stock, dated as of
April 5, 1994
**10.15 Employment Agreement between Ultrak and James D. Pritchett
**10.16 Employment Agreement between Ultrak and Tim D. Torno
**11 Computation of Per Share Data
**21 List of Ultrak's Subsidiaries
*23.1 Consent of Grant Thornton, LLP, dated June 22, 1995
*23.2 Consent of Norman, Jones, Enlow & Co., dated June 22, 1995
**23.3 Consent of Gardere & Wynne, L.L.P. (to be included in Exhibit
5.1)
*23.4 Consent of Leagre & Barnes
</TABLE>
______________
* Filed herewith
** Filed previously
<PAGE> 1
EXTENSION AGREEMENT
This Extension Agreement (this "Agreement"), dated June 28, 1995, is among
Diamond Electronics, Inc., an Ohio corporation ("Diamond"), the shareholders of
Diamond signing this Agreement (the "Signing Shareholders"), Ultrak, Inc., a
Colorado corporation ("Ultrak"), and Diamond Purchasing Corp., a Texas
corporation and wholly-owned subsidiary of Ultrak ("Ultrak Subsidiary").
Recital. The parties hereto previously executed that certain Agreement and
Plan of Reorganization, dated April 28, 1995 (the "Merger Agreement"), which
they now desire to amend pursuant to this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the provisions of
this Agreement, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto, intending to be legally bound, hereby covenant and agree as
follows:
1. The parties hereby amend and restate Section 10.01(b) of the Merger
Agreement to read as follows:
"(b) by Ultrak or Diamond if the Effective Date has not occurred on or
before July 31, 1995, 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; or"
2. Except as specifically amended as set forth above, the parties
hereto agree that the Merger Agreement shall remain in full force and
effect as written.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first written above.
[SIGNATURES ON THE FOLLOWING PAGE].
A-21
<PAGE> 2
<TABLE>
<S> <C>
DIAMOND ELECTRONICS. INC. ULTRAK, INC.
By: /s/ JOHN W. BIDDINGER By: /s/ GEORGE K. BROADY
John W. Biddinger, Chairman of the Board George K. Broady, President and CEO
/s/ RICHARD M. TOMPKINS DIAMOND PURCHASING CORP.
Richard M. Tompkins
/s/ ROBERT N. DAVIES By: /s/ GEORGE K. BROADY
Robert N. Davies George K. Broady, President
/s/ JOHN W. BIDDINGER
John W. Biddinger
/s/ H. CHARLES KOEHLER
H. Charles Koehler
/s/ WILLIAM MUIRHEAD, III
William Muirhead, III
</TABLE>
I hereby agree to the terms of this Agreement and confirm my agreement to
vote all of my shares of Diamond Common Stock (as defined in the Merger
Agreement) in favor of the Merger (as defined in the Merger Agreement).
/s/ MARGARET BIDDINGER
Margaret Biddinger
A-22
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our reports dated February 17, 1995, accompanying the
financial statements and schedules of Ultrak, Inc. and Subsidiaries contained
in the Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in this Registration Statement and Prospectus, and to
the use of our name under the caption "Experts."
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Dallas, Texas
June 28, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our reports dated March 17, 1995, on our audits of the
balance sheets of Diamond Electronics, Inc. and Subsidiary as of January 1,
1995, and the related consolidated financial statements and schedules for the
two years then ended, which are contained in this Registration Statement and
Prospectus/Proxy Statement. We consent to the inclusion of the aforementioned
reports in this Registration Statement and Prospectus/Proxy Statement, and to
the reference to our firm under the caption "Experts."
/s/ NORMAN, JONES, ENLOW & CO.
NORMAN, JONES, ENLOW & CO.
Columbus, Ohio
June 28, 1995
<PAGE> 1
EXHIBIT 23.4
Ultrak, Inc.
Dallas, Texas
Re: Registration Statement on Form S-4 of Ultrak, Inc. With Respect
to 700,000 Shares of its Common Stock Subject to Issuance to
Holders of Common Stock of Diamond Electronics, Inc.
Gentlemen:
We hereby consent to the references to our firm in the Prospectus/Proxy
Statement included in the above-described Registration Statement on Form S-4
under the heading "MERGER--Certain Federal Income Tax Consequences" and related
references elsewhere in such Prospectus/Proxy Statement.
/s/ Leagre & Barnes
LEAGRE & BARNES
Indianapolis, Indiana
June 28, 1995
