<PAGE> 1
As filed with the Securities and Exchange Commission May 5, 1995
Registration No.33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
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, IN 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 $1,545.45
==========================================================================================================================
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(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.
_____________________________
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ULTRAK, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
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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
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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
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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
DIAMOND ELECTRONICS, INC.
_____________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY ___, 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 May ___, 1995 beginning at ___________ a.m., local time, at
___________________________, Indianapolis, Indiana, 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, 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 April 28, 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 office at
4465 Coonpath Road, Carroll, Ohio 43112 for ten days 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 1.701.85 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
May ___, 1995
<PAGE> 6
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 May ____, 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 _____________, local time, on May __, 1995, at ____________________________,
Indianapolis, Indiana.
This Prospectus/Proxy Statement also relates to the Agreement and Plan
of Reorganization, dated April 28, 1995, attached hereto 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
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" 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 May __, 1995
<PAGE> 7
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. Statements contained herein concerning the provisions of such documents
are necessarily summaries of such documents, and each such statement is
qualified in its entirety by reference to the copy of the applicable document
filed with the Commission. 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 SALE 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
_______________________
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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
PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
BUSINESS OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ULTRAK'S REINCORPORATION IN DELAWARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
MANAGEMENT OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
PRINCIPAL SHAREHOLDERS OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
DESCRIPTION OF ULTRAK'S CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
MARKET FOR ULTRAK COMMON STOCK AND RELATED
SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SELECTED FINANCIAL DATA OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
BUSINESS OF DIAMOND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
MARKET FOR DIAMOND COMMON STOCK AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
PRINCIPAL SHAREHOLDERS OF DIAMOND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SELECTED FINANCIAL DATA OF DIAMOND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
DIAMOND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
ANNEXES
ANNEX A - Merger Agreement
ANNEX B - Ohio Revised Code Section 1.701.85
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
3
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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
4
<PAGE> 10
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 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."
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.
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, 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.
5
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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 Diamond for each of the five fiscal years in the period ended January
1, 1995. 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."
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ULTRAK - HISTORICAL
-----------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: 1994 1993 1992 1991 1990
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Net sales $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
Gross profit 19,444,003 12,858,457 7,367,629 4,613,904 2,494,659
Operating income (loss) 5,109,687 3,655,020 1,278,618 694,728 (318,905)
Net income (loss) from
continuing operations 2,789,512 2,638,860 543,500 470,942 (775,196)
Net Income (loss) per common 0.39 0.37 0.07 0.06 (0.15)
share
Weighted average shares 6,818,999 6,789,872 6,845,550 5,864,399 5,286,561
outstanding
BALANCE SHEET DATA:
Total assets $36,352,690 $25,384,794 $16,198,851 $8,054,270 $4,567,900
Short-term debt 18,244,183 12,875,039 7,134,701 2,218,599 1,140,000
Long-term debt 0 0 285,000 285,000 0
Shareholders' Equity 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
</TABLE>
<TABLE>
<CAPTION>
DIAMOND - HISTORICAL
-----------------------------------------------------------------------------
FISCAL YEAR ENDED
-----------------------------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales $11,774,691 $9,367,799 $8,747,964 $8,554,592 $12,861,108
Gross profit 3,765,223 2,940,844 2,539,546 2,389,684 3,871,562
Operating income (loss) 761,371 523,319 285,679 971,207 350,312
Net income (loss) 325,641 839,969 1,170,805 (1,219,647) (266,357)
Net income (loss) per common 0.07 0.19 0.41 (0.90) (0.20)
share
Weighted average shares 4,652,014 4,420,889 4,384,692 1,349,650 1,349,650
outstanding
BALANCE SHEET DATA:
Total assets $ 6,766,688 $ 5,648,036 $ 5,131,878 $ 5,627,012 $ 7,492,489
Short-term debt 1,273,122 1,238,216 1,432,567 2,064,051 2,556,566
Long-term debt 884,548 592,033 774,660 1,699,948 1,842,430
Stockholders' Equity 3,218,047 3,013,410 2,150,965 (578,662) 640,985
Cash dividends declared
per common share 0 0 0 0 0
</TABLE>
6
<PAGE> 12
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 period 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
period 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>
FISCAL YEAR ENDED DECEMBER 31, 1994
-----------------------------------
<S> <C>
INCOME STATEMENT DATA:
Net sales $90,568,402
Gross profit 23,209,226
Operating income 5,638,015
Net income from continuing operations 3,090,966
Fully diluted net income per common share 0.39
Fully diluted weighted average shares outstanding 7,886,985
BALANCE SHEET DATA:
Total assets 44,307,331
Long-term debt, less current portion 884,548
Total stockholders' equity 14,320,388
</TABLE>
7
<PAGE> 13
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, and (iv) pro forma combined information for Diamond and
Ultrak.
<TABLE>
<CAPTION>
Equivalent
Pro Pro
Forma Forma
Ultrak Diamond Diamond Combined
<S> <C> <C> <C> <C>
Income from continuing operations per common
share:
December 31, 1994 . . . . . . . . . . $ 0.39 $ 0.07 $ 0.05 $ 0.40
Dividends declared per common share:
December 31, 1994 . . . . . . . . . . 0 0 0 0
Book value per common share as of
December 31, 1994 . . . . . . . . . . $ 1.47 $ 0.68 $ 0.18 $ 1.92
Market value per common share as of
December 31, 1994 (1) (2) . . . . . . $ 7.125 (2) $ 0.89 ----
Market value per common share as of
February 9, 1995 (2) (3) . . . . . . $ 6.25 (2) $ 0.78 ----
- -------------------------------
</TABLE>
(1) Based on the closing price of $7.125 per share of Ultrak Common Stock
as reported on Nasdaq.
(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.
8
<PAGE> 14
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. Generally, these are persons who are deemed to
control, be controlled by, or under common control with Diamond. Ultrak Common
Stock issued in connection with such transactions 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 control 50.38% of such
votes after the Merger. 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 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 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
9
<PAGE> 15
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 accounted for 21% of Ultrak's sales. During 1993, sales to one
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, if any, 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 Price of and Dividends on
the 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."
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
10
<PAGE> 16
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. 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
Price of and Dividends on the Ultrak Common Stock and Related Shareholder
Matters."
11
<PAGE> 17
SPECIAL MEETING OF DIAMOND SHAREHOLDERS
TIME, DATE, PLACE, AND PURPOSE
The Special Meeting will be held on May __, 1995, at ___________,
local time, at _______________, Indianapolis, Indiana. 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 April 28, 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.
Each of these executive officers and directors of Diamond, who beneficially own
in the aggregate 61.9% of the Diamond Common Stock outstanding as of the Record
Date, 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 Proxy Statement/Prospectus. 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> 18
MERGER
BACKGROUND OF THE MERGER AND RELATED MATTERS
During the months of January and February 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 conducted a
due diligence review of, among other things, Diamond's financial condition and
results of operations, contracts, leases, litigation, and employee relations.
During the review, Ultrak determined that there were synergistic advantages to
the Merger as to products and marketing.
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.
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: (i) the historical and current financial condition, results of
operations, and business of Diamond and Ultrak; (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; (iii) the quality of and risks associated with the Ultrak Common
Stock to be received by the Diamond Shareholders in the Merger; and (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.
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 will be merged with
and into Diamond at the Effective Time in accordance with the Ohio Revised Code
(the "ORC") and 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
13
<PAGE> 19
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 (defined below) 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 (defined below)
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) 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 the 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 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.
14
<PAGE> 20
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) 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.
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
Time; (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
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 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.
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
15
<PAGE> 21
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--Joint Conditions Precedent to Closing
Obligations." 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 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. 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.
The procedure set forth in Section 1701.85 of the ORC should be
complied with strictly. Failure to follow any of such procedures may results
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 shareholder's dissenters'
rights. If a 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 the 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 Ohio law
16
<PAGE> 22
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. The executive officers and directors of
Diamond would be entitled to receive in the Merger an aggregate of 371,600
shares of Ultrak Common Stock having an aggregate market value of $8.125 (based
on the closing price per share of Ultrak Common Stock reported on the Nasdaq on
May 3, 1995). See "Ownership of Diamond Common Stock."
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.
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. 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. 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.
17
<PAGE> 23
TAX CONSEQUENCES TO DIAMOND SHAREHOLDERS. 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.
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, 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 fractional 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 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.
18
<PAGE> 24
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 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
by such affiliate or Signing Shareholder in the Merger. See "The Merger
- -Adjustments."
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 thereafter 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. The following summary does
not purport to be a complete statement of the rights of the shareholders of
Ultrak and Diamond. Persons needing more specific information should consult
with counsel regarding the Ultrak Charter, the Ultrak Bylaws, the Diamond
Charter, the Diamond Regulations, the CBCA, and the ORC.
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.
AMENDMENTS TO CHARTER AND BYLAWS. 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.
Under the CBCA, 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. The Ultrak
Charter provides that the Ultrak Bylaws may be amended or repealed by the Board
of Directors of Ultrak, subject to the power of the shareholders of Ultrak to
amend or repeal any such change to the Ultrak Bylaws.
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.
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<PAGE> 25
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 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 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 four 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 Code of 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 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.
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.
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. 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 such a proposal which will have the effect of waiving the shareholder's
dissenters' rights.
Shareholders of Ultrak are also 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
20
<PAGE> 26
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.
21
<PAGE> 27
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 sheet combines
Ultrak's December 31, 1994 consolidated balance sheet with Diamond's January 1,
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. 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 period 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.
22
<PAGE> 28
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Ultrak Diamond Pro Forma Pro Forma
12/31/94 1/1/95 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 4,302,532 539,162 0 4,841,694
FROM CONTINUING OPERATIONS
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 0 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 0 650,000(3) 7,468,999
Fully Diluted Weighted Average Shares 7,236,985 0 650,000(3) 7,886,985
Outstanding
- ------------------------------
</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.
(3) Includes the shares of Ultrak Common Stock to be issued in the Merger as
well as 50,000 shares contingently issuable if the market price of the
Ultrak Common Stock is not $8.00 per share one year after the Merger.
23
<PAGE> 29
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
Ultrak Diamond Pro forma Pro forma
ASSETS 12/31/94 1/1/95 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: 0
Preferred Stock 976,755 0 0 976,755
Common Stock 73,254 3,189,084 -3,147,084 (3) 115,254
Additional Paid in Capital 7,213,747 120,000 4,088,000 (3) 11,421,747
Retained Earnings 1,806,632 -91,037 91,037 (3) 1,806,632
----------- ------------ ----------- -----------
Total stockholders' equity 10,070,388 3,218,047 1,031,953 (4) 14,320,388
----------- ------------ ----------- -----------
TOTAL LIABILITIES AND $36,352,690 $ 6,766,688 $ 1,187,953 $44,307,331
STOCKHOLDERS' EQUITY =========== ============ =========== ===========
- --------------------------------------
</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) Adjusted to reflect the effects of 600,000 shares of Ultrak Common Stock
issued less the net tangible assets acquired.
24
<PAGE> 30
BUSINESS OF ULTRAK
GENERAL
Ultrak designs, manufactures, markets, and services video closed circuit
television 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 personnel 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 Ultrak's 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
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 of
Texas, N.A. 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 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 to be held on May 25, 1995 (the
"Annual Meeting"), the shareholders of Ultrak will be asked to consider and
vote upon the proposal to change the state of incorporation of Ultrak from
Colorado to Delaware. The proposed 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." Not less than 50% of the outstanding shares of
Ultrak Common Stock entitled to vote at the Annual Meeting must vote in favor
25
<PAGE> 31
of the proposal for it to be approved. NONE OF THE DIAMOND SHAREHOLDERS
RECEIVING SHARES OF ULTRAK COMMON STOCK PURSUANT TO THE MERGER WILL BE ELIGIBLE
TO VOTE THEIR SHARES OF THE ANNUAL MEETING. As of December 31, 1994, the
directors and officers of Ultrak, and their affiliates, as a group, were
entitled to vote in excess of 50% of the outstanding shares of Ultrak Common
Stock, and each such holder has indicated his or her intent to vote such shares
for approval of the proposal. For a summary of certain changes in the rights
of the holders of shares of Ultrak Common Stock as a result of the
reincorporation of Ultrak in Delaware, see "Ultrak's Reincorporation in
Delaware--Significant Differences in Corporate Law of Colorado and Delaware.
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 in Korea, Japan, England, Hong Kong, Taiwan, China, and the
United States.
The CCTV industry is a $850 million annual sales component of the $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, Exxis, [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.
SUPPLIERS AND DISTRIBUTION
To date, Ultrak purchases its CCTV products from non-affiliated
manufacturer suppliers. It has been and will continue to be substantially
dependent upon them. 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.
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
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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 one customer. 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 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
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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.
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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 the Annual Meeting, the shareholders will be asked to
consider and act upon 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 description 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.
The affirmative vote of the holders of at least a majority of the votes
represented by all outstanding shares of Ultrak's Common Stock and Series A
Preferred Stock (voting as a single class) entitled to vote as of the Record
Date will be required for the adoption of the Reincorporation proposal.
Because current management controls shares of Common Stock and Series A
Preferred Stock entitled to a majority of the votes to be cast, it is assured
that the Reincorporation proposal will receive the requisite vote of
shareholders of Ultrak needed for approval of the proposal. The
Reincorporation Agreement provides that the Board of Directors has the right to
terminate the Reincorporation Agreement and abandon the Reincorporation for any
reason whatsoever notwithstanding shareholder approval.
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
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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.
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.
Shareholders of Ultrak shall, subject to and by complying with Section
7-113-202 of the CBCA, have the right to object to the Reincorporation, which
will result in the right to receive payment for the fair value of their shares
and the other rights and benefits provided by the CBCA (see "--Rights of
Dissenting Shareholders to Receive Payment for Shares").
Ultrak has reserved the right to abandon the Reincorporation either before
or after shareholder approval, 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.
CERTIFICATION 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
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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 "Ultrak's Reincorporation in 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.
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 the
Surviving Corporation, 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
of its assets. Accordingly, the Reincorporation will not have a practical
impact on shareholders as regards the vote necessary to approve
significant corporate transactions.
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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.
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.
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The Reincorporation could have the effect of discouraging hostile
tender offers, proxy contests, or other transactions by forcing potential
acquirers 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, 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
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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 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.
34
<PAGE> 40
RIGHT OF DISSENTING SHAREHOLDERS TO RECEIVE PAYMENT FOR SHARES
The following is a summary of appraisal rights available to shareholders
of Ultrak, which summary is not intended to be a complete statement of the
applicable Colorado law. For more detailed information with respect to such
appraisal rights, see Article 113 of the CBCA, set forth in its entirety as
Annex J hereto.
Any shareholder of Ultrak wishing to dissent from the Reincorporation and
obtain cash payment for his shares must file with Ultrak, prior to the vote on
the Reincorporation, a written notice of his intention to demand that he be
paid fair compensation for his shares if the Reincorporation is effectuated and
must refrain from voting his shares in approval of the Reincorporation.
If the Reincorporation is approved by the required vote at the Annual
Meeting, Ultrak will mail within ten days after the consummation of the
Reincorporation a notice to all shareholders who gave due notice of intention
to demand payment and who refrained from voting, providing instructions as to
how to obtain payment for their shares. 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 and will
become a stockholder of Ultrak-Delaware on the consummation of the
Reincorporation.
Immediately upon effectuation of the Reincorporation or upon receipt of
demand for payment, if the Reincorporation has already been effectuated, Ultrak
will remit (the "Remittance") to a dissenter, who has made demand and who has
deposited his certificates, the amount which Ultrak estimates to be the fair
value of the shares, with accrued interest, if any. The Remittance will be
accompanied by certain financial information of Ultrak and a statement
regarding Ultrak's estimate of the fair value of the shares, together with a
notice of the dissenter's rights to demand supplemental payment and a copy of
the appraisal provisions of the CBCA.
If Ultrak fails to remit payment for the dissenter's shares as required by
the preceding paragraph or if the dissenter believes that the amount remitted
is less than the fair value of his shares or that the interest is not correctly
determined, he may, within thirty days after the date of mailing of the
Remittance, mail to Ultrak his own estimate of the value of the shares or of
the interest and demand payment of the deficiency. If he fails to do so, he
shall be entitled to no more than the Remittance.
If Ultrak's calculation and the dissenting shareholder's calculation of
fair value for the shares remains unsettled, Ultrak shall file in an
appropriate court, within sixty days of the dissenting shareholder's request
for payment, a petition requesting that the fair value of the shares and
interest thereon be determined by the court. Dissenters who have not settled
their demands will be entitled to participate in such proceeding. If Ultrak
fails to file a petition as provided in this paragraph, each dissenter who has
made a demand and who has not already settled his claim against Ultrak shall be
paid by Ultrak the amount demanded by him with interest and may sue therefor in
an appropriate court.
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.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax law, Ultrak, Ultrak-Delaware and the
shareholders of Ultrak who do not exercise their rights as dissenting
shareholders pursuant to Section 7-113-102 of the CBCA 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 shareholders'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
35
<PAGE> 41
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.
36
<PAGE> 42
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 Nominee for Director
Tim D. Torno 37 Secretary-Treasurer
and Chief Financial
Officer
</TABLE>
George K. Broady, Chairman of the Board, Chief Executive Officer, and
President. 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.
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, Director, Executive Vice President, and Chief
Operating Officer. 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, Secretary-Treasurer and Chief Financial Officer. Mr.
Torno has been the 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.
37
<PAGE> 43
William C. Lee, Director. 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 and director of several major
southwestern banking companies for the prior 27 years. 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, Director. 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, Nominee for Director at the Annual Meeting. 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.
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.
38
<PAGE> 44
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
---------
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
AWARDS
------
Securities
Name and Other Restricted Underlying
Principal Annual Stock Options/ All Other
Position Year Salary Bonus Compensation Awards SARs (1) Compensation(2)
-------- ---- ------ ----- ------------ ------ -------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
George K. 1994 $240,000 $ 54,750 - - - $1,613
Broady, Chief
Executive 1993 $212,762 - - - - $1,104
Officer and
President 1992 $100,000 - - - - -
James D. 1994 $164,000 $ 61,200 - - - $2,737
Pritchett,
Executive Vice 1993 $154,078 $ 38,094 - - - $1,799
President
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).
39
<PAGE> 45
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 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 $7.50 per share.
Of the total outstanding options, options to purchase 313,851 shares were held
by the three executive officers of Ultrak. The option exercise price is set by
the Board of Directors on the date of grant near or at the then verifiable
market price of Ultrak Common Stock. During 1994, 47,500 options were granted
to employees of Ultrak. During 1994, 600 options were exercised by two
employees. In 1994, 14,167 options which had been granted to one former
employee were cancelled.
40
<PAGE> 46
OPTION/SAR GRANTS, EXERCISES AND HOLDINGS
There were no exercises of stock options (or tandem SARs) and
freestanding SARs during 1994 by each of the named executive officers. The
unexercised options owned by the named executive officers as of December 31,
1994 are presented below:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money
Shares Acquired Realized Options/SARs at 12/31/94 Options/SARs at 12/31/94
Name on Exercise # ($) 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 subjecting 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 employees'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.
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.
41
<PAGE> 47
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.
Ultrak has no termination of employment or change-in-control arrangements,
except as to the substantive effect of Mr. Broady's stock ownership.
Mr. Pritchett's employment agreement, entered into in 1988, provides
for a two-year term, but automatically extends for one-year periods. Mr.
Torno's employment agreement was also entered into in 1988, but was replaced
with a new agreement in 1990, which is for a one-year term but automatically
extends for one-year periods. The employment agreement set Mr. Pritchett's and
Mr. Torno's base salaries at $90,000 and $80,000, respectively, however, the
Board of Directors and, most recently, the Compensation Committee have decided
to compensate those two at higher rates.
The employment agreements also contain standard provisions relating to
the employee being entitled to participation in Ultrak's 1988 Nonqualified
Stock Option 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 and certain relocation expenses. The
agreements further provide for standard paid vacations, 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 Ultrak terminates the employee without cause,
then all options become exercisable for the full amount of the optioned shares
and the employee is entitled to receive all compensation he would otherwise
have been entitled to receive under the terms of the agreement and all other
benefits. If the employee terminates the agreement for any reason, 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.
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 in 1994 totaled $875,000. At
present, Mr. Broady's only relationship with Veravision is in his capacity as a
guarantor of certain debt owed to Ultrak by
42
<PAGE> 48
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.
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 and using limitations provided in
Ultrak's Loan Agreement with Petrus Fund, L.P. 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.
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
43
<PAGE> 49
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.
THE FOLLOWING TABLE REPLACES THE GRAPH PRESENTED IN THIS POSITION IN
THE PAPER FILING OF THE PROXY STATEMENT AND HAS BEEN INSERTED SOLELY FOR THE
PURPOSE OF ULTRAK'S ELECTRONIC FILING:
<TABLE>
<CAPTION>
CRSP TOTAL RETURNS INDEX
FOR: 12/29/89 12/31/90 12/31/91 12/31/92 12/31/93 12/31/94
------------------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ultrak, Inc. 100.0 34.8 160.9 143.5 165.2 165.2
Nasdaq Stock Market (US 100.0 84.9 136.3 158.6 180.9 176.9
Companies)
NASDAQ Stocks (SIC 5000- 100.0 91.3 155.8 159.6 207.1 180.6
5099 US Companies)
</TABLE>
44
<PAGE> 50
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 Stock (1) of Series A Preferred Stock (1)
-------------------------- -------------------------------
Name Shares Percentage Shares Percentage
---- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
George K. Broady 2,368,769 (2) 32.55 193,351 (6) 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-
Nominee for Director
Tim D. Torno 35,290 (5) * -0- -0-
All executive officers 2,825,096 (2)(6) 38.83 193,351 (7) 100%
and directors as a
group (five persons)(4)
</TABLE>
(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 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, over 50%
of the voting power of all of the outstanding capital stock of Ultrak
is held by Mr.
Broady.
- ------------------------
* less than 1%
45
<PAGE> 51
CERTAIN TRANSACTIONS
Since July 1993, Ultrak has provided 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 in 1994 totaled $875,000. 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
terms of 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.
46
<PAGE> 52
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 12% Cumulative Convertible
Preferred Stock (the "Series A Stock"). The Series A stock is entitled to
16.667 votes per share. As of December 31, 1994, there were 195,351 shares of
Series A 12% Cumulative Convertible Preferred Stock issued and outstanding and
all of such shares are owned by Mr. Broady. Holders of the Series A 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
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 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 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.
47
<PAGE> 53
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, were compiled by Ultrak from Monthly
Statistical Reports supplied by Nasdaq. All quotes 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
1994
First quarter $8.88 $5.50
Second quarter 8.13 4.38
Third quarter 7.50 6.25
Fourth quarter 8.50 6.25
</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 February 28, 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.
48
<PAGE> 54
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>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1994 1993 1992* 1991 1990
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA
- ---------------
Net sales $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
=========== =========== =========== =========== ==========
Gross profit $19,444,003 $12,858,457 $ 7,367,629 $ 4,613,904 $2,494,659
=========== =========== =========== =========== ==========
Operating income (loss) $ 5,109,687 $ 3,655,020 $ 1,278,618 $ 694,728 $ (318,905)
=========== =========== =========== =========== ==========
Income from continuing
operations before income
taxes $ 4,302,532 $ 3,020,403 $ 569,843 $ 470,942 $ (775,196)
Income taxes 1,513,020 381,543 26,343 - -
----------- ----------- ----------- ----------- ----------
Income (loss) from
continuing
operations 2,789,512 2,638,860 543,500 470,942 (775,196)
Discontinued operations (190,000) (1,834,370) 294,255 - -
----------- ----------- ----------- ----------- ----------
Net income (loss) 2,599,512 804,490 837,755 470,942 (775,196)
Dividend requirements on
preferred stock 117,210 117,210 117,210 117,210 -
----------- ----------- ----------- ----------- ----------
Net income (loss) allocated
to common shareholders $ 2,482,302 $ 687,280 $ 720,545 $ 353,732 $ (775,196)
=========== =========== =========== =========== ==========
Income (loss) per common
share from continuing
operations $ .39 $ .37 $ .07 $ .06 $ (0.15)
=========== =========== =========== =========== ==========
Net income (loss) per common
share $ .36 $ .10 $ .11 $ .06 $ (0.15)
=========== =========== =========== =========== ==========
BALANCE SHEET DATA
- ------------------
Total assets $36,352,690 $25,384,794 $16,198,851 $ 8,054,270 $4,567,900
Short-term debt 18,244,183 12,875,039 7,134,701 2,218,599 1,140,000
Long-term debt - - 285,000 285,000 -
Shareholder's equity 10,070,388 7,541,339 6,817,683 4,177,044 2,881,847
Cash dividends declared
per common share - - - - -
</TABLE>
*Reclassified to reflect discontinued operations; see Note I of Notes to
Consolidated Financial Statements.
49
<PAGE> 55
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 $4,095,000, 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 $1,346,000 for capital expenditures for
furniture, fixtures, tooling, leasehold improvements, and other fixed assets.
Cash provided by financing activities was approximately $5,584,000, consisting
of net borrowings from Ultrak's bank and other lenders.
As of December 31, 1994, Ultrak had unused available lines of credit
totaling approximately $1,956,000.
50
<PAGE> 56
On October 31, 1994, Ultrak's revolving line of credit with
NationsBank of Texas, N.A. 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 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.
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.
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.
51
<PAGE> 57
BUSINESS OF 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 in
Carroll, Ohio. Diamond employs approximately 100 people.
MARKET FOR DIAMOND COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Diamond Common Stock is held of record by approximately 380
shareholders. 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.
52
<PAGE> 58
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. 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 2,978,523 61.9%
Officers as a Group (5 persons)
- ----------------------------
</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.
53
<PAGE> 59
SELECTED FINANCIAL DATA OF DIAMOND
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------------------
01/01/95 01/02/94 01/03/93 12/29/91 12/30/90
------------ ----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Statement of
Operations Date
- ---------------
Net Sales $11,774,691 $ 9,367,799 $ 8,747,964 $ 8,554,592 $ 12,861,108
=========== =========== =========== ============ ============
Gross Profit $ 3,765,223 $ 2,940,844 $ 2,539,546 $ 2,389,684 $ 3,871,562
=========== =========== =========== ============ ============
Operating Income (loss) $ 761,371 $ 523,319 $ 285,679 ($ 971,207) $ 341,348
=========== =========== =========== ============ ============
Income (loss) from continuing
operations before income
taxes $ 539,162 $ 384,145 ($ 29,664) ($1,219,647) ($ 266,357)
Income taxes 213,521 154,276 72,011 0 0
----------- ----------- ----------- ------------ ------------
Income (loss) from
continuing operations 325,641 229,869 ( 101,675) ( 1,219,647) ( 266,357)
Extraordinary items 0 0 1,272,480 0 0
Cumulative effect adjustment 0 610,100 0 0 0
----------- ----------- ----------- ------------ ------------
Net Income (loss) $ 325,641 $ 839,969 $ 1,170,805 $( 1,219,647) ( 266,357)
Income (loss) per common share
from continuing operations $ 0.07 $ 0.05 $( 0.03) $( 0.90) $( 0.20)
=========== =========== =========== ============ ============
Income (loss) per common
share $ 0.07 $ 0.19 $ 0.41 $( 0.90) $( 0.20)
=========== =========== =========== ============ ============
Balance Sheet Data
- ------------------
Total assets $ 6,766,688 $ 5,648,036 $ 5,131,878 $ 5,627,012 $ 7,492,489
Short-term debt 1,273,122 1,238,216 1,432,567 2,064,051 2,556,566
Long-term debt 884,548 592,033 774,660 1,699,948 1,842,430
Stockholders' equity (deficit) 3,218,047 3,013,410 2,150,965 ( 578,662) 640,985
Cash dividends declared
per common share 0 0 0 0 0
</TABLE>
54
<PAGE> 60
DIAMOND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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.
55
<PAGE> 61
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.
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.
56
<PAGE> 62
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 and schedules 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.
57
<PAGE> 63
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ULTRAK, INC. AND SUBSIDIARIES PAGE
----
<S> <C>
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-5
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1994, 1993, and 1992 F-6
Consolidated Statements of Cash Flows for the years
ended December 31, 1994, 1993, and 1992 F-7
Notes to Consolidated Financial Statements F-8
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
Independent Auditors' Report F-18
Consolidated Balance Sheets F-19
At January 1, 1995 and January 2, 1994
Consolidated Statements of Income
for the 52 weeks ended January 1, 1995
and the 52 weeks ended January 2, 1994 F-20
Consolidated Statements of Changes in
Shareholders' Equity
for the 52 weeks ended January 1, 1995
and the 52 weeks ended January 2, 1994 F-21
Consolidated Statements of Cash Flows
for the 52 weeks ended January 1, 1995
and the 52 weeks ended January 2, 1994 F-22
Notes to Consolidated Financial Statements F-23
</TABLE>
58
<PAGE> 64
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> 65
Ultrak, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
<TABLE>
<CAPTION>
ASSETS 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
=========== ===========
</TABLE>
F-3
<PAGE> 66
Ultrak, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS - CONTINUED
December 31,
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
----------- -----------
<S> <C> <C>
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-4
<PAGE> 67
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-5
<PAGE> 68
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-6
<PAGE> 69
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 (919,847) (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 (4,095,177) (5,167,152) (5,761,282)
Cash flows from investing activities
Purchases of furniture and equipment (1,346,369) (699,311) (254,747)
(Increase) decrease in net assets of
discontinued operations - 163,563 (163,563)
----------- ----------- -----------
Net cash used in investing activities (1,346,369) (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-7
<PAGE> 70
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.
F-8
<PAGE> 71
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
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.
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. 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 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 unpaid after January 17, 1995 accrue
interest at 8% per annum.
During February, 1995, the Company exercised its option to acquire an
additional 4% of the common stock of JAK.
F-9
<PAGE> 72
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
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-10
<PAGE> 73
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
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.
F-11
<PAGE> 74
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
NOTE D - STOCKHOLDERS' EQUITY - Continued
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.
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.
F-12
<PAGE> 75
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
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>
1995 $ 472,000
1996 431,000
1997 338,000
1998 258,000
1999 98,000
----------
$1,597,000
==========
</TABLE>
Total rent expense charged to operations is as follows:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C>
$473,502 $266,717 $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.
F-13
<PAGE> 76
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
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>
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)
--------- ---------
496,792 59,904
Valuation allowance (133,804) (194,594)
--------- ---------
$ 362,988 $ 590,000
========= =========
</TABLE>
F-14
<PAGE> 77
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
NOTE G - INCOME TAXES - Continued
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 decision, the
operations and net assets of the PC business segment are classified as
discontinued operations for all periods presented.
F-15
<PAGE> 78
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
NOTE I - DISCONTINUED OPERATIONS - Continued
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.
F-16
<PAGE> 79
Ultrak, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
December 31, 1994, 1993 and 1992
NOTE J - UNAUDITED QUARTERLY OPERATING RESULTS AND UNUSUAL ITEMS - Continued
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 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), a 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 lense from a remote location either
automatically or with a joy stick. The transaction will be accounted for as
a purchase.
F-17
<PAGE> 80
(Norman Jones Enlow & Co. LETTERHEAD)
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
(LETTERHEAD Addresses)
F-18
<PAGE> 81
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 1995 AND JANUARY 2, 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
ASSETS
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-19
<PAGE> 82
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-20
<PAGE> 83
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-21
<PAGE> 84
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 --
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-22
<PAGE> 85
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 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.
F-23
<PAGE> 86
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED:
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>
At January 1, 1995 and January 2, 1994, all inventories were pledged as
collateral in connection with bank loans.
F-24
<PAGE> 87
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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-25
<PAGE> 88
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>
F-26
<PAGE> 89
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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.
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.
F-27
<PAGE> 90
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
11. PLAN OF REORGANIZATION -- CONTINUED
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 common 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.
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 with 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 1994 or 1993.
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.
F-28
<PAGE> 91
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
11. PLAN OF REORGANIZATION -- CONTINUED
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.
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.
F-29
<PAGE> 92
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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.
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.
F-30
<PAGE> 93
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
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>
17. CASH FLOWS
Cash flows from operations 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-31
<PAGE> 94
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.
<PAGE> 95
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.
(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
2
<PAGE> 96
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
3
<PAGE> 97
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 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
4
<PAGE> 98
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.
(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
5
<PAGE> 99
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
6
<PAGE> 100
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 theWall Street Journal,
Southwest Edition, on the last trading day immediately prior to the
Effective Date;
(ii) The Determination Price on the First Adjustment Date
shall be the closing price, as reported for NASDAQ in theWall 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 theWall 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
7
<PAGE> 101
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
8
<PAGE> 102
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 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
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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 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,
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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.
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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 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
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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
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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.
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
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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
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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 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
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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.
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
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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
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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 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.
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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 contemplated. Except as set forth in the Ultrak Financials,
Ultrak is not liable upon or with respect to, or
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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
22
<PAGE> 116
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.
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
23
<PAGE> 117
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
24
<PAGE> 118
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 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
25
<PAGE> 119
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.
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
26
<PAGE> 120
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.
27
<PAGE> 121
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.
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.
28
<PAGE> 122
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
29
<PAGE> 123
under this Agreement have not been satisfied or waived by it on or
before the Effective Date.
The date on which occurs any termination pursuant to this Section 10.1 is
herein referred to as the "Termination Date."
10.02. Modification, Amendment and Waiver. No change,
modification, or amendment of this Agreement shall be valid or binding upon the
parties hereto unless such change, modification or amendment shall be in
writing and signed by all the parties hereto. No waiver of any term or
condition of this Agreement shall be enforceable unless it shall be in writing
signed by the party against which it is sought to be changed. The waiver by
any party of a breach of any provision of this Agreement by any other shall not
operate or be construed as a waiver of any subsequent breach by such other
party.
ARTICLE XI:
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
30
<PAGE> 124
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]
31
<PAGE> 125
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
ULTRAK, INC.
1220 Champion Circle By: /s/ GEORGE K. BROADY
Suite 100 ---------------------------
Carrollton, Texas 75006 George K. Broady, President
Attn: George K. Broady and CEO
DIAMOND ELECTRONICS, INC.
4465 Coonpath Road By: /s/ JOHN W. BIDDINGER
Carroll, Ohio 43112 ---------------------------
Attn: John W. Biddinger John W. Biddinger, Chairman
of the Board
DIAMOND PURCHASING CORP.
1220 Champion Circle By: /s/ GEORGE K. BROADY
Suite 100 ---------------------------
Carrollton, Texas 75006 George K. Broady, President
Attn: George K. Broady
Address for each Signing
Shareholder:
/s/ RICHARD M. TOMPKINS
2124 Creekview Court ------------------------------
Reynoldsburg, Ohio 43068 RICHARD M. TOMPKINS
/s/ ROBERT N. DAVIES
c/o Servaas, Inc. ------------------------------
1000 Waterway Boulevard ROBERT N. DAVIES
Indianapolis, Indiana 46202
/s/ JOHN W. BIDDINGER
7491 Albert Tillinghast Drive ------------------------------
Sarasota, Florida 34240 JOHN W. BIDDINGER
32
<PAGE> 126
<TABLE>
<S> <C>
/s/ H. CHARLES KOEHLER
9102 N. Meridian, Suite 500 ----------------------------
Indianapolis, Indiana 46260 H. CHARLES KOEHLER
/s/ WILLIAM MUIRHEAD, III
304 Long Cove Drive ----------------------------
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
33
<PAGE> 127
EXHIBIT 1.01(a)
ARTICLES OF MERGER (TEXAS)
[attached]
<PAGE> 128
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.
<PAGE> 129
5. As to each of the undersigned corporations, the numbers of
shares voted for and against the Plan, respectively, are:
<TABLE>
<CAPTION>
Corporation
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.
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> 130
EXHIBIT 1.01(b)
CERTIFICATE OF MERGER (OHIO)
[to come from Mark Barnes]
<PAGE> 131
EXHIBIT 8.01-A
CERTIFICATE OF COMPLIANCE OF DIAMOND
[attached]
<PAGE> 132
EXHIBIT 8.01-A
CERTIFICATE OF COMPLIANCE
The undersigned, Diamond Electronics, Inc., an Ohio corporation
("Diamond'), hereby certifies to Ultrak, Inc., a Colorado corporation
("Ultrak"), and Diamond Electronics Corp., a Texas corporation ("Newco"), that:
1. The representation and warranties of Diamond in the Agreement
and Plan of Reorganization (the "Merger Agreement"), dated April 11, 1995 (the
"Signing Date"), by and among Diamond, Ultrak, Newco and certain shareholders
of Diamond were true and correct in all material respects on and as of the
Signing Date and are true and correct in all material respects as of the date
hereof.
2. Diamond has complied, in all material respects, with all of
the covenants and agreements required by the Merger Agreement to be performed
and complied with by Diamond.
DATED: ________________________, 1995
DIAMOND ELECTRONICS, INC.
By:_______________________________
Signature
Printed Name:_____________________
Title:____________________________
<PAGE> 133
EXHIBIT 8.01-B
CERTIFICATE OF THE SIGNING SHAREHOLDERS
[attached]
<PAGE> 134
EXHIBIT 8.01-B
Signing Shareholders
CERTIFICATE OF COMPLIANCE
Each of the undersigned, Richard M. Tompkins ("Tompkins"), John W.
Biddinger ("Biddinger"), Robert N. Davies ("Davies"), H. Charles Koehler
("Koehler"), and William Muirhead, III ("Muirhead") (Tompkins, Biddinger,
Davies, Koehler, and Muirhead are collectively referred to herein as the
"Signing Shareholders" and individually referred to as a "Signing
Shareholder"), hereby certifies to Ultrak, Inc., a Colorado corporation
("Ultrak"), and Diamond Electronics Corp., a Texas corporation ("Newco"), that:
The representation and warranties of such Signing Shareholder in the
Agreement and Plan of Reorganization (the "Merger Agreement"), dated April 11,
1995 (the "Signing Date"), by and among Diamond Electronics, Inc., an Ohio
corporation, the Signing Shareholders, Ultrak, and Newco were true and correct
as to such Signing Shareholder in all material respects on and as of the
Signing Date and are true and correct in all material respects as of the date
hereof.
DATED:________________________, 1995
_____________________________________
Richard M. Tompkins
_____________________________________
John W. Biddinger
_____________________________________
Robert N. Davies
_____________________________________
H. Charles Koehler
_____________________________________
William Muirhead, III
<PAGE> 135
EXHIBIT 8.03
OPINION LETTER OF
DAGGER, JOHNSTON, MILLER, OGILVIE & HAMPSON
[attached]
<PAGE> 136
DAGGER, JOHNSTON, MILLER, OGILVIE & HAMPSON
[LETTERHEAD]
April 11, 1995
DRAFT
Ultrak, Inc.
1220 Champion Circle
Suite 100
Carrollton, TX 75006
Gentlemen:
We have acted as special Ohio counsel for Diamond Electronics, Inc.,
an Ohio corporation ("Diamond"), in connection with the Agreement and Plan of
Reorganization, dated April 11, 1995 (the "Agreement"), among Diamond, Ultrak,
Inc., a Colorado corporation ("Ultrak"), the Signing Shareholders and Diamond
Electronics Corp., a Texas corporation ("Newco"). This opinion letter is
being delivered to you pursuant to Section 8.03 of the Agreement. Capitalized
terms used herein that are defined in the Agreement shall have the meaning set
forth therein unless otherwise defined herein.
In connection with this opinion letter, we have examined and relied
upon the Agreement, the Articles of Incorporation, By-Laws and Regulations of
Diamond, Officers' Certificates and representations of management, and such
other corporate documents and records of Diamond as we have deemed necessary.
We have assumed the genuineness of all signatures, the legal capacity of
natural persons, the authenticity of all documents submitted to us as originals
and conformity to the original documents of all documents submitted to us as
certified or photostatic copies, the authenticity of the originals of latter
documents, and the due authorization, execution and delivery of all documents
by parties other than Diamond. We have not independently verified any of the
facts contained in such documents.
This opinion deals only with the specific legal issues explicitly
addressed herein. The law covered by the opinions expressed herein is limited
to the law of the State of Ohio. We call your attention to the fact that the
Agreement and other acquisition documents by their terms are to be governed by
and
____________________
(1) Ultrak's approval of this legal opinion is subject to Dagger, Johnston,
Miller & Hampson rendering an opinion regarding the capital stock of
Diamond Electronics, Inc.
<PAGE> 137
Page 2
Diamond Opinion Letter
construed in accordance with the laws of the State of _____________. No
opinion is expressed as to whether a Court would give effect to such provisions
and for purposes of the opinions expressed herein, we assume that the laws of
the State of ____________ do not vary from the laws of the State of Ohio.
Based solely upon the foregoing documents, examination thereof, and
representations of management, and subject to the foregoing limitations and
qualifications, based upon our current actual knowledge we are of the opinion
that:
1. Diamond is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Ohio, and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
2. Diamond has all requisite corporate power and authority to
execute and deliver the Agreement, to merge with Newco in accordance with the
terms of the Agreement, and to consummate the transactions contemplated by the
Agreement. The execution and delivery of the Agreement by Diamond, the
performance by Diamond of its obligations thereunder, and the consummation of
the Merger and the other transactions described in the Agreement have been duly
and validly authorized by all necessary corporate action on the part of
Diamond.
3. The Agreement has been duly executed and delivered by Diamond
and constitutes a valid and binding obligation of Diamond, enforceable against
Diamond in accordance with its terms, except (a) as may be limited by
Bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or
similar laws affecting the enforceability of creditors' rights generally, (b)
as may be limited by general principles of equity (regardless of whether such
enforceability is considered an action at law or equity), (c) that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to certain equitable defenses and the discretion of the Court before
which any proceeding therefore may be brought, and (d) subject to the other
Common Qualifications, as defined and set forth in the Legal Opinion Accord of
the ABA Section of Business Law (1991).
4. The execution, delivery and performance of the Agreement, the
consummation of the Merger and other transactions described in the Agreement,
and the fulfillment of and compliance of the terms and conditions of the
Agreement do not and will not, with the passing of time, or the giving of
notice or both, violate, constitute a breach of, or a default under, result in
the loss of any material benefit under, or permit the acceleration of any
<PAGE> 138
Page 3
Diamond Opinion Letter
obligation under (a) any term or provision of the Articles of Incorporation or
By-laws or Regulations of Diamond, (b) any contract or agreement of Diamond
known to us, (c) any judgment, decree of order, known to us, of any court or
governmental authority or agency addressed to and binding on Diamond or any of
its properties, or (d) the Ohio General Corporation Law, any statute,
regulation or rule of the State of Ohio, or the United States applicable to
Diamond, except in the case of clauses (b) (c) and (d) above, for such
violations, breaches, defaults or accelerations as to do not have a material
adverse effect on the assets, liabilities, results of operations, financial
condition, business, or prospects of Diamond. Further, the opinion contained
in this paragraph is specifically not directed at any antitrust or unfair
competition laws or related statutes or regulations promulgated by the United
States.
5. Each consent, approval, order or authorization of, or
registration, declaration, or filing with, any governmental agency or public or
regulatory unit, agency, body, or authority of the State of Ohio with respect
to Diamond required to be made or obtained in connection with the execution,
delivery or performance of the Agreement by Diamond or the consummation of the
transactions described therein by Diamond has been made or obtained, except for
such consents, approvals, orders, authorizations, registrations, declarations,
or filings the failure of which to obtain or make would not have a material
adverse effect upon the assets, liabilities, results of operations, financial
condition, business or prospects of Diamond. However, this Opinion does not
address legal issues, if any, arising under Federal Securities Laws and
Regulations administered by the Securities and Exchange Commission, State "Blue
Sky" Laws and Regulations, and laws and regulations relating to commodity (and
other) futures and indices and other similar instruments; (b) pension and
employee benefit laws and regulations; (c) anti-trust and unfair competition
laws and regulations; (d) laws and regulations concerning filing and notice
requirements other than requirements applicable to charter-related documents
such as Articles of Merger; (e) compliance with fiduciary duty requirements;
(f) environmental laws and regulations; (g) land use and subdivision laws and
regulations; (h) tax laws and regulations; (i) federal patent and copyright
laws and regulations and federal and state trademark and other electoral
property laws and regulations; (j) racketeering laws and regulations; (k)
health and safety laws and regulations; (l) labor laws and regulations; (m)
laws, regulations and policies concerning national and local emergency,
possible judicial deference to acts of sovereign states, and criminal and civil
forfeiture laws; (n) other statutes of general application to the extent they
provide for criminal prosecution.
<PAGE> 139
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Diamond Opinion Letter
6. Except for matters disclosed in the Agreement of the Proxy
Statements/Prospectus, we are not aware of any pending or threatened
litigation, judgment, decree, injunction, or order of any court, which is
reasonably likely (i) to have a material adverse effect on the assets,
liabilities, results of operations, financial conditions, business or prospects
of Diamond or (ii) to cause a material limitation on Ultrak's ability to
operate the business of Diamond after the Closing.
Our opinions and "negative assurance" confirmation are subject to the
following additional assumptions, exceptions and limitations:
(A) With respect to the opinion expressed in Paragraph 6 hereof,
we have not conducted any search of any indexes, dockets or other records of
any federal, state or local court, administrative agency or body of any
arbitrator or conducted any other independent investigation.
(B) As used in the opinions and "negative assurance" confirmations
expressed herein, "to the best of our knowledge," "known to us" and similar
phrases mean the actual knowledge, without independent investigation or
verification, of attorneys in our Firm who are involved in our representation
of Diamond.
(C) This Opinion may be relied upon by you only in connection with
the Agreement and Merger contemplated thereunder, and may not be used or relied
upon by you for any purpose whatsoever without in each instance our prior
written consent. We are qualified to practice law in the State of Ohio and we
do not purport to be experts on, to express any opinion concerning any law
other than the laws of the State of Ohio and relevant law of the United States
of America (with the limitations as set forth above). This Opinion Letter is
solely for the benefit of the addressee hereof in connection with the closing
of the Merger contemplated by the Agreement, and no other person or entity may
rely upon this Opinion Letter without the prior express written consent of this
firm. This Opinion letter is given as of the date hereof, and we assume no
duty to communicate with you with respect to any matter that comes to our
attention hereafter.
DAGGER, JOHNSTON, MILLER, OGILVIE &
HAMPSON
By: Brian D. Shonk, Partner
<PAGE> 140
EXHIBIT 8.05
RICHARD TOMPKINS EMPLOYMENT AGREEMENT
[attached]
<PAGE> 141
EXHIBIT 8.05
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated May ___, 1995, is between Ultrak, Inc., a
Colorado corporation ("Employer"), and Richard M. Tompkins, an individual
resident of Ohio ("Employee").
Recitals. Employee has previously been an employee and stockholder of
Diamond Electronics, Inc., an Ohio corporation ("Diamond"), and Employer has
acquired all of the stock of Diamond. Employer desires to employ Employee as
President and Chief Executive Officer ("CEO") of ("Diamond"), and Employee
desires to be employed by Employer as President and CEO of Diamond, pursuant to
the terms hereof.
NOW, THEREFORE, in consideration of the foregoing and the agreements
and covenants set forth below, the sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby
covenant and agree as follows:
1. Employment and Duties. Employee agrees to be employed by
Employer, and Employer agrees to employ Employee, as President and CEO of
Diamond on the terms and conditions set forth in this Agreement. Employee
shall perform such duties on behalf of Employer as directed from time to time
by Employer's Board of Directors (the "Board"). Employee shall use his best
efforts to preserve the business of Employer and Diamond and the goodwill of
all employees, customers, suppliers, and other persons having business
relations with Employer and Diamond. Employee agrees during the Term (as
hereinafter defined) to devote his best efforts, skills, and abilities to the
performance of his duties as stated in this Agreement and to the furtherance of
Employer's business.
2. Compensation.
(a) Employer shall pay to Employee, subject to appropriate tax
withholding, the following:
(i) A base salary (the "Base Salary") of One Hundred
Twenty-Five Thousand and No/100 Dollars ($125,000.00) during the First Year (as
hereinafter defined) and no less than One Hundred Thirty-One Thousand Two
Hundred Fifty Dollars ($131,250.00) during the Second Year (as hereinafter
defined), payable not less often than semi- monthly in accordance with
Employer's standard payment policies. If Employer extends this Agreement for a
Third Year (as hereinafter defined) pursuant to Subsection 3(a), then the Base
Salary for the Third Year shall not be less than One Hundred Thirty-Eight
Thousand Dollars ($138,000.00).
<PAGE> 142
(ii) A bonus in accordance with the bonus program (the "Bonus
Program") of Employer established by Employer for each of Employer's fiscal
years during the Term. The Bonus Program for 1995 (the "1995 Program") is
attached hereto as Exhibit A. For purposes of determining Employee's bonus
under the 1995 Program, the calculations of Actual Net Income shall be adjusted
to remove (i) any expenses associated with the merger whereby Employer acquired
Diamond and (ii) the revenue and profit targets to be achieved for employee to
receive a bonus and the amount of Employee's bonus, if any, will be prorated
from the Effective Date.
(b) On or about the date hereof, Employer shall grant Employee
options to acquire 5,000 shares of Employer's Common Stock, no par value per
share, pursuant to Employer's Nonqualified Stock Option Plan (the "Plan"). The
Board will annually evaluate issuing Employee additional stock options under
the Plan based on Employee's performance and the performance of Diamond.
(c) Employee shall be entitled to health insurance, life
insurance, and disability insurance benefits in accordance with Employer's
standard policies and practices, as such policies and practices shall exist
from time to time.
(d) Employee shall be entitled to participate in Employer's 401(k)
program and in Employer's Employee Stock Purchase Plan.
(e) Employee shall be entitled to four (4) weeks paid vacation and
holidays and sick leave in accordance with Employer's standard policies and
practices, as such policies and practices shall exist from time to time.
(f) Throughout the Term, Employer shall pay, or reimburse Employee
for, all travel and other expenses properly and reasonably incurred by him in
the discharge of his duties hereunder, provided that Employee's claims for
reimbursement are in accordance with Employer's expense reimbursement policy as
such policy shall exist from time to time.
(g) Employer will make available to Employee all such other
benefits as are from time to time made available to Employer's employees
generally.
3. Term and Termination.
(a) The employment of Employee pursuant to this Agreement shall
begin on the date of this Agreement and shall continue until the earliest of
(i) the date Employer terminates it for Just Cause (as hereinafter defined)
upon written notice to Employee, (ii) the death of Employee, (iii) Employee's
Permanent Disability (as hereinafter defined), or (iv) the second anniversary
of the date of this Agreement; provided, however, Employer shall have the
option to extend this Agreement for the Third Year by giving Employee written
notice at least sixty (60) days prior to the end of the Second Year. The term
"Term" shall mean the period from the date hereof through the date this
Agreement terminates or is terminated.
<PAGE> 143
(b) If Employee's employment terminates voluntarily or is
terminated for Just Cause, then Employee shall be entitled only to the
compensation (including accrued but unpaid bonuses) earned by him as of the
date of termination, and Employee shall not be entitled to any severance or
termination pay except as may be determined in accordance with Employer's
severance or termination pay policy.
(c) The term "Just Cause" shall mean any one or more of the
following:
(i) Employee violates, directly or indirectly, any laws
or regulations (other than minor traffic violations or similar offenses),
instructs any of Employer's employees to violate such laws or regulations, or
approves of any of Employer's employees violating such laws or regulations, or
Employee commits an act of moral turpitude, and the Board, after reasonable
investigation of the facts surrounding such violation or action, reasonably
determines that such violation or action materially and adversely affects, or
could reasonably be expected to materially and adversely affect, Employer, its
business or reputation or the ability of Employee to perform his obligations
under this Agreement.
(ii) Employee diverts Employer's funds to himself or any
other person, firm, or entity.
(iii) Employee fails to comply with a specific directive of
the Board of a substantial nature.
(d) Notwithstanding anything to the contrary in this Agreement or
in any other agreement (oral or written) now or hereafter entered into between
Employer and Employee, Employee expressly understands and agrees that the
provisions of Sections 4, 5, 6, and 9, and the remedial provisions of this
Agreement, shall survive any termination of Employee's employment under this
Agreement.
(e) The term "Permanent Disability" shall mean the mental and/or
physical inability of Employee (as determined by a licensed physician
acceptable to both Employer and Employee [or Employee's guardian]) to perform
the duties normally and customarily required of Employee pursuant to this
Agreement for twelve (12) consecutive months.
(f) The term "Year" shall mean the period from [May ___] of a
calendar year through April ___ of the following calendar year. The term
"First Year" shall mean May ___, 1995 through April ___, 1996, the term "Second
Year" shall mean May ____, 1996 through April ____, 1997, and the term "Third
Year" shall, to the extent Employer extends this Agreement pursuant to
Subsection 3(a), mean May ____, 1997 through April ____, 1998.
-3-
<PAGE> 144
4. Nondisclosure Agreement. Employee shall not, during the Term
and for a period of two (2) years thereafter, use for his own account or for
the benefit of any other person, firm, corporation, or other entity, directly
or indirectly, any of the customer lists, customer requirements, contract
terms, trade names, trade secrets, or good will owned by Employer or Diamond
and used in the business of designing, engineering, manufacturing, selling,
leasing, and/or servicing products of a type and nature that Diamond now
produces or produces between the date hereof and the date Employee's employment
terminates (the "Business") or directly or indirectly disclose or furnish to
any other person, firm, corporation, or other entity, the methods by which the
Business is or has been conducted, any of the methods by which the customers of
Employer and/or Diamond or the Business are or have been obtained, or any
confidential or proprietary information whatsoever of Employer, including,
without limitation, the identities of or other information regarding any
customers or prospective customers of Employer and/or Diamond relating to the
Business. Notwithstanding anything to the contrary contained in this Section
4, Employee shall not be prohibited from disclosing or using any information
and methods that are publicly available for reasons other than Employee's
violation of this Agreement.
5. Noncompetition Agreement.
(a) Employee acknowledges and agrees that the proprietary
information he has acquired regarding Diamond and will acquire regarding
Diamond and Employer will enable him to injure Employer and Diamond and
diminish the value of Employee's investment in Diamond if Employee should
compete with Employer and/or Diamond in the Business. Therefore, Employee
hereby agrees that, without the prior written consent of Employer, Employee
shall not, during the Term and for a period of two (2) years thereafter,
directly or indirectly, as a director, officer, agent, employee, consultant or
independent contractor or in any other capacity, (i) invest (other than passive
investments in publicly-owned companies which constitute not more than five
percent (5%) of the voting securities of any such company) or engage in any
business or activity that is competitive with the Business within the United
States; (ii) accept employment with or render services to any other company
engaged in the Business as all or any part of such other company's business; or
(iii) contact, solicit, or attempt to solicit or accept business (A) from any
of the customers of Employer during the Term, or (B) from any person or entity
whose business Employer was soliciting during the Term.
(b) If this Agreement is terminated for Just Cause, then Employee
understands that the noncompetition provisions of Subsection 5(a) applying
subsequent to the termination of this Agreement shall be fully enforceable
against Employee without additional payment by Employer.
-4-
<PAGE> 145
6. Nonemployment. During the Term, Employee shall not, on his
own behalf or on behalf of any other person, partnership, association,
corporation, or other entity, hire, solicit, or seek to hire any employee of
Employer or Diamond or in any other manner attempt directly or indirectly to
influence, induce, or encourage any employee of Employer or Diamond to leave
the employment of Employer or Diamond, nor shall Employee use or disclose to
any person, partnership, association, corporation, or other entity any
information obtained while an employee of Employer concerning the names and
addresses of Employer's and/or Diamond's employees.
7. Affiliate. For purposes of this Agreement, an "affiliate" of
Employer shall mean any person or entity controlling, controlled by, or under
common control with Employer.
8. Severability. Each provision of this Agreement shall be
treated as a separate and independent clause, and the unenforceability of any
one clause shall in no way impair the enforceability of any of the other
clauses herein. If one or more of the provisions contained in this Agreement
shall, for any reason, be held to be excessively restrictive by reason of the
geographic or business scope or duration thereof so as to be unenforceable,
such provision or provisions shall be construed by an appropriate judicial or
arbitral body by limiting and reducing it or them, so that this Agreement shall
be enforceable to the maximum extent compatible with the applicable law as it
shall then appear.
9. Inventions. Employee shall promptly disclose, grant, and
assign to Employer for its sole use and benefit any and all inventions,
improvements, technical information, and suggestions relating in any way to the
products of Employer or any of its affiliates or capable of beneficial use by
Employer or any of its affiliates, which Employee may conceive, develop, or
acquire during the Term (whether or not during usual working hours), together
with all patent applications, letters patent, copyrights, and reissues thereof
that may at any time be granted for or upon any such invention, improvement, or
technical information. In connection therewith, Employee shall promptly at all
times during and after the Term:
(a) Execute and deliver such applications, assignments,
descriptions, and other instruments as may be necessary or proper in the
opinion of Employer to vest title to such inventions, improvements, technical
information, suggestions, patent applications, patents, copyrights, and
reissues thereof in Employer and to enable it to obtain and maintain the entire
right and title thereto throughout the world; and
(b) Render to Employer, at Employer's expense, all such assistance
as it may require in the prosecution of applications for said patents,
copyrights, and reissues thereof, in the prosecution
-5-
<PAGE> 146
or defense of interferences which may be declared involving any of said
applications, copyrights, or patents, and in any litigation in which Employer
may be involved relating to any such inventions, improvements, technical
information, suggestions, patent applications, patents, copyrights, and
reissues thereof.
10. Remedies. Employee acknowledges and recognizes that a
violation or threatened violation by him of the restrictions, agreements, or
covenants contained in Sections 4, 5, 6, or 9 of this Agreement will cause
irreparable damage to Employer and that Employer will have no adequate remedy
at law for such violation or threatened violation. Accordingly, Employee
agrees that Employer shall also be entitled, in addition to any other rights or
remedies existing in its favor, to obtain specific performance or injunctive
relief in order to enforce this Agreement or prevent a breach or further breach
of any provision hereof. Such right to specific performance or injunction
shall be in addition to Employer's right to bring an action for damages
actually sustained by Employer or to exercise any other right or remedy
available to Employer as a result of any breach hereunder.
11. Acknowledgments. Employee acknowledges and recognizes that
(i) the enforcement of any of Sections 4, 5, 6, or 9 of this Agreement by
Employer is necessary to protect the legitimate interests of Employer in
protecting its goodwill, trade secrets and other confidential or proprietary
information, business, accounts, and patronage (collectively, in this Section
11, "Employer's Interests") and will not unreasonably interfere with Employee's
ability to pursue a proper livelihood, and (ii) the restraints imposed by the
covenants of and restrictions on Employee in this Agreement are not greater
than necessary to protect Employer's Interests.
12. Assignment. Employer shall have the right to assign this
Agreement to its successors or assigns only with Employee's consent. The
rights and duties of Employee hereunder are personal to him, and no such right
may be assigned or duty delegated by him.
13. Estate. If Employee dies prior to the expiration of the Term,
any monies that may be due him from Employer under this Agreement as of the
date of his death shall be paid to his estate.
14. Notices. All notices and requests hereunder shall be in
writing and shall be delivered in person, by certified or registered mail,
postage prepaid, or by a nationally recognized overnight delivery service, and
shall be addressed to the addresses specified beside each party's signature at
the end of this Agreement. Such notices and requests shall be deemed delivered
on the day on which personally delivered or, if delivered by mail, on the third
business day after deposit in the United States mail, as evidenced by a post
office receipt furnished to the sender. Any party may change his or its
address for receipt of notices and
-6-
<PAGE> 147
requests hereunder by notice duly given to the other party in accordance with
the provisions of this Section 14.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS
WITHOUT REFERENCE OR REGARD TO THE CONFLICTS OF LAW RULES OF SAID STATE.
16. Costs, Expenses, and Legal Fees. Each party hereto agrees to
pay the costs and expenses, including reasonable attorneys' fees, incurred by
the other party in successfully (i) enforcing any of the terms of this
Agreement or (ii) proving that the other party breached any of the terms of
this Agreement. Except as otherwise provided in the immediately preceding
sentence, Employer and Employee shall pay their own expenses separately
incurred in connection with the preparation and review of this Agreement and
the transactions contemplated hereby.
17. Waiver. The waiver by either party of any breach or provision
of this Agreement must be in writing. No waiver of any breach or failure by
either party to enforce any of the terms or conditions of this Agreement at any
time shall, in any manner, limit or waive such party's right thereafter to
enforce and to compel strict compliance with every term and condition hereof.
One or more waivers of any breach of any covenant, term, or provision of this
Agreement by any party shall not be construed as a waiver of a subsequent
breach of the same covenant, term, or provision nor shall it be considered a
waiver of any other then existing or subsequent breach of a different covenant,
term, or provision.
18. Miscellaneous. This Agreement may be amended only by an
instrument in writing executed by the person against whom enforcement of the
amendment is sought. This Agreement, the schedules and exhibits attached
hereto, and the documents referred to herein or reasonably contemplated hereby,
constitute the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and supersede all prior written or
oral agreements and understandings relating to the subject matter hereof.
There are no oral agreements between the parties to this Agreement. The
captions in this Agreement are for convenience of reference only. This
Agreement may be executed in one or more counterparts. This Agreement shall be
binding on the parties hereto and their heirs, estates, personal
representatives, successors, and permitted assigns. This Agreement shall not
be construed against the party responsible for, or primarily responsible for,
preparing this Agreement.
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<PAGE> 148
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
EMPLOYER:
ULTRAK, INC.
Address:
1220 Champion Circle By:________________________________
Suite 100 Title:_____________________________
Carrollton, Texas 75006
EMPLOYEE:
Address:
2124 Creekview Court ___________________________________
Reynoldsburg, Ohio 43068 Richard M. Tompkins
-8-
<PAGE> 149
EXHIBIT A
TO EMPLOYMENT AGREEMENT
THE ULTRAK GROUP
MANAGER'S INCENTIVE PROGRAM
FOR 1995
Purpose:
The manager's incentive program is intended to reward outstanding performance
and to focus attention on the important aspects of your company or division.
It is also intended to help develop you as a person, a leader and a
businessman. A full understanding of the program provisions is critical to its
success.
Program Provisions:
The program encompasses six (6) areas of measurement, some weighted more
heavily than others. The incentive is based off your base salary and will be
rewarded up to a maximum of 50% of your base salary. The six categories of
measurement and the weighting are set forth below:
<TABLE>
<CAPTION>
Grade Weight in
Range Area of Measurement Points
- ------ -------------------- ------
<S> <C> <C>
0-unlimited Actual Net Income to Budget before
corporate 5.0
0-unlimited Actual Net Revenues to Budget 2.5
0-10 Interco cooperation and market
delineation 2.5
0-10 Improvement in Customer Service
Survey Ratings 1.5
0-10 Improvement in Employee Survey
Supervisor Ratings 1.5
0-10 Organization and management of
assets (AR, Inventory) 1.5
</TABLE>
Incentive Calculations:
A total of 50 points earned equals an incentive payment of 12 1/2 % of base
salary; 100 points earned equals 25% of base salary; 150 points earned equals
37 1/2 % of base salary. Maximum points that can be earned is 200 (50% of base
salary). Irrespective of the number of points earned, no incentive will be paid
if actual net income before corporate is less than 88% of budget.
<PAGE> 150
Example Calculations:
Net income: Up to 88% of actual net income to budget before corporate
equals a grade of 0: 90% equals a grade of 2: 100% equals a
grade of 12: 120% equals a grade of 32, etc. There is no
ceiling in this category.
The grade is then multiplied times the weighting for the total
points earned. For example, if net income before corporate
were 100% of budget, the points would be 12 X weighting
of 5 for a total on this category of 60 points (12 X 5.0 = 60).
Net Revenues: Same as above except the weighting is 2.5 not 5.0. There is
no ceiling in this category. For example, if total revenues
exceed budget by 10%, the points earned would be 22 times 2.5=
55 points earned.
All Other: The maximum grade is 10, however, the weighting factors vary
by categories. Average achievement would be a 5. All of
these areas are subjective.
In the example below, assuming both actual net income before corporate and
revenues were at budget for the year and all other categories scored an 8, the
total points earned would be:
<TABLE>
<CAPTION>
Points Weight Total
------ ------ -----
<S> <C> <C> <C>
*Net Income to Budget 12 5.0 60.0
*Revenues to Budge 12 2.5 30.0
*Intercompany cooperation/delineation 8 2.5 20.0
*Improvement in customer service ratings 8 1.5 12.0
*Improvement in employee survey ratings 8 1.5 12.0
*Balance sheet management 8 1.5 12.0
----
Total points earned 146/200
=73% OR 37% OF BASE
</TABLE>
Grading and Payment:
The incentive payment request should be prepared by you and presented to your
supervisor for review, discussion and approval. If you qualify, interim
payments can be made after July 15th and can be paid on a monthly basis
thereafter. Interim incentive payments should be based upon the June 30th
financial statements. Total interim payments should not exceed 80% of the
final total incentive estimate.
Final incentive payments, including any adjustments necessary, will be made
after the year end audited financial statements are released.
<PAGE> 151
Agreement:
I have read and I understand the provisions of the 1995 Manager's Incentive
Program. My final approved 1995 budget, which is the measuring basis for this
program, is attached.
_________________________ _______________
Managing Director Date
_________________________ _______________
George K. Broady Date
<PAGE> 152
EXHIBIT 9.03
OPINION OF GARDERE & WYNNE, L.L.P.
[attached]
<PAGE> 153
G&W Draft: 4-27-95
[FORM OF OPINION OF GARDERE & WYNNE, L.L.P.)
EXHIBIT 9.03
_______________, 1995
Diamond Electronics, Inc.
4465 Coonpath Road
Carroll, Ohio 43112
Gentlemen:
We have acted as counsel for Ultrak, Inc., a Colorado corporation
("Ultrak"), and Diamond Electronics Corp., a Texas corporation and a
wholly-owned subsidiary of Ultrak ("Newco"), in connection with the
transactions described in the Agreement and Plan of Reorganization, dated as of
April 11, 1995 (the "Merger Agreement"), by and among Ultrak, Diamond
Electronics, Inc., an Ohio corporation ("Diamond"), the Signing Shareholders,
and Newco. Capitalized terms used in this opinion letter and not otherwise
defined herein shall have the meanings ascribed to such terms in the Merger
Agreement.
In so acting, we have examined and relied upon the accuracy of
original, certified, conformed, or photostatic copies of such records,
agreements, certificates, and other documents as we have deemed necessary or
appropriate to enable us to render the opinions set forth below. In all such
examinations, we have assumed the legal capacity of natural persons, Ultrak's
compliance with the Colorado Business Corporation Act, the genuineness of
signatures on original documents, the authenticity of all original documents,
and the conformity to such original documents of all copies submitted to us as
certified, conformed, or photographic copies and, as to certificates of public
officials, we have assumed the same to have been properly given and to be
accurate. We also have relied, as to various matters of fact relating to the
opinions set forth below, on certificates of public officials and officers of
Ultrak.
Based upon the foregoing and subject to the limitations,
qualifications, and assumptions set forth herein, we are of the opinion that:
(1) Ultrak is a corporation duly incorporated, validly
existing, and in good standing under the laws of the State of Colorado
and has all requisite corporate power and authority to own, lease, and
operate its properties and to carry on its business as now being
conducted. Ultrak is duly qualified to transact business and is in
good standing as a foreign corporation in the State of Texas. Newco
is a corporation duly incorporated, validly existing, and in good
standing under the laws
<PAGE> 154
Diamond Electronics, Inc.
Page 2
of the State of Texas and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on
its business as now being conducted.
(2) Ultrak and Newco have the full corporate power and
authority to execute and deliver the Merger Agreement, to perform
their obligations under the Merger Agreement, and to consummate the
Merger and the other transactions described therein. The execution
and delivery of the Merger Agreement by Ultrak and Newco, the
performance by Ultrak and Newco of their obligations thereunder, and
the consummation of the Merger and the other transactions described in
the Merger Agreement have been duly and validly authorized by all
necessary corporate action on the part of Ultrak and Newco.
(3) Each consent, approval, order, or authorization of,
or registration, declaration, or filing with, any governmental agency
or public or regulatory unit, agency, body, or authority of the State
of Texas or the United States with respect to Ultrak and/or Newco
required to be made or obtained in connection with the execution,
delivery, or performance of the Merger Agreement by Ultrak and/or
Newco or the consummation of the transactions described therein by
Ultrak and/or Newco has been made or obtained, except for such
consents, approvals, orders, authorizations, registrations,
declarations, or filings, the failure of which to obtain or make would
not have a material adverse effect upon the assets, liabilities,
results of operations, financial condition, business, or prospects of
Ultrak and/or Newco.
(4) The execution, delivery, and performance of the Merger
Agreement, the consummation of the Merger, and the other transactions
described in the Merger Agreement, and the fulfillment of and
compliance with the terms and conditions of the Merger Agreement do no
and will not, with the passing of time or the giving of notice or
both, violate, constitute a breach of, or default under, result in the
loss of any material benefit under, or permit the acceleration of any
obligation under (a) any term or provision of the Articles of
Incorporation or Bylaws of Ultrak or Newco, (b) any judgment, decree,
or order known to us of any court or governmental authority or agency
addressed to and binding on Ultrak or Newco or any of their
properties, or (c) any statute, regulation or rule of the State of
Texas or the United States applicable to Ultrak and/or Newco, except,
in the case of clauses (b) and (c) above, for such violations,
breaches, defaults, or accelerations as do not have a material adverse
effect on the assets, liabilities, results of operations, financial
condition, business, or prospects of Ultrak and/or Newco.
(5) The shares of Ultrak Common Stock that are to be
issued to the shareholders of Diamond pursuant to the Merger (on the
Effective Date and on each of the Adjustment Dates) have been duly
authorized and, when so issued in accordance with the terms of the
Merger Agreement, will be validly issued, fully paid and
nonassessable.
<PAGE> 155
Diamond Electronics, Inc.
Page 3
(6) The Merger Agreement has been duly executed and
delivered by Ultrak and Newco and constitutes the valid and binding
agreement of Ultrak and Newco, enforceable against Ultrak and Newco in
accordance with its terms, except (a) as may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, or
similar laws affecting the enforceability of creditors' rights
generally, (b) as may be limited by general principles of equity
(regardless of whether such enforceability is considered in an action
at law or a suit in equity), (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to certain equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought, and (d)
subject to the Other Common Qualifications, as defined and set forth
in the Legal Opinion Accord of the ABA Section of Business Law (1991).
The foregoing opinions are subject to the following limitations,
qualifications, and assumptions:
(a) Whenever any opinion is qualified by the words "to our
knowledge," "known to us," or other words of similar meaning, the quoted words
mean the actual knowledge, without independent investigation or verification,
of attorneys in our Firm involved in the representation of Ultrak.
(b) In rendering the opinions set forth in paragraph (1) above
concerning the good standing of Ultrak in Colorado and the foreign
qualification and good standing of Ultrak in Texas, we have relied exclusively
upon certificates of authorities of the State of Colorado and Texas, and such
opinions have only the meanings ascribed to those certificates by those
authorities.
(c) This opinion letter is limited in all respects to the laws of
the State of Texas and the federal laws of the United States, and we assume no
responsibility as to the applicability or effect of any other laws. No opinion
is expressed herein with respect to any laws, ordinances, statutes or
regulations of any county, city, or other political subdivision of the State of
Texas.
(d) The opinions and "negative assurance" confirmation expressed
herein are limited to the matters specifically addressed, and no opinion or
confirmation is implied or may be inferred beyond the matters so specifically
expressed. Without limiting the generality of the foregoing, no opinion or
confirmation is expressed herein as to the applicability or the effect of the
antitrust or (except as expressly stated herein) the securities laws and
regulations of the State of Texas or the United States to the Merger Agreement
or any of the transactions described therein.
This opinion letter has been furnished to you pursuant to Section 9.03
of the Merger Agreement, and no other person or entity shall be entitled to
rely upon it, or to quote, distribute, or otherwise use it for any other
purpose, without our prior written consent. This
<PAGE> 156
Diamond Electronics, Inc.
Page 4
opinion letter is given as of the date hereof, and we assume no obligation to
advise you after the date hereof of facts or circumstances that come to our
attention or changes in law that occur which could affect the opinions or
confirmation contained herein.
Very truly yours,
GARDERE & WYNNE, L.L.P.
