<PAGE> 1
As filed with the Securities and Exchange Commission June 9, 1995
Registration No.33-91960
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
Amendment No. 2
to
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ULTRAK, INC.
(Exact name of registrant as specified in its charter)
COLORADO 5065 84-0819156
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
_____________________________
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
(214) 280-9675
(Address, including Zip Code, and telephone number, including area
code, of registrant's principal executive offices)
_____________________________
GEORGE K. BROADY
Chairman of the Board, Chief Executive Officer and President
1220 Champion Circle, Suite 100
Carrollton, Texas 75006
(214) 280-9675
(Name, address, including Zip Code, and telephone number, including area
code, of registrant's agent for service)
Copies to:
RICHARD L. WAGGONER, Esq. MARK B. BARNES, Esq.
LANCE M. HARDENBURG, Esq. Leagre & Barnes
Gardere & Wynne, L.L.P. 9100 Keystone Crossing, Suite 800
3000 Thanksgiving Tower Indianapolis, Indiana 46240
Dallas, Texas 75201
Approximate date of commencement of proposed sale to the public: Upon
consummation of the merger referred to herein.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is general
compliance with General Instruction G, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Each Class of Amount to be Maximum Offering Maximum Aggregate Amount of
Securities to be Registered Registered Price Per Unit(1) Offering Price(1) Registration Fee
- --------------------------------------------------------------------------------------------------------------------------
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Common Stock, No Par Value 700,000 shares(2) $4.78 $3,347,900 (3)
==========================================================================================================================
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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.
(3) Previously paid.
_____________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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ULTRAK, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
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<CAPTION>
Heading in
Item Number of Form S-4 Prospectus/Proxy Statement
- ----------------------- ---------------------------
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Front Cover
Page of Prospectus . . . . . . . . . . . . . . . . . . . . . . . Facing Page of Registration Statement;
Cross-Reference Sheet; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus . . . . Inside Front and Outside Back Cover
Pages of Prospectus
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information . . . . . . . . . . . . . . . . . . . . . Prospectus/Proxy Statement Summary;
Risk Factors; Business of Ultrak;
Selected Financial Data of Ultrak;
Ultrak Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business of
Diamond; Selected Financial Data of
Diamond; Diamond Management's
Discussion and Analysis of Financial
Condition and Results of Operations
4. Terms of the Transaction . . . . . . . . . . . . . . . . . . . . Facing Page of Registration Statement;
Outside Front Cover Page of Prospectus;
Prospectus/Proxy Statement Summary
Merger
5. Pro Forma Financial Information . . . . . . . . . . . . . . . . Prospectus/Proxy Statement Summary; Pro
Forma Financial Information
6. Material Contracts with the Company Being Acquired . . . . . . . Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to Be Underwriters . . . . . . . . . Not Applicable
8. Interests of Named Experts and Counsel . . . . . . . . . . . . . Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities . . . . . . . . . Not Applicable
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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>
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DIAMOND ELECTRONICS, INC.
_____________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE ___, 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 June ___, 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 1701.85 of the Ohio Revised
Code, which is attached as Annex B to the Prospectus/Proxy Statement, may
dissent from the Merger and exercise their dissenters' rights in accordance
with Ohio law. See "MERGER - Rights of Dissenting Shareholders" in the
attached Prospectus/Proxy Statement for a description of the procedures which
must be followed to perfect such dissenters' rights under the Ohio Revised
Code.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE MARK,
SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE.
By Order of the Board of Directors
Robert N. Davies
Secretary
Carroll, Ohio
June ___, 1995
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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 June ____, 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 June __, 1995, at ____________________________,
Indianapolis, Indiana.
This Prospectus/Proxy Statement also relates to the Agreement and Plan
of Reorganization, dated April 28, 1995, attached hereto along with Exhibits
1.01(a) and (b) thereto as Annex A (the "Merger Agreement"), among Diamond,
Ultrak, Inc., a Colorado corporation ("Ultrak"), Diamond Purchasing Corp., a
Texas corporation and wholly-owned subsidiary of Ultrak ("Ultrak Subsidiary"),
and the following shareholders of Diamond: Richard M. Tompkins, John W.