By:______________________________
Richard L. Waggoner, Partner
<PAGE> 157
SCHEDULE 2.01
FOREIGN QUALIFICATION OF DIAMOND
[to come from Mark Barnes]
<PAGE> 158
SCHEDULE 2.02
INVESTMENTS OR SUBSIDIARIES OF DIAMOND
[to come from Mark Barnes]
<PAGE> 159
SCHEDULE 2.05(C)
OUTSTANDING STOCK OPTIONS, WARRANTS, SUBSCRIPTIONS,
RIGHTS OR OTHER AGREEMENTS TO ISSUE CAPITAL STOCK OF DIAMOND
[to come from Mark Barnes]
<PAGE> 160
SCHEDULE 2.05(D)
DIAMOND SHAREHOLDERS LIST
[Attached]
<PAGE> 161
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 1
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
ABF Freight 45 45 5.614 5 0
883 Frank Road; Columbus, OH 43223
Adams Barre Company 58 58 7.236 7 0
P.O. Box 99; Hilliard, OH 43026
All American 22 22 2.745 2 0
5009 Hiatus Road; Sunrise, FL 33351
Allstate Financial Corp. 42 42 5.240 5 0
8150 Perry Hwy #305; Pittsburgh, PA 15237
Alpha Security Systems 58 58 7.236 7 0
13428 West Ave; San Antonio, Texas 78216
Amatom Electronics 24 24 2.994 2 0
446 Blake Street; New Haven, CT 06515
American Credit Indemnity 287 287 35.806 35 35
300 St. Paul Place; Baltimore, MD 21202-2183
AMP, Inc. 89 89 11.104 11 11
MS-1, 6-44, Box 3608; Harrisburg, PA 17105-3608
Anchor Rubber Company 350 350 43.666 43 43
840 S. Patterson, Box 832; Dayton, OH 45401
ANR Freight Systems 48 48 5.988 5 0
Department O; Denver, CO 80271
Apple Graphics 76 76 9.482 9 0
P.O. Box 1509; Dayton, OH 45413
Argrove Box Company 18 18 2.246 2 0
P.O. Box 14015; Dayton, OH 43017
Arius 101 101 12.601 12 12
2709 Electronic Lane, Dallas, Texas 75220
Arjay 6 6 0.749 0 0
7400 Cedar Avenue, Minneapolis, MN 55423
Associated Spring/Raymond 15 15 1.871 1 0
P.O. Box 77152, Detroit, MI 48277
</TABLE>
<PAGE> 162
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 2
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Astro Industries 992 992 123.762 123 123
4403 Dayton Xenia Road, Dayton, OH 45432
ATT 1,137 1,137 141.853 141 141
P.O. Box 93366, Chicago, IL 60673
Automatic Data Processing 190 190 23.704 23 23
3660 Corporate Drive, Columbus, OH 43229
Avis 929 929 115.902 115 115
Box 772, Garden City, NJ 11530
BH Electronics 37 37 4.616 4 0
12219 Wood Lake Drive, Burnsville, MN 55337
Bailey, Thelma 19 19 2,370 2 0
1025 Carroll Eastern Rd NW, Lancaster, OH 43130
Baker, Tim 670 670 83.589 83 83
5025 Ireland Road, Lancaster, OH 43130
Basic Distribution 17 17 2.121 2 0
707 Slocum Street, Lancaster, OH 43130
Baxter, Clara 145 145 18.090 18 18
7360 Cinci-Zanevl Rd, Lancaster, OH 43130
Bearings, Inc. 38 38 4.741 4 0
1850 Lone Eagle St, Columbus, OH 43228
Bell Industries, Inc. 1,205 1,205 150.336 150 150
444 Windsor Park Drive, Dayton, OH 45459
Bennett, Deborah 142 142 17.716 17 17
1400 Graylock St, Lancaster, OH 43130
Berman, Martha L. 4,400 4,400 548.946 548 548
12 East 90th St #4B, New York, NY 10128-0654
Biddinger, John W. 363,473 16,893 380,366 47,454.607 47,454 47,454
9121 Spring Hollow Dr, Indianapolis, IN 46260
Biddinger, Karen E. 15,000 4,000 19,000 2,370.447 2,370 2,370
2020 Lincoln Park West 7C, Chicago, IL 60614
</TABLE>
<PAGE> 163
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 3
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Biddinger, Katherine J. 15,000 4,000 19,000 2,370.447 2,370 2,370
1352 Texas Ave South, Minneapolis, MN 55426
Biddinger, Margaret H. 637,637 637,637 79,551.836 79,551 79,551
9121 Spring Hollow Dr, Indianapolis, IN 46260
Biddinger Investment Capital 0 0 0.000 0 0
9102 N. Meridian St #500, Indianapolis, IN 46260
Biebel & French 6,709 6,709 837.017 837 837
2500 Kettering Tower, Dayton, OH 45423
Black Box Corporation 74 74 9.232 9 0
P.O. Box 12800, Pittsburgh, PA 15241
Blanket Security 117 117 14.597 14 14
6750 Poplar Ave Suite 110, Memphis, TN 38138
Bloom, Jeffrey 226 226 28,196 28 28
1703 Graylock St, Lancaster, OH 43130
Blue Ash Electronics 45 45 5.614 5 0
7260 Edington Drive, Cincinnati, OH 45249
Blue Chip Fasteners 163 163 20.336 20 20
4060 Webster St, Cincinnati, OH 45212-2706
Boley, Robert A. 728 728 90.826 90 90
1494 Deercreek Court, Worthington, OH 43085
Blote, Michael 675 675 84.213 84 84
8043 West Ohio State Lane, Lancaster, OH 43130
Bopla Enclosures 51 51 6.363 6 0
7330 Executive Way, Frederick, MD 21701
Bradley, B.B. 118 118 14.722 14 14
7755 Crile Road, Painesville, OH 44077
Brazos Components Inc. 54 54 6.737 6 0
P.O. Box 460 Bldg 363, Mineral Wells, TX 76067
</TABLE>
<PAGE> 164
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 4
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bresler, Karen 71 71 8.858 8 0
1232 Eighth Ave, Lancaster, OH 43130
Brown & Morrison 456 456 56.891 56 56
P.O. Box 240827, Charlotte, NC 28224
Browns Creek Corporation 5,500 5,500 686.182 686 686
631 2nd Ave South, Nashville, TN 37210
Burlington Air Express 83 83 10.355 10 0
1000 New Holland Ave, Pittsburgh, PA 15250
Calandra Industrial Supply 201 201 25.077 25 25
Box 186, 192 Quarry Rd, Lancaster, OH 43130
Call Dram Company 60 60 7.486 7 0
330 21st Avenue, San Francisco, CA 92017
Capitol Bankers Life 124 124 15.470 15 15
P.O. Box 19191, Greensville, SC 29602-9191
Cardinal Container Corp. 820 820 102.304 102 102
P.O. Box 07868, Columbus, OH 43207
Cellular One/New Par 104 104 12.975 12 12
350 East Wilson Bridge Rd, Worthington, OH 43085
Central Ohio Welding Inc. 734 734 91.574 91 91
1875 Progress Ave, Columbus, OH 43207
Christy, Virginia 161 161 20.086 20 20
4180 Lithopolis Rd, Lancaster, OH 43130
Cincinnati Gasket 65 65 8.109 8 0
40 Illinois Ave, Reading, Cincinnati, OH 45215
City Securities Corp. 50,400 48,000 98,400 12,276.422 12,276 12,276
P.O. Box 44992, Indianapolis, IN 46204
Clover, Judd 445 445 55.518 55 55
302 East Allen St, Lancaster, OH 43130
Collins, Evelyn L. 690 690 86.085 86 86
2527 Lanc-Kirkrsvl Rd NW, Lancaster, OH 43130
</TABLE>
<PAGE> 165
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 5
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Columbia Gas 2 2 0.250 0 0
P.O. Box 182007, Columbus, OH 43218
Columbus & Southern 99 99 12.351 12 12
P.O. Box 1440, Columbus, OH 43216
Commercial Optical 1,116 1,116 139.233 139 139
118 Bridge St, Huntington WV 24700
Commercial Printing 162 162 20.211 20 20
P.O. Box 2550, Lancaster, OH 43130
Compax 35 35 4.367 4 0
P.O. Box 10083, Haija Pay Israel, 26110
Computer Products Inc. 625,667 625,667 78,058,454 78,058 78,058
7900 Glad Road, Boca Raton, FL 33434
Con Way Central Express 39 39 4.866 4 0
P.O. Box 5160, Portland, OR 97208
Conkey, Michael 163 163 20.336 20 20
165 Mt. Ida Ave, Lancaster, OH 43130
Conrac Corporation 950 950 118.522 118 118
1724 South Mountain Ave, Duarte, CA 91010
Control Design Supply 45 45 5.614 5 0
5508 Elmwood Ave #303, Indianapolis, IN 46203
Coopers & Lybrand 3,070 3,070 383.014 383 383
Department 1160, Pittsburgh, PA 15264
Copco Papers 1,648 1,648 205.605 205 205
P.O. Box 16533, Columbus, OH 43216
Craig Brothers 8,914 8,914 1,112.114 1,112 1,112
P.O. Box 395, Carroll, OH 43112
CT Corporation Systems 40 40 4.990 4 0
P.O. Box 1544, Grand Central Sta, New
York, NY 10163
Custom Bobbin Windings 48 48 5.988 5 0
P.O. Box 2369, Zanesville, OH 43702
</TABLE>
<PAGE> 166
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 6
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Custom Coil & Transformer 521 521 65.000 65 65
P.O. Box 3277, Zanesville, OH 43702
D&B Power 1,178 1,178 146.968 146 146
P.O. Box 40M, Bayshore, NY 11706
Davies, Robert N. 367,475 367,475 45,846.321 45,846 45,846
3307 Bay Road North, Indianapolis, IN 46240
Delille Oxygen 5 5 0.624 0 0
701 South Columbus St, Lancaster, OH 43130
Deltec Corporation 38 38 4.741 4 0
2738 Kurtz St, San Diego, CA 92110
DHL Airway 79 79 9.856 9 0
333 Twin Dolphin Dr, Redwood City, CA 94065
Diamond Power Specialty 1,236 1,236 154.204 154 154
2600 East Main St, Lancaster, OH 43130
Digital Equipment Corp. 766 766 95.566 95 95
5231 Grand Ave, Davenport, IA 52807-1014
Downour, Cheryl 148 148 18.465 18 18
872 Valley View Dr, Lancaster, OH 43130
Druck, Diane M. 4,950 4,950 617.564 617 617
5727 Broadway St, Indianapolis, IN 46220
Druck, Justin M. 27,500 27,500 3,430.911 3,430 3,340
2401 North Street, Logansport, IN 46947
Duk Woo Electronics, Inc. 180,148 180,148 22,475.333 22,475 22,475
073-40 Bong Chun-Dong 3.4 Fl. Bon Chun Bldg.
Kwanak-Ku, Soeul, 151-060 Korea
Duncan, Jerry E. 8,800 8,800 1,097.891 1,097 1,097
401 Cactus Drive, Key West, FL 33040
Dunn & Bradstreet 69 69 8.608 8 0
299 Park Ave, New York, NY 10101
</TABLE>
<PAGE> 167
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 7
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Dwyer Instrument 81 81 10.106 10 0
P.O. Box 373, Michigan City, IN 46360
Eagle Convex Glass Co. 181 181 22.582 22 22
P.O. Box 1340, Clarksburg, WV 26302
East Coast Camera Center 45 45 5.614 5 0
236 Beach 87th St, Roakaway Beach, NY 1693
Edgington, Estella 279 279 34.808 34 34
551 W. Sixth Ave, Lancaster, OH 43130
Electro Marketing 988 988 123.263 123 123
10 Cornwall Drive, Westfield, NY 07090
Electro Mechanical 84 84 10.480 10 0
11411 Bradley Ave, Pacoma, CA 91331
Electromech Inc. 214 214 26.699 26 26
1 Cordier St, Irvington, NY 07111-4009
Electronic Security Sys 83 83 10.355 10 0
13537 Gratiot, Detroit, MI 48205
Electronic Service Parts 168 168 20.960 20 20
2901 East Washington St, Indianapolis, IN 46201
Electronics Marketing Corp. 2,701 2,701 336.978 336 336
Corp. Processing Dept, 0828, Columbus, OH
43271
Elmwood Sensors, Inc. 60 60 7.486 7 0
500 Narragansett Park Dr, Pawtucket, RI 02861
Emery Freight 66 66 8.234 8 0
Box 1959, Scranton, PA 18577
Enyart, Jim 741 741 92.447 92 92
118 Marks Ave, Lancaster, OH 43130
Esro 10 10 1.248 1 0
5364 Ehrlich Rd, Suite 222, Tampa, FL 33625
</TABLE>
<PAGE> 168
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 8
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Eversole, Donald 185 185 23.081 23 23
165 Timber Ridge Dr, Pickerington, OH
43147-1175
Exair Corporation 1,442 1,442 179.904 179 179
1250 Century Circle North, Cincinnati, OH 45246
FEMCO 607 607 75.370 75 75
P.O. Box 640349, Pittsburgh, PA 15264
Fenton, A.W. 36 36 4.491 4 0
P.O. Box 73919, Cleveland, OH 44193
Ferrero, Louis P. 8,800 8,800 1,097.891 1,097 1,097
P.O. Box 40888, Indianapolis, IN 46240
Filtrine Manufacturing 4,821 4,821 601.470 601 601
10 Main St, Harrisville, NH 03450
Fioto, Fred 428 428 53.397 53 53
29065 Evans Road, Logan, OH 43138
Fluid Technology 702 702 87.582 87 87
1315 Nelson St Unit H, Lakewood, CO 80215
Fournier Rubber & Supply 48 48 5.988 5 0
1341 Norton Ave, Columbus, OH 43212
Freeman, (Woltz) Paula 105 105 13.100 13 13
1311 West Fair Ave, Lancaster, OH 43130
Frontier Foundries 1,457 1,457 181.776 181 181
P.O. Box 627, Titusville, PA 16354
Fujinon Inc. 6,042 6,042 753.802 753 753
10 High Point Drive, Wayne, NJ 07470
Gano, Merry Melody 177 177 22.083 22 22
324 West Fair Ave, Lancaster, OH 43130
Garrock 819 819 102.179 102 102
6650 Busch Blvd, Columbus, OH 43229
General Machine & Mould 935 935 116.651 116 116
627 East Main St, Lancaster, OH 43130
</TABLE>
<PAGE> 169
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PAGE 9
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
GFS Manufacturing 452 452 56.392 56 56
P.O. Box 1409, Dover, NH 03820
GL Coulter Sales 1,356 1,356 169.175 169 169
444 Barneys Joy Road 5, Dartmouth, MA 02748
Glicks Furniture 38 38 4.741 4 0
1800 East 5th Ave, Columbus, OH 43219
Gorman, Inc. Frank W. 238 238 29.693 29 29
P.O. Box 223, El Paso, TX 79942
Gossell, Russell 156 156 19.463 19 19
464 Shoshone Dr, Lancaster, OH 43130
Gossel, Chuck 379 379 47.284 47 47
2322 Coonpath Road, Lancaster, OH 43130
Grayhill Inc. 155 155 19.338 19 19
P.O. Box 4913, Chicago, IL 60630
Gray, F.J. Company 646 646 80.595 80 80
139-24 Queens Blvd, Jamaica, NY 11435
Guinan, Lana 226 226 28.196 28 28
721 Neil Ave, Lancaster, PA 43130
Guinan, Mark 314 314 39.175 39 39
721 Neil Ave, Lancaster, PA 43130
Harvey, Anthony 173 173 21.584 21 21
1076 Rockport Drive, Carol Stream, IL
60188-2986
Helen's Flowers 37 37 4.616 4 0
936 Prestige Blvd, Lancaster, OH 43130
Hendershot, Bill 983 983 122.639 122 122
1465 Hillbrook Drive, Lancaster, OH 43130
Hersh Packing & Rubber 316 316 39.424 39 39
P.O. Box 186 Canal, Winchester, OH 43110
Hertz Corporation 153 153 19.088 19 19
P.O. Box 26141, Oklahoma City, OK 73126
</TABLE>
<PAGE> 170
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PAGE 10
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Hewlett Packard 299 299 37.303 37 37
P.O. Box 44548, San Francisco, CA 94144
Hill, Christopher 355 355 41.795 41 41
4975 Jacobs Ladder, Lancaster, PA 43130
Hinton's Sunoco 41 41 5.115 5 0
1100 North Memorial Dr, Lancaster, OH 43130
Hirschfeld, Stanley E. 13,200 13,200 1,646.837 1,646 1,646
7273 Waterview Point, Noblesville, IN 46060
HISCO 51 51 6.363 6 0
1024 South Arlington St, Akron, OH 44306
Hoffesetter, J.C. 126 126 15.720 15 15
5244 Springboro Rd, Dayton, OH 45439
Holter, Russell 378 378 47.159 47 47
2960 Sitterly Rd Rt 2 Canal, Winchester,
OH 43110
Honsberger, Peggy 276 276 34.434 34 34
2255 Lucille Dr NE, Lancaster, OH 43130
Howdyshell, Victor 37 37 4.616 4 0
41550 Cob Hollow-Fruitdale, Nelsonville,
OH 45676
Hughes, Peters Inc. 404 404 50.403 50 50
1991 Stanford Rd, Columbus, OH 43212
HULS Printing 186 186 23.205 23 23
P.O. Box 310, Logan, OH 43138
Hurricane Electronics Lab 55 55 6.862 6 0
P.O. Box 1280, Hurricane, UT 84737
Image Memory Systems 51 51 6.363 6 0
6000 Webster St, Dayton, OH 45414
Indiana University Found. 52,800 52,800 6,587.348 6,587 6,587
Showalter House, Box 500, Bloomington, IN 47402
</TABLE>
<PAGE> 171
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* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Instant Replay Video 855 855 106.670 106 106
5950 Steubenville Pike, Robinson Township,
PA 15136
Instrument Technology 26,835 26,835 3,347.945 3,347 3,347
P.O. Box 381, Westfield, MA 01086
Intermountain 25 25 3.119 3 0
11079 Random Valley Circle, Parker, CO
80134-6010
International Space Optics 9,792 9,792 1,221.654 1,221 1,221
5732 Engineer Dr, Huntington Beach, CA 92649
Issel, Daniel P. 17,600 17,600 2,195.783 2,195 2,195
10163 E. Fair Circle, Englewood, CO 8011
J.F. Hopkins & Assoc. 153 153 19.088 19 19
1324 Stimmel Road, Columbus, OH 43223
JL Industrial Supply Co. 9 9 1.123 1 0
31800 Industrial Rd, Livonia, MI 48151
JR Signs 25 25 3.119 3 0
87 Front St, Groveport, OH 43125
JR Woodruff Co. 5,948 5,948 742.075 742 742
P.O. Box 19548, Houston, TX 77024
Jas A. Murphy & Co. Inc. 18 18 2.246 2 0
1421 High St, Hamilton, OH 45011
Johnson, Dr. & Mrs. Earl 17,600 17,600 2,195.783 2,195 2,195
11704 Oak Tree Way, Carmel, IN 46032
Kailay International Corp. 508 508 63.378 63 63
17F, 695, TUN HUA S Rd Taipei, Taiwan, ROC
Kansas City Equip. Co. 512 512 63.877 63 63
P.O. Box 6823, Shawnee Mission, KS 66207
Karl, James K. 8,800 8,800 1,097.891 1,097 1,097
519 East 10th St #200, Bloomington, IN 47408
Kern, B. Keith 100 100 12.476 12 12
10909 OCG Lane, Roseville, OH 43777
</TABLE>
<PAGE> 172
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* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Kern, Russ 765 765 95.442 95 95
14 Chaney St, Roseville, OH 43777
Kern, Terry 84 84 10.480 10 0
242 Sand Street, Crooksville, OH
43731-1227
Kevelder, Dana 1,052 1,052 131.248 131 131
226 Parkwood Dr, Pickerington, OH 43147
Key Blue Print Inc. 217 217 27.073 27 27
195 East Livingston Ave, Columbus, OH 43215
Kirby, Robert 821 821 102.428 102 102
164 Elmwood Ave, Columbus, OH 43130
Kleinhuis (HKL) 26 26 3.244 3 0
Dept L-722, Columbua, OH 43260
Koehler, H. Charles 634,801 634,801 79,198.015 79,198 79,198
P.O. Box 2767, Indianapolis, IN 46206
Kula, Pat 340 340 42.419 42 42
3816 Cass Creek Ct, Groveport, OH 43125
L & B Investments 61,411 61,411 7,661.660 7,661 7,661
9100 Keystone Crossing, Indianapolis, IN 46240
Lacrosse, James 17,600 17,600 2,195.783 2,195 2,195
7915 Morningside Dr, Indianapolis, IN 46240
Lancaster Electro Plating 25 25 3.119 3 0
P.O. Box 367, Lancaster, OH 43130
Lancaster Hospital 50 50 6.238 6 0
401 North Ewing St, Lancaster, OH 43130
Lancaster Restaurant Supply 194 194 24.204 24 24
664 South Columbus St, Lancaster, OH 43130
Lasky, Marven M. 4,400 4,400 548.946 548 548
9476 Tamarack Dr, Indianapolis, IN 46260
Lathrop-Trotter Co. 397 397 49.530 49 49
5006 Barrow Ave, Cincinnati, OH 45209
</TABLE>
<PAGE> 173
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* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
L-Com 20 20 2.495 2 0
1755 Osgood St. North Andover, MA 01845
Lee Spring Co. 20 20 2.495 2 0
1-462 62nd Street, New York, NY 11219
Litton Poly-Scientific 5,137 5,137 640.894 640 640
1213 North Main Street, Blackburg, VA 24060
Lowes of Ohio 134 134 16.718 16 16
1921 Riverway Dr., Lancaster, OH 43130
M C G Electronics 39 39 4.866 4 0
12 Burt Dr., Deer Park, NY 11729
Magnetic Spring Water Co. 84 84 10.480 10 0
1801 Lone Eagle St., Columbus, OH 43228
446 Blake Street; New Haven, CT 06515
Mahrdt, J. Kurt Jr. 25,300 25,300 3,156.438 3,156 3,156
7807 Mystic Bay Dr., Indianapolis, IN 46240
300 St. Paul Place; Baltimore, MD 21202-2183
Marshall, Loretta 274 274 34.184 34 34
2231 Lucille Dr., NE, Lancaster, OH 43130
MS-1 6-55, Box 3608; Harrisburg, PA
17105-3608
Mason, Jim 284 284 35.432 35 35
76732 Eighth St. Rd., Newcomerstown, OH 43832
840 S. Patterson, Box 832; Dayton, OH 45401
May Tech Associates 88 88 10.979 10 0
285 Concord Rd., Marlboro, MA 01752
McGlaughlin Oil Co. 84 84 10.480 10 0
3750 East Livignston Ave., Columbus, OH 43227
P.O. Box 1509; Dayton, OH 45413
MCI Telecommunications 430 430 53.647 53 53
P.O. Box 85570, Lousiville, KY 40285
MCI/Telefax Service 2,804 2,804 349.828 349 349
P.O. Box 41729, Philadelphia, PA 19101
MCI/Western Union Int. 18 18 2.246 2 0
P.O. Box 41729, Philadelphia, PA 19101
McJunkin Corporation 6 6 0.749 0 0
Dept. L-300P Pittsburgh, PA 15264
</TABLE>
<PAGE> 174
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PAGE 14
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* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
McKeever Electric 78 78 9.731 9 0
375 North Grant Ave., Columbus, OH 43215
McKenzie, Eugene 19,131 19,131 2,386.791 2,386 2,386
1014 King St., Lancaster, OH 43130
McMaster-Carr Supply Co. 168 168 20.960 20 20
P.O. Box 7690, Chicago, IL 60680
Mentzell Electric 87 87 10.854 10 0
271 Route 380 West Apollo, PA 15613
Mid Ohio Electric 70 70 8.733 8 0
1170 McKinely Ave., Columbus, OH 43222
Mid South 37 37 4.616 4 0
4796 Pontchartrain Dr., Slidell, LA 70459
Midstate Sales, Inc. 12 12 1.497 1 0
Corp Processing Dept., Columbus, OH 43271
Minnesota Mining & Mfg. 330 330 41.171 41 41
10260 Alliance Rd., #300, Cincinnati, OH 45250
5025 Ireland Road, Lancaster, OH 43130
Mitchell, Russell G. 10,000 10,000 1,247.604 1,247 1,247
300 Fallriver Dr., Reynoldsburg, OH 43068
Montgomery, Paricia 257 257 32.063 32 32
1380 Sugar Grove Rd., Lancaster, OH 43130
7360 Cinci-Zanevl Rd, Lancaster, OH 43130
Moore, Glenn W. 59 59 7.361 7 0
121 Wilson Ave., Lancaster, OH 43130
1850 Lone Eagle St, Columbus, OH 43130
Motion Industries 1,607 1,607 200.490 200 200
P.O. Box 27, Lancaster, OH 43130
444 Windsor Park Drive, Dayton, OH 45459
Muirhead, Judith D. 135,850 135,850 16,948.698 16,948 16,948
710 Forest Blvd., Zionsville, IN 46077
Muirhead, William III 653,120 653,120 81,483.501 81,483 81,483
304 Long Cove Dr., Hilton Head, SC 29928
</TABLE>
<PAGE> 175
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PAGE 15
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Murdock, Greg 103 103 12.850 12 12
2982 Meadowbrook Dr., Lancaster, OH
N&S Enterprises 8,800 8,800 1,097.891 1,097 1,097
203 Brandywine Rd Ole Hickery, TN 37138
National Utility Service 5,664 5,664 706.643 706 706
P.O. Box 712 Park Ridge, NJ 07656
Newark Electronics 7,469 7,469 931.835 931 931
1350 West 5th Ave, Columbus, OH 43212
Norman, Steve 1,100 1,100 137.236 137 137
P.O. Box 150991, Nashville, TN 37215
North Hills Electronics 400 400 49.904 49 49
575 Underhill Blvd, Syosset, NY 11791-3416
Muriel, Jacob 486 486 60.634 60 60
16 Choma Umigdal St, Qyriat Chaim Israel, 26268
Ohio Bell Telephone 557 557 69.492 69 69
45 Erieview Plaza, RM 942, Cleveland, OH 44114
Ohio Counting Scale South 61 61 7.610 7 0
4833 Business Center Way, Cincinnati, OH 45246
Ohio Fluid Power 22 22 2.745 2 0
19768 Progress Drive, Strongville, OH 44136
Ohio Foundry 173 173 21.584 21 21
240 SW Avenue, Talladge, OH 44278
Omni Controls 651 651 81.219 81 81
13540 N. Florida Ave #103, Tampa, FL 33613
Osborne, Thomas S. 26,400 26,400 3,293.674 3,293 3,293
1119 Keystone Way, Carmel, IN 46032
Oyl-Air Company 620 620 77.351 77 77
28196 Scippo Creek Rd, Circleville, OH 43113
P I Rod Inc. 492 492 61.382 61 61
P.O. Box 128, Plymouth, IN 46563
</TABLE>
<PAGE> 176
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PAGE 16
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Panasonic Audio Video 17,245 17,245 2,151.493 2,151 2,151
P.O. Box 1501, Secaucus, NJ 07094
Paul, Crey B. Jr. 23,382 23,382 3,540.949 3,540 3,540
7060 Jonesboro Rd, Morrow, GA 30260
PC World 7 7 0.873 0 0
P.O. Box 55000, Boulder, CO 30322
Pearl Polymatrix Inc. 35,000 35,000 4,366.613 4,366 4,366
420 McCrary Rd, Molena, GA 30258
Peters, Stella 173 173 21.584 21 21
1495 Hillbrook Dr, Lancaster, OH 43130
Phister Equipment Co. 1,245 1,245 155.327 155 155
800 Compton Rd #14, Cincinnati, OH 45231
Pitney Bowes 129 129 16.094 16 16
P.O. Box 85390, Louisville, KY 40285
Pittman Division 2,747 2,747 342.717 342 342
P.O. Box 8500 S-6990, Philadelphia, PA 19178
Plant, Nancy 277 277 34.559 34 34
11545 Brookside Lane, Pickerington, OH 43147
Polaroid Corporation 13 13 1.622 1 0
P.O. Box 93476, Chicago, IL 60673
Principal Financial Corp. 152 152 18.964 18 18
711 High St, Des Moines, IA 50309
Priority Dispatch Inc. 21 21 2.620 2 0
4665 Malsbary Rd, Cincinnati, OH 45242-5632
Pritchard, Norman D. 15,088 15,088 1,882.385 1,882 1,882
136 E. Mithoff, Columbus, OH 43206
Priz Company 1,810 1,810 225.816 225 225
4023 Transport St, Palo Alto, CA 94303
</TABLE>
<PAGE> 177
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PAGE 17
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Prodco Equipment 85 85 10.605 10 0
P.O. Box 361069, Cleveland, Ohio 44136
Quatech 118 118 14.722 14 14
662 Wolf Ledges Parkway, Akron, OH 44311
RL Transfer Inc. 20 20 2.495 2 0
2483 SR 3 & US 22W, Wilmington, OH 45177
Randolph Industries 247 247 30.816 30 30
6400 Corvette St, Los Angeles, CA 90040-1791
Redel Laboratories 49 49 6.113 6 0
148 South Northwest Hwy, Barrington, IL
60010-4672
Reese, Carolyn 118 118 14.722 14 14
4992 Lithopolis Rd, Lancaster, OH 43130
Rental Uniform Service 8 8 0.998 0 0
P.O. Box 631, Lancaster, OH 43130
Richey, David 11,000 11,000 1,372.364 1,372 1,372
10 West Market St #1600, Indianapolis, IN
46204-2970
Rienschield, Debra 220 220 27.447 27 27
151 Lenwood Drive, Lancaster, OH 43130
RMC International 323 323 40.298 40 40
Room 316, Balk Sang Bldg, Yeoeuido-Dong
Seoul, Korea
Rosner, Eli 240 240 29.942 29 29
29 Windstone Dr, San Rafael, CA 94903
Rudolph Brothers 11 11 1.372 1 0
961 Walnut St Canal, Winchester, Oh 43110
Ruff, Paul 25 25 3.119 3 0
125 North Ewing St, Lancaster, OH 43130
Sealed Air Corporation 79 79 9.856 9 0
2550 Commerce Blvd, Sharonville, OH 45241
Sentrol Inc. 70 70 8.733 8 0
10831 SW Cascade Blvd, Portland, OR 97223
</TABLE>
<PAGE> 178
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PAGE 18
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* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Set Point Inc. 199 199 24,827 24 24
P.O. Box 20668, Portland, OR 97220
Seyed Tabaian 460 460 57.390 57 57
7442 Busey Rd Canal, Winchester, OH 43110
Sharpman, Shanman, Poret 1,421 1,421 177.285 177 177
750 Lexington Ave, New York, NY 10022
Shaws Restaurant 47 47 5.864 5 0
123 North Broad St, Lancaster, OH 43130
Shelly, R.G. 18 18 2.246 2 0
41 Cold Water Rd, Don Mills Ontario
Canada M3V 1YS
Sherrick, Jon 48 48 5.988 5 0
1121 Tarkiln Rd Lot 135, Lancaster, OH 43130
Sherwin Williams 325 325 40.547 40 40
840 West Goodale, Columbus, OH 43212
Ship N Out 153 153 19.088 19 19
Road No. 6, Route 22, Brewster, NY 10509
Silcott, Joyce 228 228 28.445 28 28
712 Virginia Avenue, Lancaster OH 43130
Skytel 16 16 1.996 1 0
1600 Golf Road #840, Rolling Meadows, IL 60008
Slaters Hardware 23 23 2.869 2 0
1141 North Memorial Dr, Lancaster, OH 43130
Smith Electronics Inc. 283 283 35.307 35 35
8200 Snowville Rd, Cleveland, OH 44141
Solid State 242 242 30.192 30 30
875 Dearborn Dr, Worthington, OH 43085
Spader & Assoc. 1,563 1,563 195.000 195 195
P.O. Box 29794, Birmingham, AL 35216
</TABLE>
<PAGE> 179
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PAGE 19
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* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Steele, Mr. and Mrs. Richard 17,600 17,600 2,195.783 2,195 2,195
5118 Beaumont Way S Dr, Indianapolis, IN 46250
Stellar Systems 35 35 4.367 4 0
3511 Leonard Court, Santa Clara, CA 95054
Stephenson, Donald 646 646 80.595 80 80
1302 East Fair Ave, Lancaster, OH 43130
Stokes Vacuum 49 49 6.113 6 0
P.O. Box 8500 S-6535, Philadelphia, PA 19178
Storm Products 39 39 4.866 4 0
116 Shore Drive, Hinesdale, IL 60521
Storts, Rose 102 102 12.726 12 12
151 East Broadway, Apt. A, New Lexington,
OH 43764
Stotts-Friedman Co. Inc. 9 9 1.123 1 0
2600 East River Rd, Dayton, OH 45439
Summit Industries, Inc. 22 22 2.745 2 0
4545 Gateway Circle, Dayton, OH 43130
Swartz, Sally 301 301 37.553 37 37
1270-F Sheridan Drive, Lancaster, OH 43130
Switching System 378 378 47.159 47 47
500 Porter Way, Placentia, CA 92670
S.L. Corporation 2,612 2,612 325.874 325 325
240 Tamal Vista Blvd, Corte Madera, CA 94925
S.W. Anderson Co. 11 11 1.372 1 0
P.O. Box 460, Downers Grove, IL 60515
TTI 14 14 1.747 1 0
4700 Rockside Rd #500, Independence, OH 44131
Taylor Chevrolet Leasing 105 105 13.100 13 13
P.O. Box 10, Lancaster, OH 43130
Tech Fab International 1,106 1,106 137.985 137 137
51 Eros Apt. 56 Nehry Place, New Delhi,
India 110 019
</TABLE>
<PAGE> 180
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PAGE 20
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Teletronix Systems 2,123 2,123 264.866 264 264
P.O. Box 2340, San Rafael, CA 94912
Television Broadcast 92 92 11.478 11 11
2 Park Avenue, New York, NY 10016
Texas Microsystems Inc. 2,993 2,993 373.408 373 373
P.O. Box 201681, Houston, TX 77216
Texwipe Company 28 28 3.493 3 0
650 East Crescent Ave, Upper Saddle, NJ 07458
Thal-More Associates 84 84 10.480 10 0
P.O. Box 489, Dayton, OH 45449
Therm-O-Disc 171 171 21.334 21 21
1320 South Main St, Mansfield, OH 44907
Thomas Publishing Co. 75 75 9.357 9 0
One Penn Plaza, New York, NY 10119
Thomas, Kerr & Kayden 350 350 43.666 43 43
100 Galleria Pkwy NW #590, Atlanta, GA 30339
Thompson Electric Supplies 575 575 71.737 71 71
2050 Fairwood Ave, Columbus, OH 43215
Thorn Automated Systems 914 914 114.031 114 114
835 Sharon Drive, Westlake, OH 44145
Thorn, Jeffrey 239 239 29.818 29 29
400 Oak St, Bremen, OH 43107
Thyssen Plastic Products Div. 370 370 46.161 46 46
830 Pickens Industrial DR NE, Marietta, GA
30062-3103
Tiffen Manufacturing 313 313 39.050 39 39
90 Osner Ave, Hauppauge, NY 11788
Tompkins, Richard M. 275,124 30,000 305,124 38,067.387 38,067 38,067
6171 Zachary Woods Ln, Columbus, OH 43232
</TABLE>
<PAGE> 181
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***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Trans World Airlines Inc. 9,892 9,892 1,234.130 1,234 1,234
Dept CH 10508, North Suburban, IL 60155
Transcat 304 304 37.927 37 37
P.O. Box 73078, Rochester, NY 14673-3078
Tri-Angle Security Inc. 1,987 1,987 247.899 247 247
379 West Second St, Logan, OH 43138
TN Cook Inc. Div. of COW Industries 2,266 2,266 282.707 282 282
1875 Progress Ave, Columbus, OH 43207-1767
U-Line 26 26 3.244 3 0
P.O. Box 460, Lake Bluff, IL 60044
Ultrak Inc. 392 392 48.906 48 48
2400 Industrial Ln #2000A, Broomfield, CO
80020-1689
United Parcel Service 1,788 1,788 223.972 223 223
P.O. Box 1030, Columbus, OH 43216
Universal Processing 1 1 0.125 0 0
707 Hadley Dr, Columbus, OH 43228
Vickroy, Janis 134 134 16.718 16 16
4535 Delmont Rd, Lancaster, OH 43130
Victroeen Inc. 131 131 16.344 16 16
6000 Cochran Rd, Cleveland, OH 44139
Vulcan Binder 539 539 67.246 67 67
P.O. Box 29, Vincent, AL 35178
WMI 26 26 3.244 3 0
3800 Columbus-Lanc Rd, Lancaster, OH 43130
Whittaker Security, Inc. 24 24 2.994 2 0
4501 Lantern Place, Alexandria, VA 22306
Wholesale Supply 71 71 8.858 8 0
P.O. Box 23437, Nashville, TN 37202
William Stamp Co. Inc. 1,189 1,189 148.340 148 148
6493 Riding Rd, Syracuse, NY 13206
</TABLE>
<PAGE> 182
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 22
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Wilson, James 125 125 15.595 15 15
15038 Monmouth St, Lancaster, OH 43130
Winchester Electronic Sales 123 123 15.346 15 15
5304 Winters Chapel Rd, Atlanta, GA 30360
Wolfe, Perry 1,354 1,354 168.926 168 168
2017 Carey Rd NE, Junction City, OH 43748
Woltz, April 127 127 15.845 15 15
3721 B West End Ave, Nashville, TN 37201
Woods, Ashley N. 19,250 19,250 2,401.637 2,401 2,401
3721 B West End Ave, Nashville, TN 37201
Woods, Frank A. 9,500 9,500 1,185.224 1,185 1,185
631 2nd Ave, Nashville, TN 37210
Woods, Grayson N. 19,250 19,250 2,401.637 2,401 2,401
3721 B West End Ave, Nashville, TN 37201
Woods, Jayne Ann 5,500 5,500 686.182 686 686
3721 B West End Ave, Nashville, TN 37201
Wright, Dr. and Mrs. Gary 13,200 13,200 1,646.837 1,646 1,646
6178 N. County Line Rd 550E, Pittsboro,
IN 46167
Wygum J. Medill 64 64 7.895 7 0
1311 County Line Rd NE, Bremen, OH 43107-9758
W.C. Sims Co. Inc. 317 317 39.549 39 39
P.O. Box 4, Springfield, OH 45501
Xerox Corporation 1,295 1,295 161.565 161 161
10490 Vista Park Rd, Dallas, TX 75238
Yates, Chester 357 357 44.539 44 44
RR #8, Lancaster, OH 43130
Ziehlke, Jerome 681 681 34.962 84 84
606 Sandy Creek Dr, Van Vleck, TX 77482
Zielinski, Jerome 18,295 18,295 2,282.491 2,282 2,282
152 Brookhill Lane, Circleville, OH 43113
</TABLE>
<PAGE> 183
DIAMOND ELECTRONICS, INC SHAREHOLDER LIST - WITH CONVERSION TO ULTRAK STOCK:
PAGE 23
***************************************************************************
* *
* ASSUMPTIONS: 1.] 600,000 ULTRAK SHARES EXCHANGED *
* *
***************************************************************************
<TABLE>
<CAPTION>
Ultrak # of
Diamond # of Ultrak # of Ultrak # of Shares
# of Shares Shares after Shares Prelim. Shares Prelim. Final after
Diamond Options/ Options/ B/4 Fractional after Fractional 10 and Less
Shareholder Name # of Shares Warrants to Warrants Shares Shares Shares
Address/City/State/Zip @ 12/31/94 Exercise Exercised Eliminated Eliminated Cashed Out
----------------------------------------- ----------- ----------- ------------ -------------- ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Subtotal before options + warrants 4,706,326 102,893 4,809,219 600,000.001 599,833 599,339
Options - R Tompkins 30,000 99.89%
Warrants Issued - Rights offering 97,786
Warrants called or expired (24,893)
--------
Subtotal after options + warrants 4,809,219
Number of Ultrak Shares to Issue 600,000
Conversion Factor 8.015365
</TABLE>
<PAGE> 184
SCHEDULE 2.08
TAXES OF DIAMOND
[to come from Mark Barnes]
<PAGE> 185
Schedule 2.09
LIABILITIES AND OBLIGATIONS OF DIAMOND
None.
<PAGE> 186
SCHEDULE 2.10
DIAMOND 401(k) SALARY SAVINGS PLAN
AND STOCK OPTION PLAN
[to come from Mark Barnes]
<PAGE> 187
SCHEDULE 2.14
PATENTS, TRADEMARKS, COPYRIGHTS, ETC.
[to come from Mark Barnes]
<PAGE> 188
SCHEDULE 2.16(c)
DISCRIMINATION CHARGES
[to come form Mark Barnes]
<PAGE> 189
SCHEDULE 2.17
LITIGATION AND CLAIMS OF DIAMOND
[to come from Mark Barnes]
<PAGE> 190
SCHEDULE 2.20
DISTRIBUTIONS OF DIAMOND SINCE JANUARY 1, 1995
[to come from Mark Barnes]
<PAGE> 191
SCHEDULE 2.21
DIAMOND CORPORATE NAME
[to come from Mark Barnes]
<PAGE> 192
SCHEDULE 2.23
CONDITION OF FIXED ASSETS
[to come from Mark Barnes]
<PAGE> 193
SCHEDULE 3.02
LIST OF SIGNING SHAREHOLDERS
[to come from Mark Barnes]
<PAGE> 194
Schedule 4.08
CAPITAL EXPENDITURES OF ULTRAK
Ultrak's capital expenditures since December 31, 1994 exceed
$150,000.00 (Ultrak's capital expenditures since December 31, 1994 amounted to
$200,967 through March 31, 1995).
<PAGE> 195
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 proposal 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 such proposal was taken at the meeting of the
shareholders, the 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, stating 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 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 of the Revised Code, the 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 corporation, 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, he, within fifteen days from the date
of the sending of such requests, shall deliver to the corporation the
certificates requested, in order 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 shareholder. Failure on the part of the shareholder to deliver such
certificates terminates his rights as a dissenting shareholder, at the option
of the corporation, exercised by written notice sent to him 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 the 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.
Such request 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 shall
have come to an agreement on the fair cash value per share of the shares as to
which he seeks relief, the shareholder or the corporation, which in the case of
a merger or consolidation may be the surviving or the new corporation, within
three months of the service of the demand by the shareholder, may file a
complaint in the court of the common pleas of the
<PAGE> 196
county in which the principal office of the corporation which issued
such 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 the period of three months, 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 complaint is
required. Upon the filing of the 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
other evidence as is submitted by either party whether the 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 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 the 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 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 so agreed upon by the parties or as 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 of 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 such 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 that on which the vote by the shareholders
was taken and, in the case of a merger pursuant to Section 1701.80 or 1701.801
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 constituent
subsidiary corporation. The fair cash value of a share for the purposes of this
section is the amount that a willing seller, under no compulsion to sell, would
be willing to accept, and that a willing buyer, under no compulsion to
purchase, would be willing to pay, but in no event shall the fair cash value of
it 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 the
shareholders shall be excluded.
(D) 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:
(1) Such shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(2) The corporation abandons, or is finally enjoined or
prevented from carrying out, or the shareholders rescind their adoption, of the
action involved;
<PAGE> 197
(3) The shareholder withdraws his demand, with the consent
of the corporation by its directors;
(4) The corporation and the dissenting shareholder shall not
have come to an agreement as to the fair cash value per share, and neither the
shareholder nor the corporation shall have filed or joined in a complaint under
division (B) of this section within the period provided.
(E) From the time of giving 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
rights 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 share, 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 otherwise 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
the termination.
<PAGE> 198
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.
<PAGE> 199
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
2
<PAGE> 200
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 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
3
<PAGE> 201
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
of 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.
4
<PAGE> 202
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.
5
<PAGE> 203
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
6
<PAGE> 204
(b) By an Independent Majority of Shareholders.
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
7
<PAGE> 205
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
8
<PAGE> 206
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
9
<PAGE> 207
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 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
10
<PAGE> 208
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
11
<PAGE> 209
its services upon receipt by the Corporation of such opinion).
Section 3. Director Approval Exception. The provisions of
Sections 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" mean:
12
<PAGE> 210
(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;
13
<PAGE> 211
(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
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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,
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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
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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
(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 andy 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.
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(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
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"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.
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(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.
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:
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(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
ARVIN/DIAMOND, INC.
BY-LAWS
Article I
OFFICES
Section 1.1. Registered Office. The registered office of the
corporation shall be maintained in the City of Cleveland, State of Ohio, and
the name of the registered agent in charge thereof is C. T. Corporation System.
Section 1.2 Other Offices. The corporation may also have an
office in the Cities of Carroll and Lancaster, State of Ohio and in the City of
Columbus, State of Indiana and also offices at such other places as the Board
of Directors may from time to time determine or the business of the Corporation
may require.
Article II
STOCKHOLDERS' MEETINGS
Section 2.1. Place of Meetings. All meetings of the stockholders,
whether annual or special, shall be held within or without the State of Ohio as
may be fixed from time to time by the Board of Directors.
Section 2.2. Annual Meetings. An annual meeting of the
stockholders, commencing with the year 1985, shall be held on the third
Thursday in April in each year, but if a legal holiday then on the next secular
day following, at 2:00 P.M., at which they shall elect a Board of Directors,
and transact such other business as may properly be brought before the meeting.
Section 2.3. Notice of Meeting. Written notice of the annual
meeting stating the place, date and hour of the meeting, shall be given not
less than ten nor more than fifty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Notice of any such meeting may be waived in writing by any shareholder if the
waiver sets forth in reasonable detail and purpose or purposes for which the
meeting is called, and the time and place thereof. Attendance at any meeting,
in person or by proxy, shall constitute a waiver of notice of such meeting.
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Section 2.4. Special Meetings. Special meetings of the
stockholders, for any purpose or purposes, unless otherwise prescribed by
statute or by the Articles of Incorporation, may be called by the President,
and shall be called by the Secretary at the request in writing of a majority of
the Board of Directors, or at the request in writing of stockholders owning at
least 50% of the number of shares of the Corporation issued and outstanding and
entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting.
Section 2.5. 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 not less
than ten nor more than fifty days before the date of the meeting to each
stockholder entitled to vote at such meeting. If mailed, notice is given when
deposited in the United Sates mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
Notice any such meeting may be waived in writing by any shareholder if the
waiver sets forth in reasonable detail the purpose or purposes for which the
meeting is called, and the time and place thereof. Attendance at any meeting,
in person or by proxy, shall constitute a waiver of notice of such meeting.
Section 2.6. Quorum. The holders of a majority of the shares
issued and outstanding and entitled to vote in person or by proxy shall be
requisite and shall constitute a quorum at all meetings otherwise provided by
statute, by the Articles of Incorporation or by these By-Laws. If, however,
such quorum shall not be present or represented at any meeting of the
stockholders, the stockholders entitled to vote in person or by proxy shall
have the power to adjourn the meeting.
Section 2.7. Voting. When a quorum is present at any meeting, the
subject to the provisions of the General Corporation Act of the State of Ohio,
the Articles of Incorporation or these By-Laws in respect of the vote that
shall be required for a specified action, the vote of the holders of a majority
of the shares having voting power, present in person or represented by proxy,
shall decide any question brought before such meeting. Each stockholder shall
have one name on the books of the Corporation, except as otherwise provided in
the Articles of Incorporation.
Section 2.8. Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for
him by proxy, but no such proxy shall be voted or acted upon after eleven
months from its date, unless the proxy provides for a longer period.
Section 2.9. Unanimous Consent. Whenever the vote of
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stockholders at a meeting thereof is required or permitted to be taken for or
in connection with any corporate action by any provisions of the statutes or of
the Articles of Incorporation or these By-Laws, the meeting, notice of the
meeting, and vote of stockholders may be dispensed with if stockholders owning
one hundred (100%) percent of the outstanding stock of the Corporation consent
in writing to such corporate action being taken.
Article III
DIRECTORS
Section 3.1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors which may exercise all such powers of the Corporation and do all such
acts and things as are not bey the General Corporation Act of the State of Ohio
nor by the Articles of Incorporation nor by these By-Laws directed or required
to be exercised or done by the stockholders.
Section 3.2 Number of Directors. The number of directors which
shall constitute the whole Board shall be three. The directors shall be elected
at the annual meeting of the stockholders, and each director shall hold office
until his successor is elected and qualified or until his earlier resignation
or removal.
Section 3.3 Vacancies. If the office of any director or
directors becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, or a new directorship is
created, a majority of the remaining directors, though less than a quorum,
shall choose a successor or successors, or a director to fill the newly created
directorship, who shall hold office for the unexpired term or until the next
election or directors.
Section 3.4. Committees of Directors. The Board of Directors may,
by resolution or resolutions passed by a majority of the whole Board, designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. Any such committee, to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize
the seal of the Corporation to be affixed to all papers which may require it;
but not such committee shall have the power or authority in reference to
amending the Articles of Incorporation, adopting an agreement or merger or
consolidation, recommending to the stockholder the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
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dissolution, or amendment the By-Laws of the Corporation; and, unless the
resolution, By-Laws, or Articles of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. 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. The committees shall keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
Section 3.5. Compensation of Directors. Directors, as such, may
receive such stated salary for their services and/or such fixed sums and
expenses for attendance at each regular or special meeting of the Board of
Directors as may be established by resolution of the Board, except that an
employee of the Corporation may not also receive compensation as a Director;
provided that nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 3.6 Annual Meeting. The annual meeting of the Board of
Directors shall be held on the date of and following the annual meeting of the
stockholders in each year at the place thereof. Notice of such meeting, unless
waived, shall be given by mail or telegram to each director elected at such
annual meeting, at his address as the same may appear on the records of the
Corporation, or in the absence of such address, at his residence or usual place
of business, at least three days before the day on which such meeting is to be
held.
Section 3.7. Special Meetings. Special meetings of the Board of
Directors may be held at any time on the call of the President or at the
request in writing of any one director. Notice of any such meeting, unless
waived, shall be given by mail or telegram to each director at his address as
the same appears on the records of the Corporation not less than one day prior
to the day on which such meeting is to be held if such notice is by telegram,
and not less than two days prior to the day on which the meeting is to be held
if such notice is by mail. If the Secretary shall fail or refuse to give such
notice, then the notice may be given by the officer or any one of the directors
making the call. Any such meeting may be held within or without the state of
Ohio at such place as the Board may fix from time to time or as may be
specified or fixed in such notice or waiver thereof. Any meeting of the Board
of Directors shall be a legal meeting without any notice thereof having been
given, if all the directors shall be present thereat, and no notice of a
meeting shall be required to be given to any director who shall attend such
meeting.
Section 3.8. Action Without Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors or any committee
thereof may be taken without a meeting, if a written
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consent to such action is signed by all members of the Board or of such
committee, as the case may be, and such written consent is filed with the
minutes of proceedings of the Board or committee.
Members of the Board of Directors, or any committee designated by the
Board, may participate in a meeting of the Board or 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 pursuant to this section shall constitute presence in person at such
meeting.
Section 3.9 Quorum and Manner of Acting. Except as otherwise
provided in these By-Laws, a majority of the total number of directors as at
the time specified by the By-Laws shall constitute a quorum at any regular or
special meeting of the Board of Directors. Except as otherwise provided by
statute, by the Articles of Incorporation, or by these By-Laws, the vote of a
majority of the directors present shall be the act of the Board of Directors.
In the absence of a quorum, a majority of the directors present may adjourn the
meeting from time to time until a quorum shall be present. Notice of any
adjourned meeting need not be given, except that notice shall be given to all
directors if the adjournment is for more than thirty days.
Article IV
OFFICERS
Section 4.1. Officers. The officers of the Corporation shall be a
president, such number of Vice Presidents, if any, as the Board of Directors
may determine, a Secretary, an Assistant Secretary and a Treasurer. One person
may hold any number of offices, except as may be otherwise provided by law.
Section 4.2. Election, Term of Office and Eligibility. The
officers of the Corporation shall be elected annually by the Board of Directors
at its annual meeting; provided that new or additional officers may be elected
at any meeting of the Board. Each officer, except such officers as may be
appointed in accordance with the provisions of Section 4.3, shall hold office
until the next annual election of officers or until his death, resignation or
removal. None of the officers need be members of the Board.
Section 4.3. Subordinate Officers. The Board of Directors may
appoint such Assistant Secretaries, Assistant Treasurers, Controller and other
officers to hold office for such period and with such authority and to perform
such duties as the Board may from time to time determine. The Board may, by
specific resolution, empower the chief executive officer of the Corporation to
appoint any such subordinate officers.
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Section 4.4. Removal. The President, any Vice President, the
Secretary and/or the Treasurer may be removed at any time, either with or
without cause, but only by the affirmative vote of the majority of the total
number of directors as at the time specified by the By-Laws. The Assistant
Secretary and any subordinate officers appointed pursuant to Section 4.3 may be
removed at any time, either with or without cause, by the majority vote of the
directors present at any meeting of the Board or by any committee or officer
empowered to appoint such subordinate officers.
Section 4.5. The President. The President shall be the chief
executive officer of the Corporation. He shall have executive authority to
effect all orders and resolutions of the Board of Directors and, subject to the
control vested in the Board of Directors by statute, by the Articles of
Incorporation, or by these By-Laws, shall administer and be responsible for the
management of the business and affairs of the Corporation. He shall preside at
all meetings of the stockholders and the Board of Directors; and in general
shall perform all duties incident to the office of the President and such other
duties as from time to time may be assigned to him by the Board of Directors.
Section 4.6. The Vice Presidents. In the event of the absence or
disability of the President, each Vice President, in the order of his
seniority, which shall be in the order of his election, shall perform the
duties of the President. The Vice Presidents shall also perform such other
duties as from time to time may be assigned to them by the Board of Directors
or by the chief executive officer of the corporation.
Section 4.7. The Secretary. The Secretary shall:
(a) Keep the minutes of the meetings of the stockholders and of
the Board of Directors;
(b) See that all notices are duly given in accordance with the
provisions of these By-Laws or as required by law;
(c) Be custodian of the records and of the seal of the Corporation
and see that the seal or a facsimile or equivalent thereof is
affixed to or reproduced on all documents, the execution of
which on behalf of the Corporation under its seal is duly
authorized;
(d) Have charge of the stock record books of the Corporation;
(e) In general, perform all duties incident to the office of
Secretary, and such other duties
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as are provided by these By-Laws and as from time to time are
assigned to him by the Board of Directors or by the chief
executive officer of the Corporation.
Section 4.8. The Assistant Secretaries. If one or more Assistant
Secretaries shall be appointed pursuant to the provisions of Section 4.3, then,
at the request of the Secretary, or in his absence or disability, the Assistant
Secretary designated by the Secretary (or in the absence of such designations,
then any one of such Assistant Secretaries) shall perform one duties of the
Secretary and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the Secretary.
Section 4.9. The Treasurer. The Treasurer shall:
(a) Receive and be responsible for all funds of and securities
owned or held by the Corporation and, in connection therewith,
among other things: keep or cause to be kept full and accurate
records and accounts for the Corporation; deposit or cause to
be deposited to the credit of the Corporation all moneys,
funds and securities so received in such or other depository
as the Board of Directors or an officer designated by the
Board may from time to time establish; and disburse or
supervise the disbursement of funds of the Corporation as may
be properly authorized;
(b) Render to the Board of Directors at any meeting thereof, or
from time to time whenever the Board of Directors or the chief
executive officer of the Corporation may require, financial
and other appropriate reports on the condition of the
Corporation.
(c) In general, perform all the duties incident to the office of
Treasurer and such other duties as from time to time may be
assigned to him by the Board of Directors or by the chief
executive officer of the Corporation.
Section 4.10. The Assistant Treasurers. If one or more Assistant
Treasurers shall be appointed pursuant to the provisions of Section 4.3, then,
at the request of the Treasurer, or in his absence or disability, the Assistant
Treasurer designated by the Treasurer (or Treasurers) shall perform all the
duties of the Treasurer and when so acting shall have all the powers of and be
subject to all the restrictions upon, the Treasurer.
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Section 4.11. Salaries. The salaries of the officers shall be
fixed from time to time by the Board of Directors, and no officer shall be
prevented from receiving such salary by reason of the fact that the is also a
director of the Corporation.
Section 4.12. Delegation of Duties. In case of the absence of any
officer of the Corporation or for any other reason which may seem sufficient to
the Board of Directors, the Board of Directors may, for the time being,
delegate his powers and duties, or any of them, to any other officer or to any
director.
Article V
SHARES OF STOCK
Section 5.1. Regulation. Subject to the terms of any contract of
the Corporation, the Board of Directors may make such rules and regulations as
it may deem expedient concerning the issue, transfer, and registration of
certificates for shares of the stock of the Corporation, including the issue of
new certificates for lost, stolen or destroyed certificates, and including the
appointment of transfer agents and registrars.
Section 5.2 Consideration for Shares. The Board of Directors
shall cause the Corporation to issue the capital stock of the Corporation for
such consideration as has been fixed by such board in accordance with the
provisions of the Articles of Incorporation.
Subject to the provisions of the Articles of Incorporation, the
consideration for the issuance of shares of the capital stock of the
Corporation may be paid, in whole or in part, in money, in other property,
tangible or intangible, or in labor actually performed for, or services
actually rendered to the Corporation; provided, however, that the part of the
surplus of the Corporation which is transferred to capital upon the issuance of
shares as a share dividend shall be deemed to be the consideration for the
issuance of such shares. When payment of the consideration for which a share
was authorized to be issued shall have been received by the Corporation, or
when surplus shall have been transferred to capital upon the issuance of a
share dividend, such share shall be declared and taken 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 thereon. In the absence of actual fraud in the
transaction, the judgment of the Board of Directors as to the value of such
property, labor or services received as consideration, or the value placed by
the Board of Directors upon the corporate assets in the event of a share
dividend shall be conclusive. Promissory notes or future services shall not be
accepted in payment or part payment of any of the capital stock of the
Corporation.
Section 5.3 Stock Certificates. Certificates for shares
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of the stock of the Corporation shall be respectively numbered serially for
each class of shares, or series thereof, as they are issued, shall be impressed
with the corporate seal or a facsimile thereof, and shall be signed by the
President or a Vice President, and by the Secretary or Treasurer, provided that
such signatures may be facsimiles on any certificate countersigned by a
transfer agent other than the Corporation or its employee or by a registrar
other than the Corporation or its employee. Each certificate shall exhibit the
name of the Corporation, the class (or series of any class) and number of
shares represented thereby, and the name of the holder. Each certificate shall
be otherwise in such form as may be prescribed by the Board of Directors.
Section 5.4 Restriction on Transfer of Securities. A restriction
on the transfer or registration of transfer of securities of the Corporation
may be imposed either by the Articles of Incorporation or by these By-Laws or
by an agreement among any number of security holders or among such holders and
the Corporation. No restriction so imposed shall be binding with respect to
securities issued prior to the adoption of the restriction unless the holders
of the securities are parties to an agreement or voted in favor of the
restriction.
A restriction on the transfer of securities of the Corporation is
permitted by this Section if it:
(a) Obligates the holder of the restricted securities to offer to
the Corporation or to any other holders of securities of the
Corporation or to any other person or to any combination of
the foregoing a prior opportunity, to be exercised within a
reasonable time, to acquire the restricted securities; or
(b) Obligates the Corporation or any holder of securities of the
Corporation or any other person or any combination of the
foregoing to purchase the securities which are the subject of
an agreement respecting the purchase and sale of the
restricted securities; or
(c) Requires the Corporation or the holders of any class of
securities of the Corporation to consent to any proposed
transfer of the restricted securities or to approve the
proposed transferee of the restricted securities; or
(d) Prohibits the transfer of the
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restricted securities to designated persons or classes of
persons, and such designation is not manifestly unreasonable;
or
(e) Restricts transfer or registration of transfer in any other
lawful manner.
Unless noted conspicuously on the security, a restriction, even though
permitted by this Section, is ineffective except against a person with actual
knowledge of the restriction.
Section 5.5 Transfer of Shares. Subject to the restrictions
permitted by Section 5.4, shares of the capital stock of the Corporation shall
be transferable on the books of the Corporation by the holder thereof in person
or by his duly authorized attorney, upon the surrender or cancellation of a
certificate or certificates for a like number of shares. As against the
Corporation, a transfer of shares can be made only on the books of the
Corporation and in the manner hereinabove provided, and the Corporation shall
be entitled to treat the registered holder of any share as the owner thereof
and shall not be bound to recognize any equitable or other claim to or interest
in such share as the owner thereof and shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall be express or other notice thereof, save as
expressly provided by the statutes of the State of Ohio.
Section 5.6 Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
shall not be more than fifty nor less than ten days before the date of such
meeting, nor more than fifty days prior to any other action.
If no record date is fixed:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at
the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close
of business on the day next preceding the day on which the
meeting is held;
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(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written consent
is expressed;
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which
the Board of Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 5.7 Lost Certificate. Any stockholder claiming that a
certificate representing shares of stock has been lost, stolen or destroyed may
make an affidavit or affirmation of the fact and, if the Board of Directors so
requires, advertise the same in a manner designated by the Board, and give the
Corporation a bond of indemnity in form and with security for an amount
satisfactory to the Board (or an officer or officers designated by the Board),
whereupon a new certificate may be issued of the same tenor and representing
the same number, class and/or series of shares as were represented by the
certificate alleged to have been lost, stolen or destroyed.
Article VI
BOOKS AND RECORDS
Section 6.1 Location. The books, accounts and records of the
Corporation may be kept at such place or places within or without the State of
Ohio as the Board of Directors may from time to time determine.
Section 6.2 Inspection. The books, accounts, and records of the
Corporation shall be open to inspection by any member of the Board of Directors
at all times; and open to inspection by the stockholders at such times, and
subject to such regulations as the Board of Directors may prescribe, except as
otherwise provided by statute.
Section 6.3 Corporate Seal. The corporate seal shall contain two
concentric circles between which shall be the name of the Corporation and the
word "Ohio" and in the center shall be inscribed the words "Corporate Seal".
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Article VII
DIVIDENDS AND RESERVES
Section 7.1 Dividends. The Board of Directors of the
Corporation, subject to any restrictions contained in the Articles of
Incorporation and other lawful commitments of the Corporation, may declare and
pay dividends upon the shares of its capital stock either out of the surplus of
the Corporation, as defined in and computed in accordance with the General
Corporation Act of the State of Ohio or in case there shall be no such surplus,
out of the net profits of the Corporation for the fiscal year in which the
dividend is declared and/or the preceding fiscal year. If the capital of the
Corporation, computed in accordance with the General Corporation Act of the
State of Ohio shall have been diminished by depreciation in the value of its
property, or by losses, or otherwise, to an amount less than the aggregate
amount of the capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets, the Board of
Directors of the Corporation shall not declare and pay out of such net profits
any dividends upon any shares of any classes of its capital stock until the
deficiency in the amount of capital represented by the issued and outstanding
stock of all classes having a preference upon the distribution of assets shall
have been repaired.
Section 7.2 Reserves. The Board of Directors of the Corporation
may set apart, out of any of the funds of the Corporation available for
dividends, a reserve or reserves for any proper purpose and may abolish any
such reserve.
Article VIII
MISCELLANEOUS PROVISIONS
Section 8.1 Fiscal Year. The fiscal year of the Corporation
shall end on the Sunday nearest December 31, in each year, or otherwise fixed
by the Board of Directors.
Section 8.2 Depositories. The Board of Directors or an officer
designated by the Board shall appoint banks, trust companies, or other
depositories in which shall be deposited from time to time the money or
securities of the Corporation.
Section 8.3 Checks, Drafts and Notes. All checks, drafts, or
other orders for the payment of money and all notes or other evidences of
indebtedness issued in the name of the Corporation shall be signed by such
officer or officers or agent or agents as shall from
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time to time be designated by resolution of the Board of Directors or by an
officer appointed by the Board.
Section 8.4 Contracts and Other Instruments. The Board of
Directors may authorize any officer, agent or agents to enter into any contract
or execute and deliver any instrument in the name and on behalf of the
Corporation and such authority may be general or confined to specific
instances.
Section 8.5 Notices. Whenever under the provisions of the
statutes or of the Articles of Incorporation or of these By-Laws shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, by depositing the same in a post office or letter box, in a post-paid
sealed wrapper, or by delivery to a telegraph company, addressed to such
director or stockholder at such address as appears on the books of the
Corporation, or, in default of other address, to such director or stockholder
at the General Post Office in the city of the shareholder's last known address
and such notice shall be deemed to be given at the time when the same shall be
thus mailed.
Section 8.6 Waivers of Notice. Whenever any notice is required
to be given under the provisions of the statutes or of the Articles of
Incorporation or of 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 to notice. Attendance of a person at
a meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice.
Section 8.7 Stock in Other Corporations. Any shares of stock in
any other corporation which may from time to time be held by this Corporation
may be represented and voted at any meeting of shareholders of such corporation
by the President or Vice President, or by any other person or persons thereunto
authorized by the Board of Directors, or by any proxy designated by written
instrument of appointment executed in the name of this Corporation by its
President or Vice President. Shares of stock belonging to the Corporation need
not stand in the name of the Corporation, but may be held for the benefit of
the Corporation in the individual name of the Treasurer or of any other nominee
designated for the purpose by the Board of Directors. Certificates for shares
so held for the benefit of the Corporation shall be endorsed in blank or have
proper stock powers attached so that said certificates are at all times in due
form for
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transfer, and shall be held for safekeeping in such manner as shall be
determined from time to time by the Board of Directors.
Section 8.8 Indemnification of Officers, Directors, Employees and
Agents; Insurance.
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 serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Corporation 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, except in
relation to matters as to which he is adjudged in such action, suit or
proceeding, civil or criminal, to be liable for negligence or misconduct in the
performance of duty to the Corporation. Provided, however, that such
indemnification shall not be deemed exclusive of any other rights to which
those indemnified may be entitled under any provision of the Articles of
Incorporation, By-Laws, resolution, or other authorization heretofore or
hereafter adopted, after notice, by a majority vote of all the voting shares
then issued and outstanding; and provided further that expenses incurred in
defending any action, suit or proceeding, civil or criminal, may 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 director,
officer, employee, or agent to repay the amount paid by the Corporation if it
shall ultimately be determined that the director, officer, employee, or agent
is not entitled to indemnification as provided hereunder.
The Corporation shall have power to 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 Section 8.8.
Section 8.9 Amendment of By-Laws. The Board of Directors, by the
affirmative vote of a majority of the whole Board, may adopt, amend or repeal
these By-Laws at any annual or special meeting.
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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
forma 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:
<PAGE> 234
(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.
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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 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,
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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
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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
(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
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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'
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
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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 o 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
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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 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
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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
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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, o 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
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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.
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
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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:
NAME ADDRESS
---- -------
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
ARTICLE XII
Incorporator
The name and address of the incorporator is as follows:
NAME ADDRESS
---- -------
Paul H. Metzinger 2600 Energy Center
717 Seventeenth Street
Denver, Colorado 80202
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> 245
STATE OF COLORADO )
)
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/
Notary Public
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<PAGE> 246
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
<PAGE> 247
VERIFICATION
STATE OF COLORADO )
CITY AND ) ss.
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
<PAGE> 249
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 ($0.00) each, which shares shall be designated "Common Stock".
This corporation also shall have authority to issue ten million
(10,000,000) shares of one cent par value ($O.01) each, which shares shall be
designated as "Class "A" Non-Voting Common Stock".
<PAGE> 250
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
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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
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(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
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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
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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
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been distributed, and the remainder pro rata to the holders of the
Common Stock.
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.
7. 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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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:
CLASS NUMBER OF SHARES
----- ----------------
Common -0-
<PAGE> 257
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
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
<PAGE> 258
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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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, $.O1 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
<PAGE> 260
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;
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(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;
(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
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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 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
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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"
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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
Preferred Stock. Neither the consolidation or merger of the
corporation into or with any other corporation or
corporations, nor the sale or
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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.
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(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
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denominations as the converting holder has specified;
(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
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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
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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 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
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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 corporations 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.
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"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.
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
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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.
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(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, 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 assis-
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tant 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
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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
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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
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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
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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 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.
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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
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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
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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.
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
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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.
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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
direc-
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tors 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 planof 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
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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.
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
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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.
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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.
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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 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
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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
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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.
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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 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
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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
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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
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the annual meeting of the board of directors or at any special meeting of the
board called for that purpose.
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
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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.
(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.
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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.
(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.
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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;
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(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;
(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.
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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.
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.
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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
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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.
(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.
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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 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
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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
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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 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
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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 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.
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(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.
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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.
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:
Name Address
---- -------
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
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 ofnolo
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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.
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
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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 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
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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
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(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.
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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ANNEX I
BY-LAWS
OF
ULTRAK, INC.
(A DELAWARE CORPORATION)
<PAGE> 317
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
OFFICES
Section 1. Registered Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Time and Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Notice of Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Notice of Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 6. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 7. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 9. List of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 10. Inspectors of Votes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 11. Actions Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2. Number, Qualification, and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 3. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 4. Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 5. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 7. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 9. Special Meetings; Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 10. Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11. Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
COMMITTEES OF DIRECTORS
Section 12. Executive Committee; How Constituted and Powers . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
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<TABLE>
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Section 13. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 14. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 15. Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 16. Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 17. Alternate Members of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 18. Minutes of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GENERAL
Section 19. Actions Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 20. Presence at Meetings by Means of Communications Equipment . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
NOTICES
Section 1. Type of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3. When Notice Unnecessary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V
OFFICERS
Section 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Election or Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Salaries of Elected Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Assistant Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 10. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 11. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 13. Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 14. Assistant Controllers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation . . . . . . . . . . . . . . . . . . . 11
Section 2. Actions by or in the Right of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Determination of Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
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<TABLE>
<S> <C> <C>
Section 6. Right to Indemnification upon Application; Procedure upon Application . . . . . . . . . . . . . 12
Section 7. Other Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9. Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 10. Savings Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Facsimile Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3. New Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 5. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 6. Registered Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2. Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3. Annual Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4. Checks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE IX
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
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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
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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, 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.
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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 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
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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.
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
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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.
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
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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.
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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.
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,
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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.
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
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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 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.
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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 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.
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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
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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 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
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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.
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
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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,
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.
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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
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(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:
(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
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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 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.
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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.
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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:
(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;
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(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 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
6
<PAGE> 342
(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 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
7
<PAGE> 343
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.
8
<PAGE> 344
___________________________________
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 May ___, 1995 at
__________________________, Indianapolis, Indiana, at _______ 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, 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.
[ ] 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.
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 IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
Dated: May ____, 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.
<PAGE> 345
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
Exhibit No. Item
- ----------- ----
2.1 Agreement and Plan of Reorganization dated April 28, 1995, among
Ultrak, Inc. ("Ultrak"), Diamond Electronics, Inc. ("Diamond"),
Diamond Purchasing Corp., and certain shareholders of Diamond
(included as Annex A to the Prospectus/Proxy Statement)
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.
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.
II-1
<PAGE> 346
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, Risheg and JAK Pacific Warranty
and Repair Services, Inc. ("JAK") regarding Ultrak's purchase
and option to purchase JAK's common stock, dated as of April 5,
1994
11 Computation of Per Share Data
21 List of Ultrak's Subsidiaries
23.1 Consent of Grant Thornton, LLP, dated May 5, 1995
23.2 Consent of Norman, Jones, Enlow & Co., dated May 5, 1995
23.3 Consent of Gardere & Wynne, L.L.P. (to be included in Exhibit
5.1)
23.4 Consent of Future Director
24.1 Power of Attorney (set forth on Page II-5)
II-2
<PAGE> 347
(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.
II-3
<PAGE> 348
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-4
<PAGE> 349
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
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Dallas, State of Texas on the 5th day of May,
1995.
ULTRAK, INC.
By: /s/ George K. Broady George K.
Broady, Chief Executive Officer
and President
POWER OF ATTORNEY
Each of the undersigned hereby appoints George K. Broady, as attorney
and agent for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, to sign and file with the Securities
and Exchange Commission under the Securities Act of 1933 any and all amendments
and exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby,
with full power and authority to do and perform any and all acts and things
whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons and in
the capacities indicated on May 5, 1995.
<TABLE>
<S> <C>
/s/ George K. Broady Chairman of the Board, Chief Executive
George K. Broady Officer, President, and Director (Principal
Executive Officer)
/s/ James D. Pritchett Executive Vice President, Chief Operating
James D. Pritchett Officer, and Director
/s/ Tim D. Torno Secretary-Treasurer and Chief Financial
Tim D. Torno Officer (Principal Financial Officer and
Principal Accounting Officer)
/s/ William C. Lee Director
William C. Lee
_______________________ Director
Charles C. Neal
</TABLE>
II-5
<PAGE> 350
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Agreement and Plan of Reorganization dated April 28, 1995, among
Ultrak, Inc. ("Ultrak"), Diamond Electronics, Inc. ("Diamond"),
Diamond Purchasing Corp., and certain shareholders of Diamond
(included as Annex A to the Prospectus/Proxy Statement)
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.
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, Risheg and JAK Pacific Warranty
and Repair Services, Inc. ("JAK") regarding Ultrak's purchase
and option to purchase JAK's common stock, dated as of April 5,
1994
11 Computation of Per Share Data
21 List of Ultrak's Subsidiaries
23.1 Consent of Grant Thornton, LLP, dated May 5, 1995
23.2 Consent of Norman, Jones, Enlow & Co., dated May 5, 1995
23.3 Consent of Gardere & Wynne, L.L.P. (to be included in Exhibit
5.1)
23.4 Consent of Future Director
24.1 Power of Attorney (set forth on Page II-5)
<PAGE> 1
EXHIBIT 5.1
May 5, 1995
Diamond Electronics, Inc.
4465 Coonpath Road
Carroll, Ohio 43112
Gentlemen:
We have acted as counsel for Ultrak, Inc., a Colorado corporation (the
"Company"), in connection with the Registration Statement on Form S-4
(Registration No. 33-________), as supplemented and amended (as so supplemented
and amended, the "Registration Statement"), filed with the Securities and
Exchange Commission in connection with the registration under the Securities
Act of 1933, as amended, of 600,000 shares of Common Stock, no par value
("Common Stock"), of the Company to be issued and sold by the Company (the
"Company Shares"), and, up to an additional 100,000 shares of Common Stock to
be sold by the Company (the "Company Additional Shares").
With respect to the foregoing, we have examined such documents and
questions of law as we have deemed necessary to render the opinions expressed
below. Based upon the foregoing, we are of the opinion that the Company Shares
and the Company Additional Shares, when issued, sold, and delivered in the
manner and for the consideration stated in the Prospectus constituting a part
of the Registration Statement, will be duly and validly issued, fully paid and
nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto, under the heading "Legal Matters."
Very truly yours,
GARDERE & WYNNE, L.L.P.
By:_________________________________
Richard L. Waggoner, Partner
<PAGE> 1
EXHIBIT 10.1
L 0 A N A G R E E M E N T
By and Between
ULTRAK, INC.
CCTV SOURCE INTERNATIONAL, INC.
LOSS PREVENTION ELECTRONICS CORPORATION
and
PETRUS FUND, L.P.
$3,000,000.00 Revolving Line of Credit
Dated as of
July 20, 1992
1
<PAGE> 2
LOAN AGREEMENT
THIS AGREEMENT made and entered into as of this 20th day of July,
1992, by and among ULTRAK, INC., a Colorado corporation ("Ultrak"), CCTV SOURCE
INTERNATIONAL, INC., a Texas corporation ("CCTV"), and LOSS PREVENTION
ELECTRONICS CORPORATION, a Colorado corporation ("Loss Prevention"), each with
principal offices and mailing address at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006 (hereinafter Ultrak, CCTV and Loss Prevention are
collectively called the "Borrowers"), and PETRUS FUND, L.P., a Texas limited
partnership, with offices at 1700 Lakeside Square, 12377 Merit Drive, Dallas,
Dallas County, Texas 75251 (hereinafter called the "Lender");
W I T N E S S E T H
For and in consideration of the mutual covenants and agreements herein
contained and of the loans and commitment hereinafter referred to, the
Borrowers and the Lender agree as follows:
ARTICLE I
GENERAL TERMS
Section 1.01 Terms Defined Above. As used in this Agreement, the
terms "Borrower," "Borrowers", and "Lender" shall have the meanings indicated
above.
Section 1.02 Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings, unless the context otherwise
requires:
"AFB" shall mean American Federal Bank, F#S#B:, a federal
savings bank.
"Affiliate" shall mean any Person controlling, controlled by
or under common control with any other Person. For purposes of this
definition, "control" (including "controlled by" and "under common
control with") means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies
of such Person, whether through the ownership of voting securities or
otherwise. Without limiting the generality of the foregoing, for
purposes of this Agreement, Borrowers, and each of their respective
Subsidiaries shall be deemed to be Affiliates of one another.
"Agreement" shall mean this Loan Agreement, as the same may
from time to time be amended or supplemented.
2
<PAGE> 3
"Borrowers' Agent" shall mean Ultrak, acting as agent
Borrowers.
"Borrowing Base" shall mean at any time an amount not to
exceed the lesser of: (a) Three Million and No/100 Dollars
($3,000,000.00) or (b) the Inventory Advance Amount determined as of
the date the Borrowing Base is calculated.
"Borrowing Date" shall mean the date Borrowers' Agent requests
funding of an advance by Lender, pursuant to Section 2.03 hereof.
"Business Day" shall mean any day on which banks in the State
of Texas are open for the conduct of general banking business.
"Closing" shall mean the date and time for closing the
transaction contemplated hereby, described in Section 8.01 hereof.
"Commitment" shall mean the obligation of the Lender to make
revolving credit loans to the Borrowers under Section 2.01 hereof, up
to the maximum amount therein stated.
"Commitment Fee" shall mean the fee payable by Borrowers as
described in Section 2.11 hereof. "Current Assets" shall mean, as of
any date, the current assets which would be reflected on a balance
sheet a of Borrowers prepared on a consolidated basis as of such date
in accordance with generally accepted accounting principles.
"Current Liabilities" shall mean, as of any date, the current
liabilities which would be reflected on a balance sheet of Borrowers
prepared on a consolidated basis as of such date in accordance with
generally accepted accounting principles.
"Current Maturities of Long Term Debt" shall mean, as of any
date, the aggregate of all principal payments required, scheduled or
anticipated to be made on account of Long Term Debt during the twelve
(12)-month period that follows such date.
"Default" shall mean the occurrence of any of the events
specified in Article VII hereof, whether or not any requirement for
notice or lapse of time or other condition precedent has been
satisfied.
"Drawdown Termination Date" shall mean the earlier of (a)
January 20, 1995 or (b) ninety (90) days following the date Lender
gives Borrowers' Agent notice of Lender's exercise of its right to
terminate its Commitment pursuant to Section 2.
3
<PAGE> 4
10(b) hereof.
"Eligible Inventory" shall mean an amount equal to the value
of all of Borrowers' Inventory, valued at the lesser of (i) net cost
or (ii) current market value, that satisfies each and all of the
following conditions:
(a) Lender has a perfected, first priority lienor
security interest in such Inventory;
(b) if the Inventory is in any Borrowers' possession,
the Inventory is segregated in the Fenced Area of the
Carrollton Warehouse within forty-eight(48) hours of arriving
on Borrowers' premises;
(c) if the Inventory is not in any Borrowers'
possession, the Inventory is identified by the seller thereof
as being property of the Borrowers and is in transit to
Borrowers;
(d) the vendor of the Inventory is either Hi-Tron,
Pacific Corporation, or such other vendor as has been mutually
agreed upon in writing by Lender and Borrowers;
(e) title to the Inventory has been or will be
acquired by a Borrower with funds provided to a Borrower
either by a direct advance under the Revolving Credit Note or
pursuant to a Letter of Credit Arrangement;
(f) the Inventory is insured against casualties,
risks and contingencies and in types and amounts as are
customary in the case of Persons engaged in the same or
similar businesses and similarly situated; with the policies
of such insurance naming the Lender as loss payee; and
(g) the Inventory is otherwise acceptable to Lender
in its sole discretion. Inventory that qualifies as Eligible
Inventory shall cease to be Eligible Inventory when Lender has
received collected funds in payment of the advance made by
Lender to the Borrower for the purchase of such Eligible
Inventory (whether such advance was made directly, as
contemplated by Section 2.30(a) (iii), or indirectly to
reimburse an issuer of a letter of credit, as contemplated by
Section 2.03(a) (iv).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Event of Default" shall mean the occurrence of any of the
events specified in Article VII hereof, provided that any requirement
for notice or lapse of time or any other condition
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precedent has been satisfied.