Biddinger, Robert N. Davies, H. Charles Koehler, and William Muirhead, III (the
"Signing Shareholders"), which provides for the merger (the "Merger") of Ultrak
Subsidiary with and into Diamond. After the Merger, the separate corporate
existence of Ultrak Subsidiary will cease, and Diamond will continue its
existence as a direct subsidiary of Ultrak. See "MERGER-Terms of the Merger
Agreement." If the Merger is consummated, all of the outstanding shares of
common stock, no par value, of Diamond ("Diamond Common Stock"), will be
converted into the right to receive, as of the Effective Date (as defined
herein), up to an aggregate 600,000 shares of common stock, no par value, of
Ultrak ("Ultrak Common Stock") at the rate of 0.125 shares of Ultrak Common
Stock for every share of Diamond Common Stock (the "Conversion Factor"), except
that cash will be distributed in lieu of Ultrak Common Stock pursuant to the
Cash Out (as defined herein) and the exercise of dissenters' rights by the
Diamond Shareholders (as defined herein). See "MERGER - Terms of the Merger
Agreement - Conversion Factor" and "- Rights of Dissenting Shareholders."
Pursuant to the Merger Agreement, Ultrak is required to issue up to 100,000
additional shares of Ultrak Common Stock to the Effective Date Shareholders
(as defined herein) unless the average closing price of Ultrak Common Stock
during both of the ten-day trading periods ending on the first trading days
that are six and twelve months, respectively, after the effective date of the
Merger (the "Effective Date") exceeds certain predetermined values. See
"MERGER - Adjustments."
SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE HOLDERS OF THE ULTRAK COMMON STOCK TO BE DISTRIBUTED
PURSUANT TO THE MERGER.
_______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY STATEMENT.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_______________________
The date of this Prospectus/Proxy Statement is June __, 1995
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AVAILABLE INFORMATION
Ultrak is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements, and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the following
Regional Offices of the Commission: Chicago Regional Office, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60601; and New York
Regional Office, 75 Park Place, Fourteenth Floor, New York, New York 10007.
Copies of such material may also be obtained at prescribed rates from the
Public Reference Section of the Commission at its principal office at 450 Fifth
Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Ultrak Common
Stock is traded on the Nasdaq National Market ("Nasdaq"), and reports, proxy
and information statements, and other information concerning Ultrak can be
inspected at the Nasdaq offices located at 1735 K Street, N.W., Washington,
D.C. 20006.
This Prospectus/Proxy Statement, which constitutes a part of a
registration statement (the "Registration Statement") filed by Ultrak with the
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
omits certain of the information set forth in the Registration Statement.
Reference is hereby made to the Registration Statement and to the exhibits
thereto for further information with respect to Ultrak and the Ultrak Common
Stock. Copies of the Registration Statement and the exhibits thereto are on
file at the offices of the Commission and may be obtained upon payment of the
fee prescribed by the Commission, or may be examined without charge at the
public reference facilities of the Commission described above.
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS/PROXY STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ULTRAK.
THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON
STOCK TO WHICH IT RELATES OR ANY OFFER TO, OR A SOLICITATION OF, ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR ANY DISTRIBUTION MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF ULTRAK OR THAT INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
2
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_______________________
TABLE OF CONTENTS
_______________________
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS/PROXY STATEMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SPECIAL MEETING OF DIAMOND SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ULTRAK'S REINCORPORATION IN DELAWARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
PRO FORMA FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
BUSINESS OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
MANAGEMENT OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
PRINCIPAL SHAREHOLDERS OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
DESCRIPTION OF ULTRAK'S CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
MARKET FOR ULTRAK COMMON STOCK AND RELATED
SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SELECTED FINANCIAL DATA OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
BUSINESS OF DIAMOND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
MARKET FOR DIAMOND COMMON STOCK AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
PRINCIPAL SHAREHOLDERS OF DIAMOND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SELECTED FINANCIAL DATA OF DIAMOND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
DIAMOND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
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ANNEXES
ANNEX A - Merger Agreement and Exhibits 1.01(a) and (b) thereto
ANNEX B - Section 1701.85 of the Ohio Revised Code
ANNEX C - Articles of Incorporation of Diamond
ANNEX D - Code of Regulations of Diamond
ANNEX E - Articles of Incorporation of Ultrak, as amended
ANNEX F - Bylaws of Ultrak
ANNEX G - Reincorporation Agreement
ANNEX H - Certificate of Incorporation of Ultrak - Delaware
ANNEX I - Bylaws of Ultrak - Delaware
ANNEX J - Article 113 of Colorado Business Corporation Act
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." Diamond Shareholders will be governed by the corporate laws
of the State of Colorado (Ultrak's state of incorporation) after consummation
of the Merger and upon their receipt of shares of Ultrak Common Stock.