"Exxis" shall mean Exxis Technologies, Inc., a Texas
corporation.
"Fenced Area of the Carrollton Warehouse" shall mean the
fenced area at Ultrak's warehouse at 1220 Champion Circle, Carrollton,
Texas 75006, which is denoted as a secure area for Eligible Inventory
and which is protected and maintained pursuant to the Warehouseman's
Agreement.
"Financial Statements" shall mean the consolidated and
consolidating financial statement or statements of the Borrowers and
their Subsidiaries described or referred to in Section 3.06 hereof.
"Indebtedness" shall mean any and all amounts owing or to be
owing by the Borrowers to the Lender in connection with the Revolving
Credit Note, this Agreement, and other liabilities of the Borrowers to
the Lender from time to time existing, including without limitation
guaranties of indebtedness and obligations acquired from third
Persons, whether in connection with this or other transactions.
"Intercreditor Agreement" shall mean the Intercreditor
Agreement described and referred to in Section 8.15 hereof.
"Inventory" shall mean all inventory of Borrowers, as such
term is defined under the Texas Uniform Commercial Code-Secured
Transactions.
"Inventory Advance Amount" shall mean at any time an amount
equal to the lesser of:
(a) Three Million and No/100 Dollars($3,000,000.00) or
(b) the product of all Eligible Inventory of the
Borrowers (excluding Eligible Inventory that is subject to a
Letter of Credit Arrangement) times the Inventory Percentage.
"Inventory Percentage" shall initially be seventy-percent
(75%).Lender shall have the right at any time, and from time to time,
in its discretion, to revise the Inventory Percentage to any
percentage equal to or greater than fifty percent (50%), upon thirty
(30) days written notice thereof to Borrowers.
"Letter of Credit Arrangement" shall mean an agreement
involving a letter of credit pursuant to which a Borrower is the
account party, a vendor of Inventory to a Borrower is the
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beneficiary, funds are drawable on the issuer thereof upon
presentation of documents evidencing or creating a sale of Eligible
Inventory to a Borrower, and the face amount of the letter of credit
is equal to or less than the net cost of the Eligible Inventory.
"Letter of Credit Payment Account" shall mean the deposit
account into which an advance under this Agreement is deposited for
the purpose of providing a portion of the a funds for reimbursement
obligations owed to an issuer of a letter of credit in connection with
a Letter of Credit Arrangement.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner of
the Property, whether such interest is based on the common law,
statute or contract, and including but not limited to the security
interest or lien arising from a mortgage, security agreement, deed of
trust, assignment, collateral mortgage, chattel mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment,
bailment for security purposes or certificate of title lien. The term
"Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances affecting Property. For
the purposes of this Agreement, the borrowers or any Subsidiary shall
be deemed to be the owner of any Property which it has acquired or
holds subject to a conditional sale agreement, financing lease or
other arrangement pursuant to which title to the Property has been
retained by or vested in some other person for security purposes.
"Long Term Debt" of any Borrower shall mean, as of any date,
all Indebtedness which would be classified as "funded indebtedness" or
"long-term indebtedness" on a balance sheet of any Borrower prepared
as of such date in accordance with generally accepted accounting
principles, including without limitation, capital lease payments.
"Maximum Non-usurious Interest Rate" shall mean the maximum
non-usurious interest rate allowable under applicable United States
federal law and under the laws of the State of Texas as presently in
effect and, to the extent allowed by such laws, as such laws may be
amended from time to time to increase such rate.
"Net Capital Expenditures" shall mean the sum of all capital
expenditures of Borrowers, minus the proceeds from the sale of assets.
"Notice of Borrowing" shall mean the written request of
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Borrowers' Agent for an advance of funds hereunder, as more fully
described and defined in Section 2.03 hereof.
"Person" shall mean any individual, corporation, partnership,
joint venture, association, joint stock company, trust, trustee,
unincorporated organization, government or any agency or political
subdivision thereof, or any other form of entity.
"Plan" shall mean any Plan subject to Title IV of ERISA and
maintained by the Borrowers or any Subsidiary, or any such plan to
which the Borrowers or any Subsidiary is required to contribute on
behalf of its employees.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Revolving Credit Note" shall mean the promissory note of the
Borrowers described in Subsection 2.01 hereof and being in the form of
note attached as Exhibit A hereto, and all renewals, extensions,
modifications and rearrangements thereof.
"Revolving Loan Maturity Date" shall mean the earlier of (a)
January 20, 1995 or (b) one hundred eighty (180) days following the
date Lender gives Borrowers' Agent notice of Lender's exercise of its
right to terminate its Commitment pursuant to Section 2.10(b) hereof.
"RICO" shall mean the Racketeer Influenced and Corrupt Organization
Act of 1970, as amended.
"Securities Laws" shall mean the Securities Act of 1933 as
amended and the Securities Exchange Act of 1934 as amended and the
regulations promulgated pursuant to such acts.
"Security Instruments" shall mean this Agreement, the
agreements or instruments described or referred to in Sections 8.09,
8.10, 8.10, 8.12 and 8.14 hereof, and any and all other agreements or
instruments now or hereafter executed and delivered by any Borrower,
any Subsidiary or any other Person (other than solely by the Lender
and/or any bank or creditor participating in the benefits of loans
evidenced by the Revolving Credit Note or any collateral or security
there for) in connection with, or as security for the payment or
performance of, the Revolving Credit Note or this Agreement.
"Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the issued and outstanding securities having ordinary
voting power for the election of directors is owned or controlled,
directly or indirectly, by the Borrowers and/or any one of them and/or
one or more of their subsidiaries and/or one or more shareholders of
the Borrowers;
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provided, that any such corporation of which more than fifty percent
(50%) of such securities is owned by the shareholders of the
Borrowers, land none of which securities are owned by the Borrowers or
any subsidiary of the Borrowers, shall not be deemed a Subsidiary
hereunder. "Tangible Net Worth" shall mean at any time the excess of
total assets over total liabilities at such time, determined on a
consolidated basis in accordance with generally accepted accounting
principles consistently applied, except that the following items shall
be excluded in the determination of total assets: (i) goodwill,
organizations expenses, research and development expenses, trademarks,
trade names, copyrights, patents, patent Applications, licenses and
rights in any thereof, and other similar intangibles, (ii) all prepaid
expenses (excluding inventory of Borrowers paid for but not yet
received), deferred charges or unamortized debt discount and expense,
(iii) all reserves carried and not deducted from assets, (iv) treasury
stock and capital stock, obligations or other securities of, or
capital contributions to, or investments in, any Subsidiary, or any
loans or advances to any Affiliate, (v) securities which are not
readily marketable, (vi) cash held in & sinking or other analogous
fund established for the purpose of redemption, retirement or
prepayment of capital stock or indebtedness, (vii) any write-up in the
book value of any asset resulting from a revaluation thereof, and
(viii) any items not included in clauses (i) through (vii) above which
are treated as intangibles in conformity with generally accepted
accounting principles.
"TCFC" shall mean Transamerica Commercial Finance Corporation,
a Delaware corporation.
"Warehouseman's Agreement" shall mean that certain
warehouseman's agreement to be executed by and among Borrower, Lender
and a bonded warehouseman satisfactory to Borrower and Lender,
pertaining to the storage and security of Borrower's Eligible
Inventory that is located in the Fenced Area of the Carrollton
Warehouse.
Section 1.03Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, this shall be done in accordance
with generally accepted accounting principles, consistently applied, except
where such principles are inconsistent with the requirements of this Agreement.
ARTICLE II
AMOUNT AND TERMS OF LOAN
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Section 2.01 The Loans and Commitment. Subject to the terms and
conditions and relying on the representations and warranties contained in this
Agreement, the Lender agrees to make the following loan to the Borrowers:
Revolving Credit Loans. From the date of this Agreement
through the Drawdown Termination Date, the Lender may make revolving
credit loans to the Borrowers from time to time on any Business Day in
such amounts as the Borrowers may request up to the maximum amount
thereinafter stated, and the Borrowers may make borrowings,
prepayments and re-borrowings (as permitted or required in Sections
2.07 and 2.08 hereof) in respect thereof; provided, however, that the
aggregate principal amount of all such revolving credit loans at any
one time outstanding shall not exceed the Borrowing Base, and the
principal amount of any single advance shall not exceed the Inventory
Percentage multiplied by the cost of the Eligible Inventory that is
being purchased (whether directly, as contemplated by Section 2.03 (a)
(iii), or indirectly by deposit into a Letter of Credit Payment
Account, as contemplated by Section 2.03 (a) (iv)). To evidence the
revolving credit loans made by the Lender pursuant to this Section,
the Borrowers will issue, execute and deliver the Revolving Credit
Note dated as of the date of this Agreement and payable on the
Revolving Loan Maturity Date. Interest on the Revolving Credit Note
shall accrue at the rate provided in Section 2.02 hereof and shall be
payable monthly on the first day of each month during its term.
Section 2.02 Interest Rate. The Revolving Credit Note shall bear
interest at the following rates:
(a) The Revolving Credit Note shall bear interest from the
date thereof until the Revolving Loan Maturity Date at a rate per
annum which is ten percent (10.0%).
(b) Past due principal and interest in respect of the
Revolving Credit Note shall bear interest at a rate which is three
percent (3%) per annum in excess of the prematurity rate set forth in
Subsection 2.02(a) hereinabove (but in no event to exceed the Maximum
Non-usurious Interest Rate).
Section 2.03 Notice and Manner of Revolving Credit Borrowing. The
amount and date of each revolving credit loan shall be made as set forth in
this Section.Each Borrower hereby constitutes and appoints Borrowers' Agent as
agent for receiving, accounting and disbursing all advances hereunder and
Borrowers' Agent hereby accepts such appointment. Such appointment may not be
revoked during the term of this Agreement without the written consent of the
Lender.
(a) Request for Loan. Borrowers' Agent shall give the
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Lender prior written notice (a "Notice of Borrowing") of each
requested advance to be made under this Agreement. Borrowers shall be
entitled to a maximum of one (1) Notice of Borrowing per calendar
week, on a non-cumulative basis. Each Notice of Borrowing shall
specify the following:
(i) the requested amount of the advance;
(ii) the requested date of such advance (the
"Borrowing Date") (such date not to be less than six (6)
Business Days after Lender receives the Notice of Borrowing
and all other information and documentation Lender may
request);
(iii) in the case of the Borrowers' direct purchase
of Eligible Inventory, a complete description of the Eligible
Inventory being purchased, including, without limitation, all
relevant purchase orders, invoices and shipping and delivery
information, or such other information as may be acceptable to
Lender in Lender's discretion;
(iv) in the case of funds being deposited in a Letter
of Credit Payment Account to pay reimbursement obligations of
a Borrower under a Letter of Credit Arrangement,
(A) a complete description of the Letter of
Credit Arrangement, including, without limitation,
all relevant letter of credit documentation
(including, as applicable, amendments and
endorsements thereto) and information pertinent to
the Letter of Credit Payment Account; and
(B) a complete description of the Eligible
Inventory being purchased, including, without a
limitation, all relevant purchase orders, invoices
and shipping and delivery information, or such other
information as may be acceptable to Lender in
Lender's discretion; and
(v) the relevant wiring instructions for the
Borrowers' request for payment of the proceeds of the advance
to the appropriate third party.
Borrowers' Agent shall also provide Lender with any and all information and
documentation Lender deems necessary to confirm and verify the net cost of the
Eligible Inventory and/or the circumstances pertaining to the Letter of Credit
Arrangement, as the case may be. Upon receipt of the Notice of Borrowing and
all other information and documentation Lender may request, Lender will
undertake such due diligence as it deems advisable to determine
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whether the Eligible Inventory or the Letter of Credit Arrangement, as the case
may be, is sufficient to justify the requested advance and is otherwise
acceptable to Lender.Within five (5) Business Days after receipt of the Notice
of Borrowing, Lender shall inform Borrowers' Agent whether such Eligible
Inventory or the Letter of Credit Arrangement, as the case may be, is
acceptable to Lender in its sole and absolute discretion. The notification of
acceptance or rejection of a Notice of Borrowing shall be made in writing by
Lender to Borrower.If Lender so deems such Eligible Inventory or Letter of
Credit Arrangement unacceptable, Lender shall have no duty to make the Loan.
If Lender fails to notify Borrower that such Eligible Inventory or Letter of
Credit Arrangement is acceptable to Lender within said five (5) Business Days,
Lender shall be deemed to have rejected such Eligible Inventory or Letter of
Credit Arrangement, as the case may be. Borrowers' Agent shall have the right
to withdraw a Notice of Borrowing at any time prior to Borrowers Agent's
receipt of the written notice of acceptance of the Notice of Borrowing by
Lender.
(b) Notice Irrevocable. After receipt by Borrowers' Agent of the
written notice from Lender of the acceptance of a Notice of Borrowing (provided
the Notice of Borrowing was not previously withdrawn by Borrower), each Notice
of Borrowing shall be irrevocable and binding on Borrowers. The individual
persons authorized to deliver a Notice of Borrowing to Lender on behalf of
Borrowers are set forth on Schedule I attached hereto.Lender is authorized to
rely upon any Notice of Borrowing purportedly signed by any one of such
authorized persons until and unless Lender receives from Borrowers a written
revocation of such authority. Borrowers shall indemnify Lender against and pay
to Lender upon demand, any reasonable cost or expense, including without
limitation reasonable attorneys' fees, paid by Lender to any third party in
connection with such requested advance as to which a Notice of Borrowing has
become irrevocable.Borrowers represent, warrant, and covenant that there will
be no change in the terms or information set forth in the Notice of Borrowing
from the date of the giving of the Notice of Borrowing to Lender through the
date of repayment to Lender of the funds advanced by Lender with respect
thereto without the prior written consent of Lender.
(c) Funding. If, and only if, Lender accepts a Notice of
Borrowing, Lender shall, on the Borrowing Date, shall authorize the wire
transfer of funds in the amount of such advance hereunder in immediately
available funds in accordance with the wiring instructions provided to the
Lender pursuant to Section 2.03 (a) (v) above.
(d) Benefit of Borrowers. Any loan or advance shall be
conclusively presumed to have been made under the terms of the Revolving Credit
Note to or for the benefit of all Borrowers when made pursuant to the terms of
any Notice of Borrowing or when said advances are deposited to the credit of
the account of Borrowers'
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Agent regardless of the fact that persons other than those authorized hereunder
may have authority to draw against such account, or may have requested an
advance.
Section 2.04 Application of Cash Sums. All cash sums paid to and
received by the Lender on account of any Property upon which the Lender has a
Lien (a) shall be promptly applied by the Lender on the Indebtedness whether or
not such Indebtedness shall have, by its terms, matured, such application to be
made to principal or interest or expenses as the Lender may elect; provided,
however, the Lender need not apply or give credit for any item included in such
sums until the Lender has received final credit therefor from its bank in
accordance with normal banking practices (three [3] business days shall be
allowed for collection of all items through normal banking channels, and funds
received by Lender by wire transfer will be given credit upon receipt) or has
received solvent credits accepted as such by the Lender; provided further,
however, the Lender's failure to so apply any such sums shall not be a waiver
of the Lender's right to so apply such sums or any other sums at any time, or
(b) so long as no Default or Event of Default has occurred and is continuing,
at the option of the Lender, shall be released to the Borrowers for use in the
Borrowers' business.
Section 2.05 Computation. All payments of interest shall be
computed on the per annum basis of a year of three hundred sixty (360) days and
for the actual number of days (including the first but excluding the last day)
elapsed unless such calculation would result in a usurious rate, in which case
interest shall be calculated on a per annum basis of a year of three hundred
sixty-five (365) or three hundred sixty-six (366) days, as the case may be.
Section 2.06 Removal of Inventory. Borrowers shall be entitled to
remove Inventory from the Fenced Area of the Carrollton Warehouse if, and only
if, the following conditions are satisfied:
(a) the advance made by Lender for the purchase of the
Eligible Inventory (whether such advance was made directly, as
contemplated by Section 2.30(a) (iii) , or indirectly to reimburse an
issuer of a letter of credit, a as contemplated by Section 2.03 (a)
(iv), has been repaid to Lender in collected funds; and
(b) at the time of removal, the Inventory to be removed, when
compared to all other Inventory located in the Fenced Area of the
Carrollton Warehouse, was the first to arrive in the Fenced Area of
the Carrollton Warehouse; it being the intention of Borrowers and
Lender that Inventory shall be removed from the Fenced Area of the
Carrollton Warehouse only on a first-in, first-out basis.
Section 2.07 Voluntary Prepayments and Re-borrowings. The
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unpaid principal balance of the Revolving Credit Note at any time shall be the
total amounts loaned or advanced thereunder by the Lender, less the amount of
payments or prepayments of principal made thereon by or for the account of
Borrowers.It is contemplated that by reason of prepayments thereon there may be
times when no Indebtedness is owing thereunder; but notwithstanding such
occurrences, the Revolving Credit Note shall remain valid and be in full force
and effect as to loans or advances made pursuant to and under the terms of the
Revolving Credit Note subsequent to each such occurrence. All loans or
advances and all payments or prepayments made thereunder on account of
principal or interest may be evidenced by Lender, or any subsequent holder,
maintaining in accordance with its usual practice an account or accounts
evidencing the Indebtedness of the Borrowers resulting from all loans or
advances and all payments or prepayments thereunder from time to time and the
amounts of principal and interest payable and paid from time to time
thereunder, in which event, in any legal action or proceeding in respect of the
Revolving Credit Note, the entries made in such account or accounts shall be
conclusive evidence of the existence and amounts of the obligations of the
Borrowers therein recorded.
Section 2.08 Mandatory Prepayments.
(a) Borrowing Base. If at any time the outstanding principal
balance under the Revolving Credit Note exceeds the Borrowing Base,
then the Borrowers shall forthwith prepay the amount of such excess
for application towards reduction of the outstanding principal balance
of the Revolving Credit Note. Said prepayment shall be without
premium or penalty, and shall be made together with the payment of
accrued interest on the amount prepaid.
(b) Sale of Eligible Inventory. Upon any sale or disposition
of Eligible Inventory or upon any removal of Eligible Inventory from
the identified and segregated location of the Eligible Inventory at
Borrowers' warehouse, then Borrowers shall forthwith prepay the
Revolving Credit Note in an amount equal to
(i) in the case of any sale or disposition of the
Eligible Inventory, the amount of the proceeds of such sale or
disposition (but in any event not less than the amount of
funds advanced by the Lender for the purchase of such Eligible
Inventory, together with the accrued interest thereon), and
(ii) in the case of any removal of Eligible Inventory
from the identified and segregated location of the Eligible
Inventory at Borrowers' warehouse,the amount of funds advanced
by the Lender for the a purchase of such Eligible Inventory,
together with the accrued
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interest thereon.
(c) Expired Letters of Credit. Borrowers shall prepay the
full amount of any advance under a Notice of Borrowing in connection
with a Letter of Credit a Arrangement, together with accrued interest
thereon, upon the expiration of any letter of credit (including any
extensions of the expiration date thereof, as approved by Lender)
issued under a Letter of Credit Arrangement.
Section 2.09 Cross-collateralization and Default. The security
Instruments, including this Agreement, the Revolving Credit Note and any other
instrument given in connection with, or as security for, any Indebtedness of
any Borrower or any Subsidiary shall serve as security one for the other, and
an event of default under the Revolving Credit Note or any such instrument
shall constitute an event of default under all such Revolving Credit Note and
instruments.
Section 2.10 Termination of Commitment. Notwithstanding anything
to the contrary contained herein, in the Revolving Credit Note, or in any other
instrument or agreement executed in connection with or as security for the
Indebtedness, the Lender may, (a) at any time, and from time to time, in its
sole discretion, refuse to make any advance for a revolving credit loan
hereunder and under the Revolving Credit Note, or (b) upon giving the
Borrowers' Agent at least ninety (90) days' prior written notice, at any time
terminate its Commitment to advance funds to the Borrowers hereunder and under
the Revolving Credit Note and all other obligations, if any, of the Lender
hereunder as of the end of such ninety (90) day Period. In the event the
Lender terminates its Commitment pursuant to Section 2.10(b), then Borrowers
will have an additional ninety (90) days (i.e., aa total of one hundred eighty
(180) days from the date of Lender's giving written notice of termination of
its commitment) within which Borrower shall pay the Indebtedness in full to the
Lender.The rights of the Lender under this Section 2.10 are in addition to the
rights of the Lender to terminate the Commitment pursuant to Section 7.02
hereof. borrowers understand that Lender has not regularly been in the
business of making revolving credit loans and may decide to terminate Lender's
commitment at any time for any reason, even though Borrowers have continued to
perform all of their obligations in an exemplary manner. Borrowers have agreed
to accept any such termination in order to induce Lender to enter into this
transaction, and have further represented to Lender that Borrowers can and will
arrange Borrowers' affairs so that termination by Lender at any time will not
surprise or damage Borrowers.
Section 2.11 Commitment Fee. Borrowers shall pay to Lender at the
Closing and on each anniversary date thereafter a commitment fee (the
"Commitment Fee"), calculated on the basis of Thirty Thousand and No/100
Dollars ($30,000.00) per annum, and pro-rated
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over the then remaining term of the Commitment, if less than a full year. This
fee shall be consideration paid to Lender in exchange for Lender's agreement to
make the total amount of the Commitment available to Borrowers, subject to the
terms of this Agreement.The Commitment Fee will be non- refundable.
Nevertheless, if Lender exercises its right under Section 2.10(b) to terminate
its Commitment, then Borrowers shall be entitled to a refund of the Commitment
Fee, pro-rated on the basis of the remaining portion, as of the effective date
of termination, of the annual period year for which the Commitment Fee vas
paid.In the event that any Indebtedness remains owing to Lender as of the
effective date of Lender's termination of the Commitment, Lender, at Lender's
option, may credit the Indebtedness in the amount of the portion of the
Commitment Fee to which Borrowers are entitled as a refund.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement, the
Borrowers represent and warrant to the Lender (which representations and
warranties will survive the delivery of the Revolving Credit Note and the
making of the loans thereunder) that:
Section 3.01 Corporate Existence. Each Borrower and each
Subsidiary is a corporation duly organized, legally existing and in good
standing under the laws of the jurisdiction in which it is incorporated and is
duly qualified as a foreign corporation in all jurisdictions wherein it
maintains a place of business. Section 3.02 Corporate Power and Authorization.
Each Borrower is duly authorized and empowered to create and issue the
Revolving Credit Note; and each Borrower and each subsidiary is duly authorized
and empowered to execute, deliver and perform the Security Instruments,
including this Agreement, to which it is a party; and all corporate action on
the Borrowers' or any Subsidiary's part requisite for the due creation and
issuance of the Revolving Credit Note and for the due execution, delivery and
performance of the Security Instruments, including this Agreement, to which any
Borrower or any Subsidiary is a party has been duly and effectively taken. The
Board of Directors of each Borrower acting pursuant to a duly called and
constituted meeting, after proper notice, or pursuant to valid and unanimous
consent, has determined (a) that entry into and performance of this Agreement
and each of the other documents to which each Borrower is a party, directly or
indirectly benefits each Borrower and (b) that adequate and fair consideration
and reasonably equivalent value have been received by each Borrower to execute
and perform this Agreement and each of the other documents to which it is a
party.
Section 3.03 Binding Obligations. This Agreement does, and the
Revolving Credit Note and other Security Instruments to which
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any Borrower and any Subsidiaries are parties upon their creation, issuance,
execution and delivery will, constitute valid and binding obligations of each
Borrower or the Subsidiary as the case may be, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, fraudulent conveyance and other
similar laws and general principles of equity. Section 3.04 No Legal Bar or
Resultant Lien. The Revolving Credit Note and the Security Instruments,
including this Agreement, to which any Borrower or any Subsidiary is a party,
do not and will not violate any provisions of the articles or certificates of
incorporation or bylaws of any such Borrower or any such Subsidiary, or any
contract, agreement, a law, regulation, order, injunction, judgment, decree or
writ to which such Borrower or such Subsidiary is subject, or result in the
creation or imposition of any Lien upon any properties of such Borrower or such
Subsidiary, other than those contemplated by this Agreement.
Section 3.05 No Consent. The execution, delivery and performance
of the Revolving Credit Note and the Security instruments, including this
Agreement, to which such Borrower or any Subsidiary is a party do not require
the consent or approval of any other Person, including without limitation any
regulatory authority or governmental body of the United States or any state
thereof or any political subdivision of the United States or any state thereof.
Section 3.06 Financial Condition. The audited consolidated
financial statements of the Borrowers' and their Subsidiaries dated as of
December 31, 1991, which have been delivered to the Lender, are complete and
correct, have been prepared in accordance with generally accepted accounting
principles, consistently applied, and fully and accurately reflect the
financial condition and results of the operations of the Borrowers and their
Subsidiaries as at the date or dates and for the period or periods stated. No
material adverse change, either in any case or in the aggregate, has since
occurred in the condition, financial or otherwise, of any Borrower or any
Subsidiary, except as disclosed to the Lender in writing.
Section 3.07 Investments and Guaranties. Neither any borrower nor
any Subsidiary has made investments in, advances to or guaranties of the
obligations of any Person, except (a) as reflected in the Financial Statements
or disclosed to the Lender in writing, and (b) guaranties by Ultrak, Loss
Prevention and CCTV to TCFC covering obligations of Exxis.
Section 3.08 Issuance of Stock. Except as disclosed in Schedule
II attached hereto, there are no outstanding subscriptions, warrants, options,
calls, commitments, convertible securities or other agreements to which any
Borrower is a party or by which it is bound, calling for the issuance of any
capital stock or securities convertible into capital stock of such Borrower.
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Section 3.09 Liabilities. Except for liabilities incurred in the
normal course of business, no Borrower nor any Subsidiary has any material
(individually or in the aggregate) liabilities, direct or contingent, except as
disclosed or referred to in the Financial Statements or as disclosed in
Schedule III attached hereto.Except as described in the Financial Statements,
or as disclosed in Schedule III attached hereto, there is no litigation, legal
or administrative proceeding, investigation or other action of any nature
pending or, to the knowledge of any Borrower, threatened against or affecting
any Borrower or any Subsidiary which involves the possibility of any judgment
or liability not fully covered by insurance, and which may materially and
adversely affect the business or the Properties of any Borrower or any
Subsidiary or their ability to carry on business as now conducted.
Section 3.10 Taxes; Governmental Charges. Each Borrower and each
Subsidiary have filed all tax returns and reports required to be filed and has
paid all taxes, assessments, fees and other governmental charges levied upon
it, except for those a taxes, assessments, charges, levies or claims that
Borrowers are currently contesting in good faith by appropriate proceedings
diligently conducted and for which the Borrowers or their Subsidiaries shall
have set up reserves therefor adequate under generally accepted accounting
principles.
Section 3.11 Titles, etc. Each Borrower and each Subsidiary have
good title to its respective material (individually or in the aggregate)
Properties, free and clear of all Liens except those referred to in the
Financial Statements and in Section 5.02 hereof.
Section 3.12 Defaults. No Borrower nor any Subsidiary is in
default (in any respect which materially and adversely affects its respective
business, Properties, operations or condition, financial or otherwise) under
any indenture, mortgage, deed of trust, agreement or other instrument to which
any Borrower or any Subsidiary is a party or by which any Borrower or any
Subsidiary is bound, except as disclosed in Schedule IV attached hereto. No
Default hereunder has occurred and is continuing.
Section 3.13 Use of Proceeds; Margin Stock. The proceed
of the Revolving Credit Note will be used by the Borrowers solely for the
purposes of (a) purchasing Inventory, or (b) providing funds for reimbursement
obligations owed to issuers of letters of credit under Letter of Credit
Arrangements. None of such proceeds will be used for, and neither the
Borrowers nor any Subsidiary are engaged in, the business of extending credit
for the purpose of purchasing or carrying any "margin stock" as defined in
Regulations G or U of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221), or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry a
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margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulations G or U.No part of the
proceeds of the loans evidenced by the Revolving Credit Note will be used for
any purpose which violates Regulation X of the Board of Governors of the
Federal Reserve System (12 C.F.R. Part 224). All loans evidenced by the
Revolving Credit Note are and shall be "business loans" as such term is used in
the Depository Institutions Deregulation and Monetary Control Act of 1980, as
amended, and such loans are for business, commercial, investment or other
similar purposes and not primarily for personal, family, household or
agricultural use, as such terms are used and defined in Chapter l of the Texas
Credit Code, Title 79, Texas Revised Civil Statutes. Neither the Borrowers nor
any Subsidiary nor any Person acting on behalf of any Borrower or any
Subsidiary have taken or will take any action which might cause the Revolving
Credit Note or any of the Security Instruments, including this Agreement, to
violate Regulations G or U or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Securities Exchange Act of 1934 or
any rule or regulation thereunder, in each case as now in effect or as the same
may hereafter be in effect.
Section 3.14 Compliance with the Law. Neither the Borrowers nor
any Subsidiary: (a) are in violation of any law, ordinance, or governmental
rule or regulation to which any Borrower or any Subsidiary or any of their
respective Properties are subject, including but not limited to those
laws,ordinances and governmental rules and regulations regarding employee wages
and overtime; (b) have failed to obtain any license, permit,franchise or other
governmental authorization necessary to the ownership of any of their
respective properties or the conduct of their respective businesses; which
violation or failure might materially and adversely affect the business,
prospects, profits, properties or condition (financial or otherwise) of any
Borrower or any Subsidiary.
Section 3.15 ERISA. The Borrowers and their Subsidiaries are in
compliance in all material respects with the applicable provisions of ERISA,
and no "reportable event," as such term is defined in Section 4043 of ERISA,
has occurred with respect to any Plan of any Borrower or any Subsidiary.
Section 3.16 Subsidiaries. CCTV, Loss Prevention and Exxis are
wholly-owned subsidiaries of Ultrak. Ultrak has no other subsidiaries. CCTV,
Loss Prevention and Exxis have no subsidiaries.
Section 3.17 Direct Benefit From Loans. Each Borrower has
received, or, upon the execution and funding thereof, will receive (a) direct
benefit from the making and execution of this Agreement and the other documents
to which it is a party, and (b) fair and independent consideration for the
entry into, and performance of,
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this Agreement and the other documents to which it is a party.
Section 3.18 RICO. No Borrower is in violation of any laws,
statutes or regulations, including, without limitation, RICO, which contain
provisions which could potentially override Lender's security interest in the
Collateral (as that term is defined in the Security Instruments).
Section 3.19. Commissions. No brokerage commission, a finders'
fee, or investment banking fees are payable by Borrower to any person or entity
in connection with the Loan Documents or the transactions contemplated thereby.
ARTICLE IV
AFFIRMATIVE COVENANTS
A deviation from the provisions of this Article IV shall not
constitute a Default under this Agreement if such deviation is consented to in
writing (in the manner hereinafter provided in Section 9.02) by the
Lender.Without the prior written consent of the Lender, the Borrowers will at
all times comply with the covenants contained in this Article IV, from the date
hereof and for so long as any part of the Revolving Credit Note or the
Commitment is outstanding.
Section 4.01 Financial Statements and Reports. The Borrowers and
the Subsidiaries will promptly furnish to the Lender from time to time upon
request such information regarding the business, affairs and financial
condition of the Borrowers and their Subsidiaries as the Lender may reasonably
request, and will furnish to the Lender:
(a) Annual Financial Statements. As soon as available and in
any event within ninety (90) days after the close of each fiscal year
of the Borrowers, the audited consolidated balance sheets of the
Borrowers and their Subsidiaries as at the end of such year, the
unaudited consolidating balance sheets of the Borrowers and their
Subsidiaries as at the end of such year, the audited consolidated
operating statements of the Borrowers and their Subsidiaries as at the
end of such year (showing income, expenses and surplus) and the
unaudited consolidating operating statements of the Borrowers and
their Subsidiaries as at the end of such year (showing income,
expenses and surplus), setting forth in each case in comparative form
figures for the previous fiscal year, a all prepared in accordance
with generally accepted accounting principles and accompanied, as to
audited statements, by the unqualified opinion of an independent
certified public accountant acceptable to the Lender;
(b) Monthly Financial Statements. As soon as available
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and in any event within thirty (30) days after the end of each
calendar month, the consolidated and consolidating balance sheets of
the Borrowers and their Subsidiaries as at the end of such month and
the consolidated and consolidating operating statements of the
Borrowers and their Subsidiaries for such month (showing income,
expenses and surplus for such month and for the a period from the
beginning of the fiscal year to the end of such month and showing
Borrowers' performance for such month compared to Borrowers'
consolidated budget for the fiscal year of such month), all prepared
in accordance with generally accepted accounting principles, subject
to year-end adjustments, certified by the principal financial officer
of the Borrowers, together with a certificate of the chief financial
officer or other appropriate officer of Borrowers' Agent, signed and
completed, in the form attached hereto asExhibit B;
(c) Monthly Borrowing Base Report. As soon as available and
in any event within twenty (20) days after the end of each calendar
month, a report in such form as Lender may reasonably request,
reflecting the Eligible Inventory of Borrowers as of the end of such
month and calculating the Inventory Advance Amount based thereon and
invoice registers, perpetual inventory listings and cash a receipt
journals which back up such report. Such report shall also reflect
the amount of sales and receipts of Borrowers during the preceding
month and such other information as Lender may reasonably request; and
(d) Weekly Cycle Count. As soon as available and in any event
not later than the Wednesday following the end of each calendar week,
a cycle count of the Borrowers' Inventory in the form attached hereto
asExhibit C, reflecting the Eligible Inventory of Borrowers as of the
end of such week and calculating the Inventory Advance Amount based
thereon and invoice registers, perpetual inventory listings and cash
receipt journals which back up such report. All such balance sheets
and other financial statements referred to in this Section 4.01above
shall be in such detail as the Lender may reasonably request and shall
conform to generally accepted accounting principles applied on a basis
consistent with those of the Financial Statements, except only for
such changes in accounting principles or practice with which
independent certified public accountants concur.
Section 4.02 Compliance with Laws; Payment of Taxes and Other
Claims. The Borrowers will and will cause each Subsidiary to observe and
comply with (a) all applicable laws, statutes, codes, acts, ordinances, rules,
regulations, directions and requirements of all federal, state, county,
municipal and other governments, departments, commissions, boards, courts,
authorities, officials and officers applicable to it and where the failure to
observe or comply would have a material adverse effect on the condition,
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financial or otherwise, of Borrowers; and (b) pay and discharge promptly all
taxes, assessments and governmental charges or levies imposed upon any Borrower
or any Subsidiary or upon the income or any Property of any Borrower or any
Subsidiary as well as all claims of any kind (including claims for labor,
materials, supplies and rent) which, if unpaid, might become a lien upon any or
all of the Property of any Borrower or any Subsidiary; provided, however, that,
neither Borrowers nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted, if the amount in controversy is less than $25,000, and if
the Borrowers or their Subsidiaries shall have set up reserves there for
adequate under generally accepted accounting principles.
Section 4.03 Maintenance. Each Borrower will and will cause each
Subsidiary to (a) maintain its corporate existence, rights and franchises; (b)
observe and comply with all applicable and valid laws, statutes, codes, acts,
ordinances, judgments, injunctions, rules, regulations, certificates,
franchises, permits and licenses (including without limitation applicable
statutes, regulations, orders and restrictions relating to environmental
standards or controls or to energy regulations) of all federal, state, county,
municipal and other governmental authorities; (c) maintain its Properties (and
any properties leased by or consigned to it or held under title retention or
conditional sales contracts) in good and workable condition (ordinary wear and
tear and sales in the ordinary course of business excepted) at all times and
make all repairs, replacements, additions, betterment and improvements to its
Properties as are needful and proper so that the business a carried on in
connection therewith may be conducted properly and efficiently at all times;
and (d) maintain and keep books of records and accounts, all in accordance with
generally accepted accounting principles, consistently applied, of all dealings
and transactions in relation to its business and activity.
Section 4.04 Further Assurances. Each Borrower will cure promptly
any defects in the creation and issuance of the Revolving Credit Note and the
execution and delivery of the Security Instruments, including this Agreement.
The Borrowers at their expense will promptly execute and deliver to the Lender
upon request all such other and further documents, agreements and instruments
to effectuate the agreements of any Borrower or any of their Subsidiaries in
the Security instruments, including this Agreement, or to further evidence and
more fully describe the collateral intended as security for the Revolving
Credit Note, or to correct any omissions in the Security Instruments, or more
fully to state the security obligations set out herein or in any of the
Security Instruments, or to perfect, protect or preserve any Liens created
pursuant to any of the Security Instruments, or to make any recordings, to file
any notices, or obtain any consents, all as may be necessary or appropriate in
connection therewith. Section 4.05
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Performance of Obligations. The Borrowers will pay the Revolving Credit Note
according to the reading, tenor and effect thereof; and the Borrowers will do
and perform every act and discharge all of the obligations provided to be
performed and discharged by the Borrowers under the Security Instruments,
including this Agreement, at the time or times and in the manner specified, and
cause each of its Subsidiaries to take such action with respect to their
obligations to be a performed and discharged under the Security Instruments to
which they respectively are parties.
Section 4.06 Reimbursement of Expenses. The Lender will pay all
legal fees of Lender incurred by the Lender in connection with the preparation
of this Agreement and any and all other Security Instruments contemplated
hereby. The Borrowers will pay all reasonable legal fees incurred by the
Lender in connection with the amendment, interpretation, administration and
enforcement of this Agreement and any and all other Security Instruments
contemplated hereby. The Borrowers will, upon request, promptly reimburse the
Lender for all amounts expended, advanced or incurred by the Lender to satisfy
any obligation of the Borrowers under this Agreement or any other Security
Instrument, or to protect the Properties or business of any Borrower or any
Subsidiary or to collect the Revolving Credit Note, or to enforce the rights of
the Lender under this Agreement, the Revolving Credit Note, or any other
security Instrument, which amounts will include all court costs, attorneys'
fees, fees of auditors and accountants, and investigation expenses reasonably
incurred by the Lender in connection with any such matters, together with
interest at either (a) the post-maturity rate specified in Section 2.02 on each
such amount from the date that the same is expended, advanced or incurred by
the Lender until the date of reimbursement to the Lender, or (b) if no Default
shall have occurred and be continuing, the prematurity rate specified in
Section 2.02 on each such amount from the date that the same is expended,
advanced or incurred by the Lender until the date of written demand or request
by the Lender for the reimbursement of same, and thereafter at the applicable
post-maturity rate specified in Section 2.02 until the date of reimbursement to
the Lender.
Section 4.07 Insurance. Each Borrower and each Subsidiary now
maintains and will continue to maintain with financially sound and reputable
insurers, insurance with respect to its respective Properties and businesses
against such liabilities, casualties, risks and contingencies and in such types
and amounts as are customary in the case of corporations engaged in the same or
similar businesses and a similarly situated. All such policies shall name the
Lender as loss payee. AFB and TCFC may be named as loss co-payees, to the
extent that their interest may appear. Upon request of the Lender, the
Borrowers will furnish or cause to be furnished to the Lender from time to time
a summary of the insurance coverage of the Borrowers and their Subsidiaries in
form and substance satisfactory to the Lender and if requested will furnish the
Lender copies of the applicable policies.
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Section 4.08 Inspections. The Borrowers will permit and will
cause each Subsidiary to permit any officer, employee or agent of the Lender to
visit and inspect any of the Properties a of any Borrower or any Subsidiary,
examine any Borrower's or any Subsidiary's books of record and accounts, take
copies and extracts there from, and discuss the affairs, finances and accounts
of any Borrower or any Subsidiary with the Borrower's or Subsidiary's current
and former officers, employees, accountants, auditors, creditors and bankers,
all at such times a during normal business hours and as often as the Lender may
desire. Borrowers will also give Lender not less than five (5) Business Days
actual notice of all regular meetings and three (3) Business days actual notice
of all special meetings of the Board of Directors of any Borrower, will permit
a person designated from time to time by Lender to attend such meetings a as an
observer and will provide such person with all information available to the
directors of the Borrowers.
Section 4.09 Notice of Certain Events. The Borrowers shall
promptly notify the Lender if the Borrowers learn of the occurrence of (a) any
event which constitutes a Default, altogether with a detailed statement by a
responsible officer of the Borrowers of the steps being taken to cure the
effect of such Default; or (b) the receipt of any notice from, or the taking of
any other action by, the holder of any promissory note, debenture or other
evidence of indebtedness of the Borrower or any Subsidiary or of any security
(as defined in the Securities Act of 1933, as amended) of any Borrower or any
Subsidiary with respect to a claimed default, together with a detailed
statement by a responsible officer of such Borrower specifying the notice given
or other action taken by such holder and the nature of the claimed default and
what action such Borrower or its Subsidiary is taking or proposes to take with
respect thereto; or (c) any legal, judicial or regulatory proceedings affecting
any Borrower or any Subsidiary or any of the Properties of any Borrower or any
Subsidiary in which the amount involved is material and is not covered by
insurance or which, if adversely determined, would have a material and adverse
effect on the business or the financial condition of any Borrower or any
Subsidiary; or (d) any dispute between any Borrower or any Subsidiary and any
governmental or regulatory body or any other Person which, if adversely
determined, might materially interfere with the normal business operations of
any Borrower or any Subsidiary; or (e) any material adverse changes, either in
any case or in the aggregate, in the assets, liabilities, financial condition,
business, operations, affairs or circumstances of any Borrower or any
Subsidiary, from those reflected in the Financial Statements or by the facts
warranted or represented in any Security Instrument, including this Agreement.
Section 4.10 ERISA Information and Compliance. The Borrowers will
promptly furnish to the Lender (a) if requested by the Lender, promptly after
the filing thereof with the United
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States Secretary of Labor or the Pension Benefit Guaranty Corporation, copies
of each annual and other report with respect to each Plan or any trust created
thereunder, and ,(b) immediately upon becoming aware of the occurrence of any
reportable event," as such term is defined in Section 4043 of ERISA, or of any
"prohibited transaction," as such term is defined in Section 4975 of the
Internal Revenue Code of 1986, as amended, in connection with any Plan or any
trust created thereunder, a written notice signed by the President or the
principal financial officer of the Borrowers specifying the nature thereof,
what action the Borrowers or any of their Subsidiaries is taking or proposes to
take with respect thereto, and, when known, any action taken by the Internal
Revenue Service with respect thereto. The Borrowers will fund, or will cause
their Subsidiaries to fund, all current service pension liabilities as they are
incurred under the provisions of all Plans from time to time in effect for the
benefit of employees of the Borrowers or any of their Subsidiaries, and comply
with all applicable provisions of ERISA.
Section 4.11 Environmental Requirements. Borrowers shall comply
with all federal laws, state statutes, municipal ordinances and all other
governmental standards, rules and regulations applicable to Borrowers or to
their Property in respect to occupational health and safety, hazardous waste
and substances and environmental matters. Borrowers shall promptly notify
Lender of its receipt of any notice of a violation or an alleged violation of
any such federal laws, state statutes, municipal ordinances or other
governmental standards, rules or regulations. Borrowers shall indemnify and
hold Lender harmless from all loss, cost, damages, claim and expense incurred
by Lender on account of any Borrower's failure to perform the obligations of
this Section.
Section 4.12 Securities Law Information and Compliance. Borrowers
and all Subsidiaries shall comply with all Securities Laws and will immediately
provide Lender as soon as available with all filings made subsequent to Closing
by Borrowers pursuant to Securities Laws, including without limitation all
Forms 8-K's, 13-Ds, 10-Q1s and 10-K's, and upon Lender's request all such
filings made prior to Closing.
Section 4.13 Identification and Segregation of Eligible Inventory.
Borrower shall segregate and maintain all Eligible Inventory in any Borrower's
possession in the Fenced Area of the Carrollton Warehouse, apart and distinct
from all other Inventory of any Borrower. Borrower shall conspicuously
identify all Eligible Inventory in any Borrower's possession as being subject
to the lien and security interest of the Lender. All Eligible Inventory shall
be physically located in the Fenced Area of the Carrollton Warehouse within
forty-eight (48) hours after such Eligible Inventory arrives at the location
commonly known as 1220 Champion Circle, Carrollton, Texas.
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Section 4.14 Warehouseman's Agreement. Borrowers shall maintain
in full force and effect the Warehouseman's Agreement during the term of this
Agreement. Borrower's shall take any and all action necessary to enable the
warehouseman to perform its duties and obligations under Warehouseman's
Agreement. borrower shall provide immediate notice to Lender of any
circumstance that would hinder, interfere with, or impede the warehouseman in
the performance of its duties and obligations under the Warehouseman's
Agreement. All expenses involved in the Warehouseman's Agreement shall be
borne by Borrowers.
ARTICLE V
NEGATIVE COVENANTS
A deviation from the provisions of this Article V shall not constitute
a Default under this Agreement if such deviation is consented to in writing (in
the manner hereinafter provided in Section 9.02) by the Lender.Without the
prior written consent of the Lender, the Borrowers will at all times comply
with the covenants contained in this Article V, from the date hereof and for so
long as any part of the Revolving Credit Note or the Commitment is outstanding.
Section 5.01 Debts, Guaranties and Other Obligations. Neither the
Borrowers nor any Subsidiary will incur, create, assume or in any manner become
or be liable in respect of any indebtedness (including obligations for the
payment of rentals); and neither the Borrowers nor any Subsidiary will
guarantee or otherwise in any way become or be responsible for obligations of
any other Person, whether by agreement to purchase the indebtedness of any
other Person or agreement for the furnishing of funds to any other Person
through the purchase or lease of goods, supplies or services (or by way of
stock purchase, capital contribution, advance or loan) for the purpose of
paying or discharging the indebtedness of any other Person, or otherwise,
except that the foregoing restrictions shall not apply to:
(a) the Revolving Credit Note or other Indebtedness to the
Lender;
(b) liabilities, direct or contingent, of the Borrowers and
their Subsidiaries existing on the date of this Agreement which are
reflected in the Financial Statements or have been disclosed to the
Lender in Schedule III attached hereto, but not any renewals and- ~
extensions thereof;
(c) liabilities in relation to leases and lease agreements to
the extent permitted by Section 5.07 hereof;
(d) endorsements of negotiable or similar instruments for
collection or deposit in the ordinary a course of business;
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(e) trade payables or similar obligations from time to time
incurred in the ordinary course of business, other than for borrowed
money;
(f) taxes, assessments or other government charges which are
not yet due or are being contested pursuant to Section 4.02 hereof;
and
(g) indebtedness which is subordinated to the Revolving Credit
Note by terms satisfactory to the Lender, a in its sole discretion.
Section 5.02 Liens. Neither the Borrowers nor any Subsidiary
will create, incur, assume or permit to exist any Lien on any of its Properties
(now owned or hereafter acquired), except:
(a) Liens securing the payment of any Indebtedness to the
Lender;
(b) Liens for taxes, assessments, or other governmental
charges not yet due or which are being contested in good faith by
appropriate action promptly initiated and diligently conducted, if
such reserve as shall be required by generally accepted accounting
principles shall have been made therefor;
(c) Liens of landlords, vendors, carriers, warehousemen,
mechanics, laborers and materialmen arising by law in the ordinary
course of business for sums not yet due or, subject to the written
approval of the Lender, being contested in good faith by appropriate
action promptly initiated and diligently conducted, if such reserves
shall be required by generally accepted accounting principles shall
have been made therefor;
(d) Liens existing on Property owned by any Borrowers or any
Subsidiary on the date of this Agreement a which have been disclosed
to the Lender in Schedule V ~ attached hereto, but not any renewals
and extensions thereof;
(e) pledges or deposits made in the ordinary course of
business in connection with workmen's compensation, a unemployment
insurance, social security and other like laws;
(f) inchoate liens arising under ERISA to secure the
contingent liability of any Borrower or any Subsidiary permitted by
Section 4.10 hereof; and
(g) purchase money liens on property of Borrowers created
solely for the purpose of securing the deferred purchase price of
property, provided that such liens cover the property being acquired
and that the principal amount of the indebtedness secured by any such
lien shall not at a any time exceed the
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original purchase price of such property.
Section 5.03 Investments, Loans and Advances. Neither the
Borrowers nor any Subsidiary will make or permit to remain outstanding any
loans or advances to or investments in any person, except that the foregoing
restriction shall not apply to:
(a) loans, advances or investments the material details of
which have been set forth in the Financial Statements or have been
otherwise disclosed to the Lender in Schedule VI attached hereto;
(b) investments in direct obligations of the United States of
America or any agency thereof;
(c) investments in certificates of deposit issued by
commercial banks in the United States having a combined capital and
surplus in excess of One Hundred Million Dollars ($100,000,000.00);
(d) investments in commercial paper with the best rating by
Standard & Poors, Moody's Investors Service, Inc., or any other rating
agency satisfactory to the Lender issued by companies in the United
States with a combined capital and surplus in excess of One Hundred
Million Dollars ($100,000,000.00); and
(e) investments in Exxis in the original amount of $950,000,
created pursuant to that certain financing arrangement with TCFC.
Section 5.04 Dividends, Distributions and Redemptions. Except as
provided in this Section, the Borrowers will not declare or pay any dividend,
purchase, redeem or otherwise acquire for value any of its stock now or
hereafter outstanding, return any capital to its stockholders, or make any
distribution of its assets to its stockholders as such, except that the
Borrowers may declare and deliver stock dividends and may convert preferred
stock of a Borrower to common stock of a Borrower. Notwithstanding the
foregoing, so long as no Event of Default has occurred nor will be created by
the payment of a dividend as described herein, Ultrak may declare and pay
dividends on presently outstanding Series A Preferred Stock of Ultrak owned by
George K. Broady in an amount up to One Hundred Seventeen Thousand Two Hundred
Eleven and No/100 Dollars ($117,211.00) per year.
Section 5.05 Sale of Properties. Neither the Borrowers nor any
Subsidiary will sell, transfer or otherwise dispose of all or any substantial
portion or integral part of their properties except in the ordinary course of
business, or enter into any arrangement, directly or indirectly, with any
Person whereby any Borrower or any Subsidiary shall sell or transfer any
Property, whether now owned
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or hereafter acquired, and whereby any Borrower or any Subsidiary shall then or
thereafter rent or lease as lessee such Property or any part thereof or other
Property which any Borrower or any Subsidiary intends to a use for
substantially the same purpose or purposes as the Property sold or transferred.
Section 5.06 Nature of Business. Neither the Borrowers nor any
Subsidiary will permit any material change to be made in the character of its
business as carried on at the date hereof.Section 5.07 Limitation on Leases.
Neither the Borrowers nor any Subsidiary will create, incur, assume or suffer
to exist any obligation for the payment of rent or hire of Property of any kind
whatsoever (real or personal), under leases or lease agreements, without the
prior written consent of Lender, except (a) leases and lease agreements for
equipment used in the office operations of the Borrowers in an aggregate amount
for the Borrowers and all Subsidiaries (determined on a consolidated basis) not
to exceed $300,000.00 in any fiscal year of the Borrowers, and (b) leases and
lease agreements for real property at 1220 Champion Circle, Suite 100,
Carrollton, Texas, not to exceed in the aggregate $300,000.00 in any fiscal
year of the Borrowers.
Section 5.08 Mergers, Consolidations, etc. Neither the Borrowers
nor any Subsidiary will, without Lender's prior written consent, which consent
shall not be unreasonably withheld, amend its certificate or articles of
incorporation or otherwise change its corporate name or structure, or
consolidate with or merge into or acquire any Person, or permit any other
Person to consolidate with or merge into or acquire any Borrower or any
Subsidiary or acquire the stock of any corporation or form any Subsidiary.
Section 5.09 ERISA Compliance. The Borrowers will not at any time
permit any Plan maintained by any Borrower or any Subsidiary to:
(a) engage in any "prohibited transaction" as such term is
defined in Section 4975 of the Internal Revenue Code of 1986, as
amended;
(b) incur any "accumulated funding deficiency" as such term is
defined in Section 302 of ERISA; or
(c) terminate any such Plan in a manner which could result in
the imposition of a Lien on the Property of any Borrower or any
Subsidiary pursuant to Section 4068 of a ERISA.
Section 5.10 Issuance of Stock. During the term of this
Agreement, Borrowers will not issue any additional shares of stock without the
written consent of Lender, which consent will not be unreasonably withheld,
except such shares as may be issuable upon presently exercisable stock options
held by officers, directors or
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key employees of Borrowers and which are disclosed in Schedule II attached
hereto.
Section 5.11 Changes in Accounting Methods. Borrowers will not
make any change in their accounting method as in effect on the date of this
Agreement or change their fiscal year ending date from December 31, unless such
changes have the prior written approval of the Lender.
Section 5.12 Transactions With Affiliates. Borrowers will not,
directly or indirectly, enter into any transaction (including, but not limited
to, the sale or exchange of property or the rendering of any service) with any
Affiliate, other than in the ordinary course of their business and upon
substantially the same or better terms as they could obtain in an arm's length
transaction with a Person who is not an Affiliate.
Section 5.13 Use of Proceeds. Borrowers will not use the proceeds
of the Revolving Credit Note for purposes other than those set forth in Section
3.13. Section 5.14 RICO. Borrowers will not violate any laws, statutes or
regulations, whether federal or state, for which forfeiture of its properties
is a potential penalty, including, without limitations, RICO.
Section 5.15 Limitation on Compensation. So long as no Event of
Default has occurred neither the Borrowers nor any Subsidiary will pay George
K. Broady directly or indirectly any salary, bonus or any other form of
compensation in excess of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) per annum in the aggregate, without the Lender's prior written
consent; after an Event of Default has occurred this amount shall be decreased
to One Hundred Twenty-Five Thousand and No/100 Dollars ($125,000.00). Section
5.16 Limitation on Payment of Subordinated Debt. Prior to March 21, 1994,
neither the Borrowers nor any Subsidiary will make any payment of principal on
that certain Promissory Note of even date herewith, in the principal sum of
$285,000.00, payable to the order of George A. Smith III.
Section 5.17 Press Releases. The Borrowers shall not permit to be
made any press release or other public communication pertaining to Lender that
mentions Lender or any affiliate of Lender without Lender's prior written
consent.
ARTICLE VI
FINANCIAL COVENANTS
A deviation from the provisions of this Article VI shall not
constitute a Default under this Agreement if such deviation is consented to in
writing (in the manner hereinafter provided in Section 9.02) by the
Lender.Without the prior written consent of the Lender, the Borrowers will at
all times comply with the
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covenants contained in this Article VI, from the date hereof and for so long as
any part of the Revolving Credit Note or the Commitment is outstanding.
Section 6.01 Current Ratio. During the term of this Agreement,
Borrowers will not permit or suffer at any date the ratio of (a) their
consolidated Current Assets, to (b) their consolidated Current Liabilities, to
be less than 1.5 to 1.0.
Section 6.02 Leverage Ratio. During the term of this Agreement,
Borrowers shall not permit or suffer at any date the ratio of (a) the
consolidated total liabilities of Borrowers, determined according to generally
accepted accounting principles (but excluding the obligations owing to TCFC for
the financing of the subsidiary of Exxis, which may not exceed $10,000,000), to
(b) Borrowers consolidated Tangible Net Worth, to be greater than 1.75 to 1.
Section 6.03 Debt Service Coverage Ratio. During the term of this
Agreement, Borrowers shall not permit or suffer at any time their ratio of (a)
Borrower's net income, plus amortization, plus depreciation, plus other
non-cash charges, minus Net Capital Expenditures, to (b) Current Maturities of
Long Term Debt to be greater than 1.75 to 1.
Section 6.04 Tangible Net Worth. During the term of this
Agreement, Borrowers will not permit or suffer at any time their consolidated
Tangible Net Worth to be less than the amounts, throughout the periods,
indicated below:
Period Minimum Tangible Net Worth
------ --------------------------
Closing through 12/31/92 $5,000,000.00
01/01/93 and thereafter $5,500,000.00
Section 6.05 Working Capital. During the term of this Agreement,
Borrowers shall not permit or suffer at any time their consolidated Current
Assets, less their consolidated Current Liabilities to be less than $4,000,000.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.01 Events. Any of the following events shall be
considered an "Event of De fault" as that term is used herein:
(a) Interest Payments. Default is made in the payment or
prepayment when due of any installment of interest on the Revolving
Credit Note or any other a Indebtedness and such default continues for
a period of three (3) days following the due date; or
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(b) Principal Pavements. Default is made in the payment or
prepayment when due of any installment of principal on the Revolving
Credit Note or any other Indebtedness; or
(c) Representations and Warranties. Any representation or
warranty made by any Borrower or any Subsidiary in any Security
Instrument, including this Agreement, proves to have been incorrect in
any material a respect as of the date thereof; or any representation,
statement (including financial statements), certificate or data
furnished or made by any Borrower or any Subsidiary (or any officer,
accountant or attorney of any Borrower or any Subsidiary) under any
Security Instrument, including this Agreement, proves to have been
untrue in any material a respect, as of the date as of which the facts
therein set forth were stated or certified; or
(d) Affirmative Covenants. Default is made in the due
observance or performance of any of the covenants or agreements
contained in Article IV of this Agreement; or
(e) Negative Covenants. Default is made in the due observance
or performance by any Borrower or any Subsidiary of any of the
covenants or agreements contained in Article V of this Agreement; or
(f) Financial Covenants. Default is made in the due
observance or performance by any Borrower or any Subsidiary of any of
the covenants or agreements contained in Article VI of this Agreement;
or
(g) Conditions Precedent. The Borrowers fail to a satisfy, or
cause to be satisfied, any of the conditions precedent contained in
Article VIII hereof which are not to be completed as of the date of
this Agreement; or
(h) Other Security Instrument Obligations. Default is made in
the due observance or performance by any a Borrower or any Subsidiary
of any of the covenants or agreements contained in any Security
Instrument other than this Agreement, and such default continues
unremedied beyond the expiration of any applicable grace period which
may be expressly allowed under such Security Instrument; or
(i) Involuntary Bankruptcy Proceedings. A
receiver,conservator, custodian, liquidator, creditors committee,
board of inspectors, or trustee of any Borrower or any Subsidiary, or
of any of their Property, is created,engaged, retained, procured,
authorized, or appointed in the United States or under any law of any
foreign country by the order or decree of any court or agency or
supervisory authority having jurisdiction; or any Borrower or any
Subsidiary becomes a debtor under the Bankruptcy Code of the
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United States or under the law of any foreign country, or is the
subject of an order for relief, or becomes a bankrupt or insolvent; or
any Borrower's or any Subsidiary's Property is sequestered, seized, or
attached in the United States or under any law of any foreign country
by court order or decree; or a complaint,petition, or similar
pleadings filed against any Borrower or any Subsidiary under any
bankruptcy,reorganization, insolvency, readjustment of
debt,dissolution, or liquidation law of any jurisdiction, in the
United States or in any foreign country, whether such law is now in
existence or hereafter in effect; or
(j) Voluntary Petitions. Any Borrower or any Subsidiary files
a petition in bankruptcy or reorganization or seeks relief under any
provision of any bankruptcy, reorganization, insolvency, readjustment
of debt, dissolution, or liquidation law of any jurisdictions in the
United States or in any foreign country, whether such law is now in
existence or hereafter in effect, or any Borrower or any Subsidiary is
the subject of an order for relief or winding-up petition entered by
any bankruptcy court, or any Borrower or any Subsidiary consents to
the filing of any petition against it under any such law in the United
States or in any foreign country; or
(k) Assignments. Conveyances. or Transfers for Benefit of
Creditors.Any Borrower or any Subsidiary makes an assignment,
conveyance, or transfer for the benefit of its creditors, or for the
purpose of enforcing a lien against its Property, or admits in writing
its inability to pay its debts generally as they become due,or is
generally not paying its debts as such debts become due, or consents
to the appointment of a custodian, receiver, trustee, assignee, or
liquidator of all,substantially all, less than substantially all, or
any part of its Property for the purpose of enforcing a lien against
its Property; or
(l) Discontinuance of Business. Any Borrower or any
Subsidiary discontinues its usual business; or
(m) Default on Other Debt or Security. Any Borrower or any
Subsidiary fails to make any payment due on any indebtedness or
security (as "security" is defined in the Securities Act of 1933, as
amended) or any event shall occur or any condition shall exist in
respect of any indebtedness or security of any Borrower or any
Subsidiary, or under any agreement securing or relating to such
indebtedness or security, the effect of which is (i) to cause or to
permit any holder of such indebtedness or other security or a trustee
to cause (whether or not such holder or trustee elects to cause) such
indebtedness or security, or a portion thereof, to become due prior to
its stated maturity or prior to its regularly scheduled dates of
payment, or (ii) to permit a trustee or the
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holder of any security (other than common stock of any Borrower or any
Subsidiary) to elect (whether or not such holder or trustee does
elect) a majority of the directors on the board of directors of any
Borrower or any Subsidiary; or
(n) Undischarged Judgments. If judgment for the payment of
money in excess of Ten Thousand and No/100 Dollars ($10,000.00) is
rendered by any court or other governmental body against any Borrower
or any Subsidiary and any Borrower or Subsidiary does not immediately
discharge the same or provide for its immediate discharge in
accordance with its terms, or procure a stay of execution thereof
within ten (10) days from the date of entry thereof, and within said
period of ten (10) days from the date of entry thereof or such longer
period during which execution of such judgment shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during
such appeal while providing such reserves there for as may be required
under generally accepted accounting principles; or
(o) Insolvency. If any Borrower shall be or become insolvent;
or
(p) Fraudulent Transfers. Any Borrower shall have concealed,
removed, or permitted to be concealed or removed, any part of its
Property, with intent to hinder, delay or defraud its creditors or any
of them, or made or suffered a transfer of any of its Property which
may be fraudulent under any bankruptcy, fraudulent transfer or similar
law; or shall have made any transfer of its Property to or for the
benefit of a creditor at a time when other creditors similarly
situated have not been paid; or shall have suffered or permitted,
while insolvent, any creditor to obtain a Lien upon any of its
Property through legal proceedings or distraint or other process which
is not vacated within 60 days from the date thereof; or
(q) Forfeiture. The filing of formal charges under a federal
or state law for which forfeiture of any a Borrower's Property is a
potential penalty; or
(r) Segregation of Inventory. The failure of any Eligible
Inventory to be located at all times within the Fenced Area of the
Carrollton Warehouse within forty-eight (48) hours after the arrival
of such Eligible Inventory at a the premises commonly known as 1220
Champion Circle, Carrollton, Texas.
Section 7.02 Remedies. Upon the happening of any Event of Default
specified in Section 7.01 and during the continuance thereof, (a) the Lender
may declare the entire principal amount a of all Indebtedness then outstanding
including interest accrued
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thereon to be immediately due and payable (provided, that the occurrence of any
event described in Subsections 6.01(g) or (h) shall automatically accelerate
the maturity of the Indebtedness, without the necessity of any action by the
Lender) without presentment, demand, protest, notice of protest or dishonor,
notice of default, notice of intent to accelerate the maturity thereof, notice
of acceleration of the maturity thereof, or other notice of any kind, all of
which are hereby expressly waived by each Borrower and each Subsidiary; and (b)
all obligations, if any, of the Lender hereunder, including the Commitment,
shall immediately cease and terminate unless and until the Lender shall
reinstate same in writing.
Section 7.03 Prohibition of Transfer, Assignment and Assumption.
This Agreement pertains to the extension of debt financing and financial
accommodations for the benefit of the Borrowers and the Subsidiaries and cannot
be transferred to, assigned to or assumed by any other person or entity either
a voluntarily or by operation of law. In the event any Borrower or any
Subsidiary becomes a debtor under the Bankruptcy Code of the United States or
under the law of any foreign country, any trustee or debtor in possession may
not assume or assign this Agreement nor delegate the performance of any
provision hereunder.
ARTICLE VIII
CONDITIONS
The obligation of the Lender to make the loans to be evidenced by the
Revolving Credit Note is subject to the accuracy of each and every
representation and warranty of the Borrowers and their Subsidiaries made or
referred to in each Security Instrument, including this Agreement, or in any
certificate delivered to the Lender pursuant to or in connection with any
Security Instrument, including this agreement, to the performance by the
Borrowers of their obligations to be performed hereunder on or before the date
of the loan, and to the satisfaction of the following further conditions which
must be satisfied as of the date of this Agreement or advance under the
Revolving Credit Note.
Section 8.01 Closing. The delivery of all instruments and
certificates referred to in this Article VIII not theretofore delivered and for
the making of the loans provided for in Article II of this Agreement shall
occur on or before July 21, 1992.
Section 8.02 Revolving Credit Note. The Borrowers shall have duly
and validly issued, executed and delivered the Revolving Credit Note to the
Lender.
Section 8.03 Charter; By-laws. The Lender shall have received a
copy, certified as true by the Secretary or Assistant Secretary of each
Borrower or the Subsidiary, respectively, of the
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articles or certificate of incorporation and the by-laws of such Borrower and
any Subsidiary which is to execute this Agreement or any Security Instrument
pursuant to this Agreement.
Section 8.04 Secretary's Certificates. The Lender shall have
received, on or before the date of Closing, certificates of the Secretary of
the Borrowers and any Subsidiary which is to execute any Security Instrument
pursuant to this Agreement setting forth (a) resolutions of its board of
directors in form and substance satisfactory to the Lender with respect to the
authorization of the Revolving Credit Note, this Agreement and any other
Security Instruments provided herein and the officers authorized to sign such
instruments, and (b) specimen signatures of the officers so authorized.
Section 8.05 Opinion of Borrowers' Counsel. The Lender a shall
have received within thirty (30) days of the date of this Agreement and prior
to the Closing from counsel for the Borrowers and the Subsidiaries, a favorable
written opinion satisfactory to the Lender and its counsel as to the matters
contained in Sections 3.01, 3.02, 3.03, 3.04 and 3.05 hereof, and as to such
counsel's knowledge of pending or threatened material litigation or
governmental or regulatory proceedings against any Borrower or any Subsidiary
or any of the Property of any Borrower or any Subsidiary; and as to the
validity, creation, attachment and perfection of Liens under any of the
Security Instruments; and as to such other matters incident to the transactions
herein contemplated as the Lender or its counsel may request. Section 8.06
Counsel of Lender. At the time of the loans hereunder, all legal matters
incident to the transactions herein contemplated shall be satisfactory to
counsel of the Lender.
Section 8.07 No Default. At the time of each loan hereunder, no
Default shall have occurred and be continuing, and there shall not have
occurred any condition, event or act which constitutes, or with notice or lapse
of time (or both) would constitute a default or event of default under any loan
agreement, note agreement or trust indenture to which any Borrower or any
Subsidiary is a party.
Section 8.08 No Material Adverse Changes. Prior to each loan,
there shall have occurred, in the opinion of the Lender, no material adverse
changes, either in any case or in the aggregate, in the assets, liabilities,
financial condition, business, operations, affairs or circumstances of any
Borrower or any Subsidiary, from those reflected in the Financial Statements or
by the facts warranted or represented in any Security Instrument, including
this Agreement.
Section 8.09 Other Security Instruments and Information. The
Borrowers shall have duly and validly executed and delivered, or caused to be
executed and delivered, to the Lender the following
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instruments, each in form and substance satisfactory to the Lender, in
sufficient executed counterparts for recording purposes, as security for the
Revolving Credit Note and other Indebtedness and shall have delivered the
following documents containing information necessary to the preparation and
perfection of the liens created by such instruments:
(a) Security Agreements covering all of the Borrowers'
accounts receivable, general intangibles, inventory, equipment,
chattel paper, instruments and documents; and
(b) Financing Statements relating to the items described in
Subsection (a).
Section 8.10 Guaranty. George K. Broady shall have duly and
validly executed and delivered, or caused to be executed and delivered, to the
Lender in form and substance satisfactory to Lender, a guaranty of validity of
collateral.
Section 8.11 Recordings. The Security Instruments described in
Section 8.09 hereof, including financing statements, security agreements and
other notices related thereto, shall have been duly delivered to the
appropriate offices for filing, recording or registration, and the Lender shall
have received confirmations of receipt thereof from the appropriate filing,
recording or registration offices.
Section 8.12 Landlord's Waiver. The owner of Borrowers' warehouse
and offices at 1220 Champion Circle, Carrollton, Texas 75006, shall have
executed and delivered, in form and substance satisfactory to the Lender, in
sufficient executed counterparts for recording purposes, waivers of any Liens
to which it may be entitled, in favor of the Lender, within thirty (30) days
from the date of Closing.
Section 8.13 Commitment Fee. Lender shall have received the
Commitment Fee in immediately available funds.
Section 8.14 Warrant Agreement. Lender shall have received a
warrant agreement for the purchase of 928,571 shares of the stock of Ultrak,
constituting approximately 2.4% of the issued and outstanding capital stock of
Ultrak, at an exercise price of $2.10 per share, and otherwise in form and
substance satisfactory to Lender.
Section 8.15 Intercreditor Agreement. Lender shall have entered
into an intercreditor agreement with AFB and TCFC, satisfactory in form and
substance to Lender.
Section 8.16 Warehouseman's Agreement. Lender shall have received
the Warehouseman's Agreement, executed by a bonded warehouseman, reasonably
satisfactory to Lender, together with an
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indemnity bond in favor of Lender, both reasonably satisfactory in form and
substance to Lender.
Section 8.17 Additional Matters. The Lender shall have received
all exhibits, annexes and schedules herein referenced and such additional
reports, certificates, documents, statements, legal opinions, agreements and
instruments, in form and substance reasonably satisfactory to the Lender, as
the Lender shall have reasonably requested from any of Borrowers and their
counsel.
Section 8.18 Revolving Credit Advances. Advances under the
Revolving Credit Note shall further be subject to the following specific
conditions:
(a) There shall have been no Default under this Agreement nor
under any of the other Security Instruments;
(b) The Financial Statements and all other financial
information required by the Lender shall have been furnished and shall
be, as of the date of the requested advance, true and correct;
(c) The financial condition of the Borrowers, as shown by the
most recent Financial Statement described in Section 4.01(b) hereof,
shall be acceptable to the Lender in its sole discretion;
(d) The Commitment Fee payable for the applicable period shall
have been paid in full; and
(e) in the case of funds being deposited in a Letter of Credit
Payment Account to pay reimbursement obligations a of a Borrower under
a Letter of Credit Arrangement, (i) a pledge of the Letter of Credit
Payment Account, in the form of Exhibit D attached hereto (the
"Account Pledge"), and (ii) an acknowledgement of the Account Pledge
from the depositary institution establishing the Letter of Credit
Payment Account, together with such depositary institution's agreement
to apply such funds only toward payment of a Borrower's reimbursement
obligation arising under a Letter of Credit Arrangement.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Notices. All communications under or in connection
with this Agreement or the Revolving Credit Note shall be in writing and shall
be mailed by registered or certified mail, return receipt requested, postage
prepaid, or personally delivered to an officer of the receiving party. All
such communications shall be mailed or delivered as follows:
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(a) If to the Borrowers, to the Borrowers' Agent, to address
shown at the beginning of this Agreement, or to such other address or
to such individual's or department's attention as it may have
furnished the Lender in writing;
(b) If to the Lender, to the attention of Sherry R. Pate, at
Lender's address shown at the beginning of this Agreement, or to such
other address or to such individual's or department's attention as it
may have furnished to the Borrowers in writing.
Any notice so addressed and mailed by registered or certified mail, return
receipt requested, shall be deemed to be given when so mailed, and any notice
so delivered in person shall be deemed to be given when receipted for by, or
actually received by, an authorized officer of the Borrowers' Agent or the
Lender, as the case may be.
Section 9.02 Deviation from Covenants. The procedure to be
followed by the Borrowers to obtain the consent of the Lender to any deviation
from the covenants contained in this agreement or any other Security Instrument
shall be as follows:
(a) The Borrowers' Agent shall send a written notice to the
Lender setting forth (i) the covenant(s) relevant to the matter, (ii)
the requested deviation from the covenant(s) involved, and (iii) the
reason for the requested deviation from the covenant(s); and
(b) The Lender will within a reasonable time send a written
notice to the Borrowers' Agent, signed by an authorized officer of the
Lender, permitting or refusing the request; but in no event will any
deviation from the covenants of this Agreement or any other Security
Instrument be effective without the written consent of the Lender.
Section 9.03 Invalidity. In the event that any one or more of the
provisions contained in the Revolving Credit Note, this Agreement or in any
other Security Instrument shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of the Revolving Credit Note, this
Agreement or any other Security Instrument.
Section 9.04 Survival of Agreements. All representations and
warranties of the Borrowers herein, and all covenants and agreements herein not
fully performed before the effective date of this Agreement, shall survive such
date.
Section 9.05 Successors and Assigns. All covenants and agreements
contained by or on behalf of the Borrowers or any Subsidiary in the Revolving
Credit Note, this Agreement and any
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other Security Instrument shall bind its successors and assigns and shall inure
to the benefit of the Lender and its successors and assigns; except that
neither Borrowers nor any Person acting on behalf of any of them may assign any
of their rights hereunder without the prior written consent of Lender. In the
event that the Lender sells participations in the Revolving Credit Note, or
other Indebtedness of the Borrowers incurred or to be incurred pursuant to this
Agreement, to other lenders, each of such other lenders shall have the rights
of set off against such Indebtedness and similar rights or Liens to the same
extent as may be available to the Lender.
Section 9.06 Renewal. Extension or Rearrangement. All provisions
of this Agreement relating to the Revolving Credit Note or other Indebtedness
shall apply with equal force and a effect to each and all promissory notes
hereinafter executed which in whole or in part represent a renewal, extension,
increase or rearrangement of any part of the Indebtedness originally
represented by the Revolving Credit Note or of any part of such other
Indebtedness. Any provision of this agreement to be performed during the "term
of this Agreement," "term hereof" or similar language, shall include any
extension period.
Section 9.07 Waivers. No course of dealing on the part of the
Lender, its officers, employees, consultants or agents, a nor any failure or
delay by the Lender with respect to exercising any right, power or privilege of
the Lender under the Revolving Credit Note, this Agreement or any other
Security Instrument shall operate as a waiver thereof, except as otherwise
provided in Section 9.02 hereof.
Section 9.08 Cumulative Rights. Rights and remedies of the Lender
under the Revolving Credit Note, this Agreement and each other Security
Instrument shall be cumulative, and the exercise or partial exercise of any
such right or remedy shall not preclude the exercise of any other right or
remedy.
Section 9.09 Construction. This Agreement is, and each of the
Revolving Credit Note will be, a contract made under and shall be construed in
accordance with and governed by the laws of the State of Texas.
Section 9.10 Interest. It is the intention of the a parties
hereto to conform strictly to applicable usury laws now in force. Accordingly,
if the transactions contemplated hereby would be usurious under applicable law,
then, in that event, notwithstanding anything to the contrary in the Revolving
Credit Note, this Agreement or in any other Security Instrument or agreement
entered into in connection with or as security for a the Revolving Credit Note,
it is agreed as follows: (a) the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, charged or
received under the Revolving Credit
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Note, this Agreement or under any of the other aforesaid Security Instruments
or agreements or otherwise in connection with the Revolving Credit Note shall a
under no circumstances exceed the maximum amount of interest permitted by
applicable law, and any excess shall be credited on the Revolving Credit Note
by the holder thereof (or, if the Revolving Credit Note shall have been paid in
full; refunded to the Borrowers); (b) determination of the rate of interest for
determining whether the loans hereunder are usurious shall be o made by
amortizing, prorating, allocating and spreading, during the full stated term of
such loans (including any renewals of the term hereof), all interest at any
time contracted for, charged or received from the Borrowers in connection with
such loans, and any excess shall be cancelled, credited or refunded as set
forth in (a) herein; and (c) in the event that the maturity of the Revolving
Credit Note is accelerated by reason of an election of the holder thereof
resulting from any Default or Event of Default under this Agreement or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the maximum
amount permitted by applicable law, and excess interest, if any, provided for
in this Agreement or otherwise shall be cancelled automatically as of the date
of such acceleration or prepayment and, if theretofore paid, shall be credited
on the Revolving Credit Note (or, if the Revolving Credit Note shall have been
paid in full, refunded to the Borrowers).
Section 9.11 Multiple Originals. This Agreement may be executed
in two (2) or more copies; each fully executed copy shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
Section 9.12 No Tri-party Loan. Texas Revised Civil Statutes
Annotated, Title 79, chapter 15 (which regulates certain revolving loan
accounts and revolving tri-party accounts) shall not apply to the loans
evidenced by this Agreement or the Revolving Credit Note.
Section 9.13 Applicable Rate Ceiling. Unless changed in
accordance with law, the applicable rate ceiling under Texas law shall be the
indicated (weekly) rate ceiling from time to time in effect as provided in
Texas Revised Civil Statutes Annotated article 5069-1.04, as amended.
Section 9.14 Performance and Venue. The obligations of Borrowers
contained herein are performable at Lender's offices in Dallas, Dallas County,
Texas, and venue for any action in connection therewith shall be in Dallas
County, Texas.
Section 9.15 Negotiation of Documents. This Agreement, the
Revolving Credit Note and all other Security Instruments have been negotiated
by the parties at arm's length, each represented by its own counsel, and the
fact that the documents have been prepared by
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the Lender's counsel, after such negotiation, shall not be cause to constitute
any of such documents against the Lender.
Section 9.16 Joint and Several Liability. The obligations and
liability of each Borrower hereunder and under the Revolving Credit Note and
all Security Instruments shall be joint and several.
Section 9.17 Notices Received by Lender. Any instrument in
writing, telex, telegram, telecopy or cable received by the Lender in
connection with any loan hereunder, which purports to dispatched or signed by
or on behalf of Borrowers, shall conclusively be deemed to have been signed by
such party, and Lender may rely thereon and shall have no obligation, duty or
responsibility to determine the validity or genuineness thereof or authority of
the Person or Persons executing or dispatching the same.
Section 9.18 Debtor-Creditor Relationship. The relationship
between the Borrowers and the Lender created by this Agreement is only that of
debtor-creditor.
Section 9.19 No Third-Party Beneficiaries. This Agreement is for
the sole and exclusive benefit of Borrowers and Lender. This Agreement does
not create, and is not intended to create, any rights in favor of or
enforceable by any other Person. This Agreement may be amended or modified by
the agreement of the Borrowers and Lender, without any requirement or necessity
for notice to, or the consent of or approval of any other Person.
Section 9.20 Release of Liability. To the maximum extent
permitted by law from time to time in effect, each Borrower hereby knowingly,
voluntarily and intentionally (and after each Phase consulted with its own
attorney) irrevocably and unconditionally agrees that no claim may be made by
any Borrower against the Lender or any of its affiliates, participants,
shareholders, directors, officers, employees, attorneys, accountants, or agents
or any of its or their successors and assigns, for any special, indirect,
consequential or punitive damages in respect of any breach or wrongful conduct
(whether the claim is based on contract, tort or statute) arising out of, or
related to, the transactions contemplated by any of this Agreement, the
Revolving Credit Note, the Security Instruments or any other related documents,
or any act, omission, or event occurring in connection herewith or therewith,
except for claims for damages arising directly from the gross negligence or
willful misconduct of Lender. In furtherance of the foregoing, each Borrower
hereby waives, releases and agrees not to sue upon any claim for any such
damages, whether or not accrued and whether or not known or suspected to exist
in its favor, and each Borrower shall indemnify and hold harmless Lender and
its affiliates, participants, shareholders, directors, officers, employees,
attorneys, accountants and agents and their successors and assigns of and from
any such claims, except for
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claims for damages arising directly from the gross negligence or willful
misconduct of Lender. Upon the full payment of the Indebtedness, and prior to
Lender releasing any lien or security interest in Property given to secure the
Indebtedness, Borrowers and each Subsidiary shall execute a release agreement,
in form and substance satisfactory to Lender, releasing Lender and Lender's
affiliates, participants, shareholders, directors, officers, employees, agents
and attorneys from any and all claims, demands, actions, causes of action,
costs, expenses and liabilities whatsoever, known or unknown, at law or in
equity, which the Borrowers or any Subsidiary may have, as of the date of
execution of such are lease or in the future, against the Lender and Lender's
affiliates, participants, shareholders, directors, officers, employees, agents
and attorneys, arising out of or in connection with the Indebtedness, this
Agreement, the Security Instruments or any related documents and all of such
released parties' actions and omissions in connection with the same.
Section 9.21 Agreement for Binding Arbitration. The parties agree
to be bound by the terms and provisions of the Arbitration Program, which is
set forth in Exhibit E attached hereto, pursuant to which any and all disputes
shall be resolved by mandatory binding arbitration upon the request of any
party.
Section 9.22 Waiver of Jury Trial. BORROWERS AND LENDER HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY
BORROWERS OR LENDER MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW OR IN EQUITY,
IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS RELATED. BORROWERS
REPRESENT AND WARRANT, THAT NO REPRESENTATIVE OR AGENT OF LENDER HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT LENDER WILL NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THIS RIGHT TO JURY TRIAL WAIVER. BORROWERS
ACKNOWLEDGE THAT LENDER HAS BED INDUCED TO ACCEPT THIS AGREEMENT BY, AMONG
OTHER THINGS, THE PROVISIONS OF THIS SECTION.
Section 9.23 Final Expression. THIS WRITTEN LOAN AGREEMENT, THE
REVOLVING CREDIT NOTE AND THE SECURITY INSTRUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF AND
THEREOF AND HAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
BORROWER:
ULTRAK, INC.
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<PAGE> 43
By: /s/ GEORGE K. BROADY
------------------------------
George K. Broady
President
CCTV SOURCE INTERNATIONAL, INC.
By: /s/ GEORGE K. BROADY
------------------------------
George K. Broady
President
LOSS PREVENTION ELECTRONICS
CORPORATION
By: /s/ GEORGE K. BROADY
------------------------------
George K. Broady
President
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PETRUS FUND, L.P.
BY: PEROT INVESTMENTS, INC.
By: /s/ STEVEN L. BLASNIK
------------------------------
Steven L. Blasnik
President
Exhibits:
A - Revolving Credit Note
B - Officer's Certificate
C - Weekly Cycle Count
D - Assignment of Account
E - Arbitration Program
Schedules:
I - Authorized Persons
II - Stock, Warrants, Etc.
III - Liabilities
IV - Defaults
V - Liens
VI - Investments, Loans & Advances
44
<PAGE> 45
EXHIBIT A
to
Loan Agreement
REVOLVING CREDIT NOTE
$3,000,000.00 Dallas, Texas July 20, 1992
FOR VALUE RECEIVED on or before January 20, 1995, the undersigned,
ULTRAK, INC., a Colorado corporation, CCTV SOURCE INTERNATIONAL, INC., a Texas
corporation, and LOSS PREVENTION ELECTRONICS CORPORATION, a Colorado
corporation (hereinafter collectively called "Maker"), jointly and severally
promise to pay to the order of
PETRUS FUND, L.P.,
a Texas limited partnership
(hereinafter called "Lender"), at its offices at 1700 Lakeside Square, 12377
Merit Drive, Dallas, Dallas County, Texas 75251, in lawful money of the United
States of America, up to the sum of THREE MILLION AND NO/100 DOLLARS
($3,000,000.00), or so much thereof as may be advanced from time to time
pursuant to that certain Loan Agreement (herein so called) of even date
herewith between Maker and Lender, together with interest on the unpaid
principal balance hereof from time to time outstanding at a rate per annum
which is ten percent (10.0%) per annum.All past due principal (and, to the
extent permitted by law, past due interest) shall bear interest at a rate per
annum which is three percent (3%) per annum above the prematurity rate
specified in the immediately preceding sentence (but in no event to exceed the
maximum rate of non-usurious interest allowed from time to time by law as now
or, to the extent allowed by law, as may hereafter be in effect [hereinafter
called the "Maximum Non-usurious Interest Rate")) from maturity until paid.
Unless otherwise specified below, interest shall be computed on a per annum
basis of a year of 360 days and for the actual number of days (including the
first but excluding the last day) elapsed unless such calculation would result
in a usurious rate, in which case interest shall be calculated on a per annum
basis of a year of 365 or 366 days, as the case may be.
Accrued interest is due and payable monthly commencing August l, 1992,
and on the same day of each and every succeeding month thereafter during the
term hereof and at maturity; provided, that upon any prepayment of principal,
at the option of Lender, it may demand (at any time at or after prepayment) all
accrued and unpaid interest with respect to the principal amount prepaid
through the date of prepayment.
The unpaid principal balance hereof shall at no time exceed the sum of
Three million and No/100 Dollars ($3,000,000.00). The unpaid principal balance
of this note at any time shall be the
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<PAGE> 46
total amounts loaned or advanced hereunder by the holder hereof, less the
amount of payments or prepayments of principal made hereon by or for the
account of Maker. All loans or advances and all payments or prepayments made
hereunder on account of principal or interest may be evidenced by Lender, or
any subsequent holder, maintaining in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Maker resulting from all
loans or advances and all payments or prepayments hereunder from time to time
and the amounts of principal and interest payable and paid from time to time
hereunder, in which event, in any legal action or proceeding in respect of this
note, the entries made in such account or accounts shall be conclusive evidence
of the existence and amounts of the obligations of the Maker therein recorded.
In the event that the unpaid principal amount hereof at any time, for any
reason, exceeds the maximum amount hereinabove specified, Maker covenants and
agrees to pay the excess principal amount forthwith upon demand; such excess
principal amount shall in all respects be deemed to be included among the loans
or advances made pursuant to the other terms of this note and shall bear
interest at the rates hereinabove stated.
Advances hereunder may be made by the holder hereof (i) pursuant to
the terms of the Loan Agreement, or (ii) at the written request of any of the
undersigned or of any officer or agent of Maker designated by or acting under
the authority of resolutions of the board of directors of Maker, if a
corporation, or other written authorization of Maker if other than a
corporation, a duly certified or executed copy of which shall be furnished to
the holder hereof, until written notice of the revocation of such authority is
received by the holder hereof.Maker covenants and agrees to furnish to the
holder hereof written confirmation of any such oral request within five (5)
days of the resulting loan or advance, but any such loan or advance shall be
deemed to be made under and entitled to the benefits of this note irrespective
of any failure by Maker to furnish such written confirmation.Any loan or
advance shall be conclusively presumed to have been made under the terms of
this note to or for the benefit of Maker when made pursuant to the terms of any
written agreement executed in connection herewith between Maker and Lender, or
in accordance with such requests and directions or when said advances are
deposited to the credit of the account of Maker with Lender regardless of the
fact that persons other than those authorized hereunder may have authority to
draw against such account, or may have requested an advance.
If any installment or payment of principal or interest of this note is
not paid when due; or if a default occurs under any instrument now or hereafter
executed in connection with or as security for this note including, without
limitation, the Loan Agreement; thereupon, or upon demand, at the option of
Lender, the principal and unpaid accrued interest on this note and any and all
other indebtedness of Maker to Lender shall become due and payable
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<PAGE> 47
forthwith without demand, notice of default or of intent to accelerate the
maturity hereof, notice of acceleration, notice of nonpayment, presentment,
protest or notice of dishonor, all of which are hereby expressly waived by
Maker and each other liable party.
If this note is not paid at maturity whether by acceleration or
otherwise and is placed in the hands of an attorney for collection, or suit is
filed hereon, or proceedings are had in probate, bankruptcy, receivership,
reorganization, arrangement or other legal proceedings for collection, Maker
and each drawer, accepter, endorser, guarantor, surety, accommodation party or
other person now or hereafter primarily or secondarily liable upon or for
payment of all or any part of this note (each hereinafter called an "other
liable party") agree to pay Lender its collection costs, including attorney's
fees. Maker and each other liable party are and shall be directly and
primarily, jointly and severally, liable for the payment of all sums called for
hereunder, and Maker and each other liable party hereby expressly waive
bringing of suit and diligence in taking any action to collect any sums owing
hereon and in the handling of any security, and Maker and each other liable
party hereby consent to and agree to remain liable hereon regardless of any
renewals, extensions for any period or rearrangements hereof, or partial
prepayments hereon, or any release or substitution of security herefor, in
whole or in part, with or without notice, from time to time, before or after
maturity.
It is the intention of Maker and Lender to conform strictly to
applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law then, in that event, notwithstanding
anything to the contrary in any agreement entered into in connection with or as
security for this note, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under applicable law that is taken,
reserved, contracted for, charged or received under this note or under any of
the other aforesaid agreements or otherwise in connection with this note shall
under no circumstances exceed the maximum amount of interest allowed by
applicable law, and any excess shall be credited on this note by the holder
hereof (or, if this note shall have been paid in full, refunded to Maker); (ii)
determination of the rate of interest for determining whether the loans
hereunder are usurious shall be made by amortizing, prorating, allocating and
spreading, in equal parts during the full stated term of such loans (including
any renewals of the term hereof) all interest at any time contracted for,
charged or received from the Maker in connection with such loans, and any
excess shall be cancelled, credited or refunded as set forth in (i) herein; and
(iii) in the event that maturity of this note is accelerated by reason of an
election by the holder hereof resulting from any default hereunder or
otherwise, or in the event of any required or permitted prepayment, then such
consideration that
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<PAGE> 48
constitutes interest may never include more than the maximum amount allowed by
applicable law, and excess interest, if any, provided for in this note or
otherwise shall be cancelled automatically as of the date of such acceleration
or prepayment and, if the heretofore prepaid, shall be credited on this note
(or if this note shall have been paid in full, a refunded to Maker).
This note shall be construed under and governed by the laws of the
State of Texas and applicable federal law, but Texas Revised Civil Statutes
Annotated, Title 79, chapter 15 (which regulates certain revolving loan
accounts and revolving a tri-party accounts) shall not apply to the loan
evidenced by this note.
Wherefore, intending to be legally bound hereby, Maker has executed this note.
MAKER:
-----
Address: ULTRAK, Inc.
1220 Champion Circle By: _________________________
Suite 100 George K. Broady,
Carrollton, Texas 75006 President
CCTV SOURCE INTERNATIONAL, INC.
1220 Champion Circle By: _________________________
Suite 100 George K. Broady,
Carrollton, Texas 75006 President
LOSS PREVENTION ELECTRONICS
CORPORATION
1220 Champion Circle By: _________________________
Suite 100 George K. Broady,
Carrollton, Texas 75006 President
48
<PAGE> 49
EXHIBIT B
to
Loan Agreement
(FORM OF OFFICER'S CERTIFICATE)
ULTRAK, INC.
OFFICER'S CERTIFICATE
FOR THE PERIOD FROM ___________, 199___ TO ___________, 199__
Petrus Fund, L.P.
1700 Lakeside Square
12377 Merit Drive
Dallas, Texas 75251
Attention: Sherry R. Pate
Re: Loan Agreement
Dear Sir or Madam:
This Certificate is delivered pursuant to Section 4.01(b) of that
certain Loan Agreement (as amended, the "Loan Agreement"), dated July 20, 1992,
by and among ULTRAK, INC., a Colorado corporation ("Ultrak"), CCTV SOURCE
INTERNATIONAL, INC., a Texas corporation ("CCTV"), and LOSS PREVENTION
ELECTRONICS CORPORATION, a Colorado corporation ("Loss Prevention")
(hereinafter Ultrak, CCTV, and Loss Prevention are collectively called the
"Borrowers"), and PETRUS FUND, L.P., a Texas limited partnership (the
"Lender"). All terms defined in the Loan Agreement shall have the same meaning
herein.
I hereby certify to you as follows:
1. I am, and at all times mentioned herein have been, the duly
elected, qualified and acting _____________________ of Ultrak, Inc. (the
"Company").
2. I have individually reviewed the provisions of Loan Agreement,
the other Security Instruments and the Revolving Credit Note, and a review of
activities of the Borrowers and their Subsidiaries during the period from
__________, 199 to ___________, 199(the "Subject Period") has been made under
my supervision with a view towards determining whether, during the Subject
Period, the Borrowers and their Subsidiaries have kept, observed, performed and
fulfilled all their respective obligations under the Loan Agreement, the other
Security Instruments, and the Revolving Credit Note.
3.To the best of my knowledge, based upon the foregoing review, the
representations and warranties made in Article III of the Loan Agreement are
true and correct in all material respects as
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<PAGE> 50
of the date hereof as though made at and as of the date hereof, except for such
representations and warranties which relate to a particular date, and no
Default or Event of Default has occurred or is continuing or is imminent.
4. Current Ratio.
The consolidated Current Assets (as defined in Subsection 1.02
of the Loan Agreement) of the Borrowers, as of the date
hereof, are:
$____________
The consolidated Current Liabilities (as defined in Subsection
1.02 of the Loan Agreement) of the Borrowers, as of the date
hereof, are:
$____________
The ratio of consolidated Current Assets of the Borrowers to
consolidated Current Liabilities of the Borrowers, as of the
date hereof, is:
_____ : 1
Requirement of Loan Agreement:
Not less than: 1.50 : 1
Covenant Satisfied ______ Covenant Not Satisfied ______
5. Leverage Ratio.
The total of all liabilities of Borrowers, determined on a
consolidated basis according to generally accepted accounting
principles (but excluding the obligations owing to TCFC for
the financing of the subsidiary of Exxis, which may not exceed
$10,000,000 ), as of the date hereof, is:
The consolidated Tangible Net Worth (as defined in Subsection
1.02 of the Loan Agreement) of the Borrowers, as of the date
hereof, is:
$_____________
The ratio of (i) the total of all liabilities of Borrowers,
determined on a consolidated
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<PAGE> 51
basis according to generally accepted accounting principles
(but excluding the obligations owing to TCFC for the
financing of the subsidiary of Exxis, which may not exceed
$10,000,000) to (ii) consolidated Tangible Net Worth of the
Borrowers, as of the date hereof, is:
______ : 1
Requirement of Loan Agreement:
Not less than: 1.80 : 1
Covenant Satisfied ______ Covenant Not Satisfied ______
6. Debt Service Coverage Ratio.
The net income, plus amortization, plus depreciation, plus
other non-cash charges, minus Net Capital Expenditures (as
defined in Subsection 1.02 of the Loan Agreement) of the
Borrowers, as of the date hereof, is:
$_____________
The consolidated Current Maturities of Long Term Debt (as
defined in Subsection 1.02 of the Loan Agreement) of the
Borrowers, as of the date hereof, are:
$_____________
The ratio of (i) the net income, plus amortization,plus
depreciation, plus other non-cash charges, minus Net Capital
Expenditures (as defined in Subsection 1.02 of the Loan
Agreement) of the Borrowers to (ii)consolidated Current
Maturities of Long Term Debt of the Borrowers, as of the date
hereof, is:
______ : 1
Requirement of Loan Agreement:
Not less than: 1.75 : 1
Covenant Satisfied ________ Covenant Not Satisfied ______
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<PAGE> 52
7. Tangible Net Worth.
The consolidated Tangible Net Worth (as defined in Subsection
1.02 of the Loan Agreement) of the Borrowers, as of the date
hereof, is:
$_____________
Requirement of Loan Agreement:
From the Closing Date through
December 31, 1992 $5,000,000
From the January l, 1993 through
December 31, 1993 $5,500,000
Covenant Satisfied ________ Covenant Not Satisfied ______
8. Working Capital.
The consolidated Current Assets (as defined in Subsection 1.02
of the Loan Agreement) of the Borrowers, as of the date
hereof, are:
$_____________
The consolidated Current Liabilities (as defined in Subsection
1.02 of the Loan Agreement) of the Borrowers, as of the date
hereof, are:
$____________
The total of consolidated Current Assets of the Borrowers less
consolidated Current Liabilities of the Borrowers, as of the
date hereof, is:
$____________
Requirement of Loan Agreement:
Not less than: $4,000,000
Covenant Satisfied ________ Covenant Not Satisfied ______
Executed and delivered this ______ day of __________, 199__.
ULTRAK, INC.
By: _________________________
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<PAGE> 53
Name:_________________________
Title:________________________
53
<PAGE> 54
EXHIBIT C
to
Loan Agreement
FORM OF WEEKLY CYCLE COUNT
[Attached.]
54
<PAGE> 55
EXHIBIT D
to
Loan Agreement
ASSIGNMENT OF DEPOSIT ACCOUNT
This Assignment of Deposit Account (this "Assignment") is entered into
effective the ___ day of __________, 1992 by and between _____ (the
"Assignor"), whose address is 1222 Champion Circle, Suite 100, Carrollton,
Texas 75006, and PETRUS FUND, L.P., a Texas limited partnership (the "Lender"),
whose address is 1700 Lakeside Square, 12377 Merit Drive, Dallas, Dallas
County, Texas 75251.
For value received, Assignor hereby transfers to Lender, land grants
Lender a security interest in, that certain _____ deposit account, designated
as account number _____, and established in the following depository
institution (the "Depository Institution"):
______
______
______
and any extensions, replacements or renewals thereof, if the account is one
which may be extended, replaced or renewed (such account and any extensions,
replacements or renewals being hereinafter called the "Account"), together with
all of Assignor's right, title and interest in and to the Account, all sums now
or at any time hereafter on deposit therein, credited thereto or payable
thereon and all instruments, documents and other writings evidencing the
Account, on the following terms and conditions.
1. Obligations Secured. This Assignment shall secure:
a. all indebtedness of ULTRAK, INC., a Colorado
corporation, CCTV SOURCE INTERNATIONAL, INC., a Texas corporation, and
LOSS PREVENTION ELECTRONICS CORPORATION, a Colorado corporation (the
"Borrowers") to Lender; and
b. all indebtedness of Assignor to Lender.
The term "indebtedness," as used in this Paragraph 1, shall mean all
debts, obligations and liabilities of every kind and character, whether direct
or indirect, contingent, primary, secondary, joint, several, joint and several,
or otherwise, and whether now existing or hereafter arising, whether evidenced
by note, draft, acceptance, overdraft or otherwise, regardless of the manner in
which, or the person or persons in whose favor originally created and
regardless of the manner in which acquired by Lender, and all renewals or
extensions of such items or any of them. The above debts, obligations and
liabilities are referred to
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<PAGE> 56
hereinafter collectively as the "Obligation." The person or persons obligated
to repay the obligation, whether Assignor, Borrowers or both, are referred to
hereinafter collectively as "Obligor."
2. Representations and Warranties. Assignor represents and warrants
that (a) Assignor is the owner of the Account and has the power and authority
to execute, deliver and comply with this Assignment, (b) the obligations of
Assignor hereunder are legal, valid and binding obligations, enforceable in
accordance with their terms, (c) except for any financing statement that may
have been filed by Lender, no financing statement covering the Account, or any
part thereof, has been filed with any filing officer, (d) no other assignment
or security agreement has been executed with respect to the Account (e) the
Account is not subject to any liens or offsets of any person, firm or
corporation other than Lender, and (f) except for any notice given by Lender,
no notice has been given to or received by the Depository Institution
indicating that the Account has been assigned or constitutes collateral for any
obligation or liability of Assignor, Borrowers or any other third party.
3. Covenants and Agreements. So long as the Obligation or any part
thereof remains unpaid, Assignor covenants and agrees to: (a) from time to time
promptly execute and deliver to Lender all such other assignments,
certificates, passbooks, supplemental writings, notices and financing
statements and do all other acts or things as Lender reasonably may request in
order to evidence and perfect more fully the security interest herein created,
(b) avoid making any statement or otherwise giving any information to third
parties that would lead them to believe that Assignor has free access to the
funds in the account or that this Assignment is not in existence and in full
force and effect, (c) promptly furnish Lender with any information or writings
that Lender reasonably may request concerning the Account, (d) promptly notify
Lender of any change in any fact or circumstances warranted or represented by
Assignor herein or in any other writing furnished by Assignor to Lender in
connection with the Account or the Obligation, (e) promptly notify Lender of
any claim, action or proceeding affecting title to the Account, or any part
thereof, or the security interest granted in the Account hereby, and, at the
request of Lender, appear in and defend any such action or proceeding, and (f)
pay to Lender the amount of any court costs and reasonable attorneys' fees
assessed by a court and incurred by Lender following default hereunder.
Assignor covenants and agrees that, without the prior consent of Lender,
Assignor will not: (g) create any other security interest in, mortgage, or
otherwise encumber or assign the Account or any part thereof, or permit the
same to be or become subject to any lien, attachment, execution, sequestration,
other legal or equitable process, or any encumbrance of any kind or character,
except the lien herein created, or (h) make or allow to be made any withdrawals
from the Account.Should any funds payable with respect to the Account be
received by Assignor, such funds shall
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<PAGE> 57
immediately upon such receipt become subject to the lien hereof and, while in
the hands of Assignor, be segregated from all other funds of Assignor and be
held in trust for Lender. Assignor shall have absolutely no dominion or
control over such funds except to pay them immediately into the Account.
4. No Duty to Collect. Lender shall never be liable for its
failure to use due diligence in the collection of the Obligation or any part
thereof, or for its failure to give notice to Assignor of default in the
payment of the Obligation or any part thereof, or in the payment of or upon any
security, whether pledged hereunder or otherwise.
5. Actions Permitted to Lender. Lender, in its discretion, without in
any manner impairing its rights and powers hereunder, may, at any time and from
time to time, without further consent from or notice to Assignor, and with or
without valuable consideration, (a) make loans or advances to Borrowers, or
otherwise incur or acquire obligations of Borrowers, (b) renew or extend the
maturity of or accept partial payments upon the Obligation or any part thereof,
(c) release any person primarily or secondarily liable in respect thereof, (d)
alter in any manner that Lender may elect the terms of any Instrument
evidencing the Obligation or any part thereof either as to the maturity
thereof, rate of interest, method of payment, parties thereto or otherwise, (e)
renew, extend or accept partial payments upon, release or permit substitutions
for or withdrawals of, any security (other than the Account) at any time
directly or indirectly, immediately or remotely, securing the payment of the
Obligation or any part thereof, and (f) release or pay to Borrowers, or any
other person otherwise entitled thereto, any amount paid or payable in respect
of any such other direct or indirect security for the Obligation or any part
thereof. 6. Collections. If, at any time, Borrowers' liabilities to Lender
are in excess of Borrowers indebtedness to Lender constituting the Obligation,
Lender, at its option, may apply all collections in respect to Borrowers'
liabilities derived from any source other than the Account toward payment of
Borrowers' liabilities not constituting the Obligation hereunder.
7. Other Collateral. Should any other person have heretofore
executed or hereafter execute in favor of Lender any deed of trust, mortgage or
security agreement, or have heretofore pledged or hereafter pledge any other
property to secure the payment of the Obligation or any part thereof, the
exercise by Lender of any right or power conferred upon it in any such
instrument or by any such pledge shall be wholly discretionary with Lender; and
the exercise or failure to exercise any such right or power shall not impair or
diminish Lender's rights, titles, interests, lines and powers existing
hereunder.
8. Default. The term "Default," as used herein, means the
occurrence of any of the following events: (a) default in the
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<PAGE> 58
payment of the Obligation or any part thereof as it becomes due in accordance
with the terms of the promissory note or notes or other writings or agreements
which evidence it or when accelerated pursuant to any power to accelerate; (b)
default in the punctual and proper performance of any covenant, agreement or
condition contained herein or in any other security agreement, mortgage, deed
of trust, assignment or contract of any kind securing or assuring payment of
the Obligation or any part thereof; (c) the death of Assignor or Obligor or, if
either is a partnership, the death of any partner therein; (d) the insolvency
of Assignor or Obligor; (e) the levy against the Account or any part thereof of
any execution, attachment, sequestration or other writ; (f) the appointment of
a receiver of Assignor or Obligor or of the Account or any part thereof; (g)
the filing of any petition or other pleading seeking any adjustment of
Assignor's or Obligor's debts or any other relief under any bankruptcy,
reorganization, debtor's relief or insolvency laws now or hereafter existing;
(h) when Lender in good faith believes that the prospect of payment of the
Obligation or the performance by Assignor or Obligor of any of the covenants,
agreements or other duties under any writing executed in connection therewith
is impaired; or (i) the receipt by Lender of information establishing that any
representation or warranty made by Assignor herein or by Assignor or Obligor in
any other writing delivered by Assignor or Obligor to Lender in connection
herewith is false, misleading or erroneous.
9. Remedies. Upon the occurrence of a Default, Lender, in
addition to any other remedies it may have, may declare the entire unpaid
balance of principal of and all earned interest on the Obligation immediately
due and payable and may demand payment thereof from the funds in or credited to
the Account. Assignor hereby authorizes and directs Depository Institution,
upon written demand from Lender following any such Default, to make payment
directly to Lender of the funds in or credited to the Account or such part
thereof as Lender may request. Depository Institution shall be protected fully
in relying upon the written statement of Lender that the Account is at the time
of such demand assigned hereunder and that Lender is entitled to payment of the
Obligation therefrom. Lender's receipt for sums paid Lender pursuant to such
demand shall be a full and complete release, discharge and acquittance to
Depositary Institution to the extent of the amount so paid.Assignor hereby
authorizes Lender upon the occurrence of a Default and so long as any part of
the Obligation remains unpaid (a) to withdraw, collect and receipt for any and
all funds on deposit in or payable on the Account, (b) on behalf of Assignor to
endorse the name of Assignor upon any checks, drafts or other instruments
payable to Assignor evidencing payment on the Account, and (c) to surrender or
present for notation of withdrawals the passbook, certificate or other
documents issued to Assignor in connection with the Account. No power granted
herein to Lender by Assignor shall terminate upon any disability of
Assignor.Lender shall not be liable for any loss of interest on or any penalty
or
58
<PAGE> 59
charge assessed by the Depository Institution against funds in, payable or
credited to the Account as a result of Lender's exercising any of its rights or
remedies under this Assignment.
10. Release. Lender shall be entitled to apply any and all funds
received by Lender hereunder toward payment of the Obligation in such order and
manner as Lender in its discretion may elect. If such funds are not sufficient
to pay the Obligation in full, Obligor shall remain liable for any deficiency;
the liability of each Obligor (if more than one) to be determined by Lender
following its receipt and crediting of such funds.Upon full and final payment
of the Obligation, Lender, at the written request of Assignor, shall release
its rights hereunder.
11. Rights and Remedies Cumulative. All rights, titles, interest,
liens and remedies of Lender hereunder are cumulative of each other and of
every other right, title, interest, lien or remedy that Lender may otherwise
have at law or in equity or under any other contract or other writing for the
enforcement of the security interest herein or the collection of the
Obligation.The exercise of one or more rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of other right or
remedies.Should Assignor have heretofore executed or hereafter execute any
other security agreement in favor of Lender, the security interest therein
created and all other rights, powers and privileges vested in Lender by the
terms thereof shall exist concurrently with the security interest created
herein.
12. No Waiver. Should any part of the Obligation be payable in
installments, the acceptance by Lender at any time or from time to time of part
payment of the aggregate amount of all installments then matured shall not be
deemed to be a waiver of the Default then existing. No waiver by Lender of any
Default shall be deemed to be a waiver of any other subsequent Default, nor
shall any such waiver by Lender be deemed to be a continuing waiver.No delay or
omission by Lender in exercising any right or power hereunder, or under any
other writings executed by Assignor or Obligor as security for or in connection
with the Obligation, shall impair any such right or power or be construed as a
waiver thereof or any acquiescence therein, nor shall any single or partial
exercise of any such right or power preclude other or further exercise thereof
or the exercise of any other right or power of Lender hereunder or under such
other writings.
13. Interest Limitation. No provision herein or in any promissory
note, instrument or any other loan document evidencing the Obligation shall
require the payment or permit the collection of interest in excess of the
maximum permitted by law. If any excess of interest in such respect is
provided for herein or in any such promissory note, instrument or any other
loan document, the provisions of this paragraph shall govern; and Obligor shall
not be obligated to pay the amount of such interest to the extent that it
59
<PAGE> 60
is in excess of the amount permitted by law.The intention of parties being to
conform strictly to the applicable usury laws now in force, all promissory
notes, instruments and other loan documents evidencing the Obligation shall be
held subject to reduction to the amount allowed under said usury laws as now or
hereafter construed by the courts having jurisdiction.
14. Successors and Assigns. This Assignment shall be binding on
Assignor and Assignor's heirs, executors, administrators, other legal
representatives, successors and assigns and, if there be more than one
Assignor, upon their respective heirs, executors, administrators, other legal
representatives, successors and assigns. This Assignment shall inure to the
benefit of Lender, its successors and assigns. An accounting to any one or
more of Assignor's heirs, executors, administrators, other legal
representative, successors and assigns shall discharge Lender of any further
liability therefor.
15. Termination. At any time when Lender is not obligated to make
further loans or advances to Borrowers on the security of this Assignment,
Assignor may terminate this Assignment by written notice delivered to Lender
insofar as this Assignment otherwise would secure indebtedness of Borrowers to
Lender arising after delivery of such notice; provided, however, this
Assignment shall continue in full force and effect as to all indebtedness of
Borrowers to Lender arising before delivery of such notice (subject to the
limitation, if any stated in Paragraph 1) and all renewals or extensions of the
same, or any part thereof, as well as with respect to all indebtedness of
Assignor to Lender,if the Obligation includes indebtedness of Assignor to
Lender.
16. Choice of Law. The validity, construction, interpretation and
enforcement of this Assignment shall be governed by the laws of the State of
Texas and the United States of America. Any conflicts of law rules of any
jurisdiction that require reference to the laws of any other jurisdiction
besides the State of Texas shall be disregarded. This Assignment is to be
performed in Dallas County, Texas. Any and all suits or proceedings arising
out of this Assignment may be brought in the state courts sitting in Dallas
County, Texas, or the United States court sitting in the Northern District of
Texas.Assignor hereby agrees to submit to the jurisdiction of such courts and
waives any right Assignor may have to plead forum non conveniens.
Assignor acknowledges receipt of a copy of this Assignment.
EXECUTED by Assignor on the date first above written.
ASSIGNOR:
______
60
<PAGE> 61
By: _________________________
__________, 1992
[Depository Institution]
______
______
______
Gentlemen:
______ (the "Depositor") has assigned to _______ (the "Lender")
account number _____ in Depositor's name with you, along with any renewals and
extensions thereof (such account and any renewals and extensions thereof being
called the "Account"), pursuant to that certain Assignment of Deposit Account,
dated _________, 1992, executed by Depositor in favor of Lender.
Your signature to and return of the enclosed copy of this letter shall
evidence your agreement in favor of Lender:
(a) Not to release or pay out any of the funds in the a Account to
Depositor or any other party until receiving written
notification from Lender that such funds may be paid out and
to whom the funds shall be paid;
(b) To include on all written confirmations of the Account
(including renewals and extension of the Account) hereafter
made by you the following legend:
"This account has been assigned to Petrus Fund, L.P.as
collateral for certain obligations owed by depositor (or
others) to such Lender";
and
(c) Not to exercise any offset rights you may have bylaw, at
equity or by express agreement with respect to the funds contained in the
Account.
Very truly yours,
PETRUS FUND, L.P.
By: Perot Investments, Inc.
By:___________________________
Name:_________________________
Title:________________________
61
<PAGE> 62
Depositor authorizes and agrees to the instructions and terms of this letter.
[Depositor]
By: _________________
The depository institution, which issued and established the Account, accepts
and agrees to the instructions and terms of this letter.
[Depository Institution]
By: ___________________
62
<PAGE> 63
EXHIBIT E
to
Loan Agreement
ARBITRATION PROGRAM
(a) Binding Arbitration. Upon the request of any party, whether
made before or after the institution of any legal proceeding, any action,
dispute, claim or controversy of any kind (e.g., whether in contract or in
tort, statutory or common law, legal or equitable) now existing or hereafter
arising between the parties in any way arising out of, pertaining to or in
connection with (1) the agreement, document or instrument to which this
Arbitration Program is attached or in which it is referred to or any related
agreements, documents, or instruments (the "Documents"), (2) all past and
present loans, credits, accounts, safekeeping agreements, guarantees, letters
of credit, goods or services or other transactions, contracts or agreements,
(3) any incidents, omissions, acts, practices, or occurrences causing injury to
either party whereby the other party or its agents, employees or
representatives may be liable, in whole or in part, or (4) any aspect of the
past or present relationships of the parties, shall be resolved by binding
arbitration in accordance with the terms of this Arbitration Program. The
foregoing matters shall be referred to as a "Dispute." Any party to this
Arbitration Program may, by summary proceedings (e.g., a plea in abatement or
motion to stay further proceedings), bring an action in court to compel
arbitration of any Disputes.
(b) Governing Rules. All disputes between the parties shall be
resolved by binding arbitration administered by the American Arbitration
Association (the "AAA") in accordance with the terms of this Arbitration
Program, the Commercial Arbitration Rules of the AAA, and to the maximum extent
applicable, the Federal Arbitration Act (Title 9 of the United States Code).
In the event of any inconsistency between this Arbitration Program and such
statute and rules, this Arbitration Program shall control. Judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction.
(c) No Waiver: Preservation of Remedies. No provisions of, nor
the exercise of any rights under this Arbitration Program shall limit the right
of any party to employ other remedies, including, without limitation, (1)
foreclosing against any real or personal property collateral or other security
by the exercise of a power of sale under a deed of trust, mortgage, or other
security agreement or instrument, or applicable law, (2) exercising self-help
remedies (including set-off rights) or (3) obtaining provisional or ancillary
remedies such as injunctive relief, sequestration, attachment, garnishment, or
the appointment of a receiver from a `court having jurisdiction before, during,
or after the pendency of any arbitration. The institution and maintenance of
an action for
63
<PAGE> 64
judicial relief or pursuit of provisional or ancillary remedies or exercise of
self-help remedies shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the Dispute to arbitration nor render
inapplicable the compulsory arbitration provisions hereof.Without limitation of
the foregoing, the parties shall be entitled to the benefits of each and all of
the remedies and assistance provided for by applicable law.
In Disputes involving indebtedness or other monetary obligations, each
party agrees that the other party may proceed against all liable persons,
jointly and severally, or against one or more of them, less than all, without
impairing rights against other liable persons. Nor shall a party be required
to join the principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A party may release
or settle with one or more liable persons as the party deems fit without
releasing or impairing rights to proceed against any persons not so released.
(d) Statute of Limitations: All statutes of limitation that would
otherwise be applicable shall apply to any arbitration proceeding.
(e) Scope of Award; Modification or Vacation of Award; Qualifications.
Any arbitrators shall resolve all Disputes in accordance with the applicable
substantive law. Any arbitrators shall be practicing attorneys licensed to
practice law in the State of Texas and shall be knowledgeable in the subject
matter of the Dispute. With respect to a Dispute in which the claim or amount
in controversy does not exceed $1,000,000, a single arbitrator (who shall have
authority to render a maximum award of $1,000,000, including all damages of any
kind and costs, fees and the like) shall be chosen and shall decide the
Dispute. With respect to a Dispute in which the claim or amount in controversy
exceeds $1,000,000, the Dispute shall be decided by a majority vote of three
arbitrators.The arbitrators may grant any remedy or relief that the arbitrators
deem just and equitable and within the scope of this Arbitration Program.The
arbitrators may also grant such ancillary relief as is necessary to make
effective the award. In all arbitration proceedings in which the amount in
controversy exceeds $1,000,000, in the aggregate, the parties shall have in
addition to the limited statutory right to seek vacation or modification of an
award pursuant to applicable law, the right to seek vacation or modification of
any award that is based in whole, or in part, on an incorrect ruling of law;
Provided, however, that any such application for vacation or modification of an
award based on an incorrect ruling of law must be filed in a court having
jurisdiction over the Dispute within 15 days from the date the award is
rendered. The arbitrators' findings of fact shall be binding on all parties
and shall not be subject to further review except as otherwise allowed by
applicable law.
64
<PAGE> 65
(f) Other Matters and Miscellaneous. To the maximum extent
practicable, an arbitration proceeding hereunder shall be concluded within 180
days of the filing of the Dispute with the AAA. Arbitration proceedings
hereunder shall be conducted at Dallas, Texas.Arbitrators shall be empowered to
impose sanctions and to take such other actions as the arbitrators deem
necessary to the same extent a judge could do pursuant to the Federal Rules of
Civil Procedure, the Texas Rules of Civil Procedure and applicable law. This
Arbitration Program constitutes the entire agreement of the parties with
respect to its subject matter and supersedes all prior discussions,
arrangements, negotiations, and other communications on dispute resolution.
The provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the parties otherwise
expressly agree in writing. To the extent permitted by applicable law, the
arbitrator shall have the power to award recovery of all costs and fees
(including attorneys' fees, administrative fees, and arbitrators' fees) to the
prevailing party. This Arbitration Program may be amended, changed, or
modified only by the express provisions of a writing which specifically refers
to this Arbitration Program and which is signed by all the parties hereto. If
any term covenant, condition or provisions of this Arbitration Program is found
to unlawful or invalid or unenforceable,such illegality or invalidity or
unenforceability shall not affect the legality, validity or enforceability of
the remaining parts of this Arbitration Program, and all such remaining parts
hereof shall be valid and enforceable and have full force and effect as if the
illegal, invalid or unenforceable part has not been included.The captions or
headings in this Arbitration Program are for convenience of reference only and
are not intended to constitute any part of the body or text of this Arbitration
Program. Each party agrees to keep all Disputes and arbitration proceedings
strictly confidential, except for disclosures of information required in the
ordinary course of business or by applicable law or regulation.
65
<PAGE> 66
Schedule II
to
Loan Agreement
Stock, Warrants, Etc.
1. Non-qualified Employee Stock Option Plan - up to 5,000,000 shares of
no par common stock at varying exercise prices.
2. Convertible Preferred Stock - convertible into 2,441,888 shares of no
par common stock.
3. Underwriter's Warrants - pursuant to the 1990 Underwriting Agreement
with Rocky Mountain Securities and Investments, convertible into
170,270 shares of no par common stock.
4. Broker's Warrants - pursuant to the 1991-1992 private stock offering,
70,000 warrants issued to Judith A. Schindler, convertible into
70,000 shares of no par common stock.
66
<PAGE> 67
Schedule III
to
Loan Agreement
Liabilities
1. $285,000 Note Payable to George Smith, due on April 1, 1994, owing by
Ultrak, Inc.
2. $6,000,000 Revolving Line of Credit with American Federal Bank,
F.S.B.; Borrowers are Ultrak, Inc., CCTV Source International, Inc.,
and Loss Prevention Electronics Corp.
3. $10,000,000 Credit Facility with Transamerican Commercial Finance
Corporation; Borrower is Exxis Technologies, Inc.
67
<PAGE> 68
Schedule IV
to
Loan Agreement
Defaults
None.
68
<PAGE> 69
Schedule V
to
Loan Agreement
Liens
1. Liens in favor of American Federal Bank, F.S.B.
2. Liens in favor of Transamerica Commercial Finance Corporation.
3. Liens granted by CCTV Source International, Inc. in favor of
Inter-Tel Communications, Inc., as evidenced by Financing Statement
No. 199094, filed October 14, 1991 with the Secretary of State of
Texas.
69
<PAGE> 70
Schedule VI
to
Loan Agreement
Investments, Loans & Advances
None, except as disclosed in the 1991 Form 10-K.
70
<PAGE> 1
EXHIBIT 10.2
FINANCING AND SECURITY AGREEMENT
by and among
NATIONSBANK OF TEXAS, N.A.
and
ULTRAK, INC.,
LOSS PREVENTION ELECTRONICS CORPORATION,
CCTV SOURCE INTERNATIONAL, INC.,
DENTAL VISION DIRECT, INC.
Dated: Effective September 24, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. REVOLVING CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.3 Repayment and Line Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.4 Mandatory Interim Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Purpose and Use of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Early Termination of Revolving Facility by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.7 Borrowing Base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.8 Continuing Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE III. COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Perfection and Protection of Lender's
Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.3 Priority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Location of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Field Examinations; Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.6 Collateral Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.7 Aging Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.8 Receivables Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.9 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.11 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.12 Appraisals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 Landlords, Bailees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.14 Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.15 Preservation of Lender's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.16 Special Rights of Lender; Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.17 Cross Collateralization; Cross Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE IV. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.1 Items to be Delivered by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.2 Loans Under Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
------------------------------
ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.1 Corporate Name: Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.3 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.4 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 No Conflicting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.11 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.13 Title to Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.14 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.15 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.16 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.17 Employee Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.18 Employee Benefit Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.19 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.20 Representations and Warranties Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.1 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.4 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.5 Annual Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.6 Interim Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.7 Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.8 SEC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.9 Collateral Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.10 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.11 Notification of Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.12 Notification of Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.13 Notification Regarding Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.14 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.15 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.16 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.17 Fees, Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.18 Waivers and Consents Respecting the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.19 Subordination Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.20 Change of Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.22 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.23 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.24 Prohibition Against Liens on Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.25 Dissolution, Liquidation, Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.26 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.27 Limitation on Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.28 Change in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.29 Change in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.30 Change in Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.31 Dividends Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.32 Redemptions and Acquisition of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.33 Bonuses, Consulting Fees to Shareholders and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.34 Loans to Officers, Directors, Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.35 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.36 Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.37 Limitation on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.38 Covenants Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII. EVENT OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.1 Refusal of Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.3 Cash Collateral; Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.4 Enforcement Costs; Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.5 Waiver of Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.6 Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.7 Performance by the Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.8 Non-waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.9 Application of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE IX. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.1 Effective date; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.4 Use of Loan Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5 Lender's Records; Account Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.6 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7 Non-applicability of Chapter 15 of Texas Credit Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 Yield Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.9 Judgment Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.10 Interest Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.11 Continuing Rights of Lender in Respect of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.12 Fees, Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 Acceptance and Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.14 Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.15 Express Waivers by Borrowers in respect of Cross-Collateralization and Cross Guaranties . . . . . . . . . 48
9.16 WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.17 Copies Valid as Financing Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.18 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9.19 Entirety and Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.20 Parties Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.21 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.22 Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.23 Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.24 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.25 Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.26 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
<PAGE> 5
FINANCING AND SECURITY AGREEMENT
This Financing and Security Agreement dated effective September 24,
1993 is executed and entered into by and among NATIONSBANK OF TEXAS, N.A., a
national bank ("Lender"), and each of (i) ULTRAK, INC., a Colorado corporation,
(ii) LOSS PREVENTION ELECTRONICS CORPORATION, a Colorado corporation, (iii)
CCTV SOURCE INTERNATIONAL, INC., a Texas corporation, and (iv) DENTAL VISION
DIRECT, INC., a Texas corporation (each severally a "Borrower" and collectively
"Borrowers"), as follows: Lender and Borrowers desire to enter into certain
financing arrangements according to the terms and provisions as set forth
hereinbelow. Therefore, for and in consideration of ten dollars ($10.00) and
other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, together with the mutual benefits provided herein, Lender and
each Borrower hereby agree as follows:
ARTICLE I. DEFINITIONS
This Agreement evidences a revolving credit facility providing for
several revolving loans to each of Ultrak, LPEC, CCTV and DVDI, respectively,
on the terms set forth below. Wherever used in this Agreement, the term
"Borrower" separately and severally means each of Ultrak, LPEC, CCTV and DVDI,
respectively, and the term "Borrowers" collectively means all of Ultrak, LPEC,
CCTV and DVDI together. In addition, the following definitions shall apply
throughout this Agreement:
1.1 "Affiliate" includes any Person (i) that directly or
indirectly controls or is controlled by a Borrower (including without
limitation all Subsidiaries), or is under common control with a Borrower, or
(ii) that directly or indirectly owns or holds five percent (5%) or more of any
class of Voting Stock of a Borrower or (iii) five percent (5%) or more of the
Voting Stock of which is directly or indirectly owned or held by a Borrower or
(iv) that is an officer, director or shareholder of a Borrower.
1.2 "Affiliate Subordination Agreement" means the subordination
agreements respecting present or former officers, directors, shareholders or
Affiliates of a Borrower as prescribed by paragraph 6.19.
1.3 "Aggregate Availability" at any time means the lesser of the
Aggregate Borrowing Base or the Credit Limit.
1.4 "Aggregate Borrowing Base" at any time means an amount equal
to (i) up to a maximum of eighty-five percent (85%) of the aggregate Eligible
Accounts of Borrowers plus (ii) up to a maximum of forty-five percent (45%) of
the aggregate Eligible Inventory of Borrowers (but limited however, to an
amount not exceeding the lesser of (i) $5,000,000.00 or (ii) fifty percent
(50.0%) of the aggregate unpaid balance of the Revolving Facility, less (iii)
the Reserve.
<PAGE> 6
1.5 "Agreement" means this Financing and Security Agreement and
all exhibits and addenda, and any extension, amendment or modification thereof.
1.6 "Blocked Collection Account" means any account maintained by
Lender for the deposit and collection of checks and other items received by a
Borrower as proceeds of Receivables.
1.7 "Borrower" separately and severally means each of Ultrak,
LPEC, CCTV and DVDI, respectively.
1.8 "Borrower Availability" as to any Borrower at any time means
the lesser of the Company Borrowing Base of such Borrower or the Unused
Aggregate Availability.
1.9 "Borrowers" collectively means all of Ultrak, LPEC, CCTV and
DVDI together, collectively.
1.10 "Business Day" means any calendar day except Saturday, Sunday
and those legal public holidays specified in 5 U.S.C. Section 6103(a), as may
be amended from time to time.
1.11 "Capital Expenditures" shall have the meaning defined in
paragraph 6.22.
1.12 "CCTV" means CCTV SOURCE INTERNATIONAL, INC., a Texas
corporation, whose chief executive office is located at 1220 Champion Circle,
Suite 100, Carrollton, Texas 75006.
1.13 "Code" means the Uniform Commercial Code in effect in the
State of Texas.
1.14 "Collateral" means collectively all of the following, now
owned and hereafter acquired: Receivables, Inventory, and all computer
programs, applications, discs, software, files and other records pertaining to
any Collateral. Collateral also includes all proceeds of any of the foregoing
at any time arising, including insurance proceeds.
1.15 "Collateral Report" means a Collateral Report prescribed by
paragraph 3.6.
1.16 "Company Borrowing Base" as to any Borrower at any time means
an amount equal to (i) up to a maximum of eighty-five percent (85%) of the
Eligible Accounts of such Borrower plus (ii) up to a maximum of forty-five
percent (45%) of the Eligible Inventory of such Borrower (provided, that the
maximum amount outstanding under the Revolving Facility in respect of advances
against all Eligible Inventory shall not at any time exceed the lesser of (a)
$5,000,000.00 or (b) fifty percent (50%) of the aggregate unpaid
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<PAGE> 7
balance of the Revolving Facility), less (iii) the Reserve applicable to such
Borrower.
1.17 "Contract Rate" means, on any day, a floating annual rate of
interest calculated on the basis of actual days elapsed but computed as if each
year consists of 360 days, equal to the sum of the Prime Rate effective as of
the first day of the calendar month in which such day falls plus one-half per
cent (0.5%). Upon written notification to Borrower sat any time when any Event
of Default exists, the Contract Rate otherwise applicable hereunder shall
automatically increase by an additional two and one- half percent (2.5%) per
annum, beginning on the effective date specified in such written notice (which
shall be on or after the date on which any such Event of Default shall have
first occurred) and continuing thereafter for so long as any such Event of
Default remains uncured or until Lender may agree otherwise.
1.18 "Contract Term" means the period beginning on the effective
date specified in the preamble of this Agreement and continuing through
September 30, 1995.
1.19 "Credit Limit" means the amount of Twelve Million and no/100
Dollars ($12,000,000.00).
1.20 "DVDI' means DENTAL VISION DIRECT, INC., a Texas corporation,
whose chief executive office is located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006.
1.21 "Eligible Accounts" means the net amount of the accounts of a
Borrower which are acceptable to lender for purposes of determining the
Aggregate Borrowing Base and the Company Borrowing Base of such Borrower and
meet all criteria for inclusion in the Aggregate Borrowing Base and the Company
Borrowing Base for such Borrower as determined and established by Lender from
time to time in its discretion. Lender at all times reserves the right in its
sole discretion to exclude Accounts from the Borrowing Base or establish
additional or different criteria for determining Eligible Accounts, without
prior notice. Lender may establish reserves against Eligible Accounts, and the
criteria for determining such reserves and the amount thereof shall at all
times be subject to adjustment or change as determined by Lender in its
discretion without prior notice.
1.22 "Eligible Inventory" shall mean all inventory of a Borrower
that is acceptable to Lender in its discretion for purposes of determining the
Aggregate Borrowing Base and the Company Borrower Base of such Borrower and
meet all criteria for inclusion in the Aggregate Borrowing Base and the Company
Borrowing Base for such Borrower as determined and established by Lender from
time to time in its discretion. Lender at all times reserves the
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<PAGE> 8
right in it sole discretion to exclude inventory from the Aggregate Borrowing
Base or the Company Borrowing Base of any Borrower, or establish additional or
different criteria for determining Eligible Inventory, without prior notice.
Lender may establish reserves against Eligible Inventory, and the criteria for
determining such reserves and the amount thereof shall at all times be subject
to adjustment or change as determined by Lender in its discretion without prior
notice.
1.23 "Environmental Damages" means all costs, judgments, good faith
settlements, claims, damages, losses, penalties, fines, liabilities,
encumbrances, liens, costs, and expenses, of whatever kind or nature,
contingent or otherwise, matured or unmatured, foreseeable or unforeseeable,
and any attorneys' fees costs and expenses in connection therewith, which are
incurred at any time as a result of the handling of Hazardous Materials, or the
existence of conditions giving rise to a violation of Environmental
Requirements resulting from a Borrower's activities, including without
limitation (i) all costs incurred in connection with the investigation or
remediation of Hazardous Materials or violations of Environmental Requirements
which are necessary to comply with any Environmental Requirements, including,
fees incurred for the services of attorneys, consultants, contractors, experts
and laboratories, and all other costs incurred in the preparation of any
feasibility studies or reports or the performance of any cleanup, remediation,
removal, response, abatement, containment, closure, restoration or monitoring
work, (ii) damages for personal injury, injury to property or natural resources
occurring on or off of affected real property, consequential damages, the cost
of demolition and rebuilding of any improvement on real property, and interest
and penalties, and (iii) liability to any third party or government agency to
reimburse, indemnify or provide contribution to such person or agency.
1.24 "Environmental Requirements" means all legislative,
regulatory, administrative and common law requirements relating to the
protection of human health and safety or the environment, including, without
limitation, applicable present and future statutes, regulations, rules,
ordinances, codes, licenses, permits, judgments, orders, judicial opinions,
approvals, authorizations, concessions, franchises, and similar items issued or
promulgated by governmental agencies, departments, commissions, boards,
bureaus, or instrumentalities of the United States, any state or any political
subdivisions.
1.25 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all regulations issued pursuant thereto.
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<PAGE> 9
1.26 "ERISA Affiliate" means any Person which, together with any
Borrower, would be treated as a single employer under Section 4001 or ERISA or
Section 414 of the IRC.
1.27 "Event of Default" shall have the meaning defined in paragraph
7.1
1.28 "GAAP" means generally accepted accounting principles as
promulgated by the American Institute of Certified Public Accountants,
consistently applied.
1.29 "Guarantor" means George K. Broady, an individual residing in
Dallas County, Texas.
1.30 "Guaranty" shall mean a guaranty agreement executed and
delivered by Guarantor for the benefit of Lender, referenced in paragraph 3.10.
1.31 "Hazardous Materials" means any chemical substances,
pollutants, contaminants, materials, or wastes, or combinations thereof,
whether solid, liquid or gaseous in nature the presence of which requires or
may require investigation or remediation under any federal, state or local
statute, regulations, ordinance, order, action, policy or common law or which
poses or threatens to pose a hazard to the health or safety of persons on or
about real property affected by any Borrower's activities, including without
limitation, material (i) which is or becomes defined as "hazardous waste,"
"hazardous substance," "pollutant or contaminant" under any Environmental
Response Compensation and Liability Act (42 U.S.C. section 9601 et. seq.) or
(ii) which contains gasoline, diesel fuel or other petroleum hydrocarbons,
polychlorinated biphenyls (PCBs), asbestos, urea formaldehyde from insulation,
or radon gas.
1.32 "Indemnified Claims" means any and all claims, demands,
actions, causes of action, judgments, obligations, liabilities, losses, damages
and consequential damages, penalties, fines, costs, fees, expenses and
disbursements (including, without limitation, fees and expenses of attorneys
and other professional consultants and experts in connection with investigation
or defense) of every kind, known or unknown, existing or hereafter arising,
foreseeable or unforeseeable, which may be imposed upon, threatened or asserted
against, or incurred or paid by, any indemnified Person at any time and from
time to time, because of, resulting from, in connection with, or arising out of
any transaction, act, omission, event or circumstance in any way connected with
the Collateral or the Loan Documents (including enforcement of Lender's rights
thereunder or defense of Lender's actions thereunder), including but not
limited to economic loss, property damage, personal injury or death in
connection with, or occurring on or in the vicinity of, any Collateral through
any cause whatsoever, any act performed or
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<PAGE> 10
omitted to be performed under any Loan Documents, any breach by a Borrower of
any representation, warranty, covenant, agreement or condition contained in any
Loan Documents or any Event of Default as defined in this Agreement.
Indemnified Claims includes, without limitation, Environmental Damages.
1.33 "Indemnified Persons" collectively means Lender and its
officers, directors, shareholders, employees, agents, attorneys and
representatives, and any Person owned or controlled by, or which owns or
controls or is under common control or is otherwise affiliated with, Lender,
and any other Person, if any, who acquires a portion of the Collateral in any
manner through Lender's exercise of rights and remedies under the Loan
Documents.
1.34 "Intercreditor Agreement" means the certain Intercreditor
Agreement among Borrowers, Lender and Petrus Fund, L.P., and any renewal,
extension or modification thereof.
1.35 "Interest Coverage Ratio" shall have the meaning defined in
paragraph 6.22.
1.36 "Inventory" means all inventory of a Borrower now or hereafter
owned, acquired, possessed or held on consignment or for sale or return,
including raw materials, work in process, finished goods and all other goods
held for sale or lease, wherever located, "Inventory" also includes returned
inventory.
1.37 "IRC" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
1.38 "Landlords Waiver" means an agreement in form and substance
satisfactory to Lender pursuant to which the landlord of any leased location
where any Collateral is located shall waive its rights, if any, to the
Collateral, and allow Lender to enter upon the premises to inspect, remove or
dispose of the Collateral.
1.39 "Lender" means NATIONSBANK OF TEXAS, N.A., a national bank,
whose principal place of business is located at NationsBank Plaza, 901 Main
Street, Dallas, Texas 75202. When used throughout this Agreement, the term
"Lender" shall also include Lender's successors and assigns, including
specifically any party to whom Lender, or its successors or assigns, may assign
its rights and interests under this Agreement.
1.40 "Leverage Ratio" shall have the meaning defined in paragraph
6.22.
1.41 "Loan Documents" means this Agreement, each Revolving Note,
the Guaranty and any other documents or agreements executed
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<PAGE> 11
in connection therewith, and also includes any and all renewals, extensions,
modifications or amendments of any of the foregoing.
1.42 "LPEC" mean LOSS PREVENTION ELECTRONICS CORPORATION, a
Colorado corporation, whose chief executive office is located at 913 Commerce
Drive, Annapolis, Maryland 21401.
1.43 "Material Adverse Effect" means (i) a materially adverse
effect on the business, assets, operations, prospects or condition, financial
or otherwise, of Borrowers, any Borrower or Guarantor, or (ii) material
impairment of the ability of Borrowers, any Borrower or Guarantor to perform
any obligations under the Loan Documents.
1.44 "Maximum Rate" means the greater of (i) the "monthly ceiling"
as referring to and in effect from time to time under the provisions of Tex.
Rev. Civ. Stat. Ann. art. 5069-1.04(c), as amended, or (ii) the maximum rate of
interest permitted from day to day by any other applicable state or federal
law.
1.45 "Net Income" shall have the meaning defined in a paragraph
6.22.
1.46 "Obligations" means (i) all obligations and indebtedness now
or hereafter owing under this Agreement, or otherwise arising in connection
with this Agreement or any of the other Loan Documents, including without
limitation, all loan repayment obligations, accrued interest and fees, costs
and expenses as provided by this Agreement or any of the other Loan Documents,
and any other amounts from time to time owing to Lender in connection
therewith; (ii) any and all other indebtedness and obligations of every kind
and character now or hereafter owing by a Borrower to Lender, whether direct or
indirect, primary or secondary, joint, several, or joint and several, fixed or
contingent, including indebtedness and obligations, if any, which may be
assigned to or acquired by Lender; and (iii) any and all renewals and
extensions of the foregoing, or any part thereof.
1.47 "PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
1.48 "Person" means any individual, corporation, joint venture,
general or limited partnership, trust, unincorporated organization or
governmental entity or agency.
1.49 "Plan" means any (i) any "employee benefit plan," as defined
in Section 3(3) of ERISA, established or maintained by a Borrower or any ERISA
Affiliate now or during any of the preceding six years, and (ii) any other plan
established or maintained now or during any of the preceding six years by a
Borrower or any ERISA Affiliate for its employees, which is covered by Title IV
of ERISA
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<PAGE> 12
or is subject to the minimum funding standards under Section 412 of the IRC.
1.50 "Prime Rate" means the rate of interest which is announced
from time to time by Lender as its prime rate of interest. It is acknowledged
that the Prime Rate may not be the lowest or most favorable interest rate at
any time charged by Lender.
1.51 "Prohibited Transaction" means any transaction described in
Section 406 of ERISA which is not exempt under Section 408 of ERISA and any
transaction described in Section 4975(c) of the IRC which is not exempt under
Section 4974(c)(2) or Section 4975(d) of the IRC, or by the transitional rules
of Section 414(c) and Section 2003(c) of ERISA.
1.52 "Receivables" means all present and future accounts, chattel
paper, contract rights, documents, instruments, deposit accounts, and general
intangibles now or hereafter owned, held, or acquired by a Borrower and
includes, without limitation, all of the following: all accounts receivable,
including all rights or payment for goods sold or leased or for services
rendered, whether or not earned by performance (and in any case where an
account arises from the sale of goods, the interest of such Borrower in such
goods); lease receivables; license receivables; notes receivable; all other
rights to receive payments of money from any Person; documents of title;
warehouse receipts; all right, title and interest under equipment leases; all
rights under any service, lease rental, consulting or similar agreements;
trademarks, trade names and service marks; rights or claims under contracts;
all tax refunds or claims for tax refunds; books of account, customer lists and
other records relating in any way to any of the foregoing.
1.53 "Reserve" at any time means an amount from time to time
established by Lender in its discretion as a reserve in reduction of the
Aggregate Borrowing Base or a Company Borrowing Base in respect of costs,
expenses, contingencies or other potential factors which, in the event they
should occur, could adversely affect or otherwise reduce the anticipated amount
of timely collections in payment of Eligible Accounts or the anticipated amount
of proceeds which could be realized upon liquidation of Eligible Inventory.
The "Reserve," if any from time to time, does not represent cash funds.
1.54 "Reportable Event" means (i) any transaction described in
Section 406 of ERISA or the regulations thereunder for which the 30-day notice
is not waived by said regulations, (ii) a withdrawal from a plan described in
Section 4063 or 4064 of ERISA, or (iii) a cessation of operations described in
Section 4062(f) of ERISA.
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1.55 "Revolving Facility" means the revolving credit facility
established by this Agreement pursuant to Article II.
1.56 "Revolving Note" means a promissory note executed by a
Borrower payable to the order of Lender evidencing loans under the Revolving
Facility, as provided in paragraph 2.1 and in form satisfactory to Lender, and
includes any and all renewals, extensions, amendments or modifications thereof.
1.57 "Subordinated Debt" shall have the meaning prescribed in
paragraph 6.22.
1.58 "Subsidiaries" at any time means all subsidiary corporations
of Ultrak that would be appropriate for inclusion in either consolidating or
consolidated financial statements of Ultrak determined according to GAAP, and
"Subsidiary" means any of such corporations.
1.59 "Tangible Net Worth" shall have the meaning defined in
paragraph 6.22.
1.60 "Ultrak" means ULTRAK, INC., a Colorado corporation, whose
chief executive office is located at 1220 Champion Circle, Suite 100,
Carrollton, Texas 75006.
1.61 "Unused Aggregate Availability" at any time means the amount,
if any, by which the Credit Limit exceeds the aggregate unpaid balance of the
Revolving Facility.
1.62 "Voting Stock" means sufficient shares of a Borrower (however
designated) having ordinary voting power for the election of a majority of the
members of its board of directors (not including shares having such power only
in the event of a contingency).
General term. Unless expressly provided otherwise, any term which is
defined by the Code shall have the same meaning, wherever used in this
Agreement, as is prescribed by the Code.
ARTICLE II. REVOLVING CREDIT FACILITY
2.1 Loans. Subject to and on the terms and conditions provided in
this Agreement, Lender hereby approves a revolving credit facility for loans by
Lender to any Borrower, secured by the Collateral, in an amount up to the
Borrower Availability applicable to such Borrower. Any Borrower may borrow and
repay amounts from time to time under the Revolving Facility, subject in all
respects to the terms of this Agreement. Loans from time to time made by
Lender to a Borrower under the Revolving Facility, and all accrued
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interest therein, shall be payable by such Borrower as provided in this
Agreement and additionally evidenced by a Revolving Note.
2.2 Interest. The unpaid principal from day to day outstanding
under the Revolving Facility shall bear interest at the lesser of (i) the
Contract Rate or (ii) the Maximum Rate, provided, however that, subject to the
provisions of paragraph 9.10, in the event that the Contract Rate shall exceed
the Maximum Rate at any time and thereafter the Contract Rate shall be less
than the Maximum Rate, the rate of interest applicable hereunder shall remain
at the Maximum Rate until the aggregate accrued interest to date under the
Revolving Facility equals the amount that would have accrued had the Contract
Rate at all times remained in effect. All past due principal and all past due
accrued interest under the Revolving Facility shall accrue interest at the
Maximum Rate.
2.3 Repayment and Line Termination. Each Borrower hereby promises
to pay to Lender all Obligations in respect of loans to such Borrower under the
Revolving Facility as provided in this Agreement. All unpaid principal and
accrued interest under the Revolving Facility shall be payable as follows:
Accrued interest shall be payable monthly on the last day of each calendar
month, and subject to Lender's rights under Article VIII, all unpaid principal
borrowed under the Revolving Facility and all unpaid accrued interest thereon,
and all other amounts payable hereunder relative to the Revolving Facility,
shall be due and payable to Lender in full, and the Revolving Facility shall
terminate, on the last day of the Contract Term. To the extent that any
accrued interest owing by a Borrower is not paid prior to the fifth day
following its due date as specified above, Lender may at its option (but with
no obligation to do so), add the amount of such accrued interest to the unpaid
principal due by such Borrower under the Revolving Facility, in which event
such amount will be deemed paid and the aggregate amount thereof shall be
treated as a loan to such Borrower under the Revolving Facility. Borrowers
acknowledge and agree that Lender shall have no obligation to renew the
Revolving Facility.
2.4 Mandatory Interim Principal Payments. If at any time, from
time to time, the aggregate unpaid principal amount outstanding and owing by a
Borrower under the Revolving Facility exceeds its Borrower Availability, such
Borrower shall make an immediate payment of principal under the Revolving
Facility in an amount not less than the amount of such excess. All such
amounts, if any, payable by such Borrower shall be deemed to be payable on
demand, and may be offset by Lender against any amount owing by Lender to such
Borrower, without prior notice. If at any time, from time to time, the
aggregate unpaid principal amount outstanding and owing by all Borrowers under
the Revolving Facility exceeds the Aggregate Availability. Borrowers jointly
and
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severally agree to make an immediate payment of principal under the Revolving
Facility in an amount not less than the amount of such excess, which may be
applied by Lender in reduction of the Revolving Facility in Lender's
discretion. All such amounts, if any, shall be deemed to be payable on demand,
and may be offset by Lender against any amount owing by Lender to any Borrower,
without prior notice.
2.5 Early Termination of Revolving Facility by Borrower.
Borrowers acknowledge that termination of the Revolving Facility at any time
prior to expiration of the Contract Term would result in the loss by Lender of
benefits under this Agreement, and that the damages incurred by Lender as a
result of such termination would be difficult and impractical to ascertain.
Therefore, in the event of termination of the Revolving Facility at any
effective time prior to expiration of the Contract Term, then, for the
privilege of any such termination and as a condition to the effectiveness
thereof, Borrowers jointly and severally agree to pay to Lender a sum certain,
as liquidated damages, equal to the following applicable percentage of the
Revolving Credit Limit: One Percent (1.0%), which amount Borrowers and Lender
acknowledge to be the best estimate of the amount necessary to fairly and
reasonably compensate Lender for its damages resulting from such termination.
No such payment will be applicable with respect to (i) any reduction under the
Revolving Facility which is a result of proceeds received by a Borrower through
capital contributions or which does not result in early termination and total
repayment of the Revolving Facility (ii) renewal or refinancing of the
Obligations by Lender or (iii) early termination of the Revolving Facility and
total payment of the Obligations following any reduction in the advance rate
applicable in respect of Eligible Accounts to an amount less than eighty
percent (80%) or any reduction in the advance rate in respect of Eligible
Inventory to an amount less than forty percent (40%).
2.6 Purpose and Use of Funds. All amounts borrowed under the
Revolving Facility shall be used to refinance existing indebtedness and for
working capital and other corporate purposes in the ordinary course of
business.
2.7 Borrowing Base. The advance rates specified in this Agreement
for determination of the Aggregate Borrowing Base and the Company Borrowing
Base applicable to any Borrower, respectively, may be decreased from time to
time based upon such considerations as Lender may deem appropriate in its
discretion. Advance rates from time to time used by lender in calculating the
Aggregate Borrowing Base and any Company Borrowing Base, respectively, are for
the sole purpose of determining the maximum amount of principal that may be
outstanding from time to time under the Revolving Facility, and shall not be
evidentiary of or binding upon Lender with respect to the market value or
liquidation value of any
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Collateral. Funding of loans hereunder shall at all times remain subject to
confirmation of existence and acceptability of Eligible Accounts and Eligible
Inventory, and the Aggregate Borrowing Base and applicable Company Borrowing
Base, respectively, in Lender's sole discretion. Any request for a loan under
the Revolving Facility which, if funded, would result in an aggregate amount
outstanding under the Revolving Facility which is in excess of the Borrower
Availability or the Aggregate Availability, respectively, may be declined by
Lender in its sole discretion without prior notice.
2.8 Continuing Representations. Except as may have been otherwise
disclosed to Lender in writing, each request by a Borrower for a loan under the
Revolving Facility shall constitute a continuing representation by such
Borrower that no event or condition that would be the subject of a required
notice under paragraph 6.12 or paragraph 6.13 is in existence as of such time.
ARTICLE III. COLLATERAL
3.1 Security Interest. Each Borrower hereby grants to Lender a
continuing security interest and lien in and to all of its right, title and
interest in the Collateral to secure full payment and performance of the
Obligations owing by such Borrower.
3.2 Perfection and Protection of Lender's Security Interest. Each
Borrower shall perform, at its expense, all action requested by Lender at any
time to perfect, maintain, protect, and enforce Lender's security interests in
the Collateral, including without limitation executing and filing financing
statements and amendments thereof, in form and substance satisfactory to
Lender; delivering to Lender the originals of all Collateral the possession of
which is required for perfection of Lender's security interests, duly endorsed
or assigned to Lender without restriction; placing notations on books of
account to disclose Lender's security interests; and such other steps as are
deemed necessary by Lender to maintain its security interests. In the event
any of Borrower's Receivables at any time are evidenced by a promissory note or
other instrument, such Borrower will immediately notify Lender and delivery
such instrument to lender, duly endorsed payable to the order of Lender.
Borrowers shall deliver to Lender the certificate of title on all Collateral
with respect to which recordation or notation is required for perfection of a
security interest, and shall execute applications for corrected certificates of
title and other such documentation as may be necessary to duly perfect Lender's
security interest therein. So long as this Agreement is in effect and until
all Obligations have been fully satisfied, Lender's security interest and lien
hereunder shall continue in full force and effect in all Collateral.
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<PAGE> 17
3.3 Priority. Lender's security interests in the Collateral
granted herein at all times shall be and remain first, prior and senior to any
other interests in the Collateral, except as provided in the Intercreditor
Agreement or as may be expressly agreed otherwise by Lender in writing. Each
Borrower represents to Lender that no other security interests, liens or other
encumbrances exist with respect to any of the Collateral, except as disclosed
in Exhibit 3.3.
3.4 Location of Collateral. Each Borrower represents and warrants
to Lender that all of its books and records relating to the Collateral owned by
such Borrower are located at its chief executive office, and at such other
locations, if any, as are specified in Exhibit 3.4. Exhibit 3.4 attached
hereto correctly identifies the locations where all Inventory will be
maintained, and if any such location is a leased location, the name and address
of the owner thereof. Each Borrower agrees that it will not maintain any
Collateral at any location other than its chief executive office designated and
those listed in Exhibit 3.4 unless it gives Lender at least 30 days prior
written notice and executes such financing statements and other documents as
Lender may request in connection therewith.
3.5 Field Examinations; Inspections. Lender shall have the right
without hindrance or delay to conduct field examinations to inspect the
Collateral and to inspect, audit and copy any Borrower's books, records,
journals, correspondence and other records and data relating to the Collateral
or its business. Lender is authorized to discuss Borrowers' affairs with any
Person, including without limitation employees of any Borrower, as Lender may
deem necessary in relation to the Collateral, any Borrower's financial
condition or Lender's rights under the Loan Documents. Borrowers jointly and
severally agree to pay Lender's out of pocket expenses relating to such field
examinations. Lender shall have full access to all records available to any
Borrower from any credit reporting service, bureau or similar service and shall
have the right to examine and make copies of any such records. Lender may
exhibit a copy of this Agreement to such service and such service shall be
entitled to rely on the provisions hereof in providing access to Lender as
provided herein.
3.6 Collateral Reports. Contemporaneously with each request for a
loan under the Revolving Facility and in any event at least weekly, and at such
other times as Lender may request, each Borrower shall execute and deliver to
Lender, in form satisfactory to Lender, a collateral report setting forth a
certification of Eligible Accounts and Eligible Inventory, and calculation of
its Company Borrowing Base, in form prescribed by Lender. Each Collateral
Report shall include a reconciliation of the calculation of the Company
Borrowing Base as certified in the most recent
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<PAGE> 18
Collateral Report delivered to Lender by such Borrower, and be accompanied by
such documents and supporting information relating to Eligible Accounts and
Eligible Inventory as Lender may request. Borrowers shall maintain, and shall
furnish to Lender at Lender's request, such supporting documents or copies as
Lender may require including, but not limited to: a schedule of Eligible
Accounts created, and Eligible Inventory purchased and received, since the
previous Collateral Report delivered to Lender; copies of invoices and
supporting delivery or service records in connection therewith; a schedule of
collections received; copies of credit memos or other advices of credit or
reductions against amounts previously billed; and such other reports as Lender
may request from time to time. If any of such reports or reports are prepared
by an accounting service or other agent, each Borrower hereby authorizes such
service or agent to deliver such records, reports and related documents to
Lender. Lender may exhibit a copy of this Agreement to any such service or
agent and such service or agent shall be entitled to rely on the provisions
hereof in providing such documentation to Lender. Each Collateral Report shall
bear a signed statement by an authorized officer of the Borrower delivering
same certifying the accuracy and completeness of all information included
therein and shall incorporate therein by reference, as if fully set forth
therein, all the terms and provisions hereof. The execution and delivery of a
Collateral Report shall in each instance constitute an agreement,
representation and warranty to Lender by the Borrower delivering same that,
except for the security interest of Lender therein: Such Borrower is the sole
owner of and has full unrestricted power to grant to Lender a continuing
security interest and lien in and to all Collateral included therein free from
any lien, security interest or encumbrance; each account included therein is in
existence, unconditional and valid, and arose from a bona fide outright sale of
Inventory in the ordinary course of business for liquidated amounts as set
forth in the Collateral Report, and such Inventory has been delivered or
provided to the respective account debtors; no account included therein arose
in connection with a contract or assignment which purports to make an
assignment or security interest therein void or conditions such assignment or
security interest on consent of the account debtor; no account is subject to
any sale, assignment, claim or security interest of any character and such
Borrower will not make any sale or other assignment thereof or create any other
security interest thereon; no account is subject to any claim for credit,
deduction, allowance, extension or adjustment, defense, dispute, setoff or
counterclaim, except for discounts for early payment allowed in the ordinary
course of business as previously disclosed to Lender and as reflected on the
face of the invoice evidencing such account; all Inventory reflected in such
Collateral Report is held for sale in the ordinary course of such Borrower's
business, and no such Inventory is located at any location in breach of the
requirements
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of this Agreement and no negotiable documents have been issued in respect of
any such Inventory; no Inventory reflected in such Collateral Report is
returned Inventory subject to the restrictions of paragraph 3.9 unless
otherwise disclosed to Lender in writing; and no Inventory reflected in such
Collateral Report is located in the "Fenced Area" or is "Petrus Inventory," as
those terms are defined in the Intercreditor Agreement.