Therefore, Diamond Shareholders receiving Ultrak Common Stock in the Merger
will have different rights than they had as Diamond Shareholders under Ohio
corporate law. See "MERGER -- Comparison of Rights of Holders of Diamond
Common Stock and Ultrak Common Stock." Ultrak's Board of Directors and
shareholders have approved and adopted a plan to reincorporate Ultrak in
Delaware, effective as of December 29, 1995. After that date, all persons
holding Ultrak Common Stock, including Diamond Shareholders who receive Ultrak
Common Stock in the Merger, will be governed by Delaware corporate law, unless
Ultrak's Board of Directors decides before that time to abandon the
Reincorporation. See "ULTRAK'S REINCORPORATION IN DELAWARE - General" and "-
Significant Differences in Corporate Law of Colorado and Delaware."
Management After the Merger. After the Merger, Diamond will become a
wholly-owned subsidiary of Ultrak and it is expected that Diamond will operate
in the same manner as prior to the Merger.
Federal Income Tax Consequences of the Merger. The consummation of the Merger
is conditioned on the receipt by Diamond and Ultrak of a tax opinion of Leagre
& Barnes to the effect that the Merger will constitute a tax-free
reorganization for purposes of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"). The federal income tax consequences of the
Merger to the Diamond Shareholders are summarized under "MERGER - Certain
Federal Income Tax Consequences."
Vote Required. Not less than two-thirds of the outstanding shares of Diamond
Common Stock entitled to vote at the Special Meeting must vote in favor of the
Merger for it to be approved. As of December 31, 1994, the directors and
officers of Diamond, and those persons who may be deemed to be their respective
affiliates and associates, as a group, were entitled to vote approximately 62%
of the outstanding shares of Diamond Common Stock, and each such holder has
indicated his or her intent to vote such shares for approval of the Merger. It
is not necessary for the shareholders of Ultrak to approve the Merger; however,
Ultrak, as the sole shareholder of Ultrak Subsidiary, has approved the Merger
and the Merger Agreement. See "SPECIAL MEETING OF DIAMOND SHAREHOLDERS - Vote
Required; Security Ownership of Diamond's Management" and "MERGER - Background
of the Merger and Related Matters."
Rights of Dissenting Shareholders. Subject to certain other conditions, a
Diamond Shareholder who does not vote his or her shares of Diamond Common Stock
in person or by proxy in favor of the Merger will be eligible to make a written
demand on Diamond for payment to him or her of the fair cash value of his or
her Diamond Common Stock within ten days after the Special Meeting. A Diamond
Shareholder who seeks to assert dissenters' rights must take certain other
steps in the manner required by Ohio law. A vote in favor of the Merger, in
person or by proxy, or the submission of an executed but unmarked proxy that
is voted at the Special Meeting, will constitute a waiver of such dissenters'
rights. See "MERGER - Rights of Dissenting Shareholders."
Conditions to the Merger; Termination. Consummation of the Merger is subject
to satisfaction or waiver of various conditions, including compliance with the
respective covenants and confirmation of the respective representations and
warranties of the parties in the Merger Agreement. The Merger Agreement also
provides that either party may abandon the Merger if it is not consummated on
or before June 30, 1995. See "MERGER - Terms of the Merger Agreement --
Conditions to the Merger" and "-- Termination."
Accounting Treatment. Ultrak intends to account for the Merger as a purchase.
See "MERGER - Accounting Treatment."
RISK FACTORS
An investment in the Ultrak Common Stock involves the consideration of
a number of special factors and investment risks. See "RISK FACTORS" for a
summary of certain of the investment risks to be considered by the Diamond
Shareholders prior to casting their votes, in person or by proxy, for or
against approval of the Merger and the Merger Agreement.
5
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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 the three months ended March 31, 1995 and 1994, respectively, and for
Diamond for each of the five fiscal years in the period ended January 1, 1995
and for the three months ended March 31, 1995 and 1994, respectively. Such
information should be read in conjunction with the selected financial statement
information of Ultrak and Diamond and the notes thereto which are included
elsewhere herein. See "Selected Financial Data of Ultrak" and "Selected
Financial Data of Diamond."