3.7 Aging Reports. Within fifteen days after the end of each
calendar month, each Borrower shall furnish to Lender an analysis of amounts
owing on all accounts included within the Receivables owing to such Borrower,
showing an aging as follows: (i) those aged 30 days or less from date of
invoice, (ii) those aged over 30 days, but less than 61 days, from date of
invoice, (iii) those aged over 60 days, but less than 91 days, from date of
invoice, (iv) those aged over 90 days from date of invoice. Such analysis
shall include a listing of the name and complete address of each account debtor
and such other information as Lender may request.
3.8 Receivables Collections. All collections and proceeds of
Receivables shall be subject to an express trust for the benefit of Lender.
Unless expressly agreed otherwise by Lender in writing, all collections and
proceeds of Receivables shall be directed daily to Lender for deposit to a
Blocked Collection Amount. All collected funds from collections and proceeds
of Receivables from time to time deposited to a Blocked Collection Account
shall be applied directly to the Obligations. All checks processed for
collection and application to the Obligations shall be subject to one (1)
Business Day collection time and shall remain provisional until collected,
provided that for the sole purpose of calculating the Aggregate Availability
and applicable Borrower Availability, if any, from time to time under the
Revolving Facility, such checks shall be assumed to be collected and applied in
reduction of the Obligations as of the Business Day of receipt by Lender.
Borrowers will not use, dispose, withhold or otherwise exercise dominion over
any proceeds of Receivables. In the event any Borrower at any time receives
any collections or proceeds of Receivables, such Borrower shall promptly
deliver same to Lender in the form received, with any necessary endorsement to
the order of Lender. Each Borrower agrees that it will not commingle proceeds
of Receivables with any other funds, and that no deposits will be made to a
Blocked Collection Account other than collections and proceeds of Receivables.
Borrowers shall have no right of withdrawal, transfer or access to any Blocked
Collection Account, and all amounts from time to time deposited to a Blocked
Collection Account shall remain subject to Lender's security interests under
this Agreement. Borrowers shall promptly report to Lender in writing any
instance in which a dispute of Receivables by an account debtor involves an
amount in excess of $100,000.00. Each Borrower agrees that it will not settle,
adjust, compromise, discharge or extend the time for
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payment of any Receivables involving an amount in excess of $100,000.00 without
Lender's consent.
3.9 Inventory. Each Borrower represents and warrants to lender
that all Inventory of such Borrower shall be held for sale in the ordinary
course of such Borrower's business, and is and will be fit for such purpose.
Each Borrower will keep its Inventory in good and marketable condition, at its
own expense. All sales of Inventory shall be in accordance with applicable
law. Each Borrower will maintain a perpetual inventory system at all times and
will conduct a physical count of its Inventory at least one per calendar year
and at Lender's request shall promptly supply Lender with a copy of such count.
No negotiable documents have been issued in respect of any Borrower's
Inventory, and none shall be issued without prior written notice to Lender and,
at Lender's request, completion of arrangements satisfactory to Lender for
possession of such negotiable documents to be delivered to Lender. No
Inventory is held by any Borrower on consignment or approval, or on a sale or
return, bill-and-hold, guaranteed sale, repurchase or similar basis and no
Inventory has been sold or delivered to any Person on consignment or approval,
or on a sale or return, bill- and-hold, guaranteed sale, repurchase or similar
basis. Borrowers will not acquire or accept any Inventory on consignment or
approval, or on a sale or return, bill-and-hold, guaranteed sale, repurchase or
similar basis without the prior written consent of Lender and Borrowers will
not sell any Inventory on consignment or approval, or on a sale or return,
bill-and-hold, guaranteed sale, repurchase or similar basis without the prior
written consent of Lender. All cash receipts, if any, from time to time
received by any Borrower in respect of the sale of Inventory, including without
limitation cash, checks or similar items, shall be subject to an express trust
for the benefit of Lender and promptly delivered to Lender in the form received
for application in reduction of the Obligations. Each Borrower shall promptly
report to Lender in writing any instance in which Inventory returned to such
Borrower by an account debtor involves an amount in excess of $100,000.00 and,
unless Lender agrees otherwise; (i) such Borrower shall not issue any credits
or allowances with respect to such returned Inventory, and (ii) all such
returned Inventory shall be segregated from all other Inventory, and shall not
be reported as Eligible Inventory, unless and until it is demonstrated to
Lender's satisfaction that such returned Inventory is in saleable condition and
meets all criteria for Eligible Inventory. Unless otherwise agreed by Lender,
the amount of Borrower's accounts relating to all returned Inventory shall be
excluded from Eligible Accounts. All returned Inventory shall be subject to
Lender's continuing security interests under this Agreement.
3.10 Guaranty. Guarantor shall execute and deliver to Lender a
guaranty agreement, in form and substance satisfactory to Lender,
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pursuant to which Guarantor shall guarantee prompt payment and performance when
due of all Obligations.
3.11 Insurance. Each Borrower shall keep and maintain adequate
insurance with respect to its business and all of its property at any time
included within the Collateral, written by insurers acceptable to Lender. Such
insurance shall be with respect to loss, damages, and liability of amounts not
less than reasonably requested by lender, and shall include, at minimum,
extended coverage insurance, insurance against business interruption, insurance
for workers compensation, and insurance for general premises liability, fire,
theft, burglary, pilferage, loss in transit, casualty and all risk. Borrowers
will make timely payment of all premiums required to maintain such insurance in
force. Borrower shall cause Lender to be an additional insured and loss payee
under all policies of insurance covering any of the Collateral, to the extent
of Lender's interest, in form satisfactory to Lender, Borrowers will cause each
policy of insurance to contain a clause or endorsement requiring the insurer to
give not less than thirty (30) days prior written notice to Lender in the event
of cancellation of the policy for any reason whatsoever. Borrowers shall
deliver copies of each insurance policy to Lender upon request. If any
Borrower fails to procure such insurance or to pay the premiums therefor when
due, lender shall have the right (but with no obligation) to make such payment,
which amount such Borrower shall pay to Lender on demand or, at Lender's option
(but with no obligation to do so) Lender may add such amount to the unpaid
principal due by such Borrower under the Revolving Facility, in which event
such amount will be deemed paid and the aggregate amount thereof shall be
treated as a loan under the Revolving Facility. Each Borrower shall promptly
notify Lender of any loss, damage, or destruction to any of its property at any
time included within the Collateral. Lender is hereby authorized to collect
all insurance proceeds directly. After deducting from such proceeds the
expenses, if any, incurred by Lender in the collection or handling thereof,
Lender may apply such proceeds to the reduction of the Obligations, in such
order as Lender determines, or at Lender's option may permit or require that
such proceeds, or any part thereof, be used to replace, repair or restore the
Collateral in a diligent and expeditious manner with materials and workmanship
of substantially the same quality as existed before the loss, damage or
destruction.
3.12 Appraisals. Borrowers shall allow Lender, at Borrowers'
expense, to make arrangements for appraisals or updated appraisals with respect
to any Collateral at such times as Lender may request (provided, that
Borrower's obligations for such expenses shall not exceed $5,000.00 per
calendar year).
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3.13 Landlords, Bailees. Except as disclosed in Exhibit 3.4.,
Borrowers will not deliver possession or control of any Collateral to any
Person without Lender's prior written consent. Borrowers shall notify each
bailee, if any, from time to time in possession of any Collateral of Lender's
security interests under this Agreement. At Lender's request, any Borrower
shall obtain such bailee's acknowledgement of such notice and its agreement to
hold all Collateral from time to time in its possession subject to disposition
at Lender's direction. At Lender's request, any Borrower will cause the
landlord to execute and deliver to Lender a Landlord's Waiver with respect to
any leased locations where any of its property at any time included within the
Collateral will be located. Borrowers shall immediately notify Lender upon
receipt of any notice from any Person claiming past due rent, fees or other
charges in respect of any Collateral.
3.14 Right to Cure. Lender in its sole discretion may pay any
amount or take any action in order to preserve, protect and maintain the
Collateral and Lender's security interest therein, including without
limitation, payment of any insurance premium, any repair, maintenance or
storage charge, any landlord's claim, and any other encumbrance or claim
asserted against property of any Borrower at any time included within the
Collateral. All such payments and all out-of-pocket costs and expenses made or
incurred by Lender shall be payable by such Borrower to Lender on demand or, at
Lender's discretion, deemed as a loan to such Borrower under the Revolving
Facility as of the date or dates of Lender's disbursement thereof. Any payment
made or other action taken by Lender under this paragraph shall be without
prejudice to any right to assert an Event of Default or exercise any other
remedy hereunder.
3.15 Preservation of Lender's Rights. To the extent allowed by
law, neither Lender nor any of its officers, directors, employees, and agents
shall be liable or responsible in any way for the safekeeping of any Collateral
or for any act or failure to act with respect to the Collateral, or for any
loss or damage thereto or any diminution in the value thereof, or for any act
by any other Person, in the case of any instruments and chattel paper included
within the Collateral, Lender shall have no duty or obligation to preserve
rights against prior parties. The Obligations shall not be affected by any
failure of Lender to take any steps to perfect its security interests or to
collect or realize upon the Collateral, nor shall loss of or damage to the
Collateral release any Borrower from any of the Obligations. Lender may extend
the time for payment of the Obligations or modify or amend the terms of any of
the Loan Documents, or compromise or grant other indulgences, renewals,
extensions or releases, and take or omit to take any other action with respect
to the Obligations or the Collateral, or any Person directly or indirectly
obligated in connection therewith, without impairing Lender's security
interests
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in the Collateral or any of Lender's rights under the Loan Documents.
3.16 Special Rights of Lender; Power of Attorney. Each Borrower
hereby irrevocably appoints Lender as its agent and attorney-in-fact to take
any action necessary to preserve and protect the Collateral and Lender's
interests under the Loan Documents. Each Borrower hereby authorizes and
appoints Lender as attorney in fact to sign and file any financing statement or
other document necessary to perfect Lender's security interest in the
Collateral. Lender shall have the right at any time to take any of the
following action, in its own name or in the name of any Borrower, whether or
not an Event of Default is in existence: (i) make written or verbal requests
for verification of amounts owing on Receivables from any or all Persons which
Lender believes may be account debtors or obligors on Receivables; (ii) notify
any or all Persons which Lender believes may be account debtors or obligors on
Receivables to make payments directly to Lender; (iii) take possession and
control of proceeds of Receivables; (iv) redirect the deposit and disposition
of collections and proceeds of Receivables; (v) endorse the name of any
Borrower on checks, instruments or other evidences of payment on Receivables;
(vi) settle, adjust, compromise or discharge Receivables or extend time of
payment upon such terms as Lender may determine; (vii) take action in Lender's
name or any Borrower's name to enforce collection of Receivables; (viii)
prepare, sign and file, on behalf of any Borrower in such Borrower's name or in
Lender's name as assignee, any proof of claim or other document in any
bankruptcy proceedings of any account debtor or obligor on Receivables; (ix)
prepare, sign and file, in the name of any Borrower, any notice of lien or
similar document necessary to create or perfect any materialman's lien,
laborer's lien or similar lien in enforcement of any Receivables; (x) access,
copy or utilize any information recorded or contained in any computer or data
processing equipment or system in respect of the Receivables maintained by any
Borrower or any Affiliate, or to which any Borrower has access; (xi) enter into
any Borrower's premises and discuss Borrower's affairs with such Borrower's
personnel as may be reasonably necessary in connection with maintaining or
enforcing Lender's rights under the Loan Documents, (xii) direct the U.S)
Postal service to change the address to which any Borrower's mail is delivered,
(xiii) open mail addressed to any Borrower and dispose of checks or other
proceeds of Receivables in accordance with this Agreement, and (xiv) take all
other action allowed by law as may be necessary to carry out the Loan Documents
and give effect to Lender's rights thereunder. Should Lender at any time elect
to exercise its right of verification or notification with respect to the
Receivables as provided in clause (i) or clause (ii) above, respectively,
Lender shall have the right in its sole discretion to direct such request for
verification, or notification, as the case may be, to all
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Persons which Lender believes may have transacted business with any Borrower at
any time, whether or not such Persons are then indebted to such Borrower, and
Lender is hereby released and discharged from any liability by reason of any
such request for verification or notification. Costs and expenses incurred by
Lender in connection with any of such actions by Lender, including attorneys'
fees and out-of-pocket expenses, shall be reimbursed to Lender on demand.
3.17 Cross Collateralization; Cross Guaranties. Lender has
determined that loans to each Borrower are conditioned upon additional credit
support from all other Borrowers. Because of the interrelationships among
Borrowers and their respective operations, each Borrower has determined
(independently from considerations relative to credit otherwise available to
such Borrower under this Agreement) that providing such additional credit
support is within is corporate purpose, will be of direct and indirect benefit
to such Borrower and is in its best interest. Accordingly: (i) each Borrower
hereby grants to Lender a continuing security interest and lien in and to all
of its right, title and interest in the Collateral to secure all Obligations
from time to time owing by each of the other Borrowers, respectively, (such
grants to be governed by, and entitled to all of the benefits of, this
Agreement); and (ii) each Borrower shall execute and deliver for the benefit of
Lender a guaranty agreement pursuant to which such Borrower shall guarantee to
Lender the prompt payment and performance of all Obligations from time to time
owing by each of the other Borrowers, respectively (such guaranty agreements to
be in form and substance satisfactory to Lender). Each Borrower hereby
acknowledges that its agreement to the provisions of this paragraph is in
consideration of the availability loans to each of the other Borrowers under
this Agreement and is not required by Lender as a condition to the availability
of loans to such Borrower under this Agreement.
ARTICLE IV. CONDITIONS
4.1 Items to be Delivered by Borrower. Prior to or simultaneously
with execution and delivery hereof, each Borrower shall deliver, or cause to be
delivered, to Lender the following:
(a) Articles of Incorporation and Certificate of
Existence. A copy of its articles of incorporation, and all amendments
thereto, accompanied by the certificate of the appropriate governmental
official of its state of incorporation bearing a date no more than thirty (30)
days prior to the date hereof, to the effect that such copy is correct and
complete and that such Borrower is a corporation duly incorporated and validly
existing in such state, and certified by the corporate secretary of
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such Borrower dated the date hereof, as being correct and complete as of the
date hereof.
(b) Good Standing. Certification by the appropriate
government official of the state of incorporation of such Borrower bearing a
date no more than thirty (30) days prior to the date hereof, to the effect that
such Borrower is in good standing with respect to payment of franchise and
similar taxes. Each Borrower represents that to the extent required by
applicable law, it is qualified or licensed to transact business in all
jurisdictions in which any of its property included within the Collateral is
located.
(c) By-Laws. A copy of the bylaws, and all amendments
thereto, of such Borrower accompanied by certificates from its corporate
secretary, dated the date hereof, to the effect that such copy is correct and
complete as of the date hereof.
(d) Incumbency. Certification of incumbency of all
officers of such Borrower executed by its president or vice president and
corporate secretary, as of the effective date hereof, certifying the name and
signature of each such officer.
(e) Resolutions. A copy of corporate resolutions of such
Borrower approving this Agreement, authorizing the transactions contemplated
hereby, and authorizing and directing a named officer or officers of such
Borrower to sign and deliver all Loan Documents to be executed by such
Borrower, duly adopted by the board of directors of such Borrower, accompanied
by the certificate of the corporate secretary, dated the date hereof, that such
copy is a true and complete copy of resolutions duly adopted by the board of
directors of such Borrower, and that such resolutions have not been amended,
modified, or revoked in any respect and are in full force and effect as of the
date hereof. Such resolutions shall be in form and substance satisfactory to
Lender.
(f) Financing and Security Agreement. This Agreement,
duly executed.
(g) Revolving Note. A Revolving Note, duly executed.
(h) Financing Statements. All financing statements
required by Lender in connection with perfection of Lender's security interests
in all property of Borrower included within the Collateral.
(i) Insurance. Evidence of insurance in compliance with
the requirements of paragraph 3.11.
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(j) Landlords Waivers; Bailees' Acknowledgements . All
Landlord's Waivers, notifications and acknowledgements as may be required by
Lender under paragraph 3.13.
(k) Affiliate Subordination Agreements. All Affiliate
Subordination Agreements required by Lender under paragraph 6.19.
(l) Guaranty. The Guaranty, duly executed and delivered
by Guarantor.
(m) Opinion of Borrower's Counsel. An opinion of counsel
for Borrowers and Guarantor, respectively, in form and substance satisfactory
to Lender.
(n) Other Documents. Such other items as Lender may
request in order to perfect or protect its interests and rights under the Loan
Documents.
4.2 Loans Under Revolving Facility. As a condition to each loan
to a Borrower under the Revolving Facility, each of the following requirements
must be satisfied in Lender's discretion: (a) such Borrower shall be current
with respect to the delivery of all items as required under paragraph 4.1, and
the Company Borrowing Base and the Aggregate Borrowing Base must be confirmed
by Lender in its discretion, (b) the amount outstanding and owing by such
Borrower under the Revolving Facility, immediately following funding of the
amount of loan requested, will not exceed its Borrower Availability, and the
aggregate amount outstanding and owing by all Borrowers under the Revolving
Facility, immediately following funding of the amount of loan requested, will
not exceed the Aggregate Availability, (c) the guaranty agreement of each other
Borrower required by paragraph 3.17 shall have been delivered to Lender, and
the same shall be in form and substance satisfactory to Lender, (d) all
representations and warranties contained in Article III and Article V hereof
shall be true, correct and complete in all material respects (as determined by
lender in its sole discretion) except as supplemented pursuant to paragraph
6.12, and (e) no Event of Default shall have occurred and be continuing, or
shall result from such loan, and no other event of condition which would be the
subject of a required notice under paragraph 6.13 shall be in existence. Any
request for a loan under the Revolving Facility at a time when any of the
foregoing requirements is not satisfied may be declined by Lender without prior
notice.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
Each Borrower (as to itself unless otherwise noted) hereby represents
and warrants to Lender the following:
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5.1 Corporate Name: Trade Names. Borrower is conducting,
transacting, and carrying on its business under its corporate name shown in
Article I and such other names as may be specified in Exhibit 5.1, and is not
engaged in business under any other name. Except as provided in Exhibit 5.1,
during the past five (5) years Borrower has not (i) done business under any
other name, or changed the location of its chief executive office, (ii) been
party to a merger or consolidation or (iii) acquired any of the property
included within the Collateral from any other Person, except for Inventory
purchased in the ordinary course of business.
5.2 Chief Executive Office. Borrower's chief executive office is
located at the address specified for Borrower in Article I.
5.3 Corporate Existence. Borrower is a corporation, duly
incorporated, validly existing, and in good standing under the laws of its
state of incorporation, and is duly qualified or licensed to transact business
in all jurisdictions the laws of which require it to be so qualified or
licensed.
5.4 Corporate Power and Authority. Borrower possesses all
requisite power and authority own, lease and operate its properties and to
carry on its business and to execute, deliver, and comply with the Loan
Documents. Each of the Loan Documents has been duly authorized by all
necessary corporate action and has been duly executed and delivered by
Borrower, and evidences valid and binding obligations enforceable in accordance
with its respective terms.
5.5 No Conflicting Agreements. Borrower represents that the
execution, delivery and performance of the Loan Documents will not violate its
articles of incorporation or bylaws, nor constitute a default under, or result
in a breach of, any contract, agreement, or other instrument to which it is a
party of which is applicable to its property.
5.6 Share Ownership. Each of Borrower's outstanding shares has
been duly and validly issued and is fully paid and nonassessable. Borrower's
outstanding share ownership is as specified in Exhibit 5.6. Except as provided
in Exhibit 5.6, there are no subscriptions, options to purchase, conversion or
exchange rights, warrants or other agreements, claims or commitments of any
nature obligating Borrower to issue, transfer, deliver or sell additional
shares of its capital stock.
5.7 Subsidiaries. Each Subsidiary is a corporation organized,
validity existing and in good standing under the laws of the state of its
incorporation, and has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now conducted
and proposed to be
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conducted. All outstanding shares of stock of each Subsidiary have been
validity issued and are fully paid and non-assessable, and all shares owned by
Borrower are free and clear of any lien, pledge, security interest or other
encumbrances.
5.8 Financial Statements. Ultrak has delivered to Lender its
consolidated audited balance sheet, income statement and statement of cash flow
as of its fiscal year ending December 31, 1992 and its consolidated balance
sheet, income statement and statement of cash flow as of the monthly period
ending June 30, 1993. All of such financial statements were prepared in
accordance with GAAP, and are correct and complete, and fairly present the
consolidated financial condition of Ultrak and the Subsidiaries on the
respective dates thereof and the results of its operations for the respective
periods then ended. There has been no material adverse change in the business,
properties or financial condition of Borrower since the dates of such financial
statements, respectively.
5.9 Litigation. Other than as disclosed to Lender in Exhibit 5.9,
Borrower represents that it is not a party to any pending lawsuits or
proceedings before or by any state or federal court or governmental agency or
instrumentality, and is not aware of any threatened or potential lawsuits,
proceedings, claims, or investigations. The items, if any, disclosed in
Exhibit 5.9, in the event of any unfavorable or adverse determination, will not
result in or cause a Material Adverse Effect.
5.10 Compliance with Laws. Borrower represents that it is not in
violation of any laws, regulations and corders in any respect which will result
in or cause, or reasonably would be expected to result in or cause, a Material
Adverse Effect.
5.11 Judgments. There are no outstanding or unpaid judgments
against Borrower.
5.12 Taxes. All tax returns or filings required to be filed by
Borrower have been filed and taxes imposed upon Borrower which are due and
payable have been paid.
5.13 Title to Property. Borrower has good and marketable title to
all property reflected as being owned by Borrower in the financial statements
previously delivered to Lender or purported to have been acquired since such
date, except property sold or otherwise disposed of subsequent to such date in
the ordinary course of business. Borrower possesses all patents, patent
rights, licenses, trademarks, trademark rights, trade names, trade name rights,
and copyrights which are required to conduct its business as now conducted
without any known infringement or conflict by or against the rights of any
Person.
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5.14 Consents. No governmental orders, permissions, consents,
approvals or authorizations are required to be obtained and no registrations or
declarations are required to be filed in connection with the execution,
delivery and performance of the Loan Documents. Borrower has all required
governmental permits and licenses, if any, on account of its operations and
activities and is in full compliance with the terms and conditions thereof, and
all such permits and licenses are in full force and effect.
5.15 Full Disclosure. Borrower has disclosed to Lender all
material facts known to Borrower concerning its financial condition and
business operations. All information furnished by Borrower to Lender was true
and complete at the time of delivery thereof to Lender, and there has been no
material change in any such information except as may have been disclosed by
Borrower to Lender in writing. There is no fact known to Borrower which would
be reasonably expected to result in a Material Adverse Effect during the term
of this Agreement.
5.16 Solvency. As of, and immediately following the effective date
of this Agreement: (i) the fair saleable value of all assets of Borrower
exceeds the amount of all of Borrower's existing debts and liabilities
(including contingent liabilities), (ii) the assets of Borrower do not
constitute an unreasonably small capital for the operation of Borrower's
business now conducted and as intended to be conducted, taking into account all
known or projected capital requirements for such operations, (iii) Borrower
does not intend to incur debts beyond its ability to pay as they mature, and
(iv) Borrower's cash flow is sufficient to pay all existing debts and
liabilities as they become due.
5.17 Employee Relations. Borrower is not aware of any
contemplated, threatened or pending strike, work stoppage or other labor
dispute involving its employees or the employees of any Affiliate.
5.18 Employee Benefit Plan. Neither Borrower nor any of its ERISA
Affiliates, nor any Plan, is in material violation in form or in operation of
any provision of ERISA or any other applicable state or federal law, including
the requirements of the IRC. No Prohibited Transaction or Reportable Event has
occurred with respect to any Plan which reasonably would be expected to result
in a Material Adverse Effect. No notice of intent to terminate a Plan has been
filed within the 24-month period preceding the date hereof, nor has any Plan
been terminated under Section 4041(c) of ERISA since September 2, 1974. The
PBGC has not instituted proceedings to terminate or appoint a trustee to
administer a Plan, and no event has occurred and no condition exists which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan.
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Neither Borrower nor any ERISA Affiliate has incurred or expects to incur any
withdrawal liability to any multiemployer plan within the meaning of Section
3(37) or Section 3001(a)(3) of ERISA or Section 414 of the IRC. Neither
Borrower nor any ERISA Affiliate has any obligation to provide medical benefits
or coverage to any former employee other than as required under Section 4980B
of the IRC or Part 6 or Title I of ERISA. Each Employee Benefit Plan subject
to Section 4980B of the IRC has satisfied the applicable requirements of
Section 4980B of the IRC. Each Plan meets the minimum funding requirements of
IRC Section 412 and no waiver from the minimum funding requirements has been
applied for or approved pursuant to Section 412(d) of the IRC. The reporting
and disclosure requirements of each Plan have been timely and completely
satisfied. Neither Borrower, any ERISA Affiliate nor any fiduciary of any Plan
has engaged in conduct that would be a breach of any duty under Part 4,
Subtitle B, Title I of ERISA. There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge of Borrower or
any ERISA Affiliate, threatened against, or with respect to, any Plan or its
assets, if any. Each Plan which is a "welfare benefit plan," as described in
Section 3(1) of ERISA, may be unilaterally amended or terminated in its
entirety without liability except as to benefits accrued prior to such
amendment.
5.19 Environmental Matters. Borrower represents and warrants to
Lender that to the best of Borrower's knowledge: (a) all of Borrower's
activities and conduct of business related to the use and handling of Hazardous
Materials, comply and have at all times complied with all Environmental
Requirements; (b) neither Borrower nor any prior owner of the Collateral has
received notice or other communication concerning any alleged violation of
Environmental Requirements, whether or not corrected to the satisfaction of the
appropriate authority, or notice or other communication concerning alleged
liability for Environmental Damages, and there exists no writ, injunction,
decree, order, judgment or lien, nor any lawsuit, claim, proceeding citation,
directive, summons or investigation, pending or threatened, relating to the
ownership, use, maintenance or operation of Borrower's business or any
associated real property, by any Person, or from alleged violation of
Environmental Requirements; (c) Borrower has all permits and licenses required
to be issued to it by any governmental authority on account of any or all of
its activities, and is in full compliance with the terms and conditions of all
such permits and licenses. No change in the facts or circumstances reported or
assumed in the application for or granting of any such permits or license
exists, and such permits and licenses are in full force and effect.
5.20 Representations and Warranties Cumulative. The
representations and warranties contained in this Article V are in
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addition to all other representations and warranties provided in the Loan
Documents.
ARTICLE VI. COVENANTS
Throughout the Contract Term and until payment and performance in full
of the Obligations, each Borrower agrees (as to itself unless otherwise noted)
as follows, unless otherwise allowed by prior written consent of Lender:
6.1 Compliance Certificate. Within forty-five (45) days following
the end of each fiscal quarter, Borrower shall deliver to Lender a certificate
signed by the president or chief financial officer of Borrower certifying to
Lender that no event or condition that would be the subject of a required
notice under paragraph 6.12 or paragraph 6.13 is in existence as of the date of
such certificates. Such certificate shall be deemed to be a continuing
representation and warranty pending any subsequent certification or
notification by Borrower respecting its compliance or non-compliance with this
Agreement, and Borrower acknowledges that Lender shall rely upon the same in
making loans under the Revolving Facility.
6.2 Authority. Immediately following any effective change thereof
(and at such other times, from time to time, at the request of Lender) Borrower
shall certify to Lender the names and signatures of all Persons authorized to
execute and deliver Collateral Reports to Lender and any other documentation
contemplated by or relating to any of the Loan Documents.
6.3 Books and Records. Borrower shall keep and maintain proper,
complete and consistent books of record and account respecting its property
included within the Collateral and Borrower's affairs and financial condition
in accordance with GAAP, and shall permit Lender from time to time, by and
through its authorized agents, to visit and inspect any of its properties,
inspect and copy its books and records, and discuss its affairs, finances,
accounts, and operations with its officers.
6.4 Corporate Existence. Borrower shall preserve and maintain its
corporate existence, good standing and authority to transact business in all
jurisdictions where necessary for the proper conduct of its business, and shall
maintain all of its properties, rights, privileges and franchises necessary or
desirable in the normal conduct of its business.
6.5 Annual Financial Statements. Ultrak shall deliver to Lender,
as soon as practicable after the end of each fiscal year, and in any event
within one hundred fifty (150) days thereafter,
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its unqualified audited consolidated balance sheet as of the end of such fiscal
year, and its audited consolidated statement of income and changes to
stockholders equity and consolidated statements of cash flow, in reasonable
detail, prepared in accordance with GAAP and certified by an independent
certified public accounting firm acceptable to Lender as fairly presenting the
consolidated financial condition and results of operations of Ultrak and the
Subsidiaries. Such financial statements shall be accompanied by a copy of the
report to management delivered to Ultrak by such accountants and also by a
statement signed by each Borrower's president or chief financial officer
representing to Lender that such financial statements are true and complete and
fairly present the consolidated financial condition and results of operation of
Ultrak and the Subsidiaries, and that no event or condition that would be the
subject of a required notice under paragraph 6.12 or paragraph 6.13 is in
existence as of the date of delivery of such statements for so long as the
Guaranty remains in effect, Borrower shall cause to be delivered to Lender as
soon as practicable after the end of each calendar year, and in any event
within one hundred fifty (150) days thereafter, a financial statement of
Guarantor as of the end of such calendar year, on a form satisfactory to
Lender, which shall be completed in all respects and signed by such Guarantor.
6.6 Interim Financial Statements. Ultrak shall deliver to Lender,
as soon as practicable after the end of each calendar month, and in any event
within forty-five (45) days thereafter, a consolidated and consolidating
balance sheet as of the end of such month, and consolidated and consolidating
income statement for such month and for the period from the beginning of the
current fiscal year to the end of such month, in reasonable detail and prepared
in accordance with GAAP. Such financial statements shall be accompanied by a
statement signed by each Borrower's president or chief financial officer
representing to Lender that such financial statements are true and complete and
fairly present the financial condition and results of operations of Ultrak and
the Subsidiaries, and that no event or condition that would be the subject of a
required notice under paragraph 6.13 is in existence as of the date of delivery
of such statements.
6.7 Projections. Borrower shall deliver to Lender, on or before
the first day of each fiscal year during the Contract Term, a projection for
the succeeding period of not less than twelve calendar months, including
projected balance sheets, statements of income and statements of cash flow, all
in form satisfactory to Lender and including such information as is required by
Lender.
6.8 SEC Filings. Borrower shall delivery to Lender a complete
copy of (i) each Form 10-K Report filed with the Securities and Exchange
Commission, which shall be delivered to
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Lender as soon as possible upon filing thereof and in any event within three
(3) Business Days after the applicable filing deadline date, (ii) each Form
10-Q Report filed with the Securities and Exchange Commission, which shall be
delivered to Lender as soon as possible upon filing thereof and in any event
within three (3) Business Days after the applicable filing deadline date, and
(iii) each other filing from time to time made with the Securities and Exchange
Commission, which shall be delivered to Lender as soon as possible upon filing
thereof.
6.9 Collateral Reports. Borrower shall timely deliver to Lender
all Collateral Reports required by paragraph 3.6 and aging analysis and account
listings required by paragraph 3.7.
6.10 Information. In addition to information and items
specifically required by the Loan Documents, Borrower shall promptly furnish to
Lender such other information, documentation or projections respecting its
business affairs, assets, and liabilities as Lender may request.
6.11 Notification of Contingent Liabilities. Promptly upon
receiving notice of otherwise becoming aware thereof, Borrower shall notify
Lender of any pending or threatened lawsuit, claim, action, liability,
investigation or proceeding that would be treated as a contingent liability of
Borrower or Guarantor under GAAP and is in an amount in excess of $100,000.00,
or which is reasonably expected to result in a Material Adverse Effect.
6.12 Notification of Material Changes. Borrower will notify Lender
in writing at least thirty (30) days prior to the occurrence of any of the
following: (i) change of Borrower's name, (ii) change of Borrower's address or
principal place of business, (iii) change of the location of Borrower's books
and records, (iv) change of the location of any Collateral, (v) the opening of
any new place of business or the closing of any existing place of business or
(vi) use of any trade name, fictitious name or other assumed name. Borrower
shall promptly notify Lender of any change in any other material fact or
circumstance represented or warranted in any of the Loan Documents.
6.13 Notification Regarding Default. Borrower shall immediately
notify Lender in writing upon becoming aware of the existence of any condition
or event which constitutes an Event of Default or any condition or event which,
after notice or lapse of time, or both, would constitute an Event of Default,
therein specifying the nature and period of existence thereof and what action
Borrower is taking or proposes to take with respect to such condition or event.
Borrower shall immediately notify Lender in writing if it knows, or reasonably
expects, that an Event of Default will occur, therein specifying the nature of
the
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anticipated Event of Default. Without limiting the foregoing, Borrower will
also immediately notify Lender of any of the following: (i) Borrower's board of
directors has authorized the filing by Borrower of a petition in bankruptcy,
(ii) Borrower is aware that any covenant under this Agreement has been
breached, or reasonably expects that any such covenant will be breached, (iii)
Borrower is aware that any account debtor obligated on any Receivables
involving an amount in excess of $100,000.00 is in bankruptcy and (iv)
repossession or attempted repossession by any Person of any Inventory involving
a cost value in excess of $100,000.00.
6.14 Payment of Taxes. Borrower shall promptly pay, or cause to be
paid, when due, any and all taxes except such taxes as may be contested in good
faith by appropriate proceedings, provided, that adequate reserves shall be
maintained as are appropriate according to GAAP. At Lender's request pending
resolution of any such contest and prior to the delinquency of such tax,
Borrower shall furnish to Lender a cash reserve in the amount of the tax,
together with a reasonable additional sum to pay all projected costs, interest
and penalties in connection therewith, conditioned that such tax, together with
applicable interest, cost, and penalties, if any, be timely paid to the extent
required upon resolution of such contest. Alternatively, Lender shall have the
right in its discretion to include such amount in the Reserve. Borrower agrees
that it shall immediately notify Lender of the initiation of any such contest
and advise Lender from time to time of the status thereof. Borrower shall
promptly pay any amounts adjudged to be due pursuant to any such contest, with
all costs, penalties, and interest thereon, before such judgment becomes final
or any writ or order is issued under which the Collateral, or any portion
thereof, may become subject to any lien or encumbrance.
6.15 Compliance with Laws. Borrower shall comply with all
applicable laws, regulations and orders applicable to it or its property, a
violation of which would reasonably be expected to result in a Material Adverse
Effect. At Lender's request, Borrower will provide Lender with evidence of
Borrower's compliance with Environmental Requirements.
6.16 Compliance with Agreements. Borrower shall comply in all
material respects with all agreements, indentures, mortgages, or documents
binding upon Borrower or affecting its property or business.
6.17 Fees, Costs and Expenses. Borrower agrees to promptly pay
upon demand all costs, fees and expenses as provided in paragraph 9.12.
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6.18 Waivers and Consents Respecting the Collateral. Borrower
shall furnish to Lender such waivers and consents as may reasonably be
requested by Lender with respect to Lender's security interests and liens in
the Collateral.
6.19 Subordination Agreements. At Lender's request, all present
and future obligations due by Borrower to present or former officers,
directors, shareholders or Affiliates (excluding ordinary course items such as
travel and expense reimbursements and other similar ordinary course items
determined by agreement) shall be subordinate in right of payment and claim to
the Obligations, pursuant to definitive subordination agreements executed by
Borrower and such Affiliates in form satisfactory to Lender.
6.20 Change of Fiscal Year. Borrower shall notify Lender at least
forty-five (45) days prior to the effective date of any change in its fiscal
year.
6.21 Employee Benefit Plans. Borrower shall timely deliver the
following to Lender: (a) a copy of any notice of noncompliance received from
the PBGC under Section 4041(b)(2)(c), within three (3) days after receipt of
such notice; (b) a copy of any notice received by Borrower or any ERISA
Affiliate, or the administrator of any Plan, that the PBGC has instituted
proceedings to terminate such Plan or to appoint a trustee to administer such
Plan, promptly upon receipt and in no event more than three (3) days after the
receipt of such notice; (c) a copy of any notice received by Borrower or any
ERISA Affiliate concerning the imposition of any withdrawal liability under
Section 4202 of ERISA, within ten (10) days after receipt thereof by Borrower
or such ERISA Affiliate; (d) a copy of any notification of intention to impose
or assert withdrawal liability under ERISA against Borrower or any ERISA
Affiliate, promptly upon receipt thereof and in any event within three (days)
of receipt thereof; and (e) a copy of any notice from the Internal Revenue
Service regarding revocation or investigation of possible revocation of the
qualified status of any Plan under the IRC, promptly upon receipt thereof and
in any event within three (3) days after receipt thereof. If requested by
Lender, Borrower shall timely deliver the following to Lender: (f) a copy of
all materials required to be filed with the PBGC with respect to any Reportable
Event, within ten (10) days after the earlier of the filing or the occurrence
thereof; (g) a copy of any notice sent by Borrower to participants of a Plan of
Borrower's intent to terminate such Plan, no later than the date such notice is
required to be provided to participants under Section 4041(a)(2) of ERISA; (h)
a copy of each annual and other report with respect to each Plan or any trustee
created thereunder, promptly after the filing thereof with the United States
Secretary of Labor or the PBGC; and (i) such additional information concerning
any of Borrower's Employee Benefit Plans as may be requested by Lender.
Borrower
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<PAGE> 36
shall make prompt payment of all contributions required under all Plans to the
extent required to meet the minimum funding standard set forth in ERISA with
respect to such Plans, but shall reduce contributions or benefits if and to the
extent necessary to avoid an Event of Default hereunder to the extent such
reduction is not prohibited by applicable provisions of ERISA.
6.22 Financial Covenants.
(a) Borrower agrees that the following financial
covenants must be maintained as set forth herein. Compliance shall be measured
as of the end of each fiscal quarter, unless the context provides otherwise.
1. Tangible Net Worth. Tangible Net Worth shall
equal or exceed the specified amounts, for the applicable periods, as follows:
<TABLE>
<CAPTION>
Effective Period Requirement
---------------- -----------
<S> <C>
September 30, 1993 $6,173,500.00
December 31, 1993 $6,500,000.00
March 31, 1994 $7,000,000.00
June 30, 1994 $7,500,000.00
September 30, 1994 $8,000,000.00
December 31, 1994 $8,500,000.00
March 31, 1995 $9,000,000.00
June 30, 1995 $9,500,000.00
September 30, 1995 $10,000,000.00
</TABLE>
2. Leverage Ratio. Leverage Ratio shall not
exceed the specified amounts as of the end of each applicable period as
follows:
<TABLE>
<CAPTION>
Effective Period Requirement
---------------- -----------
<S> <C>
December 31, 1993 2.3 to 1.0
December 31, 1994 1.8 to 1.0
</TABLE>
3. Capital Expenditures. Capital Expenditures
shall not exceed the following amounts for the applicable periods, as
specified:
<TABLE>
<CAPTION>
Effective Period Requirement
---------------- -----------
<S> <C>
Fiscal year ending
December 31, 1993 $ 500,000.00
Fiscal year ending
December 31, 1994 $1,000,000.00
January 1, 1995 -
</TABLE>
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<PAGE> 37
<TABLE>
<S> <C>
September 30, 1995 $1,000,000.00
</TABLE>
4. Interest Coverage Ratio. Interest Coverage
Ratio shall equal or exceed the following amounts as of the end of each
applicable period as follows:
<TABLE>
<S> <C>
December 31, 1993 3.0 to 1.0
December 31, 1994 4.0 to 1.0
</TABLE>
5. Net Income. Net Income shall equal or exceed
the following amounts for the applicable periods as follows:
<TABLE>
<S> <C>
Fiscal year ending
December 31, 1993 $1,500,000.00
Fiscal year ending
December 31, 1994 $2,000,000.00
</TABLE>
(b) For purposes of measuring the financial covenants
under this paragraph, the following definitions shall apply each determined on
a consolidated basis for Ultrak and the Subsidiaries according to GAAP:
1. "Capital Expenditures" for any period, means
the aggregate expenditures during such period which are classified as capital
expenditures according to GAAP.
2. "Interest Coverage Ratio" means, as of the
last day of any period, the ratio of EBIT to Interest Expense, for the 12 month
period ending on such day. As used herein:
"EBIT" for any period, means the sum of (i)
income before provision for income taxes,
plus (ii) Interest Expense for such period;
and
"Interest Expense" for any period, means all
interest charges paid or accrued during such period.
3. "Leverage Ratio" means the ratio or Total
Liabilities to Tangible Net Worth. As used
herein:
"Total Liabilities" means all indebtedness
now or hereafter existing, including without
limitation indebtedness for borrowed money,
trade debt and all other liabilities which
should be reflected on the consolidated
balance sheet of Ultrak and the Subsidiaries
according to GAAP; and
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<PAGE> 38
"Tangible Net Worth" shall have the meaning
defined hereinbelow.
4. "Net Income" for any period means net income
for such period after accruing for all appropriate taxes, according to GAAP,
and excluding the following: (a) gain arising from the sale of any capital
asset; (b) gain arising from any write up of the book value of any asset; (c)
earnings of any corporation, substantially all of the assets of which are
hereafter acquired, earnings of any corporation that hereafter becomes an
Affiliate, to the extent realized by such other corporation prior to the date
of such acquisition; (d) earnings of any Affiliate, unless (and only to the
extent) such earnings shall actually have been received in cash; (e) gain
arising from the acquisition of debt or equity securities or from the
cancellation or forgiveness of any indebtedness or obligation; and (f) any gain
arising from any extraordinary item.
5. "Tangible Net Worth" shall mean the amount by
which the sum of (a) Shareholders Equity plus Subordinated Debt exceeds (b)
Intangible Assets. As used herein:
"Shareholders Equity" means shareholders
equity determined according to GAAP.
"Subordinated Debt" means all indebtedness
which by its terms is subordinate in right of
payment and claim in favor of Lender pursuant
to an Affiliate Subordination Agreement or
any other written subordination agreement
satisfactory to Lender provided, that the
purpose, terms (including without limitation
the amount, applicable interest rate, payment
provisions and term) and subordination
arrangements pertaining to any such
indebtedness shall be satisfactory to Lender
in its discretion; and
"Intangible Assets" means those assets which
are treated an intangible pursuant to GAAP,
or as determined by Lender in its sole
discretion, and in any event including,
without limitation: (i) obligations, if any,
owing by Affiliates; (ii) the amount, if any
by which inventory exceeds the lower of cost
or market value thereof; (iii) the value of
any inventory that is obsolete or damaged or
is otherwise deemed by lender not to be of a
marketable quality commensurate with the
inventory of Borrowers as a whole; (iv)
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<PAGE> 39
accounts receivable which are deemed by any
Borrower or by Lender to be uncollectible or
which should be subject to a reserve for bad
debts in accordance with GAAP or which are
subject to potential claims or setoffs; (vi)
any asset which is intangible or lacks
intrinsic and marketable value or
collectibility, including without limitation
goodwill, noncompetition agreements, patents,
copyrights, trademarks, franchises and
organization or research and development
costs.
6.23 Sale of Assets. Borrower will not sell or dispose of any
assets other than the sale of inventory in the ordinary course of business,
provided, that Borrower shall not be precluded from making ordinary course
sales of any equipment the sales price of which, when added to the sales prices
of all other such ordinary course sales of equipment, if any, by all Borrowers
during the preceding twelve calendar months does not exceed $100,000.00,
provided further, that all proceeds at any time received by Borrower in respect
of such sale shall be promptly delivered to Lender for application in reduction
of the Obligations owing by Borrower, or in such other manner as Lender may
determine in its discretion.
6.24 Prohibition Against Liens on Collateral. Borrower will not
grant, create or allow to exist any security interest, lien or other
encumbrance on any of the Collateral, except as provided in the Intercreditor
Agreement or as otherwise may be provided in Exhibit 3.3.
6.25 Dissolution, Liquidation, Merger. Borrower shall not dissolve
or liquidate, or become a party to any merger or consolidation with any Person
(other than merger or consolidation with another Borrower, in which event
Borrower shall provide Lender with at least thirty (30) days prior written
notice of such intended merger or consolidation).
6.26 Limitation on Indebtedness. Borrower will not be obligated,
directly or indirectly, for borrowed money or otherwise under any promissory
note, bond, indenture or similar instrument, other than (i) in favor of Lender
or trade indebtedness incurred in the normal and ordinary course of Borrower's
business and not more than sixty (60) days past due, (ii) indebtedness of
Ultrak in favor of Petrus Fund, L.P. for purchase money obligations arising
from the purchase of inventory in the ordinary course of Ultrak's business as
referenced in the Intercreditor Agreement, and (iii) indebtedness of Ultrak in
favor of George Smith as evidenced by the
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<PAGE> 40
certain promissory notes dated March 20, 1991 executed by Ultrak payable to
George A. Smith, III in the face amount of $285,000.00.
6.27 Limitation on Contingent Liabilities. Borrower will be
directly or indirectly liable in connection with the obligations of any Person,
whether by guarantee, surety, endorsement (other than endorsement of negotiable
instruments for collection in the ordinary course of business), agreement to
purchase or repurchase, agreement to make investments, agreement to provide
funds or maintain working capital, or any agreement to assure a creditor
against loss, other than in favor of Lender.
6.28 Change in Business. Borrower shall not discontinue, or make
any material change in, its business as currently established, or enter any new
or different line of business not directly related to Borrower's existing line
of business.
6.29 Change in Management. There will be no change of the
personnel performing the functions of Borrower's chief executive officer, chief
financial officer and chief operating officer, as each such position is
presently constituted.
6.30 Change in Ownership. Promptly upon receiving knowledge
thereof (and in any event within three (3) days of first receiving such
knowledge), Borrower shall notify Lender in writing of any change, or pending
change, in the ownership of Borrower that results in, or would result in,
reducing the aggregate percentage of Voting Stock of Ultrak owned or controlled
by George Broady to an amount less than fifty-one percent (51.0%). At Lender's
request at any time following receipt of such notice, Borrowers jointly and
severally agree to prepay to Lender all of the Obligations in full. Such
prepayment shall be made at or prior to the effective time of any such change,
or upon demand by Lender in the event any such change has already become
effective at the time of such notice. Subject to paragraph 9.10, in the event
of any such prepayment Borrower shall also pay to Lender at the time of such
prepayment a sum certain, as liquidated damages, the following applicable
percentage of the Credit Limit: One percent (1.0%), which amount Borrowers and
Lender acknowledge to be the best estimate of this amount necessary to fairly
and reasonably compensate Lender for its damages resulting from such
prepayment.
6.31 Dividends Distributions. Borrower will not declare, pay or
issue any dividends or other distributions in respect of its capital stock, or
distribute, reserve, secure or otherwise make or commit distributions in
respect of its capital stock, provided, that for so long as no Event of Default
is in existence, (i) Ultrak shall not be prohibited from declaring and paying
dividends on account of its preferred stock in an aggregate amount not
exceeding $117,210.00 per calendar year, as provided in the certain Statement
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<PAGE> 41
of Rights and Designation of the Series Cumulative Preferred Stock and (ii)
DVDI shall not be prohibited from declaring and paying dividends on its common
stock as provided in paragraph 10 of the certain agreement (entitled "MIDCO
Agreement") dated April 21, 1993 among Ultrak, Medical Industrial Dental Vision
Direct, Inc., DVDI, Rick Owens, Randall W. Donahoo and Robert Maness (a copy of
which has been delivered to Lender).
6.32 Redemptions and Acquisition of Shares. Borrower will not make
any payment on account of the purchase, redemption or other acquisition or
retirement of any shares of its capital stock.
6.33 Bonuses, Consulting Fees to Shareholders and Directors.
Borrower will not declare or pay any bonus compensation, or pay any consulting
fees, to any Affiliate.
6.34 Loans to Officers, Directors, Shareholders. Borrower will not
make any loans or advances to or for the benefit of any Affiliate.
6.35 Transactions with Affiliates. Borrower will not make any
loans, advances or extensions of credit to or for the benefit of any Affiliate,
the unpaid balance of which at any time, when added to the unpaid balance owing
to Borrower by all other Affiliates, if any, exceeds the amount of $100,000.00.
Borrower will not make any payment on any obligation owing to any Affiliate
(excluding reasonably expense reimbursements in the ordinary course of
business) unless specifically allowed under any Affiliate Subordination
Agreement or otherwise allowed by Lender. Borrower will not enter into any
transaction with an Affiliate except in the ordinary course of business on
terms no less favorable to Borrower, nor more favorable to such Affiliate, than
would be obtainable in a comparable arm's length transaction with a Person who
is not an Affiliate. Borrower will not enter into any transaction with an
Affiliate involving an amount in excess of $100,000.00 unless such transaction
is specifically approved by Borrower's board of directors as being an arm's
length transaction on terms no less favorable to Borrower, nor more favorable
to such Affiliate, than would be obtainable in a comparable arm's length
transaction with a Person who is not an Affiliate.
6.36 Acquisitions. Borrower shall not purchase or otherwise
acquire assets from any Person outside the ordinary course of business of
Borrower, provided, that Borrower shall not be precluded from acquiring assets
the aggregate sales price of which, when added to the aggregate sales price of
all other such acquisitions, if any, by all Borrowers during the preceding
twelve calendar months does not exceed $250,000.00.
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<PAGE> 42
6.37 Limitation on Investments. Borrower shall not invest in or
otherwise purchase or acquire the securities of any Person, except for ordinary
course investments in securities of the United States and certificates of
deposit issued by commercial banks organized in the United States which have
assets in excess of $250,000.00.
6.38 Covenants Cumulative. The covenants contained in this Article
VI are in addition to all other covenants provided in the Loan Documents.
ARTICLE VII. EVENT OF DEFAULT
7.1 Event of Default. Each of the following shall constitute an
Event of Default under this Agreement:
(a) The failure of timely payment of the Obligations, or
any part thereof, as they become due in accordance with the terms of the Loan
Documents;
(b) Any violation, breach or default of any covenant,
agreement or other obligation under this Agreement (not otherwise covered by
paragraph 7.1(a) or any of the Loan Documents;
(c) Any representation or warranty made by Borrower in
the Loan Documents was false in any material respect at the time when made;
(d) Lender at any time believes, in accordance with the
standards prescribed by the Code, that the prospect for payment or performance
of the Obligations is impaired;
(e) The occurrence of any event of circumstance which
Lender believes has or may result in a Material Adverse Effect;
(f) The filing of any petition or proceeding by or
against any Borrower or Guarantor under the United States Bankruptcy Code, as
amended from time to time, or any other applicable state or federal law
relating to bankruptcy reorganization or other relief for debtors, or the
appointment of a conservator, receiver, trustee, or liquidator of all or a
substantial part of the assets of any Borrower or Guarantor.
(g) The use of any funds borrowed from Lender under this
Agreement for any purpose other than as provided in this Agreement;
(h) The filing or commencement of any attachment,
sequestration, garnishment, execution or other action against or
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<PAGE> 43
with respect to any of the Collateral involving an amount in controversy in
excess of $25,000.00;
(i) The filing or commencement of any attachment,
sequestration, garnishment, execution or other action against or with respect
to any Borrower's property not included within the Collateral if the amount in
controversy in excess of $100,000.00 or if the outcome, pendency or effect
thereof is reasonably expected to result in or cause a Material Adverse Effect;
(j) Any breach or default in the payment or performance
of any material obligation, or any defined event of default, under the terms,
provisions or conditions of any contract or instrument pursuant to which any
Borrower is obligated on any indebtedness or obligation or other liability to
any Person in an amount exceeding $100,000.00, and the expiration of thirty
(30) days from the date of such breach, default or event of default;
(k) The entry of any judgment against any Borrower in an
amount equal to or exceeding $100,000.00;
(l) The dissolution or liquidation of any Borrower, or
the taking of any action by the board of directors or shareholders of any
Borrower to dissolve or liquidate;
(m) The death of Guarantor;
(n) A Reportable Event or Prohibited Transaction with
respect to a Plan which could, in the opinion of Lender, result in a Material
Adverse Effect;
(o) The filing of a notice of intent to terminate a Plan
under a distress termination as described in section 4041(c) of ERISA which
could, in the opinion of Lender, result in a Material Adverse Effect;
(p) The receipt of a notice by the plan administrator of
Borrower that the PBGC has instituted proceedings to terminate a Plan or
appoint a trustee to administer a Plan;
(q) The withdrawal by any Borrower or any ERISA Affiliate
from a multiemployer plan as defined in Section 3(37) or Section 4001(a)(3) of
ERISA or Section 414 of the IRC if such action could, in the opinion of Lender,
result in a Material Adverse Effect;
(r) The revocation by the Internal Revenue Service of the
qualified status of any Employee Benefit Plan if such action could, in the
opinion of Lender, result in a Material Adverse Effect;
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<PAGE> 44
(s) Any qualification by a certified public accountant
relative to any financial statement delivered to Lender under this Agreement
that is not acceptable to Lender in its discretion.
(t) The receipt by any Borrower of any notice from Petrus
Fund, L.P. making demand, or giving notice of intention to accelerate, or
accelerating, any obligations or indebtedness from time to time owing by such
Borrower.
(u) The receipt by Lender or any Borrower of any
notification by Petrus Fund, L.P. or under paragraph 4 ("Restrictions of
Foreclosure and Other Actions") on the Intercreditor Agreement (or comparable
paragraph under any renewal, extension or amendment thereof), or any other
notification of intended repossession, foreclosure or other intended action in
respect of the Collateral (other than the "Petrus Collateral" as defined in the
Intercreditor Agreement).
ARTICLE VIII. REMEDIES
8.1 Refusal of Funding. Lender shall have no obligation to make
any loan (i) at any time when any applicable condition for funding prescribed
under this Agreement has not been fulfilled to Lender's satisfaction, (ii) at
any time when any Event of Default is in existence, or when any condition
exists which after notice or lapse of time, or both, would constitute an Event
of Default, (iii) if Lender has received any notice under paragraph 6.13 or has
knowledge of any event or condition which would by the subject of any notice
required thereunder, or (iv) if any Borrower has repudiated or made any
anticipatory breach of any of its obligations under this Agreement; and any
loan requested at any such time may be declined by Lender, in whole or in part,
in Lender's sole discretion without prior notice. Without limitation of the
foregoing (and without limiting the significance of any defined Event of
Default), each Borrower acknowledges that an Event of Default under
subparagraphs (t) or (u) of paragraph 7.1 may result in refusal of further loan
requests without notice.
8.2 Remedies. Should an Event of Default occur at any time,
Lender may at its option declare the entire outstanding principal amount and
unpaid accrued interest of any part of the Obligations to be immediately due
and payable and, in addition, take any or all of the following action
(provided, that with respect to any Event of Default arising under paragraphs
6.1, 6.2, 6.5, 6.6, 6.7, 6.8, 6.9, 6.14, 6.15, or 6.16, ten (10) Business Days
shall first have passed after the occurrence of any such Event of Default); (i)
commence such actions as may be necessary to enforce the Obligations, or any
part thereof; (ii) take such steps as Lender may deem appropriate to foreclose
and enforce any and all liens and
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<PAGE> 45
security interests now or hereafter granted to Lender to secure payment and
performance of the Obligations, or any part thereof; or (iii) exercise and
avail itself of any and all other remedies as may be available under the Loan
Documents or as otherwise may be available according to law. Without
limitation of the foregoing (and without limiting the significance of any
defined Event of Default), each Borrower acknowledges that an Event of Default
under subparagraphs (t) or (u) of paragraph 7.1 may result in the immediate
exercise of remedies hereunder without notice. Lender at all times shall have
the rights and remedies of a secured party under the Code, including but not
limited to the right to take possession or enforce direct payment of the
Receivables. Lender may demand, collect, receipt for, settle, compromise
adjust, sue for, foreclose or otherwise realize upon Collateral as Lender may
determine. In taking possession of any Collateral, Lender is authorized to
enter upon any premises owned or leased by any Borrower where any Collateral is
located. At its option, Lender may require any Borrower to assemble the
Collateral and make it available to Lender at a place to be designated by
Lender which is reasonably convenient to both Lender and such Borrower.
Borrowers agree that Lender shall be entitled to dispose of any Collateral on
any Borrower's premises. Unless the Collateral is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market, Lender will give reasonable notice of the time and place of any public
sale thereof or of the time after which any private sale or any other intended
disposition thereof is to be made. For this purpose, it is agreed that at
least five (5) days notice of the time of sale or other intended disposition of
the Collateral delivered in accordance with paragraph 9.3 shall be deemed to be
reasonable notice in conformity with the Code. Lender may adjourn or otherwise
reschedule any public sale by announcement at the time and place specified in
the notice of such public sale, and such sale may be made at the time and place
as so announced without necessity of further notice. Lender shall not be
obligated to sell or dispose of any Collateral, notwithstanding any prior
notice of intended disposition. With respect to any instruments or chattel
paper at any time included within the Collateral, Lender shall not have any
duty or obligation to take steps to preserve rights against prior parties.
8.3 Cash Collateral; Injunctive Relief. All cash proceeds of
Collateral from time to time existing, including without limitation collections
and payments of Receivables and cash receipts, if any, for other Collateral,
whether consisting of cash, checks or other similar items, at all times shall
be subject to an express trust for the benefit of Lender. All such proceeds
shall be subject to Lender's continuing security interests under this
Agreement. Except as may be specifically allowed otherwise by this Agreement,
each Borrower is expressly prohibited from using, spending, retaining or
otherwise exercising any dominion over such proceeds.
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<PAGE> 46
Each Borrower acknowledges and agrees that an action for damages against such
Borrower for any breach of such prohibitions shall not be an adequate remedy at
law. In the event of any such breach, each Borrower agrees too the fullest
extent allowed by law that Lender shall be entitled to injunctive relief to
restrain such breach and require compliance with the requirements of this
Agreement.
8.4 Enforcement Costs; Application of Proceeds. Borrowers jointly
and severally agree to pay to Lender on demand any and all expenses, including
legal expenses, reasonable attorneys' fees, court costs, collection costs, and
traveling expenses, incurred or paid by Lender in protecting or enforcing any
of its rights hereunder, including its right to take possession, hold, store,
prepare for sale, sell, or otherwise dispose of the Collateral and collect the
proceeds of any Collateral. Until reimbursed or otherwise paid, Lender is
hereby authorized to add all such expenses to the principal amount of the
Obligations. After deducting all of such expenses, any remaining proceeds of
collection or sale of the Collateral shall be applied in payment of the
Obligations in such manner as Lender may determine, and the excess, if any,
shall be disbursed by Lender in accordance with applicable law. Each Borrower
expressly agrees that it shall remain liable for any deficiency.
8.5 Waiver of Notices. Except as otherwise expressly provided in
this Agreement, each Borrower expressly waives presentment, demand, notice of
intention to accelerate, notice of acceleration, protest and any other notices
of any kind with respect to the Obligations.
8.6 Setoff. Each Borrower irrevocably authorizes Lender to charge
any account of such Borrower maintained with Lender with such amount as may be
necessary from time to time to pay any Obligations. Each Borrower agrees that
Lender shall have a contractual right to set off any and all deposits or other
sums at any time credited by or due from Lender to such Borrower against any
part of the Obligations. Such right of setoff may be exercised at any time by
Lender without prior notice, irrespective of whether an Event of Default exists
or whether Lender has accelerated the Obligations. Upon the occurrence of an
Event of Default and for so long as the same shall remain in existence and not
cured or waived, Lender shall be entitled in its discretion to hold any such
deposits or other sums pending acceleration of the Obligations.
8.7 Performance by the Lender. Should any Borrower fail to
perform any covenant, duty, or agreement required by the Loan Documents, Lender
may, at its sole option and election, perform or attempt to perform same on
behalf of such Borrower at such Borrower's cost and expenses, provided that
Lender shall have no
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<PAGE> 47
obligation or duty to take any such action. Each Borrower agrees to reimburse
Lender for such costs and expenses on demand.
8.8 Non-waiver. Forbearance or indulgence by Lender of any Event
of Default or any other event or condition which is or would be the subject of
a require notice under paragraph 6.13, at any time from time to time, shall not
be deemed a waiver of any rights of Lender under the Loan Documents. The
acceptance by Lender at any time and from time to time of any partial payment
of the Obligations shall not be deemed to be a waiver of any Event of Default
then existing. No delay or omission by Lender in exercising any right or
remedy shall impair such right or remedy, or be construed as a waiver thereof,
nor shall any single or partial exercise of any such rights or remedies
preclude other or further exercise thereof. Lender shall not be required or
obligated to file suit or otherwise pursue any other Person for enforcement or
collection of any of the Obligations or to take any action to realize upon any
of the Collateral.
8.9 Application of Payments. During the existence of any Event of
Default, all payments and proceeds of Collateral received by Lender shall be
applied to the Obligations in Lender's discretion, and Lender shall have the
right to adjust or reapply in another manner any such payments and proceeds as
Lender may determine in its discretion.
ARTICLE IX. MISCELLANEOUS
9.1 Effective date; Termination. This Agreement shall become
effective upon acceptance by Lender, as of the effective date specified in the
preamble of this Agreement. Subject to all other provisions of the Loan
Documents, the Revolving Facility shall continue in full force and effect
through expiration of the Contract Term at which time the Revolving Facility
shall terminate without further notice. Notwithstanding any termination or
notice of termination, the Obligations and all rights and remedies of Lender
hereunder with respect thereto, including without limitation all rights and
remedies with respect to the Collateral shall remain in full force and effect
under the Obligations have been paid in full.
9.2 Payments. All payments or collections received by Lender
after its internally established time for closing business on any Business Day
shall be deemed received as of the next succeeding Business. All payments
shall be made in immediately available funds, at Lender's address specified in
paragraph 1.34. Any payment which is due on a day which is not a Business Day
shall instead be deemed to be due on the next succeeding Business Day,
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<PAGE> 48
and interest thereon shall accrue and be payable at the then applicable rate
during the time of such extension.
9.3 Notices. Any consent, approval, notice, request, or demand
from one party to another must be made in writing to be effective, and shall be
deemed to have been given on the third Business Day after its deposit in the
United States mail, postage prepaid and properly addressed, by certified or
registered mail, return receipt requested, or on the Business Day on which it
is actually delivered by messenger delivery, telecopy or other electronic
transmission, whichever is earlier. The address of each part for the purposes
hereof is as follows:
Borrowers:
ULTRAK, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
LOSS PREVENTION ELECTRONICS CORPORATION
913 Commerce Drive
Annapolis, Maryland 21401
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
CCTV SOURCE INTERNATIONAL, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
DENTAL VISION DIRECT, INC.
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
Attention: Tim D. Torno, Vice President
Telecopy: 214/280-9659
Lender:
NATIONSBANK OF TEXAS, N.A.
901 Main Street, 6th Floor
Dallas, Texas 75202
Attention: BUSINESS CREDIT/Division Manager: URGENT
Telecopy: 214/508-3501
of such other address as may hereafter be designated and delivered in writing.
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<PAGE> 49
9.4 Use of Loan Proceeds. No portion of the proceeds of any loans
under the Revolving Facility shall be used to purchase or carry any "margin
stock" as defined under Regulation "U" of the Board of Governors of the Federal
Reserve System, or to repay or refinance any debt previously incurred by any
Borrower for such purpose.
9.5 Lender's Records; Account Statements. Lender's records in
respect of loans advanced, accrued interest, payments received and applied and
other matters in respect of calculation of the amount of the Obligations shall
be deemed conclusive absent demonstration of error. All statements of account
rendered by Lender to any Borrower relating to principal, accrued interest or
costs owing by Borrower under this Agreement shall be presumed to be correct
and accurate unless, within thirty (30) days after receipt thereof, such
Borrower shall notice Lender in writing of any claimed error therein.
9.6 Indemnity. Borrowers hereby jointly and severally agree to
indemnify and hold harmless and defend all Indemnified Persons from and against
any and all Indemnified Claims. Upon notification and demand, Borrowers are to
provide defense of any Indemnified Claim and pay all costs and expenses of
counsel selected by any Indemnified Person in respect thereof. Any Indemnified
Person against whom any Indemnified Claim may be asserted reserves the right to
settle or compromise any such Indemnified Claim as such Indemnified Person may
determine in its/his/her sold discretion, and the obligations of such
Indemnified Person, if any, pursuant to any such settlement or compromise shall
be deemed included within the Indemnified Claims. The indemnification provided
for in this paragraph shall survive any termination of this Agreement and shall
continue for the benefit of all Indemnified Persons. Except as specifically
provided in this paragraph, each Borrower waives all notices from any
Indemnified Person.
9.7 Non-applicability of Chapter 15 of Texas Credit Code. Chapter
15 of the Texas Credit Code shall not be applicable to this Agreement or the
Revolving Facility.
9.8 Yield Protection. If at any time after the date hereof, and
from time to time, Lender determines that the adoption or modification of any
applicable law, rule or regulation regarding taxation, Lender's required levels
of reserves, deposits, insurance or capital (including any allocation of
capital requirements or conditions), or similar requirements, or any
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation, administration or
compliance of Lender with any of such requirements, has or would have the
effect of increasing Lender's costs relating to the Obligations or reducing the
yield or rate of
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<PAGE> 50
return of Lender on the Obligations to a level at least one-quarter of one
person (.0025%) below that which Lender could have achieved but for the
adoption or modification of any such requirements, then within 15 days of any
request by Lender, Borrowers shall pay to Lender such additional amounts as
will compensate Lender for such increase in costs or reduction in yield or rate
of return of Lender, provided, that such amount shall only be payable in the
event Lender elects to require a similar payment or adjustment in respect of
substantially all other similarly situated borrowers. No failure by Lender to
immediately demand payment of any additional amounts payable hereunder shall
constitute a waiver of Lender's right to demand payment of such amounts at any
subsequent time. Nothing herein contained shall be construed or so operate as
require Borrower to pay any interests, fees, costs, or charges greater than is
permitted by applicable law.
9.9 Judgment Interest. It is agreed that any judgment entered by
a court in favor of Lender against any Borrower for payment of the Obligations,
or any part thereof, shall provide for post-judgment interest on the amount
thereof at a rate equal to the Maximum Rate.
9.10 Interest Limitation. In no contingency or event whatsoever
shall the amount of interest under the Loan Documents paid by any Borrower,
received by Lender, agreed to be paid by any Borrower, or requested or demanded
to be paid by Lender, exceed the Maximum Rate. In the event any such sums paid
to Lender by any Borrower would exceed the Maximum Rate, Lender shall
automatically apply such excess to any unpaid principal or, if the amount of
such excess exceeds said unpaid principal, such excess shall be paid to such
Borrower. All sums paid, or agreed to be paid, by any Borrower which are or
hereafter may be construed to be compensation for the use, forbearance, or
detention of money shall be amortized, prorated, spread and allocated in
respect of the Obligations throughout the full Contract Term until the
Obligations are paid in full. Notwithstanding any provisions contained in the
Loan Documents, or in any notes or other related documents executed pursuant
hereto, Lender shall never be entitled to receive, collect or apply as interest
any amount in excess of the Maximum Rate and, in the event Lender ever
receives, collects, or applies any amount in respect of any Borrower that
otherwise would be in excess of the Maximum Rate, such amount shall
automatically be deemed to be applied in reduction of the unpaid principal
balance of the Obligations and, if such principal balance is paid in full, any
remaining excess shall forthwith be paid to such Borrower. In determining
whether or not the interest paid or payable under any specific contingency
exceeds the Maximum Rate, Borrowers and Lender shall, to the maximum extent
permitted under applicable law, (i) characterize any non-principal payment as a
standby fee, commitment fee, prepayment charge, delinquency charge or
reimbursement for a
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<PAGE> 51
third-party expense rather than as interest, (ii) exclude voluntary prepayments
and the effect thereof, and (iii) amortize, prorate, allocate and spread in
equal parts throughout the entire period during which the indebtedness was
outstanding the total amount of interest at any time contracted for, charged or
received. Nothing herein contained shall be construed or so operate as to
require any Borrower to pay any interest, fees, costs, or charges greater than
is permitted by applicable law. Subject to the foregoing, each Borrower hereby
agrees that the actual effective rate of interest from time to time existing
with respect to loans made by Lender to such Borrower, including all amounts
agreed to by such Borrower or charged or received by Lender, which may be
deemed to be interest under applicable law, shall be deemed to be a rate which
is agreed to and stipulated by such Borrower and Lender in accordance with
applicable law.
9.11 Continuing Rights of Lender in Respect of Obligations. In the
event any amount from time to time applied in reduction of the Obligations is a
subsequently set aside, avoided, declared invalid or recovered by any Borrower
or any trustee or in bankruptcy, or in the event Lender is otherwise required
and refund or repay any such amount pursuant to any applicable law, then the
Obligations shall automatically be deemed to be revived and increased to the
extent of such amount and the same shall continue to be secured by the
Collateral as if such amount had not been so applied.
9.12 Fees, Costs and Expenses. Borrowers jointly and severally
agree to pay all reasonable costs and expenses incurred by Lender in connection
with the Loan Documents, including without limitation: (i) negotiation,
preparation and closing of the Loan Documents, including appraisal fees,
reasonable attorneys fees and disbursements, search fees, filing and recording
fees, (ii) ongoing administration of the Loan Documents, including without
limitation, reasonable fees and costs incurred in consultation with attorneys,
accountants or appraisers or in connection with any factual investigation,
(iii) negotiation, preparation and closing of any amendment, waiver or consent
relating to the Loan Documents, including appraisal, reasonable attorneys fees
and disbursements, search fees, filing and recording fees, and (iv) enforcing
any provision of the Loan Documents, including without limitation reasonable
fees and costs of attorneys, experts or other consultants retained by Lender in
connection therewith and any other fees pursuant to paragraph 8.4. Borrowers
will pay any applicable stamp, registration, recordation and similar taxes,
fees and charges in respect of the Collateral or perfection or maintenance of
Lender's rights under the Loan Documents, and agree to indemnity Lender against
any liabilities resulting from any delay, deferral or omission in payment of
any such taxes, fees or charges. All fees, costs and expenses for which
Borrowers are
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<PAGE> 52
obligated under the Loan Documents shall be payable to Lender on demand. At
Lender's option, the amount of such fees, costs and expenses owing by any
Borrower may be deducted from the proceeds of any loan to such Borrower
hereunder or added to the unpaid principal due by such Borrower under the
Revolving Facility, in which event such fees, costs and expenses will be deemed
paid and the amount thereof shall be treated as a loan to such Borrower under
the Revolving Facility.
9.13 Acceptance and Performance. This Agreement shall become
effective only upon acceptance by Lender. The Obligations are payable at
Lender's offices in Dallas, Dallas County, Texas. Each Borrower and Lender
agrees that Dallas County, Texas shall be the exclusive venue for litigation of
any dispute or claim arising under or relating to the Loan Documents, and that
such county is a convenient forum in which to decide any such dispute. Each
Borrower and Lender consents to the personal jurisdiction of the state and
federal courts located in Dallas County, Texas for the litigation of any such
dispute or claim.
9.14 Obligations. Lender's rights in respect of the Obligations
shall not be impaired by reason that the amount thereof at any time exceeds any
stated maximum or other limitation provided herein.
9.15 Express Waivers by Borrowers in respect of
Cross-Collateralization and Cross Guaranties. In connection with the matters
provided in paragraph 3.17, each Borrower agrees as follows:
(a) Borrower hereby waives: (1) notice of acceptance of
this Agreement; (2) notice of any loans or other financial accommodations made
or extended under the Loan Documents or the creation or existence of any
Obligations; (3) notice of the amount of the Obligations, subject, however, to
Borrower's right to make inquiry of Lender to ascertain the amount of the
Obligations at any reasonable time; (4) notice of any adverse change in the
financial condition of any other Borrower or of any other fact that might
increase Borrower's risk with respect to such other Borrower under this
Agreement; (5) notice of presentment for payment, demand, protest, and notice
thereof as to any promissory notes or other instruments among the Loan
Documents; and (7) all other notices (except if such notice is specifically
required to be given to Borrower hereunder or under any of the Loan Documents
to which Borrower is a party) and demands to which Borrower might otherwise be
entitled.
(b) Borrower hereby waives the right by statute or
otherwise to require Lender to institute suit against any Borrower or to
exhaust any rights and remedies which Lender has or may have
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<PAGE> 53
against any Borrower. Borrower further waives any defense arising by reason of
any disability or other defense of any other Borrower (other than the defense
that the Obligations shall have been fully and finally performed and
indefeasibly paid) or by reason of the cessation from any cause whatsoever of
the liability of any such Borrower in respect thereof.
(c) Borrower hereby waives and agrees not to assert
against Lender: (1) any defense (legal or equitable), set- off, counterclaim,
or claim which Borrower may now or at any time hereafter have against any other
Borrower or any other party liable to Lender; (2) any defense, set-off,
counterclaim, or claim of any kind or nature available to any other Borrower
against Lender, arising directly or indirectly from the present or future lack
of perfection, sufficiency, validity, or enforceability of the Obligations or
any security therefor; (3) any right or defense arising by reason of any claim
or defense based upon an election of remedies by Lender under any applicable
law; (4) the benefit of any statute of limitations affecting any other
Borrower's liability hereunder.
(d) In addition to the foregoing waivers, Borrower hereby
waives outright and absolutely, any right of subrogation Borrower has or may
have against any other Borrower with respect to the Obligations. In addition,
Borrower hereby waives any right to proceed against any other Borrower, now or
hereafter, for contribution, indemnity, reimbursement, and any other suretyship
rights and claims, whether direct or indirect, liquidated or contingent,
whether arising under express or implied contract or by operation of law, which
Borrower may now have or hereafter have as against any other suretyship rights
and claims, whether direct or indirect, liquidated or contingent, whether
arising under express or implied contract or by operation of law, which
Borrower may now have or hereafter have as against any such other Borrower with
respect to the Obligations. Borrower also hereby waives any rights to recourse
to or with respect to any asset of any other Borrower. Borrower agrees that in
light of the immediately foregoing waivers, the execution of this Agreement
shall not be deemed to make Borrower a "creditor" of any other Borrower, and
that for purposes of Sections 547 and 550 of the Bankruptcy Code Borrower shall
not be deemed a "creditor" of any other Borrower.
(e) Borrower consents and agrees that, without notice to
or by Borrower and without affecting or impairing the obligations of Borrower
hereunder, Lender may, by action or inaction: (a) compromise, settle, extend
the duration or the time for the payment of, or discharge the performance of,
or may refuse to or otherwise not enforce the Loan documents; (b) release all
or any one ore more parties to any one or more of the Loan Documents or grant
other indulgences to any other Borrower in respect thereof; (c) amend or
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<PAGE> 54
modify in any manner and at any time (or from time to time) any of the Loan
Documents; or (d) release or substitute any other guarantor, if any, of the
Obligations, or enforce, exchange, release, or waive any security for the
Obligations or any other guaranty of the Obligations, or any portion thereof.
(f) Lender shall have the right to seek recourse against
Borrower to the fullest extent provided for herein, and no election by Lender
to proceed in one form or action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Lender's right to proceed in any other
form of action or proceeding or against other parties unless Lender has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by Lender under any
document or instrument evidencing the Obligations shall serve to diminish the
liability of Borrower under this Agreement except to the extent that Lender
finally and unconditionally shall have realized indefeasible payment by such
action or proceeding.
(g) Borrower represents and warrants to Lender that
Borrower is currently informed of the financial condition of all other
Borrowers and of all other circumstances which a diligent inquiry would reveal
and which bear upon the risk of nonpayment of the Obligations. Borrower
further represents and warrants to Lender that Borrower has read and
understands the terms and conditions of the Loan Documents. Borrower hereby
covenants that Borrower will continue to keep informed of the financial
condition of all other Borrowers, the financial condition of Guarantor , and of
all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Obligations.
9.16 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO AGREE THAT
NEITHER PARTY SHALL REQUEST A TRIAL BY JURY IN THE EVENT OF LITIGATION BETWEEN
THEM CONCERNING THE LOAN DOCUMENTS OR ANY CLAIMS OR TRANSACTIONS IN CONNECTION
THEREWITH, IN EITHER A STATE OR FEDERAL COURT, THE RIGHT TO TRIAL BY JURY BEING
EXPRESSLY WAIVED BY LENDER AND EACH BORROWER. LENDER AND EACH BORROWER
ACKNOWLEDGE THAT SUCH WAIVER IS MADE WITH FULL KNOWLEDGE AND UNDERSTANDING OF
THE NATURE OF THE RIGHTS AND BENEFITS WAIVED HEREBY, AND WITH THE BENEFIT OF
ADVICE OF COUNSEL OF ITS CHOOSING.
9.17 Copies Valid as Financing Statements. A carbon, photographic
or other reproduction, including photocopy, telecopy or electronic
transmission, of this Agreement or any financing statement shall be sufficient
as a financing statement.
9.18 Governing Law. This Agreement, and all documents and
instruments executed in connection herewith, shall be governed by and construed
according to the laws of the State of Texas, provided, that to the extent
federal law would allow a higher rate
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<PAGE> 55
of interest than would be allowed by the laws of the State of Texas, then with
respect to the provisions of any law which purport to limit the amount of
interest that may be contracted for, charged or received in connection with any
of the Obligations, such federal law shall apply.
9.19 Entirety and Amendments. This Agreement embodies the entire
agreement between the parties relating to the subject matter hereof, and may be
modified or amended only by an instrument in writing executed by an authorized
officer of each party hereto.
9.20 Parties Bound. This Agreement shall be binding upon and inure
to the benefit of each Borrower and Lender, and their respective successors to
interest and assigns. Borrowers may not assign any right, power, duty, or
obligation under this Agreement, or any document or instrument executed in
connection herewith, without the prior written consent of Lender. This
Agreement is intended for the benefit of Borrowers and Lender, and their
respective successors in interest and assigns only, and may not be relief upon
by any other Person.
9.21 Accounting Terms. Except as otherwise specifically provided
herein, all accounting and financial terms used herein, and the compliance with
each financial covenant contained herein, shall be determined in accordance
with GAAP.
9.22 Exhibits. All exhibits referenced herein, and attached
hereto, are incorporated in this Agreement and made a part hereof for all
purposes. All terms defined in this Agreement, wherever used in any such
exhibits, shall have the same meanings as are prescribed by this Agreement.
9.23 Cumulative Rights. All rights and remedies of Lender under
the Loan Documents are cumulative, and are in addition to rights and remedies
available to Lender by law. Such rights and remedies may be exercised
concurrently or successively, at such time as Lender may determined in its
discretion. Each Borrower waives any right to require marshalling.
9.24 Severability. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under any present or future laws
effective during the Contract Term, such provisions shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part of this Agreement. In
such case, the remaining provisions of the Agreement shall remain in full force
and effect and shall not be effected thereby.
9.25 Multiple Counterparts. This Agreement may be executed
simultaneously in one or more multiple originals, each of which
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<PAGE> 56
shall be deemed an original, but all of which together shall constitute one and
the same Agreement.
9.26 Survival. All covenants, agreements, representations, and
warranties made by each Borrower herein shall survive the execution, delivery,
and closing of this Agreement, and all documents executed in connection
herewith, and shall not be affected by any investigation made by any party.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the effective date specified in the preamble.
NATIONSBANK OF TEXAS, N.A.
By: /s/ Kevin M. Eddy
-------------------
Kevin M. Eddy
Assistant Vice President
ULTRAK, INC.
By: /s/ George K. Broady
----------------------
George K. Broady
President
LOSS PREVENTION ELECTRONICS
CORPORATION
By: /s/ George K. Broady
----------------------
George K. Broady
President
CCTV SOURCE INTERNATIONAL, INC.
By: /s/ George K. Broady
----------------------
George K. Broady
President
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<PAGE> 57
DENTAL VISION DIRECT, INC.
By: /s/ George K. Broady
George K. Broady
President
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
Kevin M. Eddy, known to me to be the person and officers whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said NATIONSBANK OF TEXAS, N.A., and was executed for the
purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 24th day of September,
1993.
/s/ Josie G. Cortez
------------------------------------
Notary Public, State of Texas
My Commission Expires: Josie G. Cortez
7-16-94 ------------------------------------
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officers whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said ULTRAK, INC., and was executed for the purposes and
consideration therein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 24th day of September,
1993.
/s/ Josie G. Cortez
------------------------------------
Notary Public, State of Texas
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<PAGE> 58
My Commission Expires: Josie G. Cortez
7-16-94 ------------------------------------
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officers whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said LOSS PREVENTION ELECTRONICS CORPORATION, INC., and was
executed for the purposes and consideration therein expressed and in the
capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 24th day of September,
1993.
/s/ Josie G. Cortez
------------------------------------
Notary Public, State of Texas
My Commission Expires: Josie G. Cortez
7-16-94 ------------------------------------
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officers whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said CCTV SOURCE INTERNATIONAL, INC., and was executed for
the purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 24th day of September,
1993.
/s/ Josie G. Cortez
------------------------------------
Notary Public, State of Texas
My Commission Expires: Josie G. Cortez
7-16-94 ------------------------------------
(Printed Name of Notary)
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<PAGE> 59
STATE OF TEXAS )
)
COUNTY OF DALLAS )
Before me, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officers whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said DENTAL VISION DIRECT, INC., and was executed for the
purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 24th day of September,
1993.
/s/ Josie G. Cortez
------------------------------------
Notary Public, State of Texas
My Commission Expires: Josie G. Cortez
7-16-94 ------------------------------------
(Printed Name of Notary)
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<PAGE> 60
EXHIBIT 3.3 TO
FINANCING AND SECURITY AGREEMENT
BY AND AMONG
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC.
LOSS PREVENTION ELECTRONICS CORPORATION,
CCTV SOURCE INTERNATIONAL, INC.
DENTAL VISION DIRECT INC.
Other security interests, liens or encumbrances.
1. Security interests in favor of Petrus Fund, L.P. "Petrus")
covering all accounts, contract rights, chattel paper,
documents, instruments trademarks trade names, general
intangibles, inventory, and all books and records and all
proceeds of any of the foregoing, now or hereafter owned by
Ultrak, LPEC or CCTV, as evidenced by the following:
(a) Security Agreement dated July 20, 1992 between Ultrak
and Petrus;
(b) Security Agreement dated July 20, 1992 between LPEC
and Petrus; and
(c) Security Agreement dated July 20, 1992 between CCTV
and Petrus;
each securing all obligations and indebtedness owing or to be
and become owing to Petrus including limitation, the certain
promissory note dated July 20, 1992 executed by Ultrak, LPEC
and CCTV payable to Petrus in the face amount of
$3,000,000.00; it being understood and agreed, however, that
all such security interests are and shall remain subject to
the terms and provisions of the Intercreditor Agreement.
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<PAGE> 61
EXHIBIT 3.4 TO
FINANCING AND SECURITY AGREEMENT
BY AND AMONG
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC.
LOSS PREVENTION ELECTRONICS CORPORATION,
CCTV SOURCE INTERNATIONAL, INC.
DENTAL VISION DIRECT INC.
Locations of Collateral
<TABLE>
<CAPTION>
===========================================================================================================
ADDRESS OF LOCATION COUNTY Owned or Leased
[If leased, name of landlord]
- -----------------------------------------------------------------------------------------------------------
ULTRAK, INC.
- -----------------------------------------------------------------------------------------------------------
<S> <C>
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
- -----------------------------------------------------------------------------------------------------------
2400 Industrial Lane Boulder Leased
Broomfield, Colorado 80020 Superior Investments I, Inc.
- -----------------------------------------------------------------------------------------------------------
LOSS PREVENTION ELECTRONICS CORPORATION
- -----------------------------------------------------------------------------------------------------------
913 Commerce Drive Anne Arundel Leased
Annapolis, Maryland 21401 Annapolis Commerce Park
Limited Partnership
- -----------------------------------------------------------------------------------------------------------
CCTV SOURCE INTERNATIONAL, INC.
- -----------------------------------------------------------------------------------------------------------
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
- -----------------------------------------------------------------------------------------------------------
1323 Butterfield Road, Suite 110 DuPage Leased
Downers Grove, Illinois 60515 Gottileb Properties, Inc.
- -----------------------------------------------------------------------------------------------------------
DENTAL VISION DIRECT, INC.
- -----------------------------------------------------------------------------------------------------------
1220 Champion Circle, Suite 100 Dallas Leased
Carrollton, Texas 75006 Champion Circle/TCEP II
Joint Venture
===========================================================================================================
</TABLE>
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<PAGE> 62
EXHIBIT 5.1 TO
FINANCING AND SECURITY AGREEMENT
BY AND AMONG
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC.
LOSS PREVENTION ELECTRONICS CORPORATION,
CCTV SOURCE INTERNATIONAL, INC.
DENTAL VISION DIRECT INC.
Trade Names
<TABLE>
<CAPTION>
Trade Name Used By
- ---------- -------
<S> <C>
Ultrak Ultrak, Inc.
Loss Prevention Electronics Ultrak, Inc.
CCTV Source Ultrak, Inc.
Exxis Security Ultrak, Inc.
</TABLE>
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<PAGE> 63
EXHIBIT 5.6 TO
FINANCING AND SECURITY AGREEMENT
BY AND AMONG
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC.
LOSS PREVENTION ELECTRONICS CORPORATION,
CCTV SOURCE INTERNATIONAL, INC.
DENTAL VISION DIRECT INC.
Share ownership
Ownership:
Ultrak, Inc. is publicly owned. Thirty five and 36/100 percent (35.36%) of the
Voting Stock of ultrak, Inc. and one hundred percent (100%) of the convertible
preferred stock are owned and beneficially by George K. Broady.
One hundred percent (100%) of the Voting Stock of Loss Prevention Electronics
Corporation are owned of record and beneficially by Ultrak, Inc. by Ultrak,
Inc.
One hundred percent (100%) of the Voting Stock of CCTV Source International,
Inc. are owned of record and beneficially by Ultrak, Inc. by Ultrak, Inc.
Eighty percent (80%) of the Voting Stock of Dental Vision Direct, Inc. are
owned of record and beneficially by Ultrak, Inc. by Ultrak, Inc.
Stock options, warrants, etc.:
Ultrak, Inc:
1. Non-qualified Employee Stock Option Plan - up to 5,000,000
shares of no par common stock varying exercise prices.
2. Convertible Preferred Stock - convertible into 2,441,888
shares of no par common stock.
3. Underwriter's Warrants - pursuant to the 1990 Underwriting
Agreement with Rocky Mountain Securities and investments,
convertible into 170,270 shares of no par common stock.
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<PAGE> 64
4. Broker's Warrants - pursuant to the 1991-1992 private stock
offering, 70,000 warrants issued to Judith A. Schindler,
convertible into 70,000 shares of no par common stock, and
warrants issued to RBC, Inc., convertible into 120,136 shares
of no par common stock.
5. Petrus Warrants - pursuant to the 1992 loan agreement, 928,571
warrants issued to the Petrus Fund, Ltd., convertible into
928,571 shares of no par common stock.
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<PAGE> 65
EXHIBIT 5.9 TO
FINANCING AND SECURITY AGREEMENT
BY AND AMONG
NATIONSBANK OF TEXAS, N.A.
AND
ULTRAK, INC.
LOSS PREVENTION ELECTRONICS CORPORATION,
CCTV SOURCE INTERNATIONAL, INC.
DENTAL VISION DIRECT INC.
Pending lawsuits or proceedings.
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.
On July 9, 1993, a lawsuit against the Company, George K. Broady and others,
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 investment by Ultrak in BSA or
venture with BSA. After conducting a "due diligence" review of BSA, the
officers of Ultrak decided not to make an investment in BSA or with BSA. The
plaintiffs allege that the defendants breached an oral contract t purchase BSA
and seek unspecified actual and punitive damages against all defendants,
jointly and severally. Ultrak, Exxis Technologies, Inc. and Mr. Broady have
timely filed an answer to the Plaintiff's Original Petition denying any
liability. Ultrak intends to vigorously defend the lawsuit.
Ingram Micro, Inc. v. Ultrak, Inc. and Exxis Technologies, Inc.; No.
SACV93-459-GLT. Ingram Micro sued Ultrak and Exxis on April 26, 1993 in the
United States District Court for the Central District of California, Santa Ana
office, for $62,908.39 plus ten percent (10%) from the date of filing of the
lawsuit, attorneys' fees of $4,156.33, costs of suit and other relief. Suit is
for goods sold and delivered. Plaintiff claims that both Ultrak and Exxis
signed a writing whereby each agreed to pay Plaintiff any amount owed. Ultrak
is being defended by California counsel. Ultrak claims that Plaintiff is
indebted to Ultrak/Exxis in an amount exceeding $200,000.
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<PAGE> 66
GUARANTY BY INDIVIDUAL TO
NationsBank of Texas, N.A.
Date: September 24, 1993
1. Definitions. As used in this guaranty, the following terms
shall have the meanings indicated below:
(a) Borrower. The term "Borrower" shall mean each and
all of (i) Ultrak, Inc., a Colorado corporation, (ii) Loss Prevention
Electronics Corporation, a Colorado corporation, (iii) CCTV Source
International, Inc., a Texas corporation and (iv) Dental Vision Direct, Inc., a
Texas corporation, singularly and/or collectively, whether several, joint or
joint and several.
(b) Lender. The term "Lender" shall mean NationsBank of
Texas, N.A., and the mailing address of which is P.O. Box 830732, Dallas,
Texas 75283-0732,
(c) Guaranteed Indebtedness. The term "Guaranteed
Indebtedness" shall include: (i) any and all indebtedness of every kind and
character, without limit as to amount, whether now existing or hereafter
arising, of Borrower to Lender, regardless of whether evidenced by notes,
drafts, acceptances, discounts, overdrafts, or otherwise, and whether such
indebtedness be fixed, contingent, primary, secondary, joint, several, or joint
and several, and any and all accounts receivable, evidence of indebtedness,
contracts, leases, agreements, purchase orders, chooses in action, conditional
sale or lease agreements, chattel mortgages, real estate mortgages or trust
deeds, factor's liens, other liens, other security instruments, drafts, notes,
bills, acceptances, trust receipts, warehouse receipts, guaranties, securities,
liens, certificates of beneficial interest in trust agreements, or other
obligations, and security instruments heretofore or hereafter acquired by the
Lender form the Borrower by assignment, pledge, or otherwise, or in respect of
which the Borrower has or may become in any way liable; (ii) interest on any of
the indebtedness described in (i) preceding; (iii) any and all attorneys' fees
incurred or suffered by Lender in the making of, the administration of, or the
collection of the foregoing indebtedness, and any and all costs and expenses
suffered by Lender by reason of Borrower's default in payment of any of the
foregoing indebtedness; and (iv) any renewal or extension of the indebtedness,
security instruments, costs, or expenses described in (i) through (iii)
preceding, or any part thereof.
(d) Guarantor. The term "Guarantor" shall mean George K.
Broady, an individual, whose mailing address is 1220 Champion Circle, Suite
100, Carrollton, Texas 75006.
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2. Obligations. As an inducement to the Lender to advance monies
or extend credit to Borrower, or otherwise assist the Borrower in financing the
business or sales of the Borrower, the Guarantor, for value received, does
hereby guarantee to the Lender the prompt payment in full when due or declared
due and at all times thereafter of any and all of the Guaranteed Indebtedness
and the prompt, full and faithful performance and discharge by the Borrower of
each and every one of the items, conditions, agreements, representations,
warranties, covenants, warranties, and provisions ont he part of the Borrower
contained in any agreement or arrangement or in any modification or addenda
thereto or substitution thereof, or contained in any note, security investment,
schedule and Assignment of Accounts, collateral reports, or other instruments
heretofore or hereafter given by or on behalf of the Borrower to the Lender, or
otherwise, or contained in any other agreements, undertakings or obligations of
the Borrower with or to the Lender, or any agreement or indebtedness assigned
to the Lender of any kind or nature. The Guarantor shall not, so long as his
obligations under this guaranty continue, transfer or pledge any material
portion of his assets for less than full and adequate consideration.
3. Character of Obligations. This instrument shall be an
absolute, unconditional, and continuing guaranty, and the circumstances that at
any time or from time to time the Guaranteed Indebtedness may be paid in full
shall not affect the obligation of the Guarantor with respect to indebtedness
of Borrower to the Lender thereafter incurred, provided that the Guarantor may
give written notice that the Guarantor will not be liable hereunder for any
indebtedness of Borrower incurred after the giving of such notice (which notice
shall not be deemed to have been given until actually received by the Lender).
In the event of such notice the Guarantor shall remain liable on his
obligations hereunder until the payment in full of (a) the Guaranteed
Indebtedness as it exits at the date of the giving of such notice, and (b)
loans and advances made to or for the account of Borrower after such notice
pursuant to the obligation of the Lender under a commitment or agreement made
to or with Borrower prior to the giving of such notice. The terms and
conditions of this instrument, including, but not limited to, the consents and
waivers set forth in Section 4 hereof, shall remain in effect with respect to
the indebtedness described in the preceding sentence in the same manner as if
such notice had not been received. It shall not be necessary for the Lender,
in order to enforce payment hereunder by the Guarantor, first to institute suit
or exhaust its remedies against Borrower or otherwise liable ont eh Guaranteed
Indebtedness, or to enforce its rights against any security which shall ever
have been given to secure the Guaranteed Indebtedness. It is the intention of
the parties hereto that the Guarantor shall be primarily liable jointly and
severally with the Borrower and that the Guaranteed
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Indebtedness may be recovered in the same or separate actions brought to
recover the principal indebtedness. Payment of the sums for which the
Guarantor becomes liable shall be made to the Lender at its office in Dallas,
Dallas County, Texas, from time to time, on demand, or as the same become or
are declared due, notwithstanding that the Lender holds reserves, credits,
collateral or security against which the Lender may b e entitled to resort for
payment. One or more successive or concurrent actions may be brought hereon
against the Guarantor, either in the same action in which Borrower is sued or
in separate actions, as often as Lender deems advisable. The Guarantor
expressly waives and bars himself form any right to setoff, recoup or
counterclaim any claim or demand against the Borrower or against any other
person liable on any part of the Guaranteed Indebtedness. As further security
to the Lender, any assets of the Guarantor of any kind, nature or description
in the Lender's possession, custody or control, may without further notice, be
reduced to cash and, together with any other cash and any and all indebtedness
owed t the Guarantor by the Lender, may be applied by the Lender in reduction
or payment of any liability incurred hereunder, and all debts or liabilities
now and hereafter owing to the Guarantor by the Borrower or by any other person
are hereby subordinated to the Lender's claims and are hereby assigned to the
Lender.
4. Consent and Waiver. The Guarantor, without limiting his
liability hereunder in any respect, hereby consents to and waives notice of,
and hereby agrees that his obligations under the terms of this guaranty shall
not be released, diminished, impaired, reduced, or affected by the occurrence
of any one or more of the following events: (a) the taking or accepting of any
security or guaranty for any or all of the Guaranteed Indebtedness; (b) any
release, surrender, exchange, subordination, or loss of any security at any
time existing in connection with any or all of the Guaranteed Indebtedness; (c)
any partial release of the liability of the Guarantor, or the partial or total
release of any other guarantor or guarantors; (d) the death, insolvency,
bankruptcy, disability, or lack of corporate power of Borrower, the Guarantor,
or any party at any time liable for the payment of any or all of the Guaranteed
Indebtedness, whether now existing or hereafter occurring; (e) any renewal,
extension, or rearrangement of the payment of any or all of the Guaranteed
Indebtedness, or any adjustment, indulgence, forbearance, or compromise that
may be granted or given by the Lender to Borrower or the Guarantor; (f) any
neglect, delay, omission, failure, or refusal of the Lender to take or
prosecute any action for the collection of any of the Guaranteed Indebtedness
or to foreclose or take or prosecute any action in connection with any
instrument or agreement evidencing or securing all or any part of the
Guaranteed Indebtedness; (g) any failure of the Lender to notify the Guarantor
of any renewal, extension, or assignment of the Guaranteed indebtedness or any
part
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thereof, or the release of any security or of any other action taken or
refrained from being taken by the Lender against Borrower or any new agreement
between the Lender and Borrower, it being understood that the Lender shall not
be required to give the guarantor any notice of any kind under any
circumstances whatsoever with respect to or in connection with the Guaranteed
Indebtedness; (h) in the event that Borrower is a corporation, joint stock
association, or partnership, or is hereafter incorporated, the unenforceability
of all or any part of the Guaranteed Indebtedness against Borrower by reason of
the fact that the Guaranteed Indebtedness exceeds the amount permitted bylaw,
the act of creating the Guaranteed Indebtedness, or any part hereof, is ultra
vires, or the officers creating same acted in excess of their authority; (i)
any payment by Borrower to the Lender is held to constitute a preference under
the bankruptcy laws or if for any other reason the Lender is required to refund
such payment or pay the amount thereof to someone else; or (j) the subsequent
laws incorporation, reorganization, merger, or consolidation of the Borrower.
Notice of acceptance of this guaranty, the giving or extension of credit to the
Borrower, the purchase, acquisition, or pledge of notes, receivables, or other
security instruments or other instruments, or the advancement of money or
credit thereon, and presentment, demand, notices of default, nonpayment or
partial payments and protest, notice of protest and all other notices or
formalities to which the Guarantor or Borrower might otherwise be entitled are
hereby waived. WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY AGREES AS FOLLOWS:
(a) Guarantor hereby waives: (1) notice of acceptance of
this guaranty; (2) notice of any loans or other financial
accommodations made or extended to Borrowers or the creation or
existence of any guaranteed Indebtedness; (3) notice of the amount of
the Guaranteed Indebtedness, subject, however, to Guarantor's right to
make inquiry of Lender to ascertain the amount of the Guaranteed
Indebtedness at any reasonable time; (4) notice of any adverse change
in the financial condition of Borrower or any other guarantor or of
any other fact that might increase Guarantor's risk under this
guaranty; (5) notice of presentment for payment, demand, protest, and
notice thereof as to any promissory notes or other instruments among
the Guaranteed Indebtedness; and (7) all other notices (except as may
otherwise be specifically agreed to in writing with Lender) and
demands to which Guarantor might otherwise be entitled.
(b) Guarantor hereby waives the right by statute or
otherwise to require Lender to institute suit against Borrower or any
guarantor or to exhaust any rights and remedies which Lender has or
may have against Borrower or any guarantor.
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Guarantor further waives any defense arising by reason of any
disability or other defense of Borrower or any other guarantor (other
than the defense that the Guaranteed Indebtedness shall be been fully
and finally performed and indefeasibly paid) or by reason of the
cessation from any cause whatsoever of the liability of Borrower or
such Guarantor in respect thereof.
(c) Guarantor hereby waives: (1) any rights to assert
against Lender any defense (legal or equitable), set- off,
counterclaim, or claim which Guarantor may now or at any time
hereafter have against Borrower to any other guarantor of any other
party liable to Lender; (2) any defense, set-off, counterclaim, or
claim of any kind or nature, arising directly or indirectly from the
present or future lack of perfection, sufficiency, validity, or
enforceability of the Guaranteed Indebtedness or any security
therefor; (3) any right or defense arising by reason of any claim or
defense based upon an election of remedies by Lender under applicable
law of any jurisdiction; (4) the benefit of any statute of limitations
affecting the liability of Borrowers for the Guaranteed Indebtedness,
or the enforcement thereof, or Guarantor's liability hereunder, and
any act which shall defer or delay the operation of any statue of
limitations applicable of the Guaranteed indebtedness shall similarly
operate to defer or delay the operation of such statute of limitations
applicable to Guarantor's liability hereunder.
(d) In addition to the foregoing waivers, Guarantor
hereby waives outright and absolutely, any right of subrogation
Guarantor has or may have against Borrower or any other guarantor with
respect to the Guaranteed Indebtedness. In addition, Guarantor hereby
waives any right to proceed against Borrower or any other guarantor,
now or hereafter, for contribution, indemnity, reimbursement, and any
other suretyship rights and claims, whether direct or indirect,
liquidated or contingent, whether arising under express or implied
contract or by operation of law, which Guarantor may now have or
hereafter have as against Borrower or any such other guarantor with
respect to the Guaranteed Indebtedness. Guarantor also hereby waives
any rights to recourse to or with respect to any asset of Borrower
Guarantor agrees that in light of the immediately foregoing waivers,
the execution of this guaranty shall not be deemed to make Guarantor a
"creditor" of Borrower or any other guarantor, and that for purposes
of Sections 547 and 550 of the Bankruptcy Code Guarantor shall not be
deemed a "creditor" of Borrower or any other guarantor.
(e) Guarantor consented and agrees that, without notice
to or by Guarantor and without affecting or impairing the
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obligations of Guarantor hereunder, Lender, may, by action or
inaction; (a) compromise, settle, extend the duration or the time for
the payment of, or discharge the performance of, or may refuse to or
otherwise not enforce its rights or remedies in respect of the
Guaranteed Indebtedness; (b) release all or any one or more parties at
any time obligated in respect of the Guaranteed Indebtedness or grant
other indulgences to Borrower or any other guarantor in respect
thereof; (c) amend or modify in any manner and at any time (or from
time to time) any agreement, instrument or other document evidencing
or governing any of the Guaranteed Indebtedness; or (d) release or
substitute any other guarantor, if any, of the Guaranteed
Indebtedness, or enforce, exchange, release, or waive any security of
the Guaranteed Indebtedness or any other guaranty of the Guaranteed
Indebtedness, or any portion thereof.
(f) Lender shall have the right to seek recourse against
Guarantor to the fullest extent provided for herein, and no election
by Lender to proceed in one form or action or proceeding, or against
any party, or on any obligation, shall constitute a waiver of Lender's
right to proceed in any other form of action or proceeding or against
other parties unless Lender has expressly waived such right in
writing. Specifically, but without limiting the generality of the
foregoing, no action or proceeding by Lender under any document or
instrument evidencing the Guaranteed Indebtedness shall serve to
diminish the liability of Guarantor under this guaranty except to the
extent that Lender finally and unconditionally have realized
indefeasible payment by such action or proceeding.
(g) Guarantor represents and warrants to Lender that
Guarantor is currently informed of the financial condition of Borrower
and all other guarantors and of all other circumstances which a
diligent inquiry would reveal and which bear upon the risk of
nonpayment of the Guaranteed Indebtedness. Guarantor further
represents and warrants to Lender that Guarantor has read and
understands the terms and conditions of all agreements instruments and
other documents executed by Borrower and Lender. Guarantor hereby
covenants that Guarantor will continue to keep informed of the
financial condition of Borrower and all other guarantors, and of all
other circumstances which bear upon the risk of nonpayment or
nonperformance of the Guaranteed Indebtedness.
5. Liability. All liabilities of the Borrower and of the
Guarantor shall, at the option of the Lender and without notice, mature
immediately upon the insolvency of the Borrower, the appointment of a receiver
for the Borrower or any of its property, the filing of a voluntary or
involuntary petition in bankruptcy,
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reorganization, or arrangement, the making of an assignment for the benefit of
creditors, the calling of a Borrower's property, a default by Borrower in the
payment or repurchase of any of the Guaranteed Indebtedness as the same falls
due, or a default by the Borrower in respect of any undertaking. All
liabilities of the Guarantor shall, at the option of the Lender and without
notice, mature immediately upon the Lender becoming aware of the falsity of any
statement or representation hereof, or upon the insolvency of the Guarantor,
the appointment of a receiver of the Guarantor, or any of his property, the
filing of a voluntary or involuntary petition in bankruptcy, reorganization, or
arrangement, the making of an assignment for the benefit of creditors, the
calling of a meeting of creditors by the Guarantor, the breach of any provision
hereof, the encumbrance of disposition, or attempt to encumber or dispose, of
all or a substantial portion of the Guarantor's property, a default by the
Guarantor in the payment or repurchase of any of the Guaranteed Indebtedness as
the same falls due, or a default by the Guarantor in respect of any
undertaking. If the Guarantor becomes liable for any indebtedness owing by
Borrower to the Lender, by endorsement or otherwise, other than under this
guaranty, such liability shall not be in any manner impaired or affected
hereby, and the rights of the Lender hereunder shall be cumulative of any and
all other rights that the Lender may ever have against the Guarantor.
6. Construction. Nothing herein shall be construed as an
obligation on the part of the Lender to extend credit to the Borrower, or as an
obligation to continue to extend credit. The Lender's records showing the
account between the Lender and the Borrower shall be admissible in evidence in
any action or proceeding involving this guaranty, and such records shall be
prima facie proof of the items therein set forth. This guaranty shall for all
purposes be deemed to be made in the State of Texas, and shall be governed by
the laws of the State of Texas to the extent that federal law does not apply.
7. Benefit. This guaranty is for the benefit of Lender and
Lender's successors and assigns, and in the event of an assignment of the
Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This guaranty is binding not only on the
Guarantor, but on the Guarantor's successors and assigns.
8. Death of Guarantor. In the event of the death of the
Guarantor, the obligation of the estate of the deceased Guarantor shall
continue in full force and effect as to (i) the Guaranteed Indebtedness, as it
exists at the date of death, and any renewals or extensions thereof, and (ii)
loans or advances made to or for the account of Borrower after the date of
death of the deceased
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Guarantor pursuant to an obligation of Lender under a commitment made to
Borrower prior to the date of such death, subject only to the limitation, if
any be herein specified, on the amount of the Guaranteed Indebtedness.
9. Other Matters. The headings used in this Guaranty are for the
convenience only of the parties, and shall not be deemed to modify the terms,
and provisions hereof. No modification, consent, amendment or waiver of any
provision of this guaranty, nor consent to any departure by the Guarantor
therefrom, shall be effective unless the same shall be in writing and signed by
an officer of the Lender, and then shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand of the
Guarantor is any case shall, of itself, entitle the Guarantor to any other or
further notice or demand in similar or other circumstances. No delay or
omission by the Lender in exercising any power or right hereunder shall impair
any such right or power or be construed as a waiver thereof or any acquiescence
therein, nor shall any single or partial exercise of any such power preclude
other or further exercise thereof, or the exercise of any other right or power
hereunder. All rights and remedies of the Lender hereunder are cumulative of
each other and every other right or remedy which the Lender may otherwise have
at law or in equity or under any other contract or document and the exercise of
one or more rights or remedies shall not prejudice or impair the concurrent or
subsequent exercise or other rights or remedies. If the Guaranty should breach
or fail to perform any provision of this guaranty, the Guarantor agrees to pay
the Lender all costs and expenses (including court costs and reasonable
attorneys' fees) incurred by the Lender in the enforcement hereof.
EXECUTED as of the date first written above.
/s/ George K. Broady
-----------------------------------
Guarantor: GEORGE K. BROADY
================================================================================
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OR PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES, THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.
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NationsBank of Texas, N.A.
By: /s/ Kevin M. Eddy /s/ George K. Broady
---------------------------- ------------------------------
Kevin M. Eddy George K. Broady
Assistant Vice President
THE STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that he executed the same for the
purposes and considerations therein expressed.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 24th day of September,
1993.
/s/ Josie G. Cortez
----------------------------------
NOTARY PUBLIC IN AND FOR
THE STATE OF TEXAS
My Commission Expires: Josie G. Cortez
7-16-94 ----------------------------------
(Printed Name of Notary)
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ADDENDUM
TO
Guaranty by Individual
executed by
George K. Broady
for the benefit of
NationsBank of Texas, N.A.
10. Limitation of Liability. Without limiting Guarantor's
liability with respect to Guaranteed Indebtedness defined in clauses (ii),
(iii) and (iv) of paragraph 1(c) of this guaranty, Guarantor's liability for
Guaranteed Indebtedness defined in clause (i) of paragraph 2(c) of this
guaranty shall be limited to the maximum amount of $2,000,000.00, provided,
that in the event Borrower's FYE 1994 Financial Statement reflects (i) Tangible
Net Worth of $8,500,,000.00 as of December 31, 1994 and (ii) cumulative Net
Income of $2,000,000.00 for the period January 1, 1994 through December 31,
1994 then effective upon Borrower's delivery to Lender of Borrower's FYE 1994
Financial Statement and following. Guarantor's liability for Guaranteed
indebtedness defined in clause (i) of paragraph 2(c) of this guaranty shall be
limited to the maximum amount of $1,000,000.00. As used herein,
"Borrower's FYE 1994 Financial Statement" means the audited
consolidated financial statements for Borrower and its subsidiaries as
of December 31, 1994 delivered to Lender as required by paragraph 6.5
of the Financing Agreement.
"Tangible Net Worth" means Tangible Net Worth as defined in the
Financing Agreement.
"Net Income" means Net Income as defined in the Financing Agreement.
"Financing Agreement" means the certain Financing and Security Agreement dated
effective September 24, 1993 among Lender, Borrower, Loss Prevention
Electronics Corporation, CCTV Source International, Inc. and Dental Vision
Direct, Inc., as the same may be amended.
/s/ George K. Broady
-------------------------------
George K. Broady
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EXHIBIT 10.3
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment") made and
entered into as of this 4th day of October, 1993, by and among ULTRAK, INC., a
Colorado corporation ("Ultrak"), CCTV SOURCE INTERNATIONAL, INC., a Texas
corporation ("CCTV"), and LOSS PREVENTION ELECTRONICS CORPORATION, a Colorado
corporation ("Loss prevention"), each with principal offices and mailing
address at 1220 Champion Circle, Suite 100, Carrollton, Texas 75006
(hereinafter Ultrak, CCTV, and Loss Prevention are collectively called
"Borrowers"), and PETRUS FUND, L.P., a Texas limited partnership, with offices
at 1700 Lakeside Square, 12377 Merit Drive, Dallas, Dallas County, Texas 75251
(hereinafter called the "Lender");
R E C I T A L S
1. Borrowers and Lender have made and entered into that
certain Loan Agreement dated July 20, 1992 (the "Loan Agreement"),
pursuant to which Lender agreed to make available to Borrowers a
$3,000,000 line of credit in accordance with the terms and conditions
of the Loan Agreement and pursuant to the provisions set forth
therein.
2. Borrowers have requested that Lender agree to an
amendment to the Loan Agreement to, among other things: (1) increase
the line of credit from $3,000,000 to $6,000,000, (2) modify the rate
of interest accruing on funds outstanding under the line of credit,
(3) modify certain provisions pertaining to the Warehouseman's
Agreement (including substitution of representatives of Borrower for
the bonded warehouseman), and (4) extend the Drawdown Termination Date
from January 20, 1995 to April 4, 1996.
3. Lender has agreed to Borrowers' requests, subject to
the terms and conditions set forth in this Amendment.
W I T N E S S E T H
For and in consideration of the mutual covenants and agreements herein
contained and of the loans and commitment hereinafter referred to, the
Borrowers and the Lender agree as follows:
FIRST AMENDMENT TO LOAN AGREEMENT-- Page 1
<PAGE> 2
ARTICLE I
Definitions
As used in this Amendment, capitalized terms not otherwise defined in
this Amendment shall have the meanings given them in the Loan Agreement.
ARTICLE II
Amendments
2.01. Amendments to Definitions. Section 1.02 of the Loan Agreement
is amended by restating certain of the defined terms set forth in Section 1.02
to read in full as follows:
"Borrowing Base" shall mean at any time an amount not to
exceed the lesser of: (a) Six Million and No/100 Dollars
($6,000,000.00) or (b) the Inventory Advance Amount determined as of
the date the Borrowing Base is calculated.
"Drawdown Termination Date" shall mean the earlier of (a)
April 4, 1996 or (b) ninety (90) days following the date Lender gives
Borrowers' Agent notice of Lender's exercise of its right to terminate
its Commitment pursuant to Section 2.10(b) hereof.
"Fenced Area of the Carrollton Warehouse" shall mean any one
or more fenced areas at Ultrak's warehouse at 1220 Champion Circle,
Carrollton, Texas 75006, which are denoted as a secure area for
Eligible Inventory and which are protected and maintained pursuant to
the Warehouseman's Agreement.
"Inventory Advance Amount" shall mean at any time an amount
equal to the lesser of:
(a) Six Million and No/100 Dollars ($6,000,000.00), or
(b) the product of all Eligible Inventory of the
Borrowers (excluding Eligible Inventory that is subject to a
Letter of Credit Arrangement) times the Inventory Percentage.
"Revolving Credit Note" shall mean the promissory note of the
Borrowers described in Subsection 2.01 hereof and being in the form of
note attached as Exhibit A-1 hereto, and all renewals, extensions,
modifications and rearrangements thereof.
"Revolving Loan Maturity Date" shall mean the earlier of
FIRST AMENDMENT TO LOAN AGREEMENT-- Page 2
<PAGE> 3
(a) April 4, 1996 or (b) one hundred eighty (180) days following the
date Lender gives Borrowers' Agent notice of Lender's exercise of its
right to terminate its Commitment pursuant toSection 2.10(b) hereof.
"Warehouseman's Agreement" shall mean the agreement between
Borrowers and Lender pertaining to the storage and security of
Borrower's Eligible Inventory that is located in the Fenced Area of
the Carrollton Warehouse, the terms of which are set forth inExhibit
F-1 attached hereto.
2.02 Additional Definitions. Section 1.02 of the Loan Agreement is
further amended by adding the defined terms set forth in Section 1.02 to read
in full as follows:
"First Amendment" shall mean that certain First Amendment to
Loan Agreement, dated October 4, 1993, executed by and among Borrowers
and Lender.
"Nations Bank" shall mean NationsBank of Texas, N.A., a
national banking association.
"Prime Rate" shall mean the per annum rate of interest
publicly announced by NATIONSBANK from time to time as its "Prime
Rate", "Base Rate", or other similar general reference rate of
interest (which rate may or may not be the lowest rate of interest
charged by NationsBank on loans similar to the loan evidenced hereby).
2.03. Interest Rate. Section 2.02(a) of the Loan Agreement is
amended and restated to read in full as follows:
"(a) The Revolving Credit Note shall bear interest from the
date thereof until the Revolving Loan Maturity Date at a rate per
annum which is equal to the greater of:
(1) eight and one-half percent (8-1/2%) per annum;
(2) the lesser of (i) the Maximum Non-usurious Rate, and
(ii) the Prime Rate in effect from day to day, plus
two percent (2.0%) (the "Floating Rate").
Each change in the Floating Rate shall become effective, without
notice to Borrowers, on the effective date of each change in the Prime
Rate."
2.04. Request for Loan. Section 2.03(a)(ii) of the Loan Agreement
is amended and restated to read in full as follows:
"(ii) the requested date of such advance (the
"Borrowing Date") (such date not to be less than ten (10)
Business Days after Lender receives the Notice of
FIRST AMENDMENT TO LOAN AGREEMENT-- Page 3
<PAGE> 4
Borrowing and all other information and documentation Lender
may request);".
2.05. Commitment Fee. Section 2.11 of the Loan Agreement is amended
and restated to read in full as follows:
"Section 2.11 Commitment Fee. Borrowers shall pay to Lender
at execution and delivery of the First Amendment an initial fee of
Fifteen Thousand and No/100 Dollars ($15,000.00), plus an amount equal
to $30,000.00 per annum, prorated over the period of time beginning
July 20, 1993 through the date of the First Amendment. Thereafter, on
each anniversary date of the First Amendment (i.e., October 4 of each
year, beginning October 4, 1994) Borrowers shall pay to Lender a
commitment fee (the "Commitment Fee"), calculated on the basis of
Forty-Five Thousand and No/100 Dollars ($45,000.00) per annum, and
pro-rated over the then remaining term of the Commitment, if less than
a full year. These fees shall be consideration paid to Lender in
exchange for Lender's agreement to make the total amount of the
Commitment available to Borrowers, subject to the terms of this
Agreement. The Commitment Fee will be non-refundable. Nevertheless,
if Lender exercises its right under Section 2.10(b) to terminate its
Commitment, then Borrowers shall be entitled to a refund of the
Commitment Fee, pro-rated on the basis of the remaining portion, as of
the effective date of termination, of the annual period for which the
Commitment Fee was paid (i.e., beginning October 4 of one year and
ending October 3 of the following year). In the event that any
Indebtedness remains owing to Lender as of the effective date of
Lender's termination of the Commitment underSection 2.10(b), Lender,
at Lender's option, may credit the Indebtedness in the amount of the
portion of the Commitment Fee to which Borrowers are entitled as a
refund."
2.06 Subsidiaries. Section 3.16 of the Loan Agreement is amended
and restated to read in full as follows:
"Section 3.16 Subsidiaries. CCTV, Loss Prevention and Exxis
are wholly-owned subsidiaries of Ultrak. Ultrak has no other
subsidiaries, other than Dental Vision Direct, Inc., a Texas
corporation. CCTV, Loss Prevention and Exxis have no subsidiaries."
2.07. Insurance. The second sentence of Section 4.07 of the Loan
Agreement is amended and restated to read in full as follows:
"NationsBank may be names as loss co-payee, to the extent that its
interest may appear."
2.08. Warehouseman's Agreement. Section 4.14 of the Loan
FIRST AMENDMENT TO LOAN AGREEMENT-- Page 4
<PAGE> 5
Agreement is amended and restated to read in full as follows:
"Section 4.14 Warehouseman's Agreement. Borrowers shall
observe, enforce, follow and maintain the procedures set forth in the
Warehouseman's Agreement attached asExhibit F-1 hereto during the term
of this Agreement. Borrowers shall take any and all action necessary
for the performance of the duties and obligations under the
Warehouseman's Agreement. Borrowers shall provide immediate notice to
Lender of any circumstance that would hinder, interfere with, or
impede any person in the performance of the duties and obligations
under the Warehouseman's Agreement. All expenses involved in the
Warehouseman's Agreement shall be borne by Borrowers, except as
provided otherwise in Exhibit F-1."
2.09. Limitation on Leases. Section 5.07(b) of the Loan Agreement
is amended and restated to read in full as follows:
"(b) leases and lease agreements for real property at 1220 Champion
Circle, Suite 100, Carrollton, Texas, not to exceed in the aggregate
$500,000.00 in any fiscal year of the Borrowers."
2.10. Current Ratio. Section 6.01 of the Loan Agreement is amended
and restated to read in full as follows:
"Section 6.01 Current Ratio. During the term of this
Agreement, Borrowers will not permit or suffer at any date the ratio
of (a) their consolidated Current Assets, to (b) their consolidated
Current Liabilities, to be less than 1.35 to 1.0."
2.11. Leverage Ratio. Section 6.02 of the Loan Agreement is amended
and restated to read in full as follows:
"Section 6.02 Leverage Ratio. During the term of this
Agreement, Borrowers shall not permit or suffer at any date the ratio
of (a) the consolidated total liabilities of Borrowers, determined
according to generally accepted accounting principles, to (b)
Borrowers' consolidated Tangible Net Worth, to be greater than the
ratios set forth below during the corresponding periods of time set
forth below:
Period of Time Ratio
-------------- -----
From the date hereof
through and including
December 31, 1993: 2.30 to 1
From January 1, 1994
through and including
June 30, 1994: 2.20 to 1
FIRST AMENDMENT TO LOAN AGREEMENT-- Page 5
<PAGE> 6
From July 1, 1994
through and including
December 31, 1994: 2.00 to 1
From January 1, 1995
and thereafter: 1.80 to 1."
2.12. Schedules. Schedules I, II, III, V and VI of the Loan
Agreement are hereby replaced in their entirety by Schedules I-A, II-A, III-A,
V-A and VI-A, respectively, attached to this Amendment; and all references in
the Loan Agreement to Schedules I, II, III, V and VI shall be deemed references
to Schedules I-A, II-A, III-A, V-A and VI-A, respectively.
ARTICLE III
Miscellaneous
3.01. Effectiveness. Except as specified herein, all terms and
conditions of the Loan Agreement shall remain unmodified and in full force and
effect. Further, each Borrower hereby ratifies and reaffirms such Borrower's
obligations and agreements under the Security Instruments, agrees that the
Security Instruments shall remain in full force and effect, notwithstanding
execution of this Amendment, and agrees that the Security Instruments shall
continue to be the legal, valid and binding obligations of each Borrower, as
applicable, enforceable in accordance with the terms therein.
3.02. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas.
3.03. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
3.04. NO ORAL AGREEMENTS. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE A WRITTEN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE LOANS.
IN WITNESS WHEREOF, the parties hereto have cause this instrument
to be duly executed as of the date first above written.
FIRST AMENDMENT TO LOAN AGREEMENT-- Page 6
<PAGE> 7
BORROWER:
--------
ULTRAK, INC.
By: /s/ TIM D. TORNO
---------------------------
Tim D. Torno
Chief Financial Officer
CCTV SOURCE INTERNATIONAL, INC.
By: /s/ TIM D. TORNO
---------------------------
Tim D. Torno
Chief Financial Officer
LOSS PREVENTION ELECTRONICS
CORPORATION
By: /s/ TIM D. TORNO
---------------------------
Tim D. Torno
Chief Financial Officer
PETRUS FUND, L.P.
By: PEROT INVESTMENTS, INC.
By: /s/ STEVEN L. BLASNIK
---------------------------
Steven L. Blasnik
President
Exhibits:
- --------
A-1 - Revolving Credit Note
F-1 - Warehouseman's Agreement
Schedules:
- ---------
I-A - Authorized Persons
II-A - Stock, Warrants, Etc.
III-A - Liabilities
V-A - Liens
VI-A - Investments, Loans & Advances
FIRST AMENDMENT TO LOAN AGREEMENT-- Page 7
<PAGE> 1
EXHIBIT 10.4
SECOND AMENDMENT
TO
WARRANT PURCHASE AGREEMENT
SECOND AMENDMENT TO WARRANT PURCHASE AGREEMENT (the "Second
Amendment") made as of October 4, 1993, by and among Ultrak, Inc., a Colorado
corporation (the "Company"), George K. Broady (the "Shareholder"), and Petrus
Fund, L.P., a Texas limited partnership (the "Purchaser").
R E C I T A L S
1. Purchaser, Shareholder and the Company have made and entered
into that certain Warrant Purchase Agreement dated July 20, 1992 (as amended,
the "Warrant Purchase Agreement"), as amended by that certain First Amendment
to Warrant Purchase Agreement (the "First Amendment") dated November 30, 1992,
pursuant to which the Company issued to Purchaser a warrant to purchase an
aggregate of Nine Hundred Twenty-Eight Thousand Five Hundred Seventy-One
(928,571) shares of Common Stock, in Accordance with the terms and conditions
of the Warrant Purchase Agreement and pursuant to the provisions set forth
therein.
2. Purchaser and the Company desire to amend the Warrant Purchase
Agreement to (1) modify the Exercise Price, and (2) modify certain provisions
pertaining to termination of the Warrant.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained in this Second Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Purchaser, the Shareholder, and the Company, intending to be legally bound,
agree as follows:
ARTICLE I
DEFINITIONS
As used in this Second Amendment, capitalized terms not otherwise
defined in this Second Amendment shall have the meanings given them in the
Warrant Purchase Agreement.
ARTICLE II
AMENDMENT
2.01. Amendment to Exercise Price. Section 2.03 of the Warrant
Purchase Agreement is amended and restated hereby to read in full as follows:
SECOND AMENDMENT TO
WARRANT PURCHASE AGREEMENT -- Page 1
<PAGE> 2
"2.03 Exercise Price. The Exercise Price per share
will be as follows:
(a) $1.50 for each share of Common Stock covered
by the Warrant and with regard to which the Warrant is
exercised prior to a Loan Agreement Termination; and
(b) $2.10 for each share of Common Stock covered
by the Warrant and with regard to which the Warrant is
exercised after a Loan Agreement Termination that occurs on or
subsequent to January 20, 1995; and
provided, however, that in no event will the aggregate Exercise Price
for all of the shares of Common Stock covered by the Warrant exceed
$1,392,856.50 except in the case of adjustment pursuant to Section
2.03(b) or Section 3.03(d), whether as a result of any change in the
par value of the Common Stock or as a result of any change in the
number of shares purchasable as provided in this Article II or
otherwise; andprovided, further, that such limitation on the aggregate
Exercise Price will have no effect whatsoever upon the number of
shares of Common Stock for which this Warrant may be exercised."
2.02. Amendment to Exercise Date. The first sentence of Section
2.04(a) of the Warrant Purchase Agreement is amended hereby by replacing the
date "January 20, 1995" (which, pursuant to the First Amendment, replaced the
original date of "January 20, 1994"), which is made in reference to the last
day upon which the Warrant may be exercised, with the date "April 4, 1996."
2.03. Amendment to Termination Provisions. The second numbered
Section 2.10 of the Warrant Purchase Agreement, styled "Termination" is
renumbered to be Section 2.11 and is amended and restated hereby to read in
full as follows:
"2.11 Termination. Notwithstanding Section 2.04(a), this
Agreement and the Warrant will terminate and be of no further force
and effect in the event of a Loan Agreement Termination that occurs
prior to January 20, 1995. If the Loan Agreement Termination occurs
on or after January 20, 1995, then this Agreement and the Warrant
will remain in full force and effect; however, the Exercise Price
shall be adjusted as provided in Section 12.03(b)."
SECOND AMENDMENT TO
WARRANT PURCHASE AGREEMENT -- Page 2
<PAGE> 3
ARTICLE III
MISCELLANEOUS
Except as specifically amended hereby, the Warrant Purchase Agreement
remains in full force and effect.
IN WITNESS WHEREOF, the parties have executed and delivered this
Second Amendment as of the date first above written.
PETRUS FUND, L.P.
By: Perot Investments, Inc.
its General Partner
By: /s/ STEVEN L. BLANSNIK
----------------------
Steven L. Blasnik,
President
ULTRAK, INC.
By: /s/ TIM D. TORNO
-------------------------
Tim D. Torno
Chief Financial Officer
/s/ GEORGE K. BROADY
-------------------------------
George K. Broady, Individually
SECOND AMENDMENT TO
WARRANT PURCHASE AGREEMENT -- Page 3
<PAGE> 1
EXHIBIT 10.5
SECURITY AGREEMENT
This Security Agreement ("Agreement") is entered into as of this 4th
day of October, 1993 by and between EXXIS TECHNOLOGIES, INC., a Texas
corporation, whose address is 1220 Champion Circle, Suite 100, Carrollton,
Texas 75006 ("Pledgor"), and PETRUS FUND, L.P., a Texas limited partnership,
whose address is 1700 Lakeside Square, 12377 Merit Drive, Dallas, Dallas
County, Texas 75251 ("Secured Party").
ARTICLE I
CREATION OF SECURITY INTEREST
1.01 Secured Debt. Pledgor hereby grants to Secured Party a security
interest in the Collateral described in Article II of this Agreement to secure
performance and payment of all indebtedness and obligations of Ultrak, Inc., a
Colorado corporation ("Ultrak"), CCTV Source International, Inc., and Loss
Prevention Electronics Corporation, a Colorado corporation ("LPEC"), to Secured
Party, of whatsoever kind, direct or contingent, whensoever and howsoever
created or incurred, owing, or to be and become owing to Secured Party
including without limitation, that certain promissory note in the original
principal amount of $6,000,000 executed by LPEC, Ultrak and Pledgor, and
payable to Secured Party (collectively, the "Secured Debt").
ARTICLE II
DESCRIPTION OF COLLATERAL
2.01 Collateral. The Collateral (herein so called) of this Agreement
is all of Pledgor's property described as follows:
(a) All present and future accounts, contract rights, chattel
paper, documents, instruments, trademarks, trade names, and
general intangibles, whether now owned or hereafter acquired
by Pledgor, Pledgor's interest in the goods represented
thereby, all returned, reclaimed or repossessed goods with
respect thereto;
(b) All of Pledgor's inventory, all goods, merchandise or other
personal property held by Pledgor for sale or lease, all raw
materials, work or goods in process or materials or supplies
of every nature, whether now owned or hereafter acquired by
Pledgor, and wherever located;
(c) All books, records, guaranties, securities, warranties, and
all other property relating to or referring to any of the
foregoing; and
SECURITY AGREEMENT -- Page 1
(EXXIS Technologies, Inc.)
<PAGE> 2
(d) Any and all substitutions, replacements, accessions,
attachments, products and proceeds of the foregoing, in any
form (including without limitation, all claims for loss or
damage to or destruction of any of the foregoing, accounts,
chattel paper and insurance proceeds).
ARTICLE III
REPRESENTATION, WARRANTIES, AND AGREEMENTS OF PLEDGOR
Pledgor represents, warrants, and agrees that:
3.01 Financial Information. All information supplied and statements
made by Pledgor in any financial, credit or accounting statement, or
application for credit prior to, contemporaneously with, or subsequent to the
execution of this Agreement fairly present the financial condition and results
of operations of Pledgor and are consistently applied for all periods reflected
therein.
3.02 Other Liens. There is no lien, security interest, or
encumbrance in or on the Collateral, except for Permitted Liens and the
security interest granted in this Agreement, and as of the date hereof there
are no Financing Statements covering the Collateral or its proceeds on file in
any public office, other than Financing Statements with respect to the
Permitted Liens and the security interest granted in this Agreement.
3.03 Principal Office. Pledgor's chief place of business is the
address shown at the beginning of this Agreement. The office where Pledgor
keeps its records concerning the Collateral is also the address shown at the
beginning of this Agreement. Pledgor will notify Secured Party in writing of
any change or discontinuance of its address as shown at the beginning of this
Agreement.
3.04 Possession. The Collateral shall remain in Pledgor's possession
or control at all times at Pledgor's risk of loss and shall be available to
Secured Party to inspect at any reasonable time. Secured Party agrees that
Pledgor may sell the Collateral in the ordinary course of business.
3.05 Receipt of Proceeds. Subject to the rights of NationsBank of
Texas, N.A. ("NationsBank") pursuant to the terms of the Intercreditor
Agreement, all proceeds in the form of cash and negotiable instruments for the
payment of money received by Pledgor in payment of any of the Collateral will
be held in trust for Secured Party and upon written request of Secured Party,
Pledgor shall promptly pay to Secured Party for application upon the Secured
Debt.
SECURITY AGREEMENT -- Page 2
(EXXIS Technologies, Inc.)
<PAGE> 3
3.06 Validity. All investment securities, instruments, chattel
paper, and any like property delivered to Secured Party as Collateral (a) are
genuine, free from adverse claims or other security interests, default,
prepayment or defenses; (b) all persons appearing to be obligated thereon have,
to Pledgor's knowledge, the authority and capacity to contract and are bound
thereon as they appear to be from the face thereof; and (c) the same comply, to
Pledgor's knowledge, with applicable laws concerning form, content and manner
of preparation and execution.
3.07 Use. Until default, Pledgor may use the Collateral in any
lawful manner not inconsistent with this Agreement or with the terms or
conditions of any policy of insurance thereon and may also sell the Collateral
in the ordinary course of business. A sale in the ordinary course of business
does not include a transfer in partial or total satisfaction of a debt. Until
default, Pledgor may also use and consume any raw materials or supplies, the
use and consumption of which are necessary to carry on Pledgor's business.
3.08 Assessments. Pledgor shall pay prior to delinquency all taxes,
charges, liens, and assessments against the Collateral, and upon Pledgor's
failure to do so, Secured Party at its option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary to
discharge the same. Such payment shall become part of the Secured Debt and
shall be paid to Secured Party by Pledgor upon demand. Pledgor has the right
to contest any assessments in good faith.
3.09 Insurance. Pledgor shall keep its insurable properties
adequately insured at all times against all material risks and shall maintain
insurance with financially responsible and reputable insurance companies or
associations in such amounts and against such risks as is customarily
maintained by companies of established reputations engaged in the same or a
similar business and similarly situated. Pledgor shall name Secured Party
(along with NationsBank) as co-loss payee on each of said insurance policies,
to the extent of its security interests in said property and furnish Secured
Party evidence of such insurance immediately upon request, which insurance
shall be in form and content satisfactory to Secured Party.
3.10 Transfer. The Collateral will not be sold, transferred or
disposed of by Pledgor (except in the ordinary course of business) or be
subjected to any unpaid charge, including rent and taxes, or to any subsequent
interest of a third person except Permitted Liens unless Secured Party consents
in advance in writing to such sale, transfer, disposition, charge, or
subsequent interest.
3.11 Other Acts. Pledgor will, at its own expense, do, make,
procure, execute, and deliver all acts, things, writings, and
SECURITY AGREEMENT -- Page 3
(EXXIS Technologies, Inc.)
<PAGE> 4
assurances as Secured Party may at any time request to protect, assure, or
enforce its interests, rights, and remedies created by, provided in, or
emanating from this Agreement.
3.12 Duty of Secured Party. Secured Party shall not be responsible
in any way for any depreciation in the value of the Collateral, nor shall any
duty or responsibility whatsoever rest upon Secured Party to take necessary
steps to preserve rights against prior parties or to enforce collection of the
Collateral by legal proceedings or otherwise, the sole duty of Secured Party,
its successors and assigns, being to receive collections, remittances and
payments on such Collateral as and when made and received by Secured Party, and
at Secured Party's option, applying the amount or amounts so received, after
deduction of any collection costs incurred, as payment upon any indebtedness of
Pledgor to Secured Party pursuant to the provisions of this Agreement, or
holding the same for the account and order of Pledgor.
3.13 Waivers. Pledgor expressly waives (1) surrender, release,
exchange, substitution, dealing with or taking any additional Collateral, (2)
abstaining from taking advantage of or relying upon any security interest of
the Collateral and (3) any impairment of Collateral including, but not limited
to, failure to perfect a security interest in the Collateral.
3.14 Attachment. Pledgor will not attach or affix, either in whole
or in part, any of the Collateral to the real estate or other personal property
so as to allow the Collateral to become fixtures.
3.15 Returned Goods. In the event any goods, the sale or other
disposition of which creates any account which is included in the Collateral,
are returned to Pledgor for credit, at any time after the occurrence and during
the continuation of an Event of Default, Pledgor will, subject to the rights of
NationsBank pursuant to the Intercreditor Agreement, promptly pay to Secured
Party the full amount of the invoice price of such goods, and until such
payment has been made, will hold such goods separate and apart from Pledgor's
own property in trust for Secured Party and will immediately notify Secured
Party of such return. Pledgor hereby grants unto Secured Party a security
interest in such goods
3.16 Notice to Account Pledgor. After the occurrence and during the
continuation of an Event of Default, upon written notice to Pledgor, subject
to the rights of NationsBank pursuant to the Intercreditor Agreement, Secured
Party may notify or require Pledgor to notify account debtors obligated on any
or all of Pledgor's accounts to make payment directly to Secured Party, and may
take possession of all proceeds of any accounts in Pledgor's possession.
SECURITY AGREEMENT -- Page 4
(EXXIS Technologies, Inc.)
<PAGE> 5
3.17 Collection of Accounts. While an Event of Default continues,
and subject to the rights of NationsBank pursuant to the Intercreditor
Agreement, Secured Party may take any steps which Secured Party deems necessary
or advisable to collect any or all accounts, proceeds or other Collateral, or
to sell, transfer, compromise, discharge or extend the whole or any part of the
accounts, proceeds or other Collateral, and apply the proceeds thereof to the
Secured Debt. In protecting, exercising or assuring its interests, rights and
remedies under this Agreement, subject to the rights of NationsBank pursuant to
the Intercreditor Agreement, Secured Party may receive, open and dispose of
mail addressed to Pledgor and execute, sign and endorse negotiable and other
instruments for the payment of money, documents of title or other evidences of
payment, shipment or storage for any form of Collateral or proceeds on behalf
of and in the name of Pledgor.
3.18 Subrogation. Secured Party may subrogate to all of Pledgor's
interests, rights and remedies in respect to any account.
ARTICLE IV
EVENTS OF DEFAULT
4.01 Events of Default. Pledgor shall be in default under this
Agreement upon the happening of any "Event of Default" (herein so called) as
such term is defined in the Loan Agreement.
ARTICLE V
SECURED PARTY'S RIGHTS AND REMEDIES
5.01 Rights in Event of Default. Upon the occurrence of an Event of
Default and while such Event of Default is continuing, Secured Party:
(a) may declare all obligations secured hereby
immediately due and payable (which amount shall include expenses of
retaking, holding, preparing for sale, selling, or the like and
reasonable attorneys' fees);
(b) shall have the rights and remedies of a
Secured Party under the Uniform Commercial Code of Texas, including,
without limitation thereto, the right to sell, lease, or otherwise
dispose of any or all of the Collateral and the right to take
possession of the Collateral, and for that purpose Secured Party may
enter upon any premises on which the Collateral or any part thereof
may be situated and remove the same therefrom;
(c) may require Pledgor to assemble the
Collateral and make it available to Secured Party at a place to be
SECURITY AGREEMENT -- Page 5
(EXXIS Technologies, Inc.)
<PAGE> 6
designated by Secured Party which is reasonably convenient to both
parties;
(d) will, unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily
sold on a recognized market, send Pledgor reasonable notice of the
time and place of any public sale thereof or of the time after which
any private sale or other disposition thereof is to be made (the
requirement of sending reasonable notice shall be met if such notice
is mailed, postage prepaid, to Pledgor at the address designated at
the beginning of this Agreement at least ten (10) business days
before the time of the sale or disposition).
5.02 Waiver of Default. Secured Party may remedy any default and may
waive any default without waiving the default remedied or without waiving any
other prior or subsequent default.
5.03 Cumulative Results. The remedies of Secured Party hereunder are
cumulative, and the exercise of any one or more of the remedies provided for
herein shall not be construed as a waiver of any of the other remedies of
Secured Party.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Definitions.
(a) The terms "Pledgor" and "Secured Party" as
used in this Agreement shall be construed as singular or plural to
correspond with the number of persons executing this Agreement as
such. The pronouns used in this Agreement are in the masculine gender
but shall be construed as feminine or neuter as occasion may require.
(b) "Permitted Liens" shall mean the liens
permitted pursuant to Section 5.2 of the ban Agreement.
(c) "Loan Agreement" shall mean that certain Loan
Agreement, dated of even date herewith, by and among Pledgor, Ultrak
and LPEC, as borrowers, and Secured Party, as lender, together with
any and all amendments and modifications thereto.
(d) "Loan Documents" shall mean all documents and
instruments executed in connection with or to secure or guarantee the
Secured Debt, including without limitation, the Loan Agreement, all
security agreements, and guaranty agreements.
SECURITY AGREEMENT -- Page 6
(EXXIS Technologies, Inc.)
<PAGE> 7
(e) "Intercreditor Agreement" shall mean that
certain Intercreditor Agreement to be executed by and among Secured
Party and NationsBank.
6.02 Final Agreement. This Agreement, and all other Loan Documents
executed in connection herewith, represent the final and entire agreement
between the parties, and may not be contradicted by evidence of prior,
subsequent or contemporaneous oral agreements. There are no unwritten oral
agreement between the parties.
6.03 Headings. The section headings appearing in this Agreement have
been inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
Terms used in this Agreement which are defined in the Texas Uniform Commercial
Code are used with the meanings as therein defined.
6.04 Governing Law. The law governing this secured transaction shall
be that of the State of Texas except to the extent federal law controls.
6.05 Assignment. The Secured Party's rights under this Agreement or
the Secured Debt may be assigned from time to time, and in any such case the
assignee shall be entitled to all of the rights, privileges, and remedies
granted in this Agreement to Secured Party, and Pledgor will assert no claims
or defenses it may have against Secured Party against the assignee, except
those granted in this Agreement.
EXECUTED, as of, although not necessarily on, the date first written
above.
PLEDGOR: EXXIS TECHNOLOGIES, INC.
By: /s/ TIM D. TORNO
---------------------------
Tim D. Torno,
Chief Financial Officer
SECURITY AGREEMENT -- Page 7
(EXXIS Technologies, Inc.)
<PAGE> 1
EXHIBIT 10.6
SECURITY AGREEMENT
This Security Agreement ("Agreement") is entered into as of this 4th day
of October, 1993 by and between DENTAL VISION DIRECT, INC., a Texas
corporation, whose address is 1220 Champion Circle, Suite 100, Carrollton,
Texas 75006 ("Pledgor"), and PETRUS FUND, L.P., a Texas limited partnership,
whose address is 1700 Lakeside Square, 12377 Merit Drive, Dallas, Dallas
County, Texas 75251 ("Secured Party").
ARTICLE I
CREATION OF SECURITY INTEREST
1.01 Secured Debt. Pledgor hereby grants to Secured Party a security
interest in the Collateral described in Article II of this Agreement to secure
performance and payment of all indebtedness and obligations of Ultrak,
Inc., a Colorado corporation ("Ultrak"), CCTV Source International, Inc., and
Loss Prevention Electronics Corporation, a Colorado corporation ("LPEC"), to
Secured Party, of whatsoever kind, direct or contingent, whensoever and
howsoever created or incurred, owing, or to be and become owing to Secured
Party including without limitation, that certain promissory note in the
original principal amount of $6,000,000 executed by LPEC, Ultrak and Pledgor,
and payable to Secured Party (collectively, the "Secured Debt").
ARTICLE II
DESCRIPTION OF COLLATERAL
2.01 Collateral. The Collateral (herein so called) of this Agreement
is all of Pledgor's property described as follows:
(a) All present and future accounts, contract rights, chattel
paper, documents, instruments, trademarks, trade names, and
general intangibles, whether now owned or hereafter acquired
by Pledgor, Pledgor's interest in the goods represented
thereby, all returned, reclaimed or repossessed goods with
respect thereto;
(b) All of Pledgor's inventory, all goods, merchandise or other
personal property held by Pledgor for sale or lease, all raw
materials, work or goods in process or materials or supplies
of every nature, whether now owned or hereafter acquired by
Pledgor, and wherever located;
(c) All books, records, guaranties, securities, warranties, and
all other property relating to or referring to any of the
foregoing; and
SECURITY AGREEMENT -- Page 1
(Dental Vision Direct, Inc.)
<PAGE> 2
(d) Any and all substitutions, replacements, accessions,
attachments, products and proceeds of the foregoing, in any
form (including without limitation, all claims for loss or
damage to or destruction of any of the foregoing, accounts,
chattel paper and insurance proceeds).
ARTICLE III
REPRESENTATION, WARRANTIES, AND AGREEMENTS OF PLEDGOR
Pledgor represents, warrants, and agrees that:
3.01 Financial Information. All information supplied and statements
made by Pledgor in any financial, credit or accounting statement, or
application for credit prior to, contemporaneously with, or subsequent to the
execution of this Agreement fairly present the financial condition and results
of operations of Pledgor and are consistently applied for all periods reflected
therein.
3.02 Other Liens. There is no lien, security interest, or
encumbrance in or on the Collateral, except for Permitted Liens and the
security interest granted in this Agreement, and as of the date hereof there
are no Financing Statements covering the Collateral or its proceeds on file in
any public office, other than Financing Statements with respect to the
Permitted Liens and the security interest granted in this Agreement.
3.03 Principal Office. Pledgor's chief place of business is the
address shown at the beginning of this Agreement. The office where Pledgor
keeps its records concerning the Collateral is also the address shown at the
beginning of this Agreement. Pledgor will notify Secured Party in writing of
any change or discontinuance of its address as shown at the beginning of this
Agreement.
3.04 Possession. The Collateral shall remain in Pledgor's possession
or control at all times at Pledgor's risk of loss and shall be available to
Secured Party to inspect at any reasonable time. Secured Party agrees that
Pledgor may sell the Collateral in the ordinary course of business.
3.05 Receipt of Proceeds. Subject to the rights of NationsBank of
Texas, N.A. ("NationsBank") pursuant to the terms of the Intercreditor
Agreement, all proceeds in the form of cash and negotiable instruments for the
payment of money received by Pledgor in payment of any of the Collateral will
be held in trust for Secured Party and upon written request of Secured Party,
Pledgor shall promptly pay to Secured Party for application upon the Secured
Debt.
13.06 Validity. All investment securities, instruments,
SECURITY AGREEMENT -- Page 2
(Dental Vision Direct, Inc.)
<PAGE> 3
chattel paper, and any like property delivered to Secured Party as Collateral
(a) are genuine, free from adverse claims or other security interests, default,
prepayment or defenses; (b) all persons appearing to be obligated thereon have,
to Pledgor's knowledge, the authority and capacity to contract and are bound
thereon as they appear to be from the face thereof; and (c) the same comply, to
Pledgor's knowledge, with applicable laws concerning form, content and manner
of preparation and execution.
3.07 Use. Until default, Pledgor may use the Collateral in any
lawful manner not inconsistent with this Agreement or with the terms or
conditions of any policy of insurance thereon and may also sell the Collateral
in the ordinary course of business. A sale in the ordinary course of business
does not include a transfer in partial or total satisfaction of a debt. Until
default, Pledgor may also use and consume any raw materials or supplies, the
use and consumption of which are necessary to carry on Pledgor's business.
3.08 Assessments. Pledgor shall pay prior to delinquency all taxes,
charges, liens, and assessments against the Collateral, and upon Pledgor's
failure to do so, Secured Party at its option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary to
discharge the same. Such payment shall become part of the Secured Debt and
shall be paid to Secured Party by Pledgor upon demand. Pledgor has the right
to contest any assessments in good faith.
3.09 Insurance. Pledgor shall keep its insurable properties
adequately insured at all times against all material risks and shall maintain
insurance with financially responsible and reputable insurance companies or
associations in such amounts and against such risks as is customarily
maintained by companies of established reputations engaged in the same or a
similar business and similarly situated. Pledgor shall name Secured Party
(along with NationsBank) as co-loss payee on each of said insurance policies,
to the extent of its security interests in said property and furnish Secured
Party evidence of such insurance immediately upon request, which insurance
shall be in form and content satisfactory to Secured Party.
3.10 Transfer. The Collateral will not be sold, transferred or
disposed of by Pledgor (except in the ordinary course of business) or be
subjected to any unpaid charge, including rent and taxes, or to any subsequent
interest of a third person except Permitted Liens unless Secured Party consents
in advance in writing to such sale, transfer, disposition, charge, or
subsequent interest.
13.11 Other Acts. Pledgor will, at its own expense, do, make,
procure, execute, and deliver all acts, things, writings, and assurances as
Secured Party may at any time request to protect,
SECURITY AGREEMENT -- Page 3
(Dental Vision Direct, Inc.)
<PAGE> 4
assure, or enforce its interests, rights, and remedies created by, provided in,
or emanating from this Agreement.
13.12 Duty of Secured Party. Secured Party shall not be responsible
in any way for any depreciation in the value of the Collateral, nor shall any
duty or responsibility whatsoever rest upon Secured Party to take necessary
steps to preserve rights against prior parties or to enforce collection of the
Collateral by legal proceedings or otherwise, the sole duty of Secured Party,
its successors and assigns, being to receive collections, remittances and
payments on such Collateral as and when made and received by Secured Party, and
at Secured Party's option, applying the amount or amounts so received, after
deduction of any collection costs incurred, as payment upon any indebtedness of
Pledgor to Secured Party pursuant to the provisions of this Agreement, or
holding the same for the account and order of Pledgor.
3.13 Waivers. Pledgor expressly waives (1) surrender, release,
exchange, substitution, dealing with or taking any additional Collateral, (2)
abstaining from taking advantage of or relying upon any security interest of
the Collateral and (3) any impairment of Collateral including, but not limited
to, failure to perfect a security interest in the Collateral.
3.14 Attachment. Pledgor will not attach or affix, either in whole
or in part, any of the Collateral to the real estate or other personal property
so as to allow the Collateral to become fixtures.
3.15 Returned Goods. In the event any goods, the sale or other
disposition of which creates any account which is included in the Collateral,
are returned to Pledgor for credit, at any time after the occurrence and during
the continuation of an Event of Default, Pledgor will, subject to the rights of
NationsBank pursuant to the Intercreditor Agreement, promptly pay to Secured
Party the full amount of the invoice price of such goods, and until such
payment has been made, will hold such goods separate and apart from Pledgor's
own property in trust for Secured Party and will immediately notify Secured
Party of such return. Pledgor hereby grants unto Secured Party a security
interest in such goods
3.16 Notice to Account Pledgor. After the occurrence and
during the continuation of an Event of Default, upon written notice to
Pledgor, subject to the rights of NationsBank pursuant to the Intercreditor
Agreement, Secured Party may notify or require Pledgor to notify account
debtors obligated on any or all of Pledgor's accounts to make payment directly
to Secured Party, and may take possession of all proceeds of any accounts in
Pledgor's possession.
3.17 Collection of Accounts. While an Event of Default continues,
and subject to the rights of NationsBank pursuant to the
SECURITY AGREEMENT -- Page 4
(Dental Vision Direct, Inc.)
<PAGE> 5
Intercreditor Agreement, Secured Party may take any steps which Secured Party
deems necessary or advisable to collect any or all accounts, proceeds or other
Collateral, or to sell, transfer, compromise, discharge or extend the whole or
any part of the accounts, proceeds or other Collateral, and apply the proceeds
thereof to the Secured Debt. In protecting, exercising or assuring its
interests, rights and remedies under this Agreement, subject to the rights of
NationsBank pursuant to the Intercreditor Agreement, Secured Party may receive,
open and dispose of mail addressed to Pledgor and execute, sign and endorse
negotiable and other instruments for the payment of money, documents of title
or other evidences of payment, shipment or storage for any form of Collateral
or proceeds on behalf of and in the name of Pledgor.
3.18 Subrogation. Secured Party may subrogate to all of Pledgor's
interests, rights and remedies in respect to any account.
ARTICLE IV
EVENTS OF DEFAULT
4.01 Events of Default. Pledgor shall be in default under this
Agreement upon the happening of any "Event of Default" (herein so called) as
such term is defined in the Loan Agreement.
ARTICLE V
SECURED PARTY'S RIGHTS AND REMEDIES
5.01 Rights in Event of Default. Upon the occurrence of an Event of
Default and while such Event of Default is continuing, Secured Party:
(a) may declare all obligations secured hereby
immediately due and payable (which amount shall include expenses of
retaking holding, preparing for sale, selling, or the like and
reasonable attorneys' fees);
(b) shall have the rights and remedies of a Secured
Party under the Uniform Commercial Code of Texas, including, without
limitation thereto, the right to sell, lease, or otherwise dispose of
any or all of the collateral and the right to take possession of the
Collateral, and for that purpose Secured Party may enter upon any
premises on which the Collateral or any part thereof may be situated
and remove the same therefrom;
(c) may require Pledgor to assemble the Collateral
and make it available to Secured Party at a place to be designated by
Secured Party which is reasonably convenient to both parties;
SECURITY AGREEMENT -- Page 5
(Dental Vision Direct, Inc.)
<PAGE> 6
(d) will, unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily
sold on a recognized market, send Pledgor reasonable notice of the
time and place of any public sale thereof or of the time after which
any private sale or other disposition thereof is to be made (the
requirement of sending reasonable notice shall be met if such notice
is mailed, postage prepaid, to Pledgor at the address designated at
the beginning of this Agreement at least ten (10) business days before
the time of the sale or disposition).
5.02 Waiver of Default. Secured Party may remedy any default and may
waive any default without waiving the default remedied or without waiving any
other prior or subsequent default.
5.03 Cumulative Results. The remedies of Secured Party hereunder are
cumulative, and the exercise of any one or more of the remedies provided for
herein shall not be construed as a waiver of any of the other remedies of
Secured Party.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Definitions.
(a) The terms "Pledgor" and "Secured Party" as used
in this Agreement shall be construed as singular or plural to
correspond with the number of persons executing this Agreement as
such. The pronouns used in this agreement are in the masculine
gender but shall be construed as feminine or neuter as occasion may
require.
(b) "Permitted Liens" shall mean the liens permitted
pursuant to Section 5.2 of the Loan Agreement.
(c) "Loan Agreement" shall mean that certain Loan
Agreement, dated of even date herewith, by and among Pledgor, Ultrak
and LPEC, as borrowers, and Secured Party, as lender, together with
any and all amendments and modifications thereto.
(d) "Loan Documents" shall mean all documents and
instruments executed in connection with or to secure or guarantee the
Secured Debt, including without limitation, the Loan Agreement, all
security agreements, and guaranty agreements.
(e) "Intercreditor Agreement" shall mean that
certain Intercreditor Agreement to be executed by and among Secured
Party and NationsBank.
SECURITY AGREEMENT -- Page 6
(Dental Vision Direct, Inc.)
<PAGE> 7
16.02 Final Agreement. This Agreement, and all other Loan Documents
executed in connection herewith, represent the final and entire agreement
between the parties, and may not be contradicted by evidence of prior,
subsequent or contemporaneous oral agreements. There are no unwritten oral
agreement between the parties.
6.03 Headings. The section headings appearing in this Agreement have
been inserted for convenience only and shall be given no substantive meaning or
significance whatever in construing the terms and provisions of this Agreement.
Terms used in this Agreement which are defined in the Texas Uniform commercial
Code are used with the meanings as therein defined.
6.04 Governing Law. The law governing this secured transaction shall
be that of the State of Texas except to the extent federal law controls.
16.05 Assignment. The Secured Party's rights under this Agreement or
the Secured Debt may be assigned from time to time, and in any such case the
assignee shall be entitled to all of the rights, privileges, and remedies
granted in this Agreement to Secured Party, and Pledgor will assert no claims
or defenses it may have against Secured Party against the assignee, except
those granted in this Agreement.
EXECUTED, as of, although not necessarily on, the date first written above.
PLEDGOR: DENTAL VISION DIRECT, INC.
By: /s/ TIM D. TORNO
--------------------------------
Tim D. Torno,
Chief Financial Officer
SECURITY AGREEMENT -- Page 7
(Dental Vision Direct, Inc.)
<PAGE> 1
EXHIBIT 10.7
ULTRAK, INC.
1988 NON-QUALIFIED STOCK OPTION PLAN
1. Purpose. The purpose of this 1988 Stock Option Program (the
"Program") is to provide a means by which certain employees of Ultrak,
Inc. and its Affiliates (the "Company") may be given an opportunity to
purchase common stock of the Company ("Common Stock"). The Program is
intended to advance the interests of the Company by encouraging stock
ownership on the part of certain employees, by enabling the Company to
secure and retain the services of highly qualified persons and by
providing employees with an additional incentive to advance the
success of the Company. For purposes of this Program, Affiliate shall
mean any subsidiary corporation of the Company as defined in Sections
425(e) and (f) respectively of the Internal Revenue Code of 1954, as
amended (hereinafter the "Code"). Affiliation shall refer to a group
of Affiliates.
2. Stock Subject to Option. Subject to adjustment as provided in
Sections 4(h) and (j) hereof, Options may be granted by the Company
from time to time to purchase up to an aggregate of 5,000,000 shares
of the Company's authorized but unissued Common Stock, provided that
the number of shares that may be granted to any employee under the
Program shall be reasonable in relation to the purpose of the Program.
Shares that by reason of the expiration of an Option or otherwise are
no longer subject to purchase pursuant to an Option granted under the
Program may be re-Optioned under the Program. The Company shall not
be required, upon the exercise of any Option, to issue or deliver any
shares of stock prior to the completion of such exemption,
registration or other qualification of such shares under state or
Federal law, rule or regulation as the Company shall determine to be
necessary or desirable.
3. Participants. All employees of the Company may be granted Options
under the Program. An employee of the Company shall mean any person
employed full-time for whom the Company is obligated to provide W-2
Forms under the Internal Revenue Code, and who is designated in
writing, at time of employment, as a full-time employee.
4. Terms and Conditions of Options. The Committee (as that term is
defined in Section 5) may grant Options from time to time pursuant to
the Program. Such Options shall be evidenced by written agreements
substantially in the form of the Stock Option Agreement which is
attached hereto as Appendix "A", and shall not be inconsistent with
this Program. Shares of stock that may be purchased under an Option
granted pursuant to this Program shall sometimes hereinafter be
referred to as "Option Shares". Nothing in this Program or an Option
granted hereunder shall govern the employment rights and duties
<PAGE> 2
between the Optionee and the Company or Affiliate. Neither this
Program, nor any grant or exercise pursuant thereto, shall constitute
an employment agreement among such parties.
(a) Option Price. The Option Price for each Option Share shall be
determined by the Board of Directors from time to time.
(b) Term of Option. Notwithstanding any other provision of this
Program, each Option granted under this Plan shall expire not
more than ten years from the earlier of the date of employment
of Optionee or the date the Option is granted except as
provided in Section 4(e), 4(f), 4(g) and 4(h) under which
Options may expire or terminate at an earlier date.
(c) Exercise of Option. Each Option shall be exercisable at any
time during the term of the Option to the extent of the total
number of shares covered by the Option multiplied by twenty
percent (20%) and by the number of year(s) of service (as
defined below) of the Optionee. For purposes of Options
agreed to be granted on or before April 15, 1988, the number
of year(s) of service means the period beginning on the
earlier of the date when the Optionee was employed by the
Company or Affiliate (but in no event earlier than April 25,
1986) or the date the Option is granted and each anniversary
thereafter of the Optionee's continuous employment with the
Company. For purposes of Options granted after April 15,
1988, the number of years of service means the period
beginning the Date of Grant (unless express provision is made
otherwise) and each anniversary thereafter of the Optionee's
continuous employment with the Company.
Notwithstanding the foregoing, Optionee shall be entitled to
exercise the total number of shares covered by the Option if
(i) Optionee dies or becomes disabled while employed by the
Company; (ii) the Company is dissolved or liquidated; (iii)
the Company is merged, consolidated or reorganized, and the
Company is not the surviving entity; (iv) substantially all
property and assets of the Company are sold or otherwise
disposed of in a context other than sale of contracts for
financing purposes; (v) a "Fifty Percent Acquisition" (as
defined below) occurs; (vi) if the Compensation Committee with
approval of the Board of Directors approves otherwise; or
(vii) if Optionee is terminated (but not for cause) and his
written employment agreement so provides.
A "Fifty Percent Acquisition" means a purchase or other
acquisition by any individuals or entity including, but not
limited to corporations, partnerships or other
2
<PAGE> 3
business organizations, whereby such individual or entity
owns, immediately after, but not before, such purchase or
other acquisition, more than fifty percent (50%) of the total
combined voting power of the outstanding stock of the Company.
Where an Optionee's employment by the Company is terminated
for any reason other than death or disability including, but
not limited to, the Optionee's transfer to a Company
Affiliate, no Option shall give an Optionee (or his successor)
a right to acquire any greater number of shares than he had
rights to acquire on the date of his termination.
(d) Manner of Exercise. Shares of Common Stock purchased upon
exercise of Options shall at the time of purchase be paid for
in full. To the extent that the right to purchase shares has
accrued hereunder, Options may be exercised from time to time
by written notice to the Company stating the full number of
shares with respect to which the Option is being exercised and
the time of delivery thereof, which shall be at least fifteen
days after the giving of such notice unless an earlier date
shall have been mutually agreed upon, accompanied by full
payment for the shares by one of the following (or combination
thereof) selected for the Optionee by the Company in its sole
discretion: (i) certified or official bank check or the
equivalent thereof acceptable to the Company; or (ii)
tendering property including, but not limited to, shares of
Common Stock of the Company with a fair market value at least
equal to the aggregate Option price for the Option Shares to
be acquired. Where the Optionee exercises his Options by
tendering Common Stock of the Company, the fair market value
of such shares as of the date of the tendering of the Common
Stock of the Company is received by the Company (the "date of
exercise") shall be established in good faith by the Board of
Directors. In setting the fair market value as of the date of
exercise, due regard shall be given to all facts and
circumstances. However, if an active market exists for the
Common Stock, the lowest closing bid price on the date of
exercise shall be set by the Board of Directors, as the fair
market value. If an active market does not exist at the date
of exercise, an Optionee may condition his exercise on the
Board of Directors establishing a fair market value above the
amount specified in the Optionee's written notice. Any shares
tendered which are not used to satisfy payment for the
exercise of an Option shall be returned to the Optionee.
At the time of delivery, the Company shall, without stock
transfer tax to the Optionee (or other person entitled to
exercise the Option), deliver to the Optionee (or to such
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<PAGE> 4
other person) at the principal office of the Company, or such
other place as shall be mutually agreed upon, a certificate or
certificates for such shares; provided, however, that the time
of delivery may be postponed by the Company for such period as
may be required for it with reasonable diligence to comply
with any requirements of law. In the event the Common Stock
issuable upon exercise of an Option is not registered under
the Securities Act of 1933 (the "Act"), then the Company at
the time of exercise will require, in addition, that the
registered owner deliver an Investment Representation in the
form attached hereto as Appendix B to the Company and its
counsel and the Company will place a legend on the certificate
for such Common Stock restricting the transfer of same. There
shall be no obligation or duty for the Company to register
under the Act at any time the Common Stock issuable under
exercise of the Options.
(e) Termination of Employment.
(1) In the event that the Optionee's employment by the
Company shall terminate with cause (as defined below
or as defined in any written employment agreement
with Optionee), the Options granted to the Optionee
pursuant to this Program shall terminate immediately.
In the event that Optionee's employment by the
Company shall terminate without cause (as defined
below), the Optionee shall have the right to exercise
his Option at any time within 30 days after such
termination to the extent he was entitled to exercise
the same immediately prior to the termination (unless
express provision is made otherwise in any written
employment agreement with Optionee allowing Optionee
to exercise his Option to the total number of shares
covered by such Option). Termination with cause
means that the Company terminates the Optionee's
employment with the Company (i) where there has been
a material breach by the Optionee of any of the terms
of any employment contract, if any, or (ii) where the
Optionee is guilty of fraud or embezzlement, or has
conducted himself in a way punishable as a felony or
constituting malfeasance, gross negligence, gross
incompetence, moral turpitude or drug or alcohol
abuse that could in the opinion of a reasonable
person materially impair the Optionee's ability to
perform his duties or injure the assets, properties,
operations or business reputation of the Company.
Termination without cause means any termination
including, but not limited to, the Optionee's
voluntary resignation or the Optionee's
4
<PAGE> 5
transfer to a Company Affiliate, which is not with
cause and to which the provisions of Sections 4(e)(2)
(Death and Disability), 4(e)(3) (Retirement) and 4(g)
(Dissolution, etc., of the Issuer of Option Stock) do
not apply.
(2) In the event that Optionee shall die while in the
employment of the Company or if Optionee's employment
by the Company is terminated because Optionee has
become disabled within the meaning of Section
105(d)(4) of the Code, Optionee, his estate or
beneficiary shall have the right to exercise his
Options at any time within twelve (12) months from
the date of death of Optionee or termination of his
employment due to disability, as the case may be, to
the extent of the total number of shares covered by
the Option. Notwithstanding the foregoing, the
provisions of this Section 4(e)(2) shall be subject
to Sections 4(h) (Adjustment of Option Upon
Reorganization) and 4(g) (Dissolution, etc., of
Issuer of Option Stock) as may earlier terminate the
Option.
(3) In the event that termination of employment is due to
retirement with the consent of his employer, the
Optionee shall have the right to exercise his Option
at any time within three (3) months after such
retirement to the extent he was entitled to exercise
the same immediately prior to retirement.
Notwithstanding the foregoing, the provisions of this
Section 4(e)(3) shall be subject to Sections 4(h)
(Adjustment of Option Upon Reorganization) and 4(g)
(Dissolution, etc., of Issuer of Option Stock) as may
earlier terminate the Option.
(f) Adjustment of Options on Recapitalization. The aggregate
number of shares of Common Stock for which Options may be
granted to persons participating under the Program, the number
of shares covered by each such Option and the exercise price
per share for each such Option, shall be proportionately
adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from the
subdivision or consolidation of shares, or the payment of a
stock dividend after the date of grant of the Option, or other
increase in such shares effected without receipt of
consideration by the Company; provided, however, that any
Options to purchase fractional shares resulting from any such
adjustment shall be eliminated.
(g) Dissolution, Sale of Assets or Stock of Issuer of Option
Stock. In the event of the: (i) dissolution or
5
<PAGE> 6
liquidation of the Company; (ii) merger, consolidation or
reorganization of the Company where the Company is not the
surviving entity; (iii) sale, lease exchange or other form of
disposition of substantially all property and assets of the
Company other than sale of contracts for financing purposes;
or (iv) a Fifty Percent Acquisition, the Options granted
hereunder shall terminate as of a date to be fixed by the
Committee, provided that not less than thirty (30) days' prior
written notice of the date so fixed shall be given to the
Optionee, and the Optionee shall have the right, during the
period of thirty (30) days preceding such termination of the
Option, to exercise his Option to the extent of the total
shares covered by the Option. Notwithstanding the foregoing,
the provisions of this Section shall be subject to Section
4(h) (Adjustment of Options Upon Reorganization) if the
Optionee receives notice under Section 4(h) (Adjustments of
Options Upon Reorganization) at a time earlier than the notice
provided for herein.
(h) Adjustment of Options Upon Certain Reorganization.
(1) If the Company shall at any time merge or consolidate
with or into another corporation without the sale of
substantially all assets or the sale of more than
fifty percent (50%) of the Common Stock and (A) the
Company is not the surviving entity, or (B) the
Company is the surviving entity and the shareholders
of the Company Common Stock are required to exchange
their shares for property and/or securities, the
holder of each Option will thereafter receive, upon
the exercise thereof, the securities and/or property
to which a holder of the number of shares of Common
Stock then deliverable upon the exercise of such
Option would have been entitled to receive upon such
merger or consolidation, and the Company shall take
such steps in connection with such merger or
consolidation as may be necessary to assure that the
provisions of this Program shall thereafter be
applicable, as nearly as reasonably may be, in
relation to any securities or property thereafter
deliverable upon the exercise of such Option.
(2) The resulting Affiliation following any
reorganization may at any time, in its sole
discretion, tender substitute Options as it may deem
appropriate. However, in no event may the substitute
Options entitle the Optionee to any fewer shares (or
at any greater aggregate price) or any less other
property than the Optionee would be entitled to under
the immediately preceding
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<PAGE> 7
paragraph upon an exercise of the Options held prior
to the substitution of the new Option.
(i) Rights as a Shareholder. The Optionee shall have no rights as
a shareholder with respect to any shares of Common Stock of
the Company held under Option until the date of issuance of
the stock certificates to him for such shares. Except as
provided in Section 4(f) (Adjustment of Options on
Recapitalization), no adjustment shall be made for dividends
or other rights for which the record date is prior to the date
of such issuance.
(j) Time of Granting Options. The grant of an Option shall occur
only when a written Option Agreement substantially in the form
of the Stock Option Agreement which is attached hereto marked
Exhibit "A" shall have been duly executed and delivered by or
on behalf of the Company and the employee to whom such Option
shall be granted.
(k) Stock, Legend. Certificates evidencing shares of the
Company's Common Stock purchased upon the exercise of Options
issued under the Program shall be endorsed with a legend in
substantially the following form:
The shared evidenced by this certificate may not be
sold or transferred prior to ________, 19___, in the
absence of a written statement from Ultrak, Inc. (the
"Company") to the effect that the Company is aware of
the fact of such sale or transfer.
Upon delivery to the Company, at its principal executive
office, of a written statement to the effect that such shares
are proposed to be sold or transferred prior to such date, the
Company does hereby agree to promptly deliver to the transfer
agent for such shares a written statement to the effect that
the Company is aware of the fact of such proposed sale or
transfer. This Section 4(k) shall have no effect on other
restrictions on transfer to which the stock may be subject.
5. Administration.
(a) The Program shall be administered by a Compensation Committee
(the "Committee") consisting of not less than two (2)
individuals to be appointed by the Board of Directors of the
Company. The Board of Directors may, from time to time,
remove members from or add members to the Committee.
Vacancies in the Committee, however caused, shall be filled by
the Board of Directors. The Committee shall select one of its
member's chairman and
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<PAGE> 8
shall hold meetings at such times and places as it may
determine. The Committee may appoint a secretary and, subject
to the provisions of the Program and to policies determined by
the Board of Directors, may make such rules and regulations
for the conduct of its business as it shall deem advisable. A
majority of the Committee shall constitute a quorum. All
action of the Committee shall be taken by a majority of its
members. Any action may be taken by a written instrument
signed by a majority of the members, and action so taken shall
be fully as effective as if it had been taken by a vote of the
majority of the members at a meeting duly called and held.
The Board of Directors may act in lieu of Committee and shall
act in lieu of a Committee at any time such Committee is not
instituted.
(b) Subject to the express terms and conditions of the Program,
the Committee shall have full power to grant Options under the
Program, the Committee shall have full power to grant Options
under the Program, to construe or interpret the Program, to
construe or interpret the Program, to prescribe, amend,
rescind and waive rules and regulations relating to it and to
make all other determinations necessary or advisable for its
administration.
(c) Subject to the provisions of Sections 3 and 4 hereof, the
Committee may, from time to time, determine which employees of
the Company shall be granted Options under the Program, the
number of Option Shares subject to each Option, and the time
or times at which Options shall be granted, to grant such
Options under the Program and waive any term or condition of
an Option.
(d) The Committee shall report to the Board of Directors the names
of employees granted Options, the number of option Shares
subject to, and the terms and conditions of, each Option.
(e) No member of the Board of Directors or of the Committee shall
be liable for any action or determination made in good faith
with respect to the Program or to any Option.
6. Effective Date. The effective date of the Program is April 15, 1988.
7. Amendments. The Board of Directors of the Company may, from time to
time, alter, amend, suspend, or discontinue the Program, or alter or
amend any and all Option Agreements granted thereunder; provided,
however, that no such action of the Board of Directors, may alter the
provisions of the
8
<PAGE> 9
Program so as to alter any outstanding Option Agreement to the
detriment of the Optionee without his consent.
8. Use of Proceeds. The proceeds from the sale of Common Stock pursuant
to the exercise of Options will be used for the Company's general
corporate purposes.
9. Authorization. Authorized and made effective by the Board of
Directors on April 15, 1988 pursuant to their signatures below.
/s/ George K. Broady /s/ Theodore A. Waibel, Jr.
- ------------------------- -------------------------------
George K. Broady Theodore A. Waibel, Jr.
9
<PAGE> 1
EXHIBIT 10.8
AMENDMENT NO. 2
TO
ULTRAK, INC.
1988 NON-QUALIFIED STOCK OPTION PLAN
This Amendment No. 2 amends the Ultrak, Inc. 1988 Non-Qualified Stock
Option Plan adopted by the Board of Directors of Ultrak, Inc., a Colorado
corporation (the "Company"), on April 15, 1988, as amended effective November
1, 1991 (the "Plan").
W I T N E S S E T H
WHEREAS, the Plan provides that the Company may grant options to purchase
up to an aggregate of 5,000,000 shares of the Company's Common Stock, no par
value ("Common Stock"), pursuant to the Plan; and
WHEREAS, Section 4(f) of the Plan provides that the number of shares of
Common Stock for which options may be granted to persons participating under
the Plan shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from the subdivision or
consolidation of shares of Common Stock; and
WHEREAS, on December 17, 1993 the shareholders of the Company approved,
effective December 28, 1993, a one for six reverse stock split in the form of a
reclassification of the Company's Common Stock;
NOW, THEREFORE, in consideration of the foregoing, effective December 28,
1993, Section 2 of the Plan is amended to read in its entirety as follows:
"2. Stock Subject to Option. Subject to adjustment as provided in
Sections 4(h) and 4(j) hereof, Options may be granted by the Company from
time to time to purchase up to an aggregate of 833,334 shares of the
Company's authorized but unissued Common Stock, provided that the number
of shares that may be granted to any employee under the Program shall be
reasonable in relation to the purpose of the Program. Shares that by
reason of the expiration of an Option or otherwise are no longer subject
to purchase pursuant to an Option granted under the Program may be
re-Optioned under the Program. The Company shall not be required, upon
the exercise of any Option, to issue or deliver any shares of stock prior
to the completion of such exemption, registration or other
qualification of such shares under state or Federal law, rule or
regulation as the Company shall determine to be necessary or
desirable."
<PAGE> 2
This Amendment No. 2 to the Plan was adopted by the Board of Directors
of the Company as of December 17, 1993.
/s/ GEORGE K. BROADY
------------------------------
George K. Broady, Chairman of
the Board, Chief Executive
Officer and President
/s/ TIM D. TORNO
------------------------------
Tim D. Torno, Vice President
Finance, Treasurer and Secretary
<PAGE> 1
EXHIBIT 10.9
- --------------------------------------------------------------------------------
WARRANT PURCHASE AGREEMENT
by and between
PETRUS FUND, L.P.
ULTRAK, INC.
and
GEORGE K. BROADY
July 20, 1992
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
Article I - Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Article II - The Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.01 The Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.02 Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.03 Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.04 Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.05 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.06 Warrant Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.07 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.08 Cash in Lieu of Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.09 Lost, Stolen, Mutilated, or Destroyed Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Stock Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.10 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Article III - Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.01 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.02 Dilution Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.03 Adjustments to Number of Shares Purchasable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Article IV - Put Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.01 Grant of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.02 Put Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.03 Certain Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.05 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Article V - Co-Sale Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.01 Rights of Co-Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.02 Method of Electing Sale; Allocation of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.03 Sales to Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Article VI - Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.01 Required Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.02 Incidental Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.03 Form S-3 Registrations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.04 Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.05 Allocation of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.06 Listing on Securities Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.07 Holdback Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.08 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Article VII - Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.01 Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.02 Representations and Warranties of Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Article VIII - Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.01 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.02 Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.03 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.04 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.05 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.06 Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
8.07 Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.08 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.09 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
8.10 Warrant Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Article IX - Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.01 Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.02 Loan Agreement Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.03 Material Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.04 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Article X - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.01 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.02 Nominees for Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.03 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.04 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.05 Headings; Section References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.06 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.07 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.08 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.09 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.10 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.11 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.13 Other Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.14 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.15 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
<PAGE> 4
WARRANT PURCHASE AGREEMENT
WARRANT PURCHASE AGREEMENT (the "Agreement") made as of July 20, 1992,
by and between Ultrak, Inc., a Colorado corporation (the "Company"), George K.
Broady (the "Shareholder"), and Petrus Fund, L.P., a Texas limited partnership
(the "Purchaser").
R E C I T A L S
1. Purchaser and the Company have made and entered into that
certain Loan Agreement dated of even date herewith (the "Loan Agreement"),
pursuant to which Purchaser has agreed to make certain advances to the Company;
and
2. Purchaser is willing to enter into and consummate the
transactions contemplated by the Loan Agreement only if, among other things,
the Company and the Shareholder enter into and perform under this Agreement;
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Purchaser, the Shareholder, and the Company, intending to be legally bound,
agree as follows:
Article I
Definitions
As used in this Agreement, the following terms have the meanings
indicated:
Affiliate. With respect to any Person, (a) a Person that directly or
indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such Person, (b) any
Person of which such Person or such Person's spouse is an officer,
director, partner, or, in the case of a trust, the beneficiary or
trustee, and (c) any Person that is an officer, director, partner, or,
in the case of a trust, the beneficiary or trustee of such Person.
The term "control" as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether
through the ownership of voting securities, by contract, or otherwise.
Average Market Value. The average of the Closing Prices for the
security in question for the thirty (30) trading days immediately
preceding the date of determination.
Capital Stock. The Common Stock and any other capital stock of the
Company authorized from time to time, and any other shares, options, interests,
participation, or other equivalents (however designated) of or in the Company,
whether voting or nonvoting,
<PAGE> 5
including, without limitation, common stock, options, warrants, preferred,
stock, phantom stock, stock appreciation rights, preferred stock, convertible
debentures, stock purchase rights, and al agreements, instruments, documents,
and securities convertible, exercisable, or exchangeable, in whole or in part,
into any one or more of the foregoing.
Closing Date. July 20, 1992.
Closing Price.
(a) If the primary market for the security in question is
a national securities exchange registered under the Exchange Act, the
National Association of Securities Dealers Automated Quotation System
-- National Market System, or other market or quotation system in
which last sale transactions are reported on a contemporaneous basis,
the last reported sales price, regular way, of such security for such
day, or, if there is not a sale on such trading day, the highest
closing or last bid quotations therefor on such trading day; or
(b) If the primary market for such security is not an
exchange or quotation system in which last sale transactions are
contemporaneously reported, the highest closing or last bid or asked
quotation in the over-the-counter market on such trading day as
reported by the National Association of Securities Dealers through its
Automated Quotation system or its successor or such other generally
accepted source of publicly reported bid quotations as Purchaser
reasonably designates.
Common Stock. The common stock, without par value, for the Company.
Commission. The Securities and Exchange Commission and any successor
federal agency having similar powers.
Company. Ultrak, Inc. and any successor or assign, and, unless the
context requires otherwise, the term Company includes any Subsidiary.
Exchange Act. The Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
Exercise Price. The price per share specified in Section 2.03, as the
same are adjusted from time to time pursuant to the provisions of this
Agreement.
Fair Market Value.
(a) As to securities regularly traded in the organized
securities markets, the Average market Value; and
5
<PAGE> 6
(b) As to all securities not regularly traded in the
securities markets and other property, the fair market value thereof
as is determined in good faith by the Board of Directors of the
Company at the time of authorization of the transaction giving rise to
the right to receive such securities or property (the "Determination
Date"); provided, however, that, at the election of the Holder, the
Fair Market Value of such securities and other property will be
determined as set forth below. For a period of 30 days after the date
any notice of such transaction is given (the "Negotiation Period"),
the Company and each Holder will negotiate in good faith to reach
agreement on the Fair Market Value of such securities or property, as
of the date such notice was given. In the event that the parties are
unable to agree upon the Fair Market Value of such securities or other
property by the end of the Negotiation Period, the Fair Market Value
of such securities or property will be determined for purposes of this
Agreement by an appraiser selected by Purchaser and reasonably
acceptable to the Company (the "Appraiser") and whose appraisal will
be conclusive and binding on all Persons. Fair Market Value of each
share of Common Stock at a time when (i) the Company is not a
reporting company under the Exchange Act, and (ii) the Common Stock is
not traded in the organized securities markets will, in all cases, be
calculated by determining the Fair Market Value of the entire Company
taken as a whole and dividing that value by the sum of (x) the number
of shares of Common Stock then outstanding plus (y) the number of
shares of Common Stock then issuable upon exercise of the Warrant,
without premium for control or discount for minority interests or
restrictions on transfer. The costs of the Appraiser will be borne by
the Company. In no event will the Fair Market Value of the Common
Stock be less than the per share consideration received or receivable
with respect to the Common Stock in connection with any pending
transaction involving a sale, merger, or liquidation of the Company, a
sale of all or a majority of its assets, or similar transaction.
Holder. Purchaser and all Persons holding Registrable Securities.
Unless otherwise provided herein, in each instance that the Holder is
permitted to request or required to consent to an action to be taken
hereunder, the Holder will be deemed to have requested or consented to
such action if the holders of a majority-in-interest of the
Registrable Securities so request or consent.
Initial Holder. Purchaser and any Affiliate of Purchaser to which the
Warrant is assigned.
Issuable Warrant Shares. Shares of Common Stock or Other
Consideration issuable on exercise of the Warrant.
6
<PAGE> 7
Issued Warrant Shares. Shares of Common Stock or Other Consideration
issuable on exercise of the Warrant.
Loan Agreement. Loan Agreement, as defined in the recitals, and all
documents evidencing indebtedness thereunder or otherwise related
thereto, dated as of the Closing Date, as the same may be amended from
time to time, and any refinancing, refunding, or replacements of the
indebtedness thereunder.
Loan Agreement Termination. Termination of the Loan Agreement by the
Purchaser pursuant to Section 2.09(b) of the Loan Agreement at a time
when there is not Event of Default or Default (as such terms are
defined in the Loan Agreement).
New Securities. Any Capital Stock of the Company other than (a)
securities issued upon exercise of the Warrant; (b) the Permitted
Stock; (c) securities issued in a bona fide acquisition of the
business of an unaffiliated Person or all or a majority of such
person's assets; (d) securities issued on exchange or conversion of
the preferred stock of the Company issued and outstanding on the date
of this Agreement; (e) securities issued under the stock option plan
of the Company as in effect on the date of this Agreement; (f)
securities issued on exercise of warrants to acquire 170,270 shares of
Common Stock issued to Rocky Mountain Securities and Investments; and
(g) securities issued on exercise of the warrants to acquire 70,000
shares of Common Stock issued to Judith A. Schindler.
Note. All or any portion of any of the Revolving Credit Note (as
defined in the Loan Agreement, and any and all documents evidencing
the indebtedness thereunder and any refinancing, refunding, or
replacement thereof.
Other Consideration. Any stock, other securities, property, or other
consideration (other than Common Stock) that the Holder of the Warrant
becomes entitled to receive upon exercise of the Warrant.,
person. Will be interpreted broadly to include any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
organization, association, corporation, institution, entity, party, or
government (whether national, federal, state, county, city, municipal,
or otherwise, including, without limitation, any instrumentality,
division, agency, body, or department thereof).
Permitted Sales. Sales by the Shareholder of Capital Stock in
brokers' transactions (as defined in Rule 144 under the Act) in the
open market and sales by the Shareholder in other transactions not
exceeding five percent (5%) of the amount of
7
<PAGE> 8
any class of Capital Stock beneficially owned by the Shareholder
(determined as of the beginning of the twelve- month period referred
to below) during any twelve-month period.
Permitted Stock. Common Stock or options or warrants to acquire
Common Stock, constituting, in the aggregate, ten percent (10%) or
less of the outstanding Common Stock, issued or reserved for issuance
to present and future key management of the Company pursuant to a
management incentive program. I no event will the number of shares of
Permitted Stock issued or reserved for issuance, in the aggregate,
exceed the lesser of the number of shares constituting ten percent
(10%) of the outstanding Common Stock on the date hereof or on the
date issued.
Put Shares. The Warrant Shares.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
the effectiveness of such registration statement.
Registrable Securities. (a) The Issuable Warrant Shares and (b) the
Issued Warrant Shares that have not been previously sold to the
public.
Requesting Holder. Any Holder who requests registration of
Registrable Securities pursuant to Section 5.01 or 5.02.
Securities Act. the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
Senior Debt. All obligations of the Company under (a) that certain
Loan Agreement, dated June 15, 1992 amount the Company, LPEC, CCTV,
and American Federal Bank, F.S.B., as the same may be amended from
time to time, and any refinancing, refunding, or replacements of the
indebtedness thereunder and (b) that certain Loan and Security
Agreement, dated as of July 1, 1992, between Exxis and Transamerica
Commercial Finance Corporation.
Shareholder. This term is defined in the preamble.
Subsidiary. Loss Prevention Electronics Corporation, a Colorado
corporation ("LPEC"), CCTV Fourth International, Inc., a Texas
corporation ("CCTV"), Exxis Technologies, Inc., a Texas corporation
("ETI"), and each other Person of which or in which the Company and
its other Subsidiaries own directly or indirectly 50% or more of (i)
the combined voting power of all classes of stock having general
voting power under
8
<PAGE> 9
ordinary circumstances to elect a majority of the board of directors
or equivalent body of such Person, if it is a corporation; (ii) the
capital interest or profits interest of such Person, if it is a
partnership, joint venture or similar entity; or (iii) the beneficial
interest of such Person, if it is a trust, association, or other
unincorporated organization.
Warrant. The Warrant, as defined in Section 2.01, dated as of the
Closing Date, issued to Initial Holder, and all warrants issued upon
the transfer or division of or in substitution for such Warrant.
Warrant Shares. The Issued Warrant Shared and the Issuable Warrant
Shares.
Article II
The Warrant
2.01 The Warrant. On the Closing Date, Purchaser agrees to
purchase from the Company at an aggregate total purchase price of ten dollars
($10.00), and the Company agrees to issue to Purchaser, a warrant in
substantially the form of Exhibit A attached hereto and incorporated herein
(collectively, the "Warrant"), to purchase an aggregate of Nine Hundred
Twenty-Eight Thousand Five Hundred Seventy-One (928,571) shares of Common
Stock, all in accordance with the terms and conditions of this Agreement and
pursuant to the provisions set forth below.
2.02 Legend. The Company will deliver to Purchaser on the Closing
Date one or more certificates representing the Warrant in such denominations of
at least one hundred thousand (100,000) shares as Purchaser requests. Suc
certificates will be issued in Purchaser's name or in the name of Purchaser's
designee. It is understood and agreed that the certificates evidencing the
Warrant will bear the following legend:
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN ACQUIRED FOR INVESTMENT ANDNOT WITH A VIEW TO OR FOR
SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THIS WARRANT
AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
ANY STATE SECURITIES LAWS, AND MAY OT BE PLEDGED, SOLD,
OFFERED FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF REGISTRAITON UNDER OR EXEMPTION FROM SUCH ACT AND
ALL APPLICABLE STATE SECURITIES LAWS."
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF
ARE SUBJECT TO THE TERMS AND PROVISIONS OF A WARRANT PURCHASE
AGREEMENT DATED AS OF July 20, 1992, BETWEEN ULTRAK, INC. (THE
"COMPANY"), GEORGE K. BROADY, AND PETRUS FUND, L.P. (AS SUCH
AGREEMENT MAY BE
9
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SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO
TIME, THE "AGREEMENT"). A COPY OF THE AGREEMENT IS AVAILABLE
AT THE EXECUTIVE OFFICES OF THE COMPANY."
2.03 Exercise Price. The Exercise Price per share will be $2.10
for each share of Common Stock covered by the Warrant; provided, however, that
in no event will the aggregate Exercise Price for all of the shares of Common
Stock covered by the Warrant exceed $1,949,999.10 except in the case of
adjustment pursuant to Section 3.03(d), whether as a result of any change in
the par value of the Common Stock or as a result of any change in the number of
shares purchasable as provided in this Article II or otherwise; and provided,
further, that such limitation on the aggregate Exercise Price will have no
effect whatsoever upon the number of shares of Common Stock for which this
Warrant may be exercised.
2.04 Exercise.
(a) The Warrant may be exercised at any time or from time
to time on or after the Closing Date until January 20, 1994, on any
day that is a business day, for all or any part of the number of
shares of Common Stock purchasable upon its exercise, but in no event
for fewer than one hundred thousan (100,000) shares of Common Stock
(subject to adjustment consistent with Section 2.08), except in
instances where the Warrant so exercised is exercisable for fewer than
one hundred thousan (1000,000) shares of Common Stock, in which case
such Warrant will be exercisable in full. In order to exercise the
Warrant, in whole or in part, the Holder will deliver to the Company
at the office of the Company listed in Section 10.07, (i) a written
notice of such Holder's election to exercise the Warrant, specifying
the number of shares of Common Stock to be purchased pursuant to such
exercise, (ii) payment of the Exericise Price, in any amount equal to
the aggregate purchase price for all shares of Common Stock to be
purchased pursuant to such exercise, (ii) payment of the Exercise
Price, in an amount equal to the aggregate purchase price for all
shares of Common Stock to be purchased pursuant to such exercise, and
(iii) the Warrant. Such notice will be substantially in the form of
the Subscription Form appearing at the end of the Warrant. Upon
receipt of the foregoing, the Company will, as promptly as
practicable, and in any event within five (5) business days of such
receipt, execute, or cause to be executed, and deliver to such Holder
a certificate or certificates representing the aggregate number of
full shares of Common Stock issuable upon such exercise, as provided
in this Agreement. The stock certificat or certificates so delivered
will be in such denominations in excess of one hundred thousand
(1000,000) shares (or such lessor number as is provided for in the
first sentence of this Section 2.04(a)) as may be specified in such
notice and will be registered in the name of such Holder, or such
other name as is designated
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in such notice. the Warrant will be deemed to have been exercised and
such certificate or certificates will be deemed to have been issued,
and such Holder or any other Person so designated or named in such
notice will be deemed to have become a holder of record of such shares
for all purposes, as of the date of such notice, together with such
cash or check or checks and the Warrant, is received by the Company.
If the Warrant has been exercised in part, the Company will, at the
time of delivery of such certificate of certificates, deliver to such
Holder a new Warrant evidencing the rights of such Holder to purchase
a number of shares of Common Stock with respect to which the Warrant
has been exercised, which new Warrant will, in all other respects, be
identical with the Warrant, or, at the request to such Holder,
appropriate notation may be made on the Warrant and returned to such
Holder.
(b) Payment of the Exercise Price will be made, at the option
of the Holder, by company or individual check, certified or official
bank check, or cancellation of any debt owed by the Company to the
Holder. If the Holder surrenders a combination of cash and
cancellation of any debt owed by the Company to the Holder, the Holder
will specify the respective number of shares of Common Stock to be
purchased with each form of consideration, and the foregoing
provisions will be applied to each form of consideration with the same
effect as if the Warrant were being separately exercised with respect
to each form of consideration; provided, however, that the Holder may
designate that any cash to be remitted to the Holder in payment of
debt be applied, together with other monies to the exercise of the
portion of the Warrant being exercised for cash.
2.05 Taxes. The issuance of any Common Stock or Other
Consideration upon the exercise of the Warrant will be made without charge to
the Holder for any tax, other than income taxes assessed on the Holder, in
respect of the issuance of such certificate.
2.06 Warrant Register. The Company will, at all times while the
Warrant remains outstanding and exercisable, keep and maintain at its principal
office a register in which the registration, transfer, and exchange of the
Warrant will be provided for. The Company will not at any time, except upon
the dissolution, liquidation, or winding up of the Company, close such register
so as to result in preventing or delaying the exercise or transfer of the
Warrant.
2.07 Transfer and Exchange. Subject to applicable securities laws
the Warrant and all options and rights under the Warrant are transferable, as
to all or any part of the number of shares of Common Stock and Other
Consideration purchasable upon its exercise, by the Holder of the Warrant, in
person or by duly authorized
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attorney, on the books of the Company upon surrender of the Warrant at the
principal offices of the Company, together with the form of transfer
authorization attached to the Warrant duly executed; provided, however, that
any transfer of rights under the Warrant will be for no fewer than the greater
of (a) one hundred thousand shares and (b) all Issuable Warrant Shares
represented by such Warrant. Absent any such transfer and subject to Section
10.02, the Company may deem and treat the registered Holder of the Warrant at
any time as the absolute owner of the Warrant for all purposes and will not be
affected by any notice to the contrary. If the Warrant is transferred in part,
the Company will at the time of surrender of the Warrant, issue to the
transferee a Warrant covering the number of shares of Common Stock transferred
and to the transferor a Warrant covering the number of shares not transferred.
2.08 Cash in Lieu of Fractional Shares. If the Holder of the
Warrant would be entitled, on the exercise of any rights evidenced thereby, to
receive a fractional interest in a share, the Holder may, at its sole option,
cause the Company to issue such fractional share or to purchase such fractional
interest for an amount in cash equal to the Average Market Value (or in the
absence thereof, the Fair Market Value) of such fractional interest, determined
as of the date on which the Holder exercises the Warrant.
2.09 Lost, Stolen, Mutilated, or Destroyed Warrants. If the
Warrant is lost, stolen, mutilated, or destroyed, the Company will issue a new
Warrant of like denomination, tenor, and date as the Warrant so lost, stolen,
mutilated, or destroyed upon presentation by the Holder of a reasonable
indemnity in customary form. Any such new Warrant will constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated, or destroyed Warrant is at any time enforceable by anyone.
2.10 Stock Legend. The Warrant and the securities issuable upon
exercise of the Warrant have not been registered under the Securities Act or
qualified under applicable state securities laws. Accordingly, unless there is
an effective registration statement and qualification respecting those
securities issued upon exercise of the Warrant under the Securities Act or
under applicable state securities laws at the time of exercise of the Warrant,
any stock certificate issued pursuant to the exercise of the Warrant will bear
the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES
LAWS AND (B) ARE SUBJECT TO THE TERMS OF AND PROVISIONS OF A WARRANT
PURCHASE AGREEMENT
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<PAGE> 13
DATED AS OF JULY 20, 1992 BETWEEN PETRUS FUND, L.P., ULTRAK, INC. (THE
"COMPANY"), and GEORGE K. BROADY (AS SUCH AGREEMENT MAY BE
SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE
"AGREEMENT"). A COPY OF THE AGREEMENT IS AVAILABLE AT THE OFFICES OF
THE COMPANY."
2.10 Termination. Notwithstanding Section 2,04(a), this Agreement
and the Warrant will terminate and be of no further force and effect in the
event of a Loan Agreement Termination.
ARTICLE III
Anti-Dilution Provisions
3.01 Preemptive Rights. The Company will not issue or sell any New
Securities without first complying with this Section 3.01. The Company hereby
grants to the Holder the preemptive right to purchase, pro rata, all or any
part of the New Securities that the Company may, from time to time, propose to
sell or issue. The Holder's pro rata share for purposes of this Section 3.01
is the ratio that the number of Warrant Shares owned by such Holder immediately
prior to the issuance of the New Securities, bears to the sum of (i) the total
number of shares of Common Stock then outstanding, plus (ii) the number of
shares of Common Stock issuable upon exercise of all Warrants then outstanding.
In the event the Company proposes to issue or sell New Securities, it will give
each Holder written notice of its intention, describing the type of New
Securities and the price and terms upon which the Company proposes to issue or
sell the New Securities. Each Holder will have ten (10) days from the date of
receipt of any such notice to agree to purchase up to its respective pro rata
share of the New Securities for the price (valued at Fair Market Value) for any
noncash consideration) and upon the terms specified in the notice by giving
written notice to the Company and stating in such notice the quantity of New
Securities agreed to be purchased. In the event a Holder fails to exercise
such preemptive right within such ten (10) day period, the other Holders, if
any, will have an additional five (5) day period to purchase such Holder's
portion not so agreed to be purchased in the same proportion in which such
other Holders were entitled to purchase the New Securities (excluding for such
purposes such nonpurchasing Holder). Thereafter, the Company will have thirty
(30) days to consummate the sale of the New Securities not elected to be
purchased by the Holders at the same price and upon the same terms specified in
the Company's notice described above; provided; however, that the Company may
proceed with such sale prior to the expiration of the periods during which the
Holders may exercise their preemptive rights if the Company reserves sufficient
shares for such Holders to exercise such preemptive rights in full. In the
event the Company has not sold the New Securities within such thirty (30) day
period, the Company will not thereafter issue or sell any New Securities,
without first offering such securities in the manner provided above.
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3.02 Dilution Fee.
(a) Without limiting the ability of the Company to pay
dividends on its currently outstanding preferred stock, in case at any
time after the date of this Agreement, the Company declares a dividend
or makes a distribution upon the shares of Capital Stock otherwise
than out of consolidated earnings or consolidated earned surplus
(determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for a
minority interest, if any, in Subsidiaries), and otherwise than in
securities to which the provisions of Section 3.02(b) apply, and
provided that such dividend or distribution does not otherwise result
in an adjustment of the Exercise Price pursuant to any other provision
of this Agreement, the Company will immediately pay to each Holder,
the securities and other property (including cash) that such Holder
would have received (together will all distributions thereon) if such
Holder had exercised its Warrants on the record date fixed in
connection with such dividend or distribution.
(b) If at any time, or from time to time, on or after the
date of this Agreement the Company grants, issues, or sells any
options or rights to purchase Capital Stock pro rata to the Holders of
any class of Capital Stock, then if the Holders are entitled to an
adjustment pursuant to the provisions of this Article III, in lieu of
such adjustment, each Holder will be entitled, at such Holder's
option, to acquire (whether or not the Warrants have been exercised)
upon the terms applicable to such options or rights, the aggregate of
such options or rights that such Holder could have acquired if such
Holder had held the number of Warrant Shares issuable on exercise of
its Warrants immediately prior to the time at which the Company
granted, issued, or sold such options or rights.
3.03 Adjustments to Number of Shares Purchasable.
(a) The Warrant will be exercisable for the number of
shares of Common Stock in such manner that following the complete and
full exercise of the Warrant the amount of Common Stock issued to the
Holder will equal, to the nearest whole share, Nine Hundred
Twenty-Eight Thousand Five Hundred Seventy-One (928,571) shares of
Common Stock, as adjusted, to the extent necessary, to give effect to
the following events:
(i) In case at any time or from time to time, the
holders of any class of Capital Stock have received, or (on or
after the record date fixed for the determination of
shareholders eligible to receive) have become entitled to
receive, without payment therefor:
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<PAGE> 15
(A) consideration (other than cash) by
way of dividend or distribution; or
(B) consideration (including cash) by
way of spin-off, split-up, reclassification
(including any reclassification in connection with a
consideration or merger in which the Company is the
surviving corporation), recapitalization, combination
of shares into a smaller number of shares, or similar
corporate restructuring);
other than additional shares of Common Stock issued as a stock
dividend or in a stock-split (adjustments in respect of which
are provided for in Sections 3.03(a)(ii) and (iii)), then, and
in each such case, the Holder of the Warrant, on the exercise
of the Warrant, will be entitled to receive for each share of
Common Stock issuable under the Warrant as of the record date
fixed for such distribution, the greatest per share amount of
consideration received by any holder of any class of Capital
Stock or to which such holder is entitled. All such
consideration receivable upon exercise of the Warrant with
respect to such a distribution will be deemed to be
outstanding and owned by such Holder for purposes of
determining the amount of consideration to which such Holder
is entitled upon exercise of the Warrant with respect to any
subsequent distribution or dividend.
(ii) If at any time there occurs any stock split,
stock dividend, reverse stock split, or other subdivision of
the Common Stock, then the number of shares of Common Stock to
be received by the Holder of the Warrant and the Exercise
Price, subject to the limitations set forth in this Agreement,
will be proportionately adjusted.
(iii) In case of any reclassification or change of
outstanding shares of any class of Capital Stock (other than a
change in par value, or from par value to no par value, or
from no par value to par value), or in the case of any
consolidation of the Company with, or merger of the Company
with or into, another Person, or in case of any sale of all,
or a majority of, the property, assets, business, or goodwill
of the Company, the Company, or such successor or other
Person, as the case may be, will provide that the Holder of
this Warrant will thereafter be entitled to receive the
highest per share kind and amount of consideration received or
receivable (including cash) upon such reclassification,
change, consolidation, merger, or sale by any holder of any
class of Common Stock that this Warrant entitles the Holder to
receive immediately prior to such reclassification, change,
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<PAGE> 16
consolidation, merger, or sale (as adjusted pursuant to Section
3.03(a)(i) and otherwise in this Agreement). Any such
successor Person, which thereafter will be deemed to be the
Company for purposes of the Warrant, will provide for
adjustments that are nearly equivalent as may be practicable to
the adjustments provided for by this Section 3.30.
(iv) If at any time the Company issues or sells
any shares of any Capital Stock at a per unit or share price
less than the then current Fair Market Value per share of
Common Stock immediately prior to the time such Capital Stock
is issued or sold, then:
(A) the Exercise Price will be reduced
to the price calculated by multiplying the then
existing Exercise Price by a fraction, the numerator
of which is (x) the sum of (1) the number of shares
of Capital Stock outstanding immediately prior to
such issuance or sale, multiplied by the Fair Market
Value per share of Common Stock immediately prior to
such issuance or sale, plus (2) the aggregate
consideration received by the Company upon such
issuance or sale, divided by the total number of
shares of Capital Stock outstanding immediately after
such issuance or sale, and the denominator of which
is the (y) Fair Market Value per share of Common
Stock immediately prior to such issuance or sale (for
purposes of this subsection (A), the date as of which
the Fair Market Value per share of Common Stock will
be computed will be the earlier of the date upon
which the Company enters into a firm contract for the
issuance of such shares, or issues such shares); and
(B) the number of shares of Common Stock
for which the Warrant may be exercised at the
Exercise Price resulting from the adjustment
described in subsection (A) above will be equal to
the product of the number of shares of Common Stock
purchasable under the Warrant immediately prior to
such adjustment multiplied by a fraction, the
numerator of which is the Exercise Price in effect
immediately prior to such adjustment and the
denominator of which is the Exercise Price resulting
from such adjustment.
(v) In case any event occurs as to which the
preceding Sections 3.3(a)(i) through (iv) are not strictly
applicable, but as to which the failure to make any adjustment
would not fairly protect the purchase rights represented by
the Warrant in accordance with the
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<PAGE> 17
essential intent and principles of this Agreement, then, in
each such case, the Holder may appoint an independent
investment bank or firm of independent public accountants
reasonably acceptable to the company, which will give its
opinion as to the adjustment, if any, on a basis consistent
with the essential intent and principles established in this
Agreement, necessary to preserve the purchase rights
represented by the Warrant. Upon receipt of such opinion, the
company will promptly deliver a copy thereof to the Holder and
will make the adjustments described in such opinion. The fees
and expenses of such investment bank or independent public
accountants will be borne equally by the Company, on the one
hand, and the Holders, on the other.
(b) The Company will not by any action including, without
limitation, amending its charter documents or through and
reorganization, reclassification, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other similar
voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Agreement or the Warrant, but will at all
times in good faith assist in the carrying out of all such terms and
in the taking of all such actions as may be necessary or appropriate
to protect the right of the Holder against impairment or dilution.
Without limiting the generality of the foregoing, the Company will (i)
take all such action as may be necessary or appropriate in order that
the company may validly and legally issue fully paid and nonassessable
shares of Common Stock and Other Consideration upon the exercise of
this Warrant, free and clear of all liens, encumbrances, equities and
claims and (ii) use its best efforts to obtain all such
authorizations, exemptions, or consents from any public regulatory
body having jurisdiction as may be necessary to enable the company to
perform its obligations under the Warrant. Without limiting the
generality of the foregoing, the Company represents and warrants that
the board of directors of the company has determined the Exercise
Price to be adequate and in the best interests of the company and its
shareholders.
(c) Any calculation under this Section 3.03 will be made
to the nearest one thousandth of a share and rounded upwards to the
nearest whole share.
(d) If each of the conditions listed in Sections
3.03(d)(i) through (iii) below are fulfilled at any time prior to
January 20, 1993, then the Exercise Price will be increased by fifteen
percent (15%). Such increase in Exercise Price will be subject to the
fulfillment of each of the following conditions:
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(i) There not having occurred at any time after
the date of this Agreement any default under this Agreement or
the Loan Agreement.
(ii) There not being any continuing Default or
Event of Default (as defined in the Loan Agreement) at the
time of the fulfillment of the condition set forth in Section
3.03(d)(iii).
(iii) All indebtedness (as defined in the Loan
Agreement) having been fully and unconditionally paid and
performed under the Loan Agreement and not subject to any
offset, recoupment, claim, or condition.
(iv) The Company having voluntarily terminated in
accordance with the terms of the Loan Agreement, the Loan
Agreement and the Revolving Credit Note.
Such increase in the Exercise Price will be deemed effective only upon
completion of the conditions specified above.
Article IV
Put Option
4.01 Grant of Option. The company hereby grants to the Holder an
option to sell to the company, and the Company is obligated to purchase from
the Holder under this option (the "Put Option"), all (or such portion as is
designated by the Holder) of the Put Shares. The Put Option will be effective
at any time or times with ninety (90) days after receipt of written notice of
the occurrence of any of the following events (the "Put Option Period"):
(a) a material change in the ownership of the Company;
for purposes of this subsection "material change" means the
Shareholder ceasing, directly or indirectly, to own thirty-three and
one third percent (33 1/3%) of the Common Stock on a fully diluted
basis (including in the computation of the amount so owned all Common
Stock equivalents held by the Shareholder and without giving effect to
the issuance of any shares of Common Stock under the Warrant); or
(b) a merger of the Company or sale of all or a majority
of the assets, business, or revenue or earnings generating operations
of the Company or any Subsidiary or any substantial change in the type
of business conducted by the Company or any Subsidiary.
4.02 Put Price. In the event that any Holder exercises the Put
Option, the price (the "Put Price") to be paid to each such Holder pursuant to
this Agreement will be cash in the sum of the amount determined by multiplying
the Fair Market Value per share of
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Common Stock times the number of shares of Common Stock for which the Put
Option is being exercised by such Holder together with the Fair Market Value of
the Other Consideration issuable upon exercise of the Warrant.
4.03 Certain Remedies.
(a) Except as otherwise provided in Section 4.04(b), in
the event that the Company defaults in its obligation to purchase all
or any portion of the Warrant and/or the Warrant Shares upon exercise
of the Put Option, in addition to any other rights or remedies of
Purchaser, the unpaid portion of the purchase price will bear interest
at the lesser of 13% or the highest rate permitted by applicable law.
(b) In the event that the payment of the exercise price
or any portion thereof in cash causes the Company to be in default on
the Senior Debt or in violation of any applicable law, the company
will (i) purchase or cash the maximum amount of the Put Shares
permissible, (ii) provide Purchaser a certificate and notice
satisfactory in form and substance to Purchaser describing in
reasonable detail the default resulting from payment of all or a
portion of the Put Price and/or the legal reasons why such payment may
not be made.
4.05 Closing. The closing for the purchase and sale of all or such
portion of the Put Shares as to which the Holder has notified the company of
its intention to exercise the Put Option, will occur at Purchaser's office,
which is located at the address set forth in Section 10.07 hereof, on the date
specified in such notice of exercise, no less than thirty (30) days from
delivery of such notice of exercise of such option (an "Option Closing"). At
any Option Closing, to the extent applicable, the Holder of the Put Shares will
deliver the certificate or certificates evidencing the Put Shares being
purchased, duly endorsed in blank. In consideration therefor, the company will
deliver to the Holder the Put Price, which will be payable in cash.
Article V
Co-Sale Rights
5.01 Rights of Co-Sale. In the event that the Shareholder intends
to sell or transfer any shares of any class of Capital Stock in excess of the
amount of Permitted Sales beneficially owned by him to any Person other than a
Related Party, directly or indirectly, each Holder will have the right to
participate in such sale or transfer on the terms set forth below; provided,
however, none of the provisions of this Agreement will apply to any sale by the
Shareholder of shares of Capital Stock in a bona fide underwritten public
offering under the Securities Act, so long as
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all Holders have had an opportunity to participate in such offering pursuant to
the registration rights under this Agreement.
5.02 Method of Electing Sale; Allocation of Sales. No sale or
transfer by the Shareholder of any shares of Capital Stock in excess of the
amount of Permitted Sales will be valid unless the transferee of such Capital
Stock first agrees in writing to be bound by the terms of this Agreement and to
have the liabilities and obligation of the "Shareholder," as such term is used
in this Agreement. No such sale or transfer by the Shareholder will effect any
delegation of its duties, obligations, or liabilities under this Agreement. In
addition, before any shares of Capital Stock in excess of the amount of
Permitted Sales held, directly or indirectly, by the Shareholder may be sold or
transferred to a Person other than a Related Party, such selling Shareholder
(as such, the "Selling Shareholder") will comply with the following provisions:
(a) The Selling Shareholder will deliver or cause to be
delivered a written notice (the "Notice of Sale") to each Holder as of
that time at least ten (10) days prior to making any such sale or
transfer. The Company agrees to provide the Selling Shareholder with
a list of the names and addresses of each such Holder for such
purpose. The Notice of Sale will sate (i) the Selling Shareholder's
bona fide intention to sell or transfer, (ii) the name and address of
the prospective transferee (the "Transferee"), (iii) the number of
shares of Capital Stock of the company to be sold or transferred, (iv)
the terms and conditions of the contemplated sale or transfer, (v) the
purchase price, in cash, that the Purchaser will pay for such shares
of Capital Stock, and (vi) the expected closing date of the
transaction. The Selling Shareholder will not sell or transfer any
shares of Capital Stock for consideration other than cash.
(b) Any Holder receiving the Notice of Sale may elect to
participate in the contemplated sale or transfer by exercising its
right to co-sell its Capital Stock pursuant to Section 5.02(c). Such
right may be exercised in the sole discretion of the Holder by
delivering a written notice (an "Election Notice") to the Company and
the Selling Shareholder within ten (10) days after receipt of such
Notice of Sale stating the election of the Holder to exercise its
right of co-sale pursuant to Section 5.02(c).
(c) Each Holder may elect to sell or transfer in the
contemplated transaction up to the total of the number of shares of
Warrant Shares then held by it. Promptly after the receipt of an
Election Notice exercising such right, the Selling Shareholder will
use his best efforts to cause the Transferee to amend its offer so as
to provide for the Transferee's purchase, upon the same terms and
conditions as
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<PAGE> 21
those contained in the Notice of Sale, of all of the Warrant Shares
elected to be sole (the "Co-Sell Shares") in such Election Notices.
In the event that the Transferee is unwilling to amend its offer to
purchase all of the co-Sell Shares in addition to the shares of
Capital Stock described in the related Notice of Sale, if the Selling
Shareholder desires to proceed with the sale, the total number of
shares that such Transferee is willing to purchase will be allocated
to the Selling Shareholder and each Holder having given an Election
Notice exercising its right pursuant to this Section 5.02(d) (the
"Co-Sellers") in proportion to the aggregate number of Warrant Shares
held by each such Person; provided, however, that no such Person will
be so allocated a number of shares greater than the number of shares
that it sought to sell to such Transferee in the related Notice of
Sale or Election Notice.
All Capital Stock sold or transferred by the Selling
Shareholder and the co-Sellers with respect to a single Notice of Sale
under Section 5.02(b) will be sold or transferred to the Transferee in
a single closing on the terms described in such Notice of Sale, and
each such share will receive the same per share cash consideration.
In the event that the Transferee, for any reason, declines to purchase
any shares from any Holder delivering an Election Notice, then the
Selling Shareholder will not be permitted to sell or transfer any
shares of Capital Stock to such Transferee.
5.03 Sales to Related Parties.
(a) No sale or transfer of shares of Capital Stock by the
Shareholder to a Related Party will be subject to the provisions of
Section 5.02(a), (b), or (c); provided, however, that such Related
Party first agrees to assume the obligations of the Shareholder
(without relieving such Shareholder of any obligations under this
Agreement) under this Agreement with respect to the shares of Capital
Stock thereby acquired by it and to be a "Shareholder" as such term is
used in this Agreement in a written instrument in a form and substance
satisfactory to the Holders.
(b) For purposes of this Section 5.03, "Related Party"
means the spouse of lineal descendents of the Selling Shareholder or
an entity wholly owned by the Selling Shareholder and/or one or more
Related Parties or a trust solely for the benefit of the Selling
Shareholders or one or more Related Parties.
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Article VI
Registration Rights
6.01 Required Registration. At any time the Holders may, upon not
more than one (1) occasion, make a written request to the company requesting
that the company effect the registration of Registrable Securities. After
receipt of such a request, the Company will, as soon as practicable, notify all
Holders of such request and use its best efforts to effect the registration of
all Registrable Securities that the Company has been so requested to register
by the Holders for sale, all to the extent required to permit the disposition
(in accordance with the intended method or methods thereof) of the Registrable
Securities so registered. In no event will any Person other than a Holder be
entitled to include any shares of Capital Stock in any registration statement
filed pursuant to this Section 6.01. Notwithstanding the foregoing, the
Company will not be obligated to register any Registrable Securities as to
which counsel acceptable to the Holders renders an opinion in form and
substance satisfactory to the Holders to the effect that such Registrable
Securities are freely saleable under Rule 144 under the Securities Act.
6.02 Incidental Registration. If the Company at any time proposes
to file on its behalf or on behalf of any of its security holders a
registration statement under the Securities Act on any form (other than a
registration statement on Form S-4 or S-8 or any successor form) for any class
that is the same or similar to Registrable Securities, it will give written
notice to all holders of Registrable Securities at least thirty (30) days
before the initial filing with the Commission of such registration statement,
and offer to include in such filing such Registrable Securities as such Holders
may request. Each Holder of any such Registrable Securities desiring to have
Registrable Securities registered under this Section 6.02 will advise the
Company in writing within thirty (30) days after the date of receipt of such
offer from the Company, setting forth the amount of such Registrable Securities
for which registration is requested. The Company will thereupon include in
such filing the number of Registrable Securities for which registration is so
requested, and will use its best efforts to effect registration under the
Securities Act of such Registrable underwriter or underwriters, if any, of such
offering deliver a written opinion to the Holders of such Registrable
Securities that the success of the offering would be materially and adversely
affected by inclusion of the Registrable Securities requested to be included,
then the amount of securities to be offered for the accounts of Holders will be
reduced pro rata (according to the Registrable Securities proposed for
registration) to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount recommended by such managing
underwriter or underwriters; provided, that if securities are being offered for
the account of other Persons as well as the Company,
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then with respect to the Registrable Securities intended to be offered by
Holders, the proportion by which the amount of such class of securities
intended to be offered by Holders is reduced will not exceed the proportion by
which the amount of such class of securities intended to be offered by Holders
is reduced will not exceed the proportion by which the amount of such class of
securities intended to be offered by such other Persons (other than the
Company) is reduced.
6.03 Form S-3 Registrations. In addition to the registration rights
provided in Sections 6.01 and 6.02 above, if at any time the Company is
eligible to use Form S-3 (or any successor form) for registration of secondary
sales of capital stock, any Holder of Registrable Securities may request in
writing that the Company register shares of Registrable Securities on such
form. Upon receipt of such request, the Company will promptly notify all
holders of Registrable Securities in writing of the receipt of such request and
each such Holder may elect (by written notice sent to the Company within ten
(10) days of receipt of the Company's notice) to have its Registrable
Securities included in such registration pursuant to this Section 6.03.
Thereupon the Company will, as soon as practicable, use its best efforts to
effect the registration on Form S-3 of all Registrable Securities that the
Company has so been requested to register by such Holder for sale. The Company
will use its best efforts to qualify and maintain its qualification for
eligibility to use Form S-3 for such purposes.
6.04 Registration Procedures. In connection with any registration of
Registrable Securities hereunder, the Company will, as soon as practicable:
(a) prepare and file with the Commission a registration
statement with the respect to such securities and use its best efforts
to cause such registration statement to become and remain effective
for a period of time required for the disposition of such securities
by the holders thereof;
(b) prepare and file with the Commission such amendments
and company to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all
securities covered by such registration statement until the earlier of
such time as all of such securities have been disposed of or the
expiration of one hundred eighty (180) days (except with respect to
registrations effected on Form S-3 or any successor form, as to which
no such period shall apply);
(c) furnish to the Holders such number of copies of the
registration statement and prospectus (including, without limitation,
a preliminary prospectus) in conformity with the
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requirements of the Securities Act (in each case including all
exhibits) and each amendment or supplement thereto, together with such
other documents as such Holders may reasonably request;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United
States and Puerto Rico as each Holder reasonably requests, and do such
other acts and things as may be reasonably required of it to enable
such Holder to consummate the disposition in such jurisdiction of the
securities covered by such registration statement;
(e) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its securities holders, as soon as practicable, an earnings
statement covering the period of at least twelve months beginning with
the first month after the effective date of such registration
statement, which earnings statement will satisfy the provisions of
Section 11(a) of the Securities Act;
(f) provide and cause to be maintained a transfer agent
and registrar for Registrable Securities covered by such statement
from and after a date not later than the effective date of such
registration statement;
(g) if requested by the underwriters for any underwritten
offering or Registrable Securities on behalf of a holder of
Registrable Securities pursuant to a registration requested under
Section 6.01, the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to contain
such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, provisions with respect to indemnities and contribution as
are reasonably satisfactory to such underwriters and the Holders; the
Holders of on whose behalf Registrable Securities are to be
distributed by such underwriters will be parties to any such
underwriting agreement and the representations and warranties by, and
the other agreements on the part of, the Company to and for the
benefit of such underwriters, will also be made to and for the benefit
of such Holders of Registrable Securities; and no Holder of
Registrable Securities will be required by the Company to make any
representations or warranties to or agreements with the Company or the
underwriters other than reasonable and customary representations,
warranties, or agreements regarding such Holder, such Holder's
Registrable Securities, and such Holder's intended method or methods
of disposition and any other representation required by law;
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(h) furnish, at the written request of any Holder on the
date that such Registrable Securities are delivered to the
underwriters for sale pursuant to such registration or, if such
Registrable Securities are not being sold through underwriters, on the
d ate that the registration statement with respect to such Registrable
Securities becomes effective, (i) an opinion in form and substance
satisfactory to such Holders, and addressing matters customarily
addressed in underwritten public offering, of the counsel representing
the Company for the purposes of such registration (who will not be an
employee of the Company and who will be satisfactory to such Holders),
addressed to the underwriters, if any, and to the selling Holders; and
(ii) a letter (the "comfort letter") in form and substance
satisfactory to such Holders, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and
to the selling Holders making such request (and, if such accountants
refuse to deliver the comfort letter to such Holders, then the comfort
letter will be addressed to the Company and accompanied by a letter
addressed to such Holders stating that they may rely on the comfort
letter addressed to the Company); and
(i) during the period when the registration statement is
required to be effective, notify each selling Holder of the happening
of any event as a result of which the prospectus included in the
registration statement contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
It will be a condition precedent to the obligation of the
Company to take any action pursuant to this Article VI in respect of
the securities that are to be registered at the request of any Holder
of Registrable Securities that (i) such Holder furnish to the Company
such information regarding the Registrable Securities held by such
Holder and the intended method of disposition thereof as is required
in connection with the action taken by the Company and (ii) such
Holder agrees to enter into a customary indemnification agreement with
the Company and any underwriter agreeing to indemnify and hold
harmless such Persons against costs, damages, and liability arising
out of any misstatement of a material fact or omission to state a
material fact required to be stated in order to make such statements
not misleading to the extent such misstatement or omission is made by
such Holder in a
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written instrument expressly intended for inclusion in the
registration statement. The managing underwriter or underwriters, if
any, for any offering of Registrable Securities to be registered
pursuant to Section 6.01 or 6.03 will be selected by the Holders of a
majority of the Registrable Securities being so registered.
6.05 Allocation of Expenses. Except as provided in the
following sentence, the Company will bear all expenses arising or
incurred in connection with any of the transactions contemplated by
this Article VI, including, without limitation, (a) all expenses
incident to filing with the National Association of the Securities
Dealers, Inc., (b) registration fees, (c) printing expenses, (d)
accounting and legal fees and expenses, (e) expenses of any special
audits or comfort letters incident to or required by any such
registration or qualification, and (f) expenses of complying with the
securities or blue sky laws of any jurisdictions in connection with
such registration or qualification. Each Holder will bear the expense
of its underwriting fees, discounts, commissions relating to its sale
of Registrable Securities.
6.06 Listing on Securities Exchange. If the Company lists
any shares of Capital Stock on any securities exchange or on the
National Association of Securities Dealers, Inc. Automated Quotation
System, it will, at its expense, list thereon, maintain and, when
necessary, increase such listing of, all Registrable Securities.
6.07 Holdback Agreements.
(a) if any registration pursuant to Section 6.02 is in
connection with an underwritten public offering, each Holder of
Registrable Securities agrees, if so required by the managing
underwriter, not the effect any public sale or distribution of
Registrable Securities (other than as part of such underwritten public
offering) within seven (7) days prior to the effective date of such
registration statement or the earlier of the ninetieth (90th) day
after the effective date of such registration statement or the date
all securities registered under such registration statement are sold;
provided, however, that the Shareholder and each person that is an
officer, director, or owner of five percent (5%) or more of the
outstanding shares of any class of capital stock of Company entered
into similar agreements.
(b) The Company and the Shareholder agree (i) not to
effect any public sale or distribution within seven (7) days (or such
longer period as may be prohibited by Rule 10b-6 under the Exchange
Act) prior to the effective date of the registration statement
employed in any underwritten public
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offering and prior to the earlier of the ninetieth (90th) day after
any such registration statement contemplated by Section 5.01 and 5.03
has become effective and the date on which all securities registered
under such registration statement are sold, except as part of such
underwritten public offering pursuant to such registration statement
and except pursuant to securities registered on Forms S-4 or S-8 of
the Commission of any successor forms, and (ii) use their best efforts
to cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company at any time after
the date of this Agreement (other than in a public offering), to agree
not to effect any such public sale or distribution of such securities
during such period.
6.08 Rule 144. At all times the Company will take such action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell shares of Registrable Securities without
registration pursuant to and in accordance with (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.
Article VII
Representations and Warranties
7.01 Representations and Warranties of the Company and the
Shareholder. The Company represents and warrants to the Purchaser that:
(a) The Company is a corporation duly organized and existing
and in good standing under the laws of the State of Colorado and is
qualified or licensed to do business in all other countries, states,
and jurisdictions the laws of which require it to be so qualified or
licensed, except where failure to do so would not have a material,
adverse effect on the Company. Each Subsidiary is a corporation duly
organized and existing and in good standing under the laws of its
jurisdiction of incorporation and is qualified or licensed to do
business in all other countries, states, and jurisdictions the laws of
which require it to be so qualified or licensed, except where failure
to do so would not have a material, adverse effect on the Company.
The Company has no Subsidiaries or debt or equity investment in any
Person other than LPEC, ETI, and CCTV. Except for liens related to
the Senior Debt and the Loan Agreement, the Company owns 100% of the
equity interests of LPEC, ETI, and CCTV free and clear of all liens,
claims, and encumbrances, and no Person has any rights whether granted
by the Company or any Subsidiary to
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acquire any portion of the equity interest of any Subsidiary or the
assets of the Company or any Subsidiary.
(b) Each of the Company and the Shareholder has, and at all
times that this Agreement is in force will have, the right and power
and is duly authorized to enter into, execute, deliver, and perform
this Agreement and, in the case of the Company, the Warrant, and the
officers of Company executing and delivering this Agreement and the
Warrant are duly authorized to do so. This Agreement and the Warrant
have been duly and validly executed, issued, and delivered and
constitute the legal, valid, and binding obligations of Company and
the Shareholder, enforceable in accordance with their respective
terms.
(c) The execution, delivery, and performance of this
Agreement and the Warrant will not, by the lapse of time, the giving
of notice or otherwise, constitute a violation of any applicable
provisions contained in Company's Articles or Certificate of
Incorporation or Bylaws or any Subsidiary's charter or organizational
documents or contained in any agreement, instrument, or document to
which Company, any Subsidiary, or the Shareholder is a party or by
which any of them is bound.
(d) As of June 30, 1992, the Company's authorized capital
stock consists of 50,000,000 shares of common stock, without par
value, of which 38,920,085 shares are issued and outstanding and
928,571 shares of Common Stock are reserved for issuance on exercise
of the Warrant. The number of shares issued since June 30, 1992 is
not material. All such issued and outstanding shares have been duly
authorized and validly issued, are fully paid and nonassessable and
have been offered, issued, sold, and delivered by Company free from
preemptive or similar rights and in compliance with applicable federal
and state securities laws. Except (i) pursuant to this Agreement,
(ii) except for the Permitted Stock, and (iii) except as set forth in
Schedule II to the Loan Agreement on the date of this Agreement, the
Company is not obligated to issue or sell any Capital Stock.
(e) The shares of Common Stock issuable on exercise of the
Warrant have been duly and validly authorized and reserved for
issuance and, when issued in accordance with the terms of the Warrant
will be validly issued, fully paid, and nonassessable and free of
preemptive of similar rights.
(f) The Company has good, indefeasible, and merchantable
title to and ownership of all of its assets free and clear of all
liens, pledges, security interests, claims, or other encumbrances
except pursuant to the Senior Debt and the Loan Agreement.
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(g) There is not now, and at no time during the term of this
Agreement will there be, any agreement, arrangement, or understanding
involving the Company or the Shareholder, other than this Agreement,
modifying, restricting, or in any way affecting the rights of the
Shareholder to vote securities of the Company.
(h) Each of the representations and warranties made by the
Company pursuant to the Loan Agreement is true and correct.
7.02 Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company and the Shareholder that:
(a) Purchase is a limited partnership duly organized and
existing and in good standing under the laws of the State of Texas.
(b) Purchaser has the right and power and is duly authorized
to enter into, execute, deliver, and perform this Agreement, and the
agents of the Purchaser executing this Agreement, and the agents of
the Purchaser executing and delivering this Agreement are duly
authorized to do so. This Agreement has been duly and validly
executed, issued, and delivered and constitutes the legal, valid, and
binding obligation of Purchaser, enforceable in accordance with its
terms.
(c) The execution, delivery, and performance of this
Agreement will not, by the lapse of time, the giving of notice or
otherwise, constitute a violation of any material applicable provision
contained in Purchaser's organizational documents or contained in any
material agreement, instrument, or document to which Purchaser is a
party or by which it is bound.
(d) Purchaser (i) is an "accredited investor," as that term
is defined in Regulation D under the Securities Act, or (ii) has such
knowledge, skill, and experience in business and financial matters,
based on actual participation, that it is capable of evaluating the
merits and risks of an investment in the Company and the suitability
thereof as an investment for Purchaser, and has received such
documents and information as it has requested and has had an
opportunity to ask questions of and receive satisfactory answers from
the Company concerning the terms and conditions of the investment
proposed herein and based thereon believes it can make an informed
investment decision.
(e) Except as otherwise contemplated by this Agreement,
Purchaser represents that it is acquiring the Warrant and any
securities issuable upon exercise thereof for investment for
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its own account and not with a view to any distribution thereof in
violation of applicable securities laws.
(f) Purchaser agrees that the certificates representing the
Warrants and any securities issuable upon exercise thereof will bear
the appropriate legends referencing restrictions on transfer and the
Warrant or securities issuable upon exercise thereof, as the case may
be, will not be offered, sold or transferred in the absence of
registration or exemption under applicable securities laws.
Article VIII
Covenants
The Company covenants and agrees that so long as the Purchaser or its
Affiliates own any Warrants or Warrant Shares:
8.01 Financial Statements. The Company will comply with Section 4.01
of the Loan Agreement and furnish to each Holder the information referred to
therein, and, in addition provide to each Holder:
(a) As soon as available, a copy of each (i) financial
statement, report, notice, or proxy statement sent by the Company to
its shareholders in their capacity as shareholders, (ii) regular,
periodic, or special report, registration statement, or prospectus
filed by the Company with any securities exchange, state securities
regulator, or the Commission, (iii) material order issued by any
court, governmental authority, or arbitrator in any material
proceeding to which the Company is a party, (iv) press release or
other statement made available generally by the Company to the public
generally concerning material developments in the business of the
Company, and (v) a copy of all correspondence, reports, and other
information sent by the Company to any holder of any indebtedness,
including the holders of Senior Debt.
(b) Promptly, such additional information concerning the
Company as Purchaser may reasonably request, including without
limitation auditor management letters or reports and audit "waiver"
lists and any information available to a director of the Company.
8.02 Laws. The Company and the Shareholder will comply with all
applicable statutes, regulations, and orders of the United States, domestic and
foreign states, and municipalities, and all agencies, and instrumentalities of
the foregoing applicable to the Company and the Shareholder, a violation of
which might materially and adversely affect the ability of the Company or the
Shareholder to perform their respective obligations under this Agreement.
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8.03 Inspection. The Company will permit any representative designed
by Purchaser (at the expense of Purchaser) upon reasonable notice and during
normal business hours, to (a) visit and inspect any of the properties of the
Company, (b) examine the corporate and financial records of Company and made
copies thereof or extracts therefrom, and (c) discuss the affairs, finances,
and accounts of the Company with the directors, officers, employees, and
independent accountants of the Company; provided, however, that any such visit,
inspection, examination, or discussion will not unreasonably disrupt the normal
business operations of the Company. In addition to any rights under this
Section 8.03, the Company will give Purchaser not less than twenty-four (24)
hours actual notice of all regular meetings and twenty-four (24) hours actual
notice of all special meetings of the Company's Board of Directors, will permit
a person designated from time to time by Purchaser to attend such meetings as
an observer and will provide such person with all information available to the
directors of the Company. Such regular meeting will be held at least
quarterly. The Company will reimburse such person for expenses incurred
traveling to and attending such meetings.
8.04 Certain Actions. Without the prior written consent of Purchaser,
which consent may be withheld in the sold discretion of Purchaser, the
Shareholder will not permit the Company or any Subsidiary to, and neither the
Company nor any Subsidiary will:
(a) except for Permitted Stock, enter into any transaction or
transactions with any director, officers, employee, or shareholder of
the Company or any Subsidiary, or any Affiliate or relative of the
foregoing except upon terms that, in the reasonable opinion of
Purchaser, are fair and reasonable and that, are, in any event, at
least as favorable as would result in a comparable arm's-length
transaction with a Person not a director, officer, employee,
shareholder, or Affiliate of the Company or any Affiliate or related
party of the foregoing, or advance any monies to any such Persons,
except for travel advances in the ordinary course of business;
(b) increase beyond the amounts permitted pursuant to the Loan
Agreement as of the date of this Agreement the amount of benefits
payable under any benefit plan in the aggregate, or increase the
aggregate amount of salary and any other direct and indirect
remuneration (including, but not limited to, employee benefits,
professional, management, and consulting fees and expenses, and
bonuses under any plans) paid or accrued by the Company or any
Subsidiary during any fiscal year to or for the direct or indirect
benefit of any of its or its Subsidiaries' officers, directors, or
shareholders;
(c) except as required by the Senior Debt ont he date hereof,
acquire any debt or equity interest in any Person or establish or
acquire a Subsidiary other than LPEC, ETI, and
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CCTV or make any additional capital contribution or purchase any
additional equity in LPEC, ETI, and CCTV or make any advances or loans
to any Subsidiary or transfer any technology or assets to any
Subsidiary;
(d) allow the aggregate par value of the Capital Stock subject
to the Warrant from time to time to exceed the price payable or
exercise of the Warrant, as adjusted from time t time; or
(e) obligate itself or otherwise agree to take, permit or
enter into any of the events described in subsections (a) through (d)
above.
8.05 Records. The Company will keep books and records of account in
which full, true, and correct entries will be made of all dealings and
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied to a consistent basis.
8.06 Accountants. The Company will retain independent public
accountants who will certify the Company's consolidated financial statements at
the end of each fiscal year, and in the event that the services of the
independent public accountants so selected, or any firm of independent public
accounts employed by Company, are terminated, the Company will promptly
thereafter notify Purchaser and upon Purchaser's request, the Company will
request the firm of independent public accountants whose services are
terminated to deliver to Purchaser a letter of such firm setting forth the
reasons for the termination of their services and in its notice to Purchaser
the Company will state whether the change of accountants was recommended or
approved by the Board of Directors of the Company or any committee thereof.
The Company, its Subsidiaries, and the Shareholder will release and indemnify
such accountants from and against any liability arising out of the delivery of
suc letter to Purchaser.
8.07 Existence. The Company and each Subsidiary will maintain in
full force and effect its corporate existence, rights, and franchises and all
licenses and other rights.
8.08 Notice.
(a) In the event of (i) any setting by the Company of a
record date with respect to the holders of any class of securities of
the company for the purpose of determining which of such holders are
entitled to dividends, repurchases of securities, or other
distributions, or any right to subscribe for, purchase, or otherwise
acquire any shares of Capital Stock or other property or to receive
any other right; or (ii) any capital reorganization of the Company, or
reclassification or recapitalization of the Capital Stock or any
transfer of
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all or a majority of the assets of the company to, or consolidation or
merger of the Company or any Subsidiary; or (iii) any voluntary or
involuntary dissolution, liquidation, or winding up of the Company; or
(iv) any proposed issue or grant by the Company of any Capital Stock,
or any right or option to subscribe for, purchase, or otherwise
acquire any Capital Stock (other than the issue of Capital Stock
pursuant to exercise of the Warrant), then and in each such event the
Company will deliver or cause to be delivered to the registered Holder
of the Warrant at the time outstanding a notice specifying, as the
case may be, (A) the date on which any such record is to be set for
the purpose of such dividend, distribution or right, and stating the
amount and character of such dividend, distribution, or right; (B) the
date as of which the holders of record will be entitled to vote on any
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, conveyance, dissolution, liquidation, or
winding-up; (C) the date on which any such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
conveyance, dissolution, liquidation, or winding-up is to take place
and the time, if any is to be fixed, as of which the holders of record
of any class of Capital Stock (or such stock or securities receivable
upon the exercise of the Warrant) will be entitled to exchange their
shares of Capital Stock (or such other stock or securities) for
securities or other property deliverable upon such event; and (D) the
amount and character of any Capital Stock, property or rights proposed
to be issued or granted, the consideration to be received therefor
and, in the case of rights or options, the exercise price thereof, and
the date of such proposed issue or grant and the Persons or class of
Persons to whom such proposed issue or grant will be offered or made.
Any such notice will be deposited in the United States mail, postage
prepaid, at least thirty (30) days prior to the date therein
specified, and notwithstanding anything in this Agreement to the
contrary the registered Holder of the Warrant may exercise the Warrant
within thirty (30) days from the receipt of such Notice.
(b) If there is any adjustment as provided above in
Article III, or if securities or property other than shares of Common
Stock of the Company becomes purchasable in lieu of shares of such
Common Stock upon exercises of the Warrant, the Company will promptly
cause written notice of such occurrence to be sent to the registered
Holders, which notice will, upon request of the Purchaser, be
accompanied by a certificate of the independent public accountants or
other independent professional firm reasonably acceptable to the
Purchaser in form and substance satisfactory to Purchaser of the
Company setting forth in reasonable detail the basis for the Holder's
becoming entitled to purchase such shares and the number of shares
that may be purchased and the Exercise Price
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thereof, or the facts requiring any such adjustment and the Exercise
Price and number of shares purchasable after such adjustment, or the
kind and amount of any such securities or property so purchasable upon
the exercise of the Warrant, as the case may be. At the request of
Holder and upon surrender of the Warrant, the Company will reissue
this Warrant in a form conforming to such adjustments.
8.09 Taxes. The Company will file all required tax returns,
reports, and requests for refunds on a timely basis and will pay on a timely
basis all axes imposed on either of them or upon any of assets, income, or
franchises.
8.10 Warrant Rights. The Company covenants and agrees that during
the term of this Agreement and so long as the Warrant is outstanding, (a) the
Company will at all times have authorized and reserved a sufficient number of
shares of Capital Stock to provide for the exercise in full of the rights
represented by the Warrant, (b) the Company will not increase or permit to be
increased the par value per share or stated capital of its Common Stock or
other shares purchasable under the Warrant or the consideration receivable upon
issuance of its Capital Stock, and (c) in the event that the exercise of the
Warrant would require the payment by the Holder of consideration for the Common
Stock or Other Consideration receivable upon such exercise of less than the par
or stated value of such stock, the Company and the Shareholder will promptly
take, and use its best efforts to have its security holders take, such action
as may be necessary to change the par or stated value of such stock to an
amount less than or equal to such consideration.
Article IX
Conditions
The obligations of Purchaser to effect the transactions contemplated
by this Agreement will be subject to the following conditions:
9.01 Opinion. Purchaser shall have received favorable opinions,
dated the Closing Date, from Gardere & Wynne, a Registered Limited Liability
Partnership, counsel for Company, in form and substance satisfactory to
Purchaser and its counsel and addressing, without limitation, the matters set
forth in Sections 7.01(a), (b), (c), (d), and (e).
9.02 Loan Agreement Conditions. all of the conditions precedent to
the obligations of Purchaser under the Loan Agreement will have been satisfied
in full.
9.03 Material Change. There will have occurred no material adverse
change in the business prospects, results, operations, or condition, financial
or otherwise, of the Company.
34
<PAGE> 35
9.04 Proceedings. All proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents necessary to the
consummation of this Agreement, will be satisfactory in form and substance to
Purchaser and its counsel, and Purchaser and its counsel will have received
copies (executed or certified as may be appropriate) of all documents,
instruments, and agreements that Purchaser or such counsel may request in
connection with the consummation of such transactions.
Article X
Miscellaneous
10.01 Indemnification. In addition to any other rights or remedies
to which Purchaser may be entitled, the Company agrees to and will indemnify
and hold harmless Purchaser and its Affiliates and their successors, assigns,
officers, directors, employees, attorneys, and agents (individually and
collectively, and "Indemnified Party") from and against any and all losses,
claims, obligations, liabilities, penalties, causes of action, damages, costs,
and expenses (including, without limitation, cost of defense, reasonable
attorneys' fees and expenses, including, without limitation, those arising out
of the negligence of any Indemnified Party, that the Indemnified party may
suffer, incur, or be responsible for arising or resulting form any damage or
deficiency resulting from any misrepresentation, breach of warranty, or
nonfulfillment of any agreement on the part of the Company or the Shareholder
under this Agreement, the Loan Agreement or any other agreement to which the
Company or the Shareholder is a party in connection with this transaction, or
from any misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished to Purchaser under this Agreement or
the Loan Agreement.
10.02 Nominees for Beneficial Owners. In the event that any
Registrable Securities are held by a nominee for the beneficial owner, the
beneficial owner thereof, may, at its election, be treated as the Holder of
such Registrable Securities for purposes of any request or other action by any
Holder or Holders of Registrable Securities held by any Holder or Holders of
Registrable Securities contemplated by this Agreement. If the beneficial owner
of any Registrable Securities so elects, the Company may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities. In no event will a Holder be required to exercise the
Warrant as a condition to the registration of such Warrant of Registrable
Securities.
10.03 Default. It is agreed that a violation by any party of the
terms of this Agreement cannot be adequately measured or compensated in money
damages, and that any breach or threatened breach of this Agreement by a party
to this Agreement would do irreparable injury to the nondefaulting party. It
is, therefore, agreed that in the event of any breach or threatened breach by a
35
<PAGE> 36
party to this Agreement of the terms and conditions set forth in this
Agreement, the nondefaulting party will be entitled, in addition to any and all
other rights and remedies that it may have in law or in equity, to apply for
and obtain injunctive relief requiring the defaulting party to be restrained
from any such breach or threatened breach or to refrain from a continuation of
any actual breach. Unless otherwise specifically provided in this Agreement,
in the event that either party defaults on any obligation to make payments
under this Agreement, the unpaid amount will bear interest at an annual rate
equal to the lesser of 13% or the highest rate permitted by applicable law.
10.04 Integration. This Agreement constitutes the entire agreement
between the parties with respect to the written and all previous or
contemporaneous oral negotiations, understandings, and agreements. This
Agreement may not be amended or supplemented except by a writing signed by
Company, the Shareholder, and the Holders of Warrants for a majority of the
Warrant Shares.
10.05 Headings; Section References. The headings in this Agreement
are for convenience and reference only and are not part of the substance of
this Agreement. All references in the Agreement to the Sections, subsections,
and Articles are references to the Sections, subsections, and Articles of this
Agreement unless the context requires otherwise.
10.06 Severability. The parties to this Agreement expressly agree
that it is not the intention of any of them to violate any public policy,
statutory or common law rule, regulation, or decision of any governmental or
regulatory body. If any provision of this Agreement is judicially or
administratively interpreted or construed as being in such provision, section,
sentence, word, clause, or combination thereof will be inoperative (and in lieu
thereof or there will be inserted such provision, sentence, word, clause, or
combination thereof as may be valid and consistent with the intent of the
parties under this Agreement) and the remainder of this Agreement, as amended,
will remain binding upon the parties to this Agreement, unless the inoperative
provision would cause enforcement of the remainder of this Agreement to be
inequitable under the circumstances.
10.07 Notices. Whenever it is provided in this Agreement that any
notice, demand, request, consent, approval, declaration, or other communication
be given to or served upon any of the parties by another, such notice, demand,
request, consent, approval, declaration, or other communication will be in
writing and will be deemed to have been validly served, given or delivered (and
"the date of such notice" or words of similar effect will mean the date) three
(3) days after deposit in the United States mails, certified mail, return
receipt requested, with proper postage prepaid, or upon receipt thereof
(whether by non-certified mail,
36
<PAGE> 37
telecopy, telegram, express delivery or otherwise), whichever is earlier, and
addressed to the party to be notified as follows:
If to Purchaser, at: Petrus Fund, L.P.
1700 Lakeside Square
12377 Merit Drive
Dallas, Texas 75251
FAX: 214-788-3097
Attn: Sherry Richardson Pate
with copies to: Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attn: Glen Hettinger
FAX: 214-939-6100
If to the Company, at: Ultrak, Inc.
1220 Champion Circle
Suite 100
Carrollton, Texas 75006
Attn: Tim D. Torno
FAX: 214-280-9659
with copies to: Gardere & Wynne
A Registered Limited Liability
Partnership
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Attn: Richard Waggoner
FAX: 214-999-4828
If to the Shareholder: George K. Broady
1220 Champion Circle
Suite 100
Carrollton, Texas 75006
FAX: 214-280-9659
or to such other address as each party may designate for itself by like notice.
Notice to any Holder other than Purchaser will be delivered as set forth above
to the address shown on the stock transfer books of the Company or the Warrant
Register unless such Holder has advised the Company in writing of a different
address as to which notices will be sent under this Agreement.
Failure or delay in delivering copies of any notice, demand, request,
consent, approval, declaration or other communication to the persons designated
above to receive copies of the actual notice will not adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration,
or other communication.
37
<PAGE> 38
10.08 Successors. This Agreement will be binding upon and inure to
the benefit of the parties and their respective successors and assigns.
10.09 Remedies. The failure of any party to enforce any right or
remedy under this Agreement, or promptly to enforce any such right or remedy,
will not constitute a waiveR thereof, nor give rise to any estoppel against
such party, nor excuse any other party from its obligation under this
Agreement. Any waiver of any such right or remedy by any party must be in
writing and signed by the party against which such waiver is sought to be
enforced.
10.10 Survival. All warranties, representations, and covenants made
by any party in this Agreement or in any certificate or other instrument
delivered by such party or on its behalf under this Agreement will be
considered to have been relied upon by the party to which it is delivered and
will survive the Closing Date, regardless of any investigation made by such
party or on its behalf. All statements in any such certificate or other
instrument will constitute warranties and representations under this Agreement.
10.11 Fees. Except for fees and expenses of preparation of this
Agreement, as to which each party will bear its own, any and all reasonable
fees, costs, and expenses, of whatever kind and nature, including reasonable
attorneys' fees and expenses, incurred by Purchaser in connection with the
defense or prosecution of any actions or proceedings arising out of or in
connection with this Agreement will be borne and paid by the Company within
then (10) days of demand by Purchaser.
10.12 Counterparts. This Agreement may be executed in any number of
counterparts, which will individually and collectively constitute one
agreement.
10.13 Other Business. It is understood and accepted that Purchaser
and its Affiliates have interests in other business ventures that may be in
conflict with the activities of the Company and that nothing in this Agreement
limit the current or future business activities of such parties whether or not
such activities are competitive with those of the Company. The Company and the
Shareholder agree that all business opportunities in any field substantially
related to the business of the Company will be pursued exclusively through the
Company; provided, that Purchaser consents thereto; and, provided, further,
that if Purchaser does not consent to the Company's pursuing such opportunity,
that the Shareholder may pursue such opportunity through Person other than the
Company. In no event the Shareholder or any Affiliate of the Shareholder use
any of the trade secrets or confidential or proprietary information of the
Company or any of its assets or personnel for their own benefit, directly or
indirectly.
38
<PAGE> 39
10.14 Choice of Law. THIS AGREEMENT HAS BEEN EXECUTED, DELIVERED
AND ACCEPTED BY THE PARTIES IN THE STATE OF TEXAS, WILL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF TEXAS, AND WILL BE INTERPRETED AND THE RIGHTS OF THE
PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE
THERETO AND THE INTERNAL LAWS OF THE STATE OF TEXAS APPLICABLE TO AN AGREEMENT
EXECUTED, DELIVERED, AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO ANY
CHOICE-OF-LAW RULE OR OTHER POLICY THEREOF THAT MIGHT REQUIRE THE APPLICATION
OF THE LAWS OF ANY OTHER JURISDICTION.
10.15 Publicity. The Company and the Shareholder will not make any
press release or other public statement regarding this Agreement or the
transactions contemplated hereby without the prior written consent of the
Purchaser.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
PETRUS FUND, L.P.
By: Perot Investments, Inc.
its General Partner
By: /s/ STEVEN L. BLASNIK
---------------------------
Steven L. Blasnik,
President
UNTRAK, INC.
By: /s/ GEORGE K. BROADY
--------------------------
Name: George K. Broady
-------------------------
Title: President
------------------------
/s/ GEORGE K. BROADY
---------------------------
George K. Broady
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION WITH
THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE UPON
EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED
FOR SALE, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO
THE TERMS AND PROVISIONS OF A WARRANT PURCHASE AGREEMENT DATED AS OF JULY 20,
1992, BETWEEN ULTRAK, INC. (THE "COMPANY"), GEORGE K. BROADY, AND PETRUS FUND,
L.P. (AS SUCH AGREEMENT MAY BE
39
<PAGE> 40
SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE
"AGREEMENT"). A COPY OF THE AGREEMENT IS AVAILABLE AT THE EXECUTIVE OFFICES OF
THE COMPANY.
928,571 shares of
Common Stock,
without par value,
of the Company Warrant No. [*]
WARRANT TO PURCHASE COMMON STOCK OF
Ultrak, Inc.
This is to certify that, in consideration of ten dollars ($10.00) and
other valuable consideration, which is hereby acknowledged as received, Petrus
Fund, L.P., its successors and registered assigns, is entitled at any time
after the Closing Date (as defined in the Agreement) to exercise this Warrant
to purchase Nine Hundred Twenty-Eight Thousand Five Hundred Seventy-One
(928,571) shares of the common stock, without par value, of Ultrak, Inc. (the
"company"), as the same is adjusted from time to time pursuant to the
provisions of the Agreement at a price per share as specified in the Agreement
and to exercise the other rights, powers, and privileges provided in the
Agreement, all on the terms and subject to the conditions specified herein and
in the Agreement.
This Warrant is issued under, and the rights represented hereby are
subject to the terms and provisions continued in the Agreement, to all terms
and provisions of which the registered holder of this Warrant, by acceptance of
this Warrant, assents. Reference is hereby made to the Agreement for a more
complete statement of the rights and limitations of rights of the registered
holder of this Warrant and the rights and duties of the Company under this
Warrant. Copies of the Agreement are on file at the office of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed.
Dated as of July 20, 1992.
UNTRAK, INC.
By: ______________________________
Name:______________________________
Title:_____________________________
40
<PAGE> 41
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of this Warrant irrevocable exercises
this Warrant for an purchases __________ of the number of shares of Common
Stock of Ultrak, Inc. purchasable with this Warrant, and herewith makes payment
therefor, all at the price and on the terms and conditions specified in this
Warrant and requests that certificates for the shares of Capital Stock hereby
purchased (and any securities or other property issuable upon such exercise) be
issued in the name of and delivered to ____ whose address is
________________________________________________ and if such shares of Common
Stock do not include all of the shares of Common Stock issuable as provided in
this Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Common Stock issuable thereunder to be delivered to the undersigned.
Dated: ____________________, 19___.
By: ______________________________
Name:______________________________
Title:_____________________________
Address: _________________________
_________________________
_________________________
41
<PAGE> 42
SUBSCRIPTION FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant
hereby sells, assigns, and transfers unto the Assignee named below all of the
rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
No. of Shares Name and Address of Assignee
and does hereby irrevocably constitute and appoint as attorney
_________________________ to register such transfer on the books of Ultrak,
Inc. maintained for the purpose, with full power of substitution in the
premises.
Dated: ____________________, 19___.
By: ______________________________
Name:______________________________
Title:_____________________________
42
<PAGE> 1
EXHIBIT 10.10
S T O C K W A R R A N T
Ultrak, Inc., a Colorado corporation ("Company") hereby certifies that
for $10.00 received, Judith A. Schindler of 5258 Princeton Way, Boca Raton,
Florida 33496 ("Owner") is entitled to purchase from the Company at any time
before 5:00 p.m., local time, on March 31, 1995, a maximum of $70,000 shares of
the no par value common stock of the Company (the number and character of such
shares being subject to adjustment as provided below) at $1.25 per share. This
warrant is subject to the following terms and conditions:
1. Exchange of Warrants. This warrant at any time prior to the
exercise hereof, upon presentation and surrender to the Company may be
exchanged, alone, or with warrants of like tenor, registered in the name of
such Owner for another warrant or other warrants of like tenor in the name of
such owner exercisable for the same aggregate number of shares as the warrant
or warrants surrendered.
2. Nontransferable. This warrant is personal, nontransferable
and nonassignable.
3. Exercise of Warrant. The Owner may purchase shares pursuant
to this warrant by surrendering this warrant certificate with the form of the
subscription which is attached hereto duly executed by the Owner to the Company
at the principal office of the Company at 300 Crescent Court, Suite 1300,
Dallas, Texas 75201, accompanied by payment in full or in part. This warrant
may be exercised in whole or in part. If exercised in part only, the Company
will deliver to the Owner a new warrant of like tenor in the name of the Owner
evidencing the right to purchase the number of shares as to which this warrant
has not been exercised. Notwithstanding anything herein to the contrary, each
certificate for shares purchased under this warrant shall bear a legend as
follows:
"The securities represented by this certificate are
restricted securities or securities owned by an affiliate of
the issuer within the meaning of the Securities Act Rule 144.
The securities may not be sold or transferred in the absence
of an effective registration under the Securities Act of 1933
or an opinion of counsel satisfactory to the issuer that the
sale or transfer is exempt from registration under said Act."
4. Registration Rights. The Owner, agrees that before any
disposition is made of any shares purchased pursuant to the warrant, the Owner
shall give written notice to the Company
STOCK WARRANT - Page 1
<PAGE> 2
describing briefly the manner of any such proposed disposition. The shares
shall not be transferred unless and until (i) the Company has advised the Owner
that it is satisfied that the shares may be sold pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as amended, or
(ii) a Registration Statement has been filed by the Company and made effective
by the Securities and Exchange Commission relating to such shares.
The Owner shall have the right to have his warrants and warrant shares
included in the Registration Statement proposed to be filed by the Company in
connection with the representations made and obligations undertaken pursuant to
its Regulation D offering dated October 22, 1991.
If at any time after the date hereof the Company proposes to file with
the Securities and Exchange Commission a Registration Statement for some
purpose other than of the registering the shares subject to or purchased
pursuant to warrants, it shall give written notice of the proposed filing to
the Owner of the warrants, at the Owner's address appearing on the records of
the Company. Unless the underwriter, if any, of such proposed offering
objects, the Company shall offer to include in such filing any proposed
disposition of warrants or warrant shares, upon receipt by the Company within
15 days after receipt of such notice, of a request from the Owner of the
warrant or warrant shares to include such shares under the Registration
Statement. Such persons shall also set forth the facts with respect to such
proposed disposition. THE COMPANY SHALL BE OBLIGATED TO REGISTER THE WARRANTS
OR WARRANT SHARES OWNED BY OWNER ONLY ONE (1) TIME AND THEN ONLY IN SUCH STATE
WHEREIN THE OWNER RESIDES. OWNER'S WARRANT MUST BE EXERCISED, IN FULL, PRIOR
TO THE EFFECTIVENESS OF ANY REGISTRATION STATEMENT FILED RELATING TO THE
REGISTRATION OF SUCH WARRANT OR WARRANT SHARES. All costs involved in such
registration will be borne by the Company. The Company agrees to use its best
efforts to cause any Registration Statement filed by it relating to the
warrants or warrant shares to be declared effective by the Securities and
Exchange Commission.
The Company and the Owner of the warrant or shares purchased pursuant
to warrants will cooperate with each other in the preparation and filing of any
such Registration Statement. The Owner will indemnify and hold the Company and
its officers, directors and controlling persons harmless against all losses,
damages, expenses and liabilities based upon, or arising out of, or in
connection with the investigation of any untrue statement of a material fact
contained in any such Registration Statement out of or based upon or in
investigation of any untrue statement of a material fact contained in any such
Registration Statement or arising out of or based upon or in connection with
the investigation of an omission to state a material fact required to
STOCK WARRANT - Page 2
<PAGE> 3
be stated or necessary to make any statement therein not misleading to the
extent that such untrue statement or omission was made by the Company or its
officers and directors in reliance upon information furnished by such Owner.
The Company will indemnify and hold each Owner and each person, if any, who
controls such Owner harmless against all losses, damages, expenses and
liabilities based upon or arising out of or in connection with the
investigation of any untrue statement of a material fact contained in any such
Registration Statement or based upon or arising out of or in connection with
the investigation of, an omission to state a material fact required to be
stated or necessary to make any statement therein not misleading, but only to
the extent that such untrue statement or omission was not made by the Company
or its officers or directors upon information furnished by such Owner. Prior
to the effective date of any such Registration Statement, the Company and each
Owner of the warrants or shares purchased pursuant to warrants shall enter into
reciprocal indemnification agreements as herein contemplated substantially in
the form customarily used by investment bankers.
5. Anti-Dilution. If prior to the exercise of this warrant the
Company shall have effected one or more stock split-ups, stock dividends, or
other increases or reductions of the number of shares of its common stock
outstanding without receiving compensation therefor in money, services or
property, the number of shares of common stock subject to the warrant hereby
granted shall (a) if a net increase shall have been effected in the number of
outstanding shares of the Company's stock, be proportionally increased and the
cash consideration payable per share be proportionally reduced; and (b) if a
net reduction shall have been effected in the number of outstanding shares of
the Company's common stock, be proportionally reduced and the cash
consideration payable per share be proportionally increased.
6. Reorganizations and Liquidations. If prior to the expiration
of the warrant the Company adopts a Resolution to merge, consolidate,
reorganize with the meaning of the Internal Revenue Code of 1986, sell
substantially all of its assets or to liquidate and dissolve, the Company shall
give written notice thereof by certified mail to the registered Owner of the
warrants at the address shown on the Company's records. If the warrant Owner
does not elect in writing within fifteen days to exercise the warrants, then
the warrants shall be forfeited. The exercise price of the warrants may be
paid at any time after election but prior to the effective date of any such
merger, consolidation, sale of assets or liquidation and dissolution.
7. Reservation of Shares. The Company will at all times reserve
and keep available out of its authorized shares, solely for issuance upon the
exercise of this warrant and other similar warrants, such number of its shares
as shall be issuable upon the
STOCK WARRANT - Page 3
<PAGE> 4
exercise of this warrant and all other similar warrants at the time
outstanding.
8. Warrant Holder Not a Shareholder. The holder of this warrant,
as such, shall not be entitled by reason of this warrant to any rights
whatsoever as shareholder of the Company.
9. Notices. All notices and other communications from the
Company to the holder of the warrant shall be mailed first class certified
mail, preposted, to the address last furnished in writing to the Company by the
Owner of this warrant.
Dated ___________________________, 1995
ULTRAK, INC.
S E A L By: __________________________________
George K. Broady, President
STOCK WARRANT - Page 4
<PAGE> 5
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
TO: ULTRAK, INC.
300 Crescent Court
Suite 1300
Dallas, Texas 75201
The undersigned, the Owner of within the Warrant, hereby irrevocably
elects to exercise the purchase rights represented by such Warrant for, and to
purchase thereunder _________________, Common Shares of the Company, and
herewith makes payment of $______________ therefor, and requests that the
certificates for such shares be issued in the name of and be delivered to
_______________________ whose address is ________________________ and if such
shares shall not be all of the shares purchasable hereunder, that a new Warrant
of like tenor for the balance of the shares purchasable hereunder be delivered
to the undersigned.
Dated: _____________________________, 19__
______________________________________
(Signature must conform in all
respects to the name of the Owner as
specified on the face of the Warrant).
STOCK WARRANT - Page 5
<PAGE> 1
EXHIBIT 10.11
NationsBank
NationsBank of Texas, N.A.
- --------------------------------------------------------------------------------
FIRST AMENDMENT
to
FINANCING AND SECURITY AGREEMENT
by and among
NATIONSBANK OF TEXAS, N.A.
and
ULTRAK, INC.,
LOSS PREVENTION ELECTRONICS CORPORATION,
CCTV SOURCE INTERNATIONAL, INC.,
DENTAL VISION DIRECT, INC.
Dated: Effective October 31, 1994
<PAGE> 2
NationsBank
NationsBank of Texas, N.A.
- --------------------------------------------------------------------------------
FIRST AMENDMENT
to
FINANCING AND SECURITY AGREEMENT
This First Amendment to Financing and Security Agreement dated
effective October 31, 1994 (the "Effective Date") is executed and entered into
by and among NATIONSBANK OF TEXAS, N.A. a national bank ("Lender"), and each of
(i) ULTRAK, INC., a Colorado corporation, (iii) CCTV SOURCE INTERNATIONAL,
INC., a Texas corporation, and (iv) DENTAL VISION DIRECT, INC., a Texas
corporation (each severally a "Borrower" and collectively "Borrowers"), as
follows:
Recitals
Lender and Borrowers are parties to the certain Financing and Security
Agreement dated effective as of October 31, 1994 (the "Financing and
Security Agreement"). Terms defined in the Financing and Security
Agreement, wherever used herein, shall have the same meanings as are
prescribed by the Financing and Security Agreement.
Lender and Borrowers have agreed to amend the Financing and Security
Agreement as provided herein.
Therefore, for and in consideration of ten dollars ($10.00) and other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
together with the mutual benefits provided herein, Lender and each Borrower
hereby agree as follows:
1. Paragraph 1.4 ("Aggregate Borrowing Base") hereby is amended
to read in its entirety as follows:
"1.4 "Aggregate Borrowing Base" at any time means an amount equal to
(i) up to a maximum of eighty- five percent (85%) of the aggregate
Eligible Accounts of Borrowers plus (ii) up to a maximum of forty-
five percent (45%) of the aggregate Eligible Inventory of Borrowers
(but limited however to an amount not exceeding the lesser of (i)
$6,000,000.00 or (ii) fifty percent (50.0%) of the aggregate unpaid
balance of the Revolving Facility, less (iii) the Reserve."
2. Paragraph 1.16 ("Company Borrowing Base") hereby is amended to
read in its entirety as follows:
<PAGE> 3
"1.16 "Company Borrowing Base" as to any Borrower any time means an
amount equal to (i) up to a maximum of eighty-five percent (85%) of
the Eligible Accounts of such Borrower plus (ii) up to a maximum of
forty-five percent (45%) of the Eligible Inventory of such Borrower
provided that the maximum amount outstanding under the Revolving
Facility in respect of advances against all Eligible Inventory shall
not at any time exceed the lesser of (a) $6,000,000.00 or (b) fifty
percent (50%) of the aggregate unpaid balance of the Revolving
Facility), less (iii) the Reserve applicable to such Borrower."
3. Paragraph 1.19 ("Credit Limit") hereby is amended to read in
its entirety as follows:
"1.19 "Credit Limit" means the amount of Twelve Million and no/100
Dollars ($13,200,000.00)."
4. Contemporaneously upon execution hereof, each Borrower shall
execute and deliver to Lender a renewal promissory note in the face amount of
$13,200,000.00, which shall be in renewal of the existing Revolving Note of
such Borrower, but otherwise on substantially the same terms as provided
therein. Upon such execution and delivery, such renewal promissory note shall
thereupon be the Revolving Note of such Borrower under the Financing and
Security Agreement.
5. Contemporaneously upon execution of this agreement, each
Borrower shall deliver to Lender a copy of corporate resolutions approving this
agreement, authorizing the transactions contemplated hereby, and authorizing
and directing a named officer or officers to execute and deliver this agreement
and any related documents contemplated hereby to be executed by such party,
duly adopted by the board of directors, accompanied by the certificate of the
corporate secretary, dated as of the Effective Date, that such copy is a true
and complete copy of resolutions duly adopted by the board of directors, and
that such resolutions have not been amended, modified, or revoked in any
respect and are in full force and effect as of the date hereof. Such
resolutions shall be in form and substance satisfactory to Lender.
6. Each Borrower represents that, as of the Effective Date, it is
in compliance with all requirements under the Financing and Security Agreement
and that no Event of Default exists thereunder.
7. Each Borrower on the one hand, and Lender on the other, each
represents to the other that all necessary corporate action has been taken to
authorize its execution and performance of this agreement.
8. The Loan Documents, supplemented as provided herein, hereby
are ratified and confirmed as being and remaining valid and in full force and
effect in accordance with their respective terms, as so supplemented.
<PAGE> 4
9. This agreement (i) shall be deemed effective prospectively as
of the Effective Date, (ii) contains the entire agreement among the parties and
may not be amended or modified except in writing signed by all parties, (iii)
shall be governed and construed according to the laws of the State of Texas and
(iv) may be executed in any number of counterparts, each of which shall be
valid as an original and all of which shall be one and the same agreement. A
telecopy of any executed counterpart shall be deemed valid as an original.
THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
EXECUTED as of the Effective Date specified in the preamble.
NATIONSBANK OF TEXAS, N.A.
By: /s/ FORREST W. McCOLLUM
-----------------------------------
Forrest W. McCollum
Vice President
ULTRAK, INC.
By: /s/ GEORGE K. BROADY
-----------------------------------
George K. Broady
President
LOSS PREVENTION ELECTRONICS CORPORATION
By: /s/ GEORGE K. BROADY
-----------------------------------
George K. Broady
President
CCTV SOURCE INTERNATIONAL, INC.
By: /s/ GEORGE K. BROADY
-----------------------------------
George K. Broady
President
<PAGE> 5
DENTAL VISION DIRECT, INC.
By: /s/ GEORGE K. BROADY
-------------------------------
George K. Broady
President
<PAGE> 6
ACKNOWLEDGEMENT AND CONSENT
The undersigned acknowledges and consents to the foregoing First
Amendment to Financing and Security Agreement and confirms his obligations
under the certain Guaranty dated September 24, 1993 previously executed and
delivered by the undersigned for the benefit of Lender. All Obligations under
the Financing and Security Agreement, as amended by this agreement, shall
continue to be included within the "Guaranteed Obligations" defined in such
Guaranty, subject to the limitation of liability provided in the Addendum
thereto.
/s/ GEORGE K. BROADY
----------------------------------
George K. Broady, individually
<PAGE> 7
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
Forrest W. McCollum, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said NATIONSBANK OF TEXAS, N.A., and was executed for the
purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _____ day of October,
1994.
_____________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
______________________ _____________________________________
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said ULTRAK, INC., and was executed for the purposes and
consideration therein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _____ day of October,
1994.
_____________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
______________________ _____________________________________
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said LOSS
<PAGE> 8
PREVENTION ELECTRONICS CORPORATION, and was executed for the purposes and
consideration therein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _____ day of October,
1994.
_____________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
______________________ _____________________________________
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said CCTV SOURCE INTERNATIONAL, INC., and was executed for
the purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _____ day of October,
1994.
_____________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
______________________ _____________________________________
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person and officer whose name is
subscribed to the foregoing instrument, and acknowledged to me that the same
was the act of the said DENTAL VISION DIRECT, INC., and was executed for the
purposes and consideration therein expressed and in the capacity therein
stated.
<PAGE> 9
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _____ day of October,
1994.
_____________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
______________________ _____________________________________
(Printed Name of Notary)
STATE OF TEXAS )
)
COUNTY OF DALLAS )
BEFORE ME, the undersigned authority, on this day personally appeared
George K. Broady, known to me to be the person whose name is subscribed to the
foregoing instrument, and acknowledged to me that the same was executed for the
purposes and consideration therein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the _____ day of October,
1994.
_____________________________________
NOTARY PUBLIC, STATE OF TEXAS
My Commission Expires:
______________________ _____________________________________
(Printed Name of Notary)
<PAGE> 1
EXHIBIT 10.12
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") made and
entered into as of this 4th day of October, 1994, by and between ULTRAK, INC.,
a Colorado corporation ("Ultrak" or "Borrower"), with its principal office and
mailing address at 1220 Champion Circle, Suite 100, Carrollton, Texas 75006,
and PETRUS FUND, L.P., a Texas limited partnership, with offices at 1700
Lakeside Square, 12377 Merit Drive, Dallas, Dallas County, Texas 75251
(hereinafter called the "Lender").
R E C I T A L S
1. Ultrak, CCTV SOURCE INTERNATIONAL, INC., a Texas
corporation ("CCTV"), and LOSS PREVENTION ELECTRONICS CORPORATION, a
Colorado corporation ("Loss Prevention") (Ultrak, CCTV, and Loss
Prevention being referred to as the "Prior Borrowers"), and Lender
have made and entered into that certain Loan Agreement dated July 20,
1992 (as amended, the "Loan Agreement"), pursuant to which Lender
agreed to make available to Prior Borrowers a $3,000,000 line of
credit in accordance with the terms and conditions of the Loan
Agreement and pursuant to the provisions set forth therein.
2. Pursuant to the terms of that certain First Amendment
to Loan Agreement, Prior Borrowers and Lender amended the Loan
Agreement to, among other things: (a) increase the line of credit
from $3,000,000 to $6,000,000, (b) modify the rate of interest
accruing on funds outstanding under the line of credit, (c) modify
certain provisions pertaining to the Warehouseman's Agreement
(including substitution of representatives of Borrower for the bonded
warehouseman), and (d) extend the Drawdown Termination Date from
January 20, 1995 to April 4, 1996.
3. Pursuant to the Agreement and Plan of Merger, made
and entered into as of December 20, 1993, among Ultrak, Loss
Prevention and CCTV, Loss Prevention and CCTV were merged with and
into Ultrak, with Ultrak being the surviving corporation.
4. Ultrak has requested that Lender agree to a second
amendment to the Loan Agreement to, among other things: (1) increase
the line of credit from $6,000,000 to $7,000,000, and (2) further
increase the line of credit from $7,000,000 to $8,000,000, subject to
achievement, during two consecutive fiscal quarters, of total net
income, before taxes, in excess of $3,000,000.
5. Lender has agreed to Borrower's requests, subject to
the terms and conditions set forth in this Amendment.
SECOND AMENDMENT TO LOAN AGREEMENT--Page 1
<PAGE> 2
W I T N E S S E T H
For and in consideration of the mutual covenants and agreements herein
contained and of the loans and commitment hereinafter referred to, the Borrower
and Lender agree as follows:
ARTICLE I
DEFINITIONS
As used in this Amendment, capitalized terms not otherwise defined in
this Amendment shall have the meanings given them in the Loan Agreement.
ARTICLE II
AMENDMENTS
2.01. Amendments to Definitions. Section 1.02 of the Loan Agreement
is amended by restating certain of the defined terms set forth in Section 1.02
to read in full as follows:
"Borrowing Base" shall mean at any time an amount not to
exceed the lesser of: (a) the Maximum Loan Amount, or (b) the
Inventory Advance Amount determined as of the date the Borrower Base
is calculated.
"Inventory Advance Amount" shall mean at any time an amount
equal to the lesser of:
(a) the Maximum Loan Amount, or
(b) the product of all Eligible Inventory of the
Borrower (excluding Eligible Inventory that is subject to a
Letter of Credit Arrangement) times the Inventory Percentage.
"Revolving Credit Note" shall mean the promissory note of the
Borrower described in subsection 2.01 hereof and being in the form of
note attached as Exhibit A-2 to the Second Amendment, and all
renewals, extensions, modifications and rearrangements thereof.
2.02. Additional Definitions. Section 1.02 of the Loan Agreement is
further amended by adding the defined terms set forth in Section 1.02 to read
in full as follows:
"Maximum Loan Amount" shall mean the following:
SECOND AMENDMENT TO LOAN AGREEMENT--Page 2
<PAGE> 3
(a) beginning on the date of the Second
Amendment, the Maximum Loan Amount shall be Seven Million and
No/100 Dollars ($7,000,000.00); and
(b) from and after Borrower's written request for
an increase thereto, the Maximum Loan Amount shall be Eight
Million and No/100 Dollars ($8,000,000.00), so long as the
following conditions have been satisfied:
(1) Borrower has achieved, during any
period of two (2) consecutive fiscal quarters, net
income, before taxes, in excess of Three Million
Dollars ($3,000,000), as evidenced and certified by
financial statements provided to Lender, pursuant to
Section 4.01(b) of this Agreement;
(2) Borrower has paid to Lender the
Commitment Fee applicable to the increased Maximum
Loan Amount, as calculated in accordance with Section
2.11 of this Agreement; and
(3) No Event of Default has occurred and
is continuing under this Agreement as of the time of
borrower's request for the increase to the Maximum
Loan Amount."
"Second Amendment" shall mean that certain Second
Amendment to Loan Agreement, dated October 4, 1994, executed
by and among Borrower and Lender.
2.03. Commitment Fee. Section 2.11 of the Loan Agreement is amended
and restated to read in full as follows:
"Section 2.11 Commitment Fee. Borrower shall pay to Lender
at execution and delivery of the Second Amendment, and on each
anniversary date of the Second Amendment (i.e., October 4 of each
year, beginning October 4, 1995), a commitment fee (the "Commitment
Fee"), calculated on the following basis:
(a) if the Maximum Loan Amount is $7,000,000,
then the Commitment Fee shall be Fifty Thousand and No/100
Dollars ($50,000.00) per annum, and
(b) if the Maximum Loan Amount is $8,000,000,
then the Commitment Fee shall be Fifty-Five Thousand and
No/100 Dollars ($55,000.00) per annum, and
in any event, pro-rated over the then remaining term of the
Commitment, if less than a full year. These fees shall be
consideration paid to Lender in exchange for Lender's agreement to
make the total amount of the Commitment available
SECOND AMENDMENT TO LOAN AGREEMENT--Page 3
<PAGE> 4
to Borrower, subject to the terms of this Agreement. The Commitment
Fee will be non-refundable. Nevertheless, if Lender exercises its
right under Section 2.10(b) to terminate its Commitment, then Borrower
shall be entitled to a refund o the Commitment Fee, pro-rated on the
basis of the remaining portion, as of the effective date of
termination, of the annual period for which the Commitment Fee was
paid (i.e., beginning October 4 of one year and ending October 3 of
the following year). In the event that any Indebtedness remains owing
to Lender as of the effective date of Lender's termination of the
Commitment underSection 2.10(b), Lender, at Lender's option, may
credit the Indebtedness in the amount of the portion of the Commitment
Fee to which Borrower is entitled as a refund."
2.04. Limitation on Compensation. Section 5.15 of the Loan
Agreement is amended and restated to read in full as follows:
"Section 5.15 Limitation on Compensation. So long as no
Event of Default has occurred, neither the Borrower nor any Subsidiary
will pay George K. Broady directly or indirectly any salary, bonus or
any other form of compensation in excess of Three Hundred Fifty
Thousand and No/100 Dollars ($350,000.00) per annum in the aggregate,
without the Lender's prior written consent. After an Event of Default
has occurred, this amount shall be decreased to Two Hundred
Twenty-Five Thousand and No/100 Dollars ($225,000.00)."
2.05. Current Ratio. Section 6.01 of the Loan Agreement is amended
and restated to read in full as follows:
"Section 6.01 Current Ratio. During the term of this
Agreement, Borrower will not permit or suffer at any date the ratio of
(a) its consolidated Current Assets, to (b) its consolidated Current
Liabilities, to be less than 1.20 to 1.0."
2.06. Leverage Ratio. Section 6.02 of the Loan Agreement is amended
and restated to read in full as follows:
"Section 6.02 Leverage Ratio. During the term of this
Agreement, Borrower shall not permit or suffer at any date the ratio
of (a) the consolidated total liabilities of Borrower, determined
according to generally accepted accounting principles, to (b)
Borrower's consolidated Tangible Net Worth, to be greater than the
ratio of 2.75 to 1."
2.07. Warrants, Stock Options, Etc. Schedule II of the Loan
Agreement is replaced in its entirety by Schedule II-2 to this Amendment.
SECOND AMENDMENT TO LOAN AGREEMENT--Page 4
<PAGE> 5
ARTICLE III
MISCELLANEOUS
3.01. Effectiveness. Except as specified herein, all terms and
conditions of the Loan Agreement shall remain unmodified and in full force and
effect. Further, each Borrower hereby ratifies and reaffirms such Borrower's
obligations and agreement under the Security Instruments, agrees that the
Security Instruments shall remain in full force and effect, notwithstanding
execution of this Amendment, and agrees that the Security Instruments shall
continue to be the legal, valid and biding obligations of each Borrower, as
applicable, enforceable in accordance with the terms therein.
3.02. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas.
3.03. Counterparts. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
3.04. NO ORAL AGREEMENTS. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS CONSTITUTE A WRITTEN AGREEMENT WHICH REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES RELATING TO THE LOAN.
SECOND AMENDMENT TO LOAN AGREEMENT--Page 5
<PAGE> 6
IN WITNESS WHEREOF, the parties hereby have caused this instrument to
be duly executed as of the date first above written.
BORROWER:
ULTRAK, INC.
By: /s/ TIM D. TORNO
---------------------------------
Tim D. Torno
Chief Financial Officer
PETRUS FUND, L.P.
By: PEROT INVESTMENTS, INC.
By: /s/ STEVEN L. BLASNIK
----------------------------
Steven L. Blasnik
President
Exhibit:
A-2 - Revolving Credit Note
Schedule:
II-2 - Stock, Warrants, Etc.
SECOND AMENDMENT TO LOAN AGREEMENT--Page 6
<PAGE> 1
EXHIBIT 10.13
THIRD AMENDMENT
to
WARRANT PURCHASE AGREEMENT
THIRD AMENDMENT TO WARRANT PURCHASE AGREEMENT (the "Third Amendment")
made as of October 4, 1994, by and among Ultrak, Inc., a Colorado corporation
(the "Company"), George K. Broady (the "Shareholder"), and Petrus Fund, L.P., a
Texas limited partnership (the "Purchaser").
R E C I T A L S
1. Purchaser, Shareholder and the Company have made and entered
into that certain Warrant Purchase Agreement dated July 20, 1992 (as amended,
the "Warrant Purchase Agreement"), as amended by that certain First Amendment
to Warrant Purchase Agreement (the "First Amendment") dated November 30, 1992,
and as further amended by that certain Second Amendment to Warrant Purchase
Agreement (the "Second Amendment") dated October 4, 1993, pursuant to which the
Company issued to Purchaser a warrant to purchase an aggregate of Nine Hundred
Twenty-Eight Thousand Five Hundred Seventy-One (928,571) shares of Common
Stock, in accordance with the terms and conditions of the Warrant Purchase
Agreement and pursuant to the provisions set forth therein.
2. On or about December 28, 1993, the Company effected a "reverse
stock split", pursuant to which six (6) shares of its stock were converted to
one (1) share of its stock. After giving effect to the "reverse stock split",
the number of shares of Common Stock covered by the Warrant Purchase Agreement
is One Hundred Fifty-Four Thousand Seven Hundred Sixty-Two (154,762).
3. Purchaser and the Company desire to amend the Warrant Purchase
Agreement to (a) increase the number of shares of Common Stock covered by the
Warrant Purchase Agreement from One Hundred Fifty-Four Thousand Seven Hundred
Sixty-Two (154,762) to Two Hundred Thousand (200,000), (b) decrease the
Exercise Price from $9.00 per share to $8.00 per share, and (c) modify certain
other provisions pertaining to the Warrant.
NOW, THEREFORE, in consideration of the foregoing, the mutual
covenants contained in this Third Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Purchaser, the Shareholder, and the Company, intending to be legally bound,
agree as follows:
THIRD AMENDMENT TO
WARRANT PURCHASE AGREEMENT--Page 1
<PAGE> 2
Article I
Definitions
As used in this Third Amendment, capitalized terms not otherwise
defined in this Third Amendment shall have the meanings given them in the
Warrant Purchase Agreement.
Article II
Amendments
2.01. Amendment to Warrant. Section 2.01 of the Warrant Purchase
Agreement is amended and restated hereby to read in full as follows:
"2.01 The Warrant. On the Closing Date, Purchaser agrees
to purchase from the Company at an aggregate total purchase price of
ten dollars ($10.00), and the Company agrees to issue to Purchaser, a
warrant in substantially the form ofExhibit A attached hereto and
incorporated herein (collectively, the "Warrant"), to purchase an
aggregate of Two Hundred Thousand (200,000) shares of Common Stock,
all in accordance with the terms and conditions of this Agreement and
pursuant to the provisions set forth below."
2.02. Amendment to Exercise Price. Section 2.03 of the Warrant
Purchase Agreement is amended and restated hereby to read in full as follows:
"2.03 Exercise Price. The Exercise Price per share will be
Eight Dollars ($8.00) for each share of Common Stock covered by the
Warrant; provided, however, that in no event will the aggregate
Exercise Price for all of the shares of Common Stock covered by the
Warrant exceed $1,600,000.00, except in the case of adjustment
pursuant toSection 2.03(b) or Section 3.03(d), whether as a result of
any change in the par value of the Common Stock or as a result of any
change in the number of shares purchasable as provided in thisArticle
II or otherwise; and provided, further, that such limitation on the
aggregate Exercise Price will have no effect whatsoever upon the
number of shares of Common Stock for which this Warrant may be
exercised."
2.03. Amendment to Adjustments to Number of Shares Purchasable. The
preamble to Section 3.03(a) of the Warrant Purchase Agreement is amended hereby
to read in full as follows, in order to reflect the effect of the reverse stock
split:
THIRD AMENDMENT TO
WARRANT PURCHASE AGREEMENT--Page 2
<PAGE> 3
"(a) The Warrant will be exercisable for the number of
shares of Common Stock in such manner that following the complete and
full exercise of the Warrant the amount of Common Stock issued to the
Holder will equal, to the nearest whole share, Two Hundred Thousand
(200,000) shares of Common Stock, as adjusted, to the extent
necessary, to give effect to the following events:".
2.04. Amendment to Representation and Warranty Regarding Authorized
Capital Stock. Section 7.01 of the Warrant Purchase Agreement is amended
hereby adding the following subsection (i), immediately following Subsection
7.01(h):
"(i) As of September 30, 1994, the Company's authorized
capital stock consists of 20,000,000 shares of common stock, without
par value, of which 6,538,352 shares are issued and outstanding and
200,000 shares of Common Stock are reserved for issuance on exercise
of the Warrant. The number of shares issued since September 30, 1994
is not material. All such issued and outstanding shares have been
duly authorized and validly issued, are fully paid and nonassessable,
and have been offered, issued, sold, and delivered by the Company free
from preemptive or similar rights and in compliance with applicable
federal and state securities laws. Except (i) pursuant to this
Agreement, (ii) except for the Permitted Stock, and (iii) except as
set forth in Schedule II to the Loan Agreement on the date of this
Agreement, the Company is not obligated to issue or sell any Capital
Stock."
2.05. Amendment to Form of Warrant. Exhibit A of the Warrant
Purchase Agreement is amended, restated and replaced hereby to read in full as
set forth on Exhibit A-3 attached hereto and made a part hereof.
Article III
Miscellaneous
Except as specifically amended hereby, the Warrant Purchase Agreement
remains in full force and effect.
THIRD AMENDMENT TO
WARRANT PURCHASE AGREEMENT--Page 3
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed and delivered this Third
Amendment as of the date first above written.
PETRUS FUND, L.P.
By: Perot Investments, Inc.
its General Partner
By: /s/ STEVEN L. BLASNIK
------------------------
Steven L. Blasnik,
President
ULTRAK, INC.
By: /s/ TIM D. TORNO
---------------------------------
Tim D. Torno
Chief Financial Officer
/s/ GEORGE K. BROADY
-------------------------------------
George K. Broady, Individually
Exhibit:
A-3 - Warrant
THIRD AMENDMENT TO
WARRANT PURCHASE AGREEMENT--Page 4
<PAGE> 1
EXHIBIT 10.14
April 5, 1994
Ms. Abeer A. Risheq
J-A-K Pacific Video
Warranty and Repair Services, Inc.
12751 Maplewood Court
Poway, California 92064
RE: Sale of Shares of Common Stock of J-A-K Pacific Video Warranty
and Repair Services, Inc., a California corporation ("J-A-K"),
by Abeer A. Risheq ("Seller") to Ultrak, Inc., a Colorado
corporation ("Purchaser")
Dear Abeer:
Seller desires to sell and Purchaser desires to purchase some or all
of the shares of Common Stock of J-A-K in the following manner and subject to
and in consideration for the following terms and conditions:
1. Seller and J-A-K represent and warrant that J-A-K has recently
acquired and now owns certain inventory, customer lists, service equipment,
office furniture, contracts, accounts receivable, and other assets free and
clear of any liens, liabilities, claims and encumbrances. Notwithstanding
anything to the contrary contained in this Letter Agreement, Purchaser shall
not assume or become in any way liable for any debt, liability, claim or
obligation of Seller or J-A-K, except for warranty costs.
2. Seller agrees to sell, convey, transfer, assign and deliver to
Purchaser, and Purchaser agrees to purchase from Seller, 56% of all of the
shares of Common Stock of J-A-K owned by Seller (the "Purchase Stock"), free
and clear of all liens, liabilities, claims and encumbrances.
3. The purchase price (the "Purchase Price") for the Purchase
Stock shall be $400,000.00, PLUS any and all amounts that Purchaser owes to
Seller and/or J-A-K as designated in the Settlement Statement (the "Settlement
Statement") attached as Exhibit A hereto (which shall include a $173,315.00
entry), LESS any and all amounts that Seller and/or J-A-K owe to Purchaser as
designated in the Settlement Statement, of which (a) an amount equal to the
Purchase Price LESS $400,000.00 (such amount shall hereinafter be referred to
as the "Closing Payment") shall be paid to Seller at Closing (as defined
below); (b) $100,000.00 shall be paid to Seller on or before 90 days after the
Closing Date (as defined below); (c) $100,000.00 shall be paid to Seller on or
before 240 days after the Closing Date; and (d) $200,000.00 shall be paid to
Seller on or before January 16, 1995. If the Closing Payment is a negative
number, then an amount equal to the product of the Closing Payment and -1.0
shall be paid by Seller to Purchaser at Closing. Purchaser shall not be
obligated to make the payments described in (b), (c) and (d) of this Section 3
unless and until a Certificate of Merger (the "Certificate of Merger") has been
issued by the Secretary of State of California in connection with the Agreement
of Merger that was originally filed by J-A-K
<PAGE> 2
Ms. Abeer A. Risheq
April 5, 1994
Page 2
with the Secretary of State of California on April 4, 1994. Seller and J-A-K
hereby covenant and agree to use her and its best efforts to effect the
issuance of the Certificate of Merger.
4. At Closing, the parties shall execute and deliver each
document, agreement, and instrument required by this Letter Agreement to be so
executed and delivered in connection with the purchase of the Purchase Stock
and not theretofore accomplished. At Closing, Seller shall deliver to
Purchaser certificates representing the Purchase Stock issued in Purchaser's
name, free and clear of all liens, liabilities, claims and encumbrances.
5. The closing of the transactions contemplated by this Letter
Agreement ("Closing") shall take place on a date to be agreed upon by the
parties, but in no event later than April 29, 1994 (the "Closing Date"), at a
place to be agreed on by the parties. Notwithstanding anything to the contrary
contained in this Letter Agreement, the effective date of the transaction
contemplated by this Letter Agreement shall be April 5, 1994.
6. Seller, J-A-K and Purchaser hereby agree that a certain amount
of J-A-K's business is based upon J-A- K's performance of warranty repair
servicing for four customers (the "Customers") of a certain equipment
manufacturer (the "Warranty Repair Business"). If, at any time or from time to
time during the period between the Closing Date and December 31, 1995,:
(a) One or more of the Customers ceases to utilize J-A-K for
warranty repair servicing; and
(b) Purchaser is not responsible for such Customer or Customers
ceasing to utilize J-A-K for warranty repair servicing;
then, within 30 days after receiving written notice from Purchaser of a
Customer or Customers ceasing to utilize J-A-K for warranty repair servicing
(the "Warranty Business Notice"), Seller shall refund to Purchaser an amount
equal to 25% of the following number for each Customer listed in the Warranty
Business Notice: $75,000.00 less any net profits earned by J-A-K from the
Warranty Repair Business during the time period between the Closing Date and
the date Seller receives the Warranty Business Notice.
7. For and in consideration of $10.00, and the other terms of
this Letter Agreement, the receipt and sufficiency of which is hereby
acknowledged, Seller grants an Option (the "Option") to Purchaser to purchase
all of the remaining shares of Common Stock of J-A-K (the "Option Stock"), free
and clear of all liens, liabilities, claims and encumbrances. Purchaser shall
have the option to purchase the Option Stock for $500,000.00 (the "Option
Price") upon the following terms and conditions:
<PAGE> 3
Ms. Abeer A. Risheq
April 5, 1994
Page 3
(a) The Option shall terminate at 11:59 p.m., Central Standard
Time, on January 16, 1995 (the "Expiration Date"), unless
sooner exercised.
(b) To exercise the Option, Purchaser shall give Seller written
notice, on or prior to the Expiration Date, that Purchaser
will purchase the Option Stock.
(c) If Purchaser timely exercises the Option, then the Closing
(the "Option Closing") shall take place on the tenth day
following Seller's receipt of Purchaser's notice. The Option
Closing shall take place at a time and place to be agreed upon
by the parties.
(d) At the Option Closing, at the option of Seller, Purchaser
shall pay to Seller the Option Price by delivering either (i)
Purchaser's Restricted Common Stock, valued (solely for the
purpose of this Letter Agreement) at $8.00 per share, to a
foreign corporation (the "Foreign Corporation") to be
designated by Seller; or (ii) a promissory note bearing
interest at 8% per annum, the principal and interest of which
shall be due and payable in twelve (12) equal monthly
installments beginning on the first day of the month following
the Option Closing and continuing on the first day of each
month thereafter. At the Option Closing, Seller, the Foreign
Corporation, and any principal/affiliate of Seller and the
Foreign Corporation shall execute such documents and
agreements as Purchaser shall require in order for Purchaser
to issue shares of its stock in compliance with exemptions
from registration under applicable federal and state
securities laws, including, but not limited to an investment
letter in substantially the form of Exhibit B attached hereto.
Seller and Purchaser shall each pay one-half of all reasonable
out-of-pocket costs and expenses, including reasonable legal
fees, in connection with issuing Purchaser's stock pursuant to
the exemptions from applicable federal and state securities
laws.
(e) At the Option Closing, if any, the parties shall execute and
deliver each document, agreement, and instrument required by
this Letter Agreement to be so executed and delivered in
connection with the purchase of the Option Stock and not
theretofore accomplished. At the Option Closing, Seller shall
deliver to Purchaser certificates representing the Option
Stock issued in Purchaser's name, free and clear of all liens,
liabilities, claims, and encumbrances.
8. Seller and J-A-K represent and warrant that the following are
true and correct as of this date and will be true and correct
<PAGE> 4
Ms. Abeer A. Risheq
April 5, 1994
Page 4
through the Closing Date and the Option Closing, if any, as if made on those
dates:
(a) The authorized capital stock of J-A-K consists of 10,000,000
shares of Common Stock, $1.00 par value per share (the
"Stock"), of which 7,303 shares are issued and outstanding on
the date hereof. All of the issued and outstanding shares of
the Common Stock of J-A-K have been duly authorized and
validly issued and are fully paid and nonassessable, and
shares of the Common Stock of J-A-K are held in its treasury.
All of the issued and outstanding shares of the Common Stock
of J-A-K are owned by Seller. There are no voting trusts,
voting agreements, shareholder agreements, or other
arrangements relating to the Common Stock of J-A-K and Seller
has the sole right to vote or direct the voting of the shares
of the Common Stock of J-A-K owned by him. The delivery at
Closing, if any of the certificates representing the Purchase
Stock issued in the Purchaser's name will vest in Purchaser
good and indefeasible title to such Purchase Stock, free and
clear of all liens, liabilities, claims, and encumbrances.
The delivery at the Option Closing of the certificates
representing the Option Stock issued in Purchaser's name, in
exchange for the Option Price, will vest in Purchaser good and
indefeasible title to such Option Stock, free and clear of all
liens, liabilities, claims, and encumbrances of every kind and
the Option Stock shall be duly authorized, validly issued,
fully paid, and nonassessable. No shares of Common Stock of
J-A-K have been issued or disposed of in violation of any
preemptive rights of any shareholder of J-A- K. There is no
outstanding subscription, contract, convertible or
exchangeable security, option, warrant, call or other right
obligating J-A-K, Seller, or any other person or entity to
issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem, or otherwise acquire, shares of or
securities convertible into or exchangeable for, the Common
Stock of J-A-K. There are no agreements between or among any
of J-A-K, Seller, or any other person or entity limiting or
restricting the free transferability of shares of Common Stock
of J-A-K or granting to any person a right of first refusal
with respect to any such shares of Common Stock of J-A-K.
(b) This Letter Agreement and each other agreement contemplated
hereby have been or will be duly executed and delivered by
Seller and J-A-K and constitute or will constitute legal,
valid and binding obligations of Seller and J-A-K, enforceable
against Seller and J-A-K in accordance with their terms.
<PAGE> 5
Ms. Abeer A. Risheq
April 5, 1994
Page 5
(c) Between the execution hereof and January 16, 1995, Seller and
J-A-K will not enter into any transaction that would restrict
Purchaser's ability to fully exercise the Option or could
reasonably be expected to affect adversely the Option Stock.
(d) Seller owns the Purchase Stock and the Option Stock
(collectively, the "Stock") free an clear of all liens,
liabilities, claims, and encumbrances. At Closing, the
Purchase Stock (and through the Option Closing, if any, the
Option Stock) will be free and clear of all liens,
liabilities, claims, and encumbrances.
(e) Neither Seller nor J-A-K are parties to, nor is any of the
Stock subject to or otherwise affected by, any judgment,
order, writ, injunction, or decree (collectively, "Judgment").
Neither the execution and performance of this Letter Agreement
or the agreements contemplated hereby nor the consummation of
the transaction contemplated hereby or thereby will violate
any agreement, document, applicable law or regulation or any
Judgment. J-A-K has complied with all applicable laws,
regulations and licensing requirements, and have filed with
the proper authorities all necessary statements and reports.
J-A-K possess all necessary licenses, franchises, permits and
governmental authorizations to conduct the business of J-A-K
as now conducted.
(f) J-A-K has duly and timely filed and paid all amounts owed in
connection with all income, excise, property, sales, payroll,
withholding and other tax returns and reports required to be
filed by it as of the date hereof.
(g) No authorization, consent, approval, permit or license of, of
filing with, any governmental or public body or authority, any
lender or lessor of any other person or entity is required to
authorize, or is required in connection with, the execution,
delivery and performance of this Letter Agreement or the
agreements contemplated hereby on the part of Seller and
J-A-K.
(h) Seller does not own, directly or indirectly, any interest or
have any investment in any corporation, business or other
person which is a competitor or potential competitor of, or
which otherwise directly or indirectly does business with,
J-A-K.
(i) All information furnished to Purchaser by Seller and J-A-K
herein is true, correct and complete in all material respects.
Such information states all material facts
<PAGE> 6
Ms. Abeer A. Risheq
April 5, 1994
Page 6
required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
such statements are made, true, correct and complete.
9. Seller and J-A-K hereby agree that on or prior to Closing and
the Option Closing, if any:
(a) Neither Seller nor J-A-K shall take any action that might
impair the business of J-A-K without the prior consent of
Purchaser or take or fail to take any action that would cause
or permit any representation made in Paragraph 8 hereof to be
inaccurate at the time of Closing of the Option Closing, if
any, or preclude Seller and J-A-K from making such
representations and warranties at Closing or the Option
Closing, if any.
(b) Seller and J-A-K shall permit Purchaser and its authorized
representatives full access to, and make available for
inspection, the business premises of J-A-K and furnish
Purchaser all documents and information with respect to the
business ad affairs of J-A-K as Purchaser may request.
(c) As long as this Letter Agreement shall remain effective,
Seller will not negotiate with any other person with respect
to the sale of the Stock.
10. Except as may be waived in writing by Purchaser, the
obligations of Purchaser hereunder are subject t the fulfillment at or prior to
Closing ad the Option Closing, if any, of each of the following conditions (the
"Purchasers's Conditions Precedent"):
(a) The representations and warranties of Seller and J-A-K
contained herein shall be true and correct.
(b) Seller and J-A-K shall have performed and complied with all
covenants or conditions required by this Letter Agreement to
be performed and complied with by him or it.
(c) No action by any court or governmental agency shall have been
threatened, asserted, or instituted to restrain or prohibit
the transactions contemplated by this Letter Agreement.
(d) The terms and provisions of this Letter Agreement must be
approved in writing by Purchaser's lenders.
(e) Purchaser shall have been furnished all due diligence
documentation and information requested by it regarding Seller
and J-A-K and the Stock and such document and
<PAGE> 7
Ms. Abeer A. Risheq
April 5, 1994
Page 7
information shall be satisfactory to Purchaser in Purchaser's
sole discretion.
11. Seller hereby covenants and agrees that any time he owns
Stock, Seller shall vote the Stock held by him so that the Board of Directors
of the Corporation shall at all time consist of a majority of persons nominated
by Purchaser.
12. Upon execution of this Letter Agreement, the stock
certificates representing the Stock shall contain substantially the following
legend, in addition to any other legends deemed appropriate or necessary by the
Purchaser:
This certificate is subject to the provision of that certain Letter
Agreement dated April 5, 1994, among J-A-K Pacific Video Warranty and
Repair Services, Inc., a California corporation, Abeer A. Risheq, and
Ultrak, Inc., a Colorado corporation, which contains provisions for
voting of shares and restrictions on transfer of shares. A copy of
such Letter Agreement is on file in the office of the Secretary of the
Corporation. The Corporation will furnish a copy of such Letter
Agreement to the record holder of this certificate, without charge,
upon written request to the Corporation at its principal place of
business or registered office.
13. Seller and J-A-K hereby agree to indemnify, defend and holder
Purchaser and its agents, attorneys, affiliates, officers, directors and
shareholders, harmless from and against all losses claims, obligations,
demands, assessments, penalties, liabilities, costs, damages, reasonable
attorneys' fees and expenses (collectively, "Damages"), asserted against or
incurred by Purchaser by reason of or resulting from: (a) a breach by Seller or
J-A-K of any representation, warranty or covenant contained herein or in any
agreement executed pursuant hereto; (b) any product liability claims,
product-based personal injury claims, or breach of warranty claims relating to
products sold by J-A-K, and any general liability claims arising out of or
relating to occurrences of any nature relating to J-A-K's business prior to
Closing or the Option Closing, if any, and whether any such claims are asserted
prior to or after Closing or prior to or after the Option Closing, if any; (c)
the conduct of J-A-K's business prior to Closing and the Option Closing, if
any. The remedies provided in this Paragraph 13 shall not be exclusive of any
other rights or remedies available to Purchaser, either at law or in equity.
14. Any notice or communication pursuant hereto must be in writing
and sent by certified mail, postage prepaid and with return receipt requested,
to the address specified on the signature page of this Letter Agreement.
Notices delivered personally shall be deemed communicated as of actual receipt;
mailed notices shall be
<PAGE> 8
Ms. Abeer A. Risheq
April 5, 1994
Page 8
deemed communication as of 10:00 a.m. on the second business day after mailing.
Any party may change its address for notice by written notice given to the
other parties.
15. Each party hereto agrees to pay the costs and expenses,
including reasonable attorneys' fees, incurred by any other party in
successfully (i) enforcing any other terms of this Letter Agreement against
such party or (ii) providing that the other party breached any of the terms of
this Letter Agreement. Except as otherwise provided in the immediately
preceding sentence, the parties shall pay their own expenses separately
incurred in connection with the preparation and review of this Letter Agreement
and the transactions contemplated hereby.
16. The waiver by any party of any breach or provision of this
Letter Agreement must be in writing and shall not constitute a continuing
waiver or a waiver of any subsequent breach of the same or a different
provision hereof.
17. If any provision of this Letter Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this Letter
Agreement shall b construed and enforced as if such illegal, invalid, or
unenforceable provision never comprised a part of this Letter Agreement; and
the remaining provisions of this Letter Agreement shall remain in full force ad
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by this severance herefrom. Furthermore, in lieu of such illegal,
invalid, or unenforceable provision, there shall be added automatically as part
of this Letter 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.
18. This Letter Agreement may be amended only by an instrument in
writing executed by the person against whom enforcement of the amendment is
sought. This Letter Agreement constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof. There are no oral
agreements among the parties to this Letter Agreement. Neither Seller nor
J-A-K may assign any of their rights hereunder or delegate any of their duties
hereunder. This Letter Agreement and the rights and obligations of the parties
hereto shall be governed by, construed, and enforced in accordance with
California law. This Letter Agreement is performable in San Diego County,
California and venue in any litigation arising hereunder shall be in a court of
competent jurisdiction in San Diego County, California. This Letter Agreement
may be executed in one or more counterparts. This letter Agreement shall be
binding on the parties hereto and their heirs, estates, personal
representatives, successors, and assigns. This Letter Agreement shall not be
construed against the party
<PAGE> 9
Ms. Abeer A. Risheq
April 5, 1994
Page 9
responsible for, or primarily responsible for, preparing this Letter Agreement.
19. The representatives, warranties and covenants contained herein
shall survive Closing and the Option Closing, if any.
20. Seller shall be liable for and shall indemnify Purchaser
against all sales, use or other taxes resulting from the transactions
contemplated hereby.
If the foregoing correctly states our agreement concerning the matters
referred to herein, please indicate your acceptance hereof and agreement hereto
by executing the original and the enclosed copies of this Letter Agreement in
the space provided below, retaining the copies for your reference and returning
the original to the under signed at the address indicated below.
Very truly yours,
ULTRAK, INC.
Address:
1200 Champion Circle
Suite 100 By:/s/ George K. Broady
Carrollton, Texas 75006 Its: President
Print Name: George K. Broady
ACCEPTED AND AGREED TO
effective as of the 5th
day of April, 1994:
Address:
12751 Maplewood Court
Poway, California 92064 /s/ Abeer A. Risheq
ABEER A. RISHEQ
J-A-K PACIFIC VIDEO WARRANTY
AND REPAIR SERVICES, INC.
Address:
12751 Maplewood Court By: /s/ Abeer A. Risheq
Poway, California 92064 Its: President
Print Name: Abeer Risheq
<PAGE> 10
Ms. Abeer A. Risheq
April 5, 1994
Page 10
SETTLEMENT STMT-REVISED 4/13/94 EXHIBIT A
<TABLE>
<CAPTION>
ITEMS DUE TO JAK: ATTACHMENT AMOUNT
<S> <C> <C>
1). Payment at Closing per Agreement 173,315.00
2). UPS freight paid by JAK on behalf 1 19,265.46
of Focus from 10-1-93 to 3-31-94
3). Portion of Eric Z.s salary paid by JAK 2 7,764.00
on behalf of Focus from 10-1-93 to 3-31-94
4). Rent and other overhead from 10-1-93 to 3-31-94 3,236.00
5). JAK Inventory as of 3-31-94 3 40,744.23
Estimated Freight 1,000.00
6). JAK Fixed assets as of 3-31-94 4 9,840.00
7). JAK Accounts Receivable as of 3-31-94 (to be 0.00
collected and remitted directly to JAK)
----------
Total amounts due to JAK 257,164.69
----------
ITEMS DUE FROM JAK:
1). Invoice due from JAK 8 112,766.68
from 10-18-93 to 3-17-94
2). Product sold by JAK from Focus Inventory 9 24,501.00
from 3-18-94 to 3-31-94
----------
Total amounts due from JAK 137,267.68
----------
Net amount doe to JAK at closing 119,897.01
----------
AGREED TO BY:
/s/ Abeer Risheq 4-14-94
----------
Abeer Risheq Date
/s/ George Broady 4-14-94
----------
George Broady Date
</TABLE>
<PAGE> 11
EXHIBIT B
_____________, 1995
INVESTMENT LETTER
Ultrak, Inc.
1220 Champion Circle
Suite 100
Carrollton, Texas 75006
Gentlemen:
This letter is issued to you in connection with the undersigned's
purchase from you of a total of 62,500 shares (the "Shares") of your Common
Stock, no par value, for total consideration of $500,000.00.
In connection with the issuance to the undersigned of the Shares, the
undersigned hereby acknowledges and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Federal Act"), or
any securities act of any applicable state (the "State Acts"), that the Shares
are being issued to the undersigned in reliance upon one or more exemptions
from registration contained in the Federal Act and the State Acts, and that
your reliance on such exemptions is based in part upon the representations made
in this letter.
The undersigned hereby represents to you that the undersigned is
acquiring the Shares solely for the undersigned's own account for investment
and not with a view to, or for offer or sale in connection with, the
"distribution" of all or any part of the Shares within the meaning of the
Federal Act.
The undersigned hereby acknowledges that the provisions of Rule 144
promulgated under the Federal Act are not now available for the public resale
of the Shares, and that the undersigned has no right to have the Shares
registered under the Federal Act to permit them to be resold. The undersigned
also hereby acknowledges that, as the result of the foregoing, the undersigned
must hold the Shares for the holding period provided by Rule 144, assuming the
entire risk of investment therein during such period, unless the Shares are
subsequently registered under the Federal Act or unless an exemption from
registration is available at the time or resale.
The undersigned hereby acknowledges that the undersigned has been
given copies of the documents (the "Documents") listed on Exhibit A attached
hereto and previously filed by you with the Securities and Exchange Commission
(the "SEC"). Moreover, the undersigned hereby represents to you that the
undersigned has such knowledge and experience in financial and business
matters, that the undersigned is capable of evaluating the merits and risks of
investing in the Shares and that the undesigned is able to bear the economic
risk, including a total loss, of such an investment. In that regard, the
undersigned hereby represents to you that the undersigned meets the definition
of an "accredited investor" under
<PAGE> 12
April 5, 1994
Page 2
Rule 501(a) of Regulation D promulgated by the SEC (a copy of Rule 501(a) is
attached hereto).
The undersigned understands that the purchase of the Shares involves a
high degree of risk and possible loss of the entire investment in the Shares.
The undersigned is purchasing the Shares based solely on the undersigned's
review of the Documents and not based on any written or oral statements by you
or any individual or firm (other than the currently applicable statements in
the Documents - which the undersigned may rely on).
The undersigned understands that the undersigned must not, and the
undersigned agrees that the undersigned will not, sell, transfer, assign,
encumber, or otherwise dispose of the Shares or any interest therein, unless
prior thereto the undersigned has delivered to you, and you have accepted as
satisfactory, an opinion of experienced and competent counsel to the effect
that such proposed sale, transfer, assignment, encumbrance, or disposition will
not constitute or result in any violation of the Federal Act, the State Acts,
or any other applicable statute relating to the disposition of securities.
Nothing in this letter shall permit the undersigned to sell any of the
Shares in violation of any other agreement between you and the undersigned or
among you, the undersigned, and others.
The undersigned understands and agrees that there may a typed or
otherwise printed on the certificates representing the Shares a legend
referring to the foregoing restriction upon disposition, such legend to be
substantially in the following form:
The shares evidenced by this certificate have not been registered
under the Securities Act of 1933 (the "Act") or under any applicable
state law, and such shares may not be sold, transferred, assigned or
otherwise disposed of unless a registration statement under the Act
with respect to such disposition shall then be in effect or unless the
person requesting the transfer of such shares shall furnish, with
respect to such transfer, an opinion of counsel (both counsel and
opinion to be satisfactory to the Corporation) to the effect that such
sale, transfer, assignment or disposition will not involve any
violation of the Act or any superseding statute or any applicable
state law.
The undersigned also understands that the keeper of your stock
transfer books and records has been instructed not to transfer the Shares
except upon your instructions and that you will take such other steps as you
deem necessary to prevent the transfer of the Shares in the absence of
compliance with the foregoing restrictions.
Very truly yours,
<PAGE> 13
April 5, 1994
Page 3
Date:___________ ___________________________________
If the person signing this letter is an individual and is married,
then such person's spouse must sign below:
I hereby acknowledge that I have read this letter and fully understand
the contents. I further agree that any community interest that I have in the
Shares shall be subject to this letter.
Date:____________ ___________________________________
Signature
<PAGE> 1
Exhibit 11
Ultrak, Inc.
COMPUTATION OF PER SHARE DATA
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
1994 1993 1992
---------- ----------- ----------
<S> <C> <C> <C>
Computation of earnings per share -
primary
Income from continuing operations $2,789,512 $ 2,638,860 $ 569,843
Less dividend requirements on
preferred stock (117,210) (117,210) (117,210)
---------- ----------- ----------
2,672,302 2,521,650 452,633
---------- ----------- ----------
Net income 2,482,302 687,280 720,545
---------- ----------- ----------
Weighted average number of common shares
outstanding during the period 6,541,786 6,511,269 6,481,768
Net effect of dilutive stock options and
warrants based on the treasury stock
method using the average market price 277,213 278,603 363,782
---------- ----------- ----------
Shares used for computation 6,818,999 6,789,872 6,845,550
========== =========== ==========
Income per share - primary
Continuing operations $.39 $.37 $.07
==== ==== ====
Net income $.36 $.10 $.11
==== ==== ====
Computation of earnings per share -
assuming full dilution
Income from continuing operations $2,789,512 $ 2,638,860 $ 569,843
Less dividend requirements on
preferred stock - (117,210) (117,210)
---------- ----------- ----------
2,789,512 2,521,650 452,633
---------- ----------- ----------
Net income 2,599,512 687,280 720,545
---------- ----------- ----------
Weighted average number of common shares
outstanding during the period 6,541,786 6,511,269 6,481,768
Net effect of dilutive stock options and
warrants based on the treasury stock method
using the greater of the average or ending
price 288,218 286,474 364,761
Net effect of preferred stock conversion 406,981 - -
---------- ----------- ----------
Shares used for computation 7,236,985 6,797,743 6,846,529
========== =========== ==========
Income per share - assuming full dilution
Continuing operations $.39 $.37 $.07
==== ==== ====
Net income $.36 $.10 $.11
==== ==== ====
</TABLE>
<PAGE> 1
EXHIBIT 21
Ultrak, Inc.
List of Subsidiaries
<TABLE>
<CAPTION>
Subsidiary Name % Ownership State of Incorporation
- --------------- ----------- ----------------------
<S> <C> <C>
Exxis Technologies, Inc. 100% Texas
Dental Vision Direct, Inc. 100% Texas
JAK Pacific Video Warranty and
Repair Services, Inc. 56% California
</TABLE>
<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."
GRANT THORNTON LLP
Dallas, Texas
May 5, 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."
NORMAN, JONES, ENLOW & CO.
Columbus, Ohio
May 5, 1995
<PAGE> 1
EXHIBIT 23.4
CONSENT OF FUTURE DIRECTOR
The undersigned hereby consents to the use of his name as a proposed
director of Ultrak, Inc., a Colorado corporation, under the heading "Management
of Ultrak" in their Registration Statement on Form S-4 filed with the
Securities and Exchange Commission on May 5, 1995.
/s/ ROBERT F. SEXTON
Robert F. Sexton
May 5, 1995