<TABLE>
<CAPTION>
ULTRAK - HISTORICAL
--------------------------------------------------------------------------------------------------
THREE MONTHS
ENDED MARCH 31, FISCAL YEAR ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: 1995 1994 1994 1993 1992 1991 1990
------ ------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $21,829,162 $17,764,973 $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
Gross profit 5,322,078 4,172,044 19,444,003 12,858,457 7,367,629 4,613,904 2,494,659
Operating income (loss) 1,608,666 1,122,619 5,109,687 3,655,020 1,278,618 694,728 (318,905)
Net income (loss) from
continuing operations 781,933 628,057 2,789,512 2,638,860 543,500 470,942 (775,196)
Net Income (loss) per common $.11 $.09 $0.39 $0.37 $0.07 $0.06 $(0.15)
share
Weighted average shares 6,821,027 6,816,955 6,818,999 6,789,872 6,845,550 5,864,399 5,286,561
outstanding
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
AS OF MARCH 31, ---------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $36,112,432 $36,352,690 $25,384,794 $16,198,851 $8,054,270 $4,567,900
Short-term debt 17,882,187 18,244,183 12,875,039 7,134,701 2,218,599 1,140,000
Long-term debt 0 0 0 285,000 285,000 0
Shareholders' Equity 10,823,019 10,070,388 7,541,339 6,817,683 4,177,044 2,881,847
Cash dividends declared
per common share 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
DIAMOND - HISTORICAL
THREE MONTHS ----------------------------------------------------------------------
ENDED MARCH 31, FISCAL YEAR ENDED
-------------------------- ----------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ -------- -------- -------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $2,959,586 $2,321,700 $11,774,691 $9,367,799 $8,747,964 $8,554,592 $12,861,108
Gross profit 941,651 730,009 3,765,223 2,940,844 2,539,546 2,389,684 3,871,562
Operating income (loss) 190,489 44,542 761,371 523,319 285,679 971,207 350,312
Net income (loss) 85,323 2,761 325,641 839,969 1,170,805 (1,219,647) (266,357)
Net income (loss) per common 0.07 0.19 0.41 (0.90) (0.20)
share
Weighted average shares 4,734,326 4,476,267 4,652,014 4,420,889 4,384,692 1,349,650 1,349,650
outstanding
</TABLE>
<TABLE>
<CAPTION>
AS OF FISCAL YEAR END,
AS OF MARCH 31, --------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $ 6,557,552 $ 6,766,688 $ 5,648,036 $ 5,131,878 $ 5,627,012 $ 7,492,489
Short-term debt 888,369 1,273,122 1,238,216 1,432,567 2,064,051 2,556,566
Long-term debt 859,596 884,548 592,033 774,660 1,699,948 1,842,430
Stockholders' Equity 3,344,572 3,218,047 3,013,410 2,150,965 (578,662) 640,985
Cash dividends declared
per common share 0 0 0 0 0 0
</TABLE>
6
<PAGE> 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 periods presented. The pro forma information is provided for informational
purposes only and is not necessarily indicative of actual results that would
have been achieved had the Merger been consummated at the beginning of the
periods presented or of future results. The pro forma information is derived
from the Pro Forma Financial Information appearing elsewhere herein and should
be read in conjunction with those statements. See "PRO FORMA FINANCIAL
INFORMATION."
<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
MARCH 31, 1995 DECEMBER 31, 1994
------------------ -----------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales $24,788,748 $90,568,402
Gross profit 6,263,729 23,209,226
Operating income 1,790,508 5,638,015
Net income from continuing operations 861,981 3,090,966
Fully diluted net income per common share .11 0.39
Fully diluted weighted average shares outstanding 7,845,063 7,836,985
BALANCE SHEET DATA:
Total assets 43,731,412 44,307,331
Long-term debt, less current portion 876,194 884,548
Total stockholders' equity 15,073,019 14,320,388
</TABLE>
7
<PAGE> 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, (iv) pro forma combined information for Diamond and
Ultrak; (v) pro forma equivalent of one share of Diamond Common Stock based on
the Conversion Factor as adjusted to reflect the issuance of 50,000 additional
shares of Ultrak Common Stock pursuant to adjustments under the Merger
Agreement; and (vi) pro forma equivalent of one share of Diamond Common Stock
based on the Conversion Factor as adjusted to reflect the issuance of 100,000
additional shares of Ultrak Common Stock pursuant to adjustments under the
Merger Agreement.
<TABLE>
<CAPTION>
EQUIVALENT EQUIVALENT
PRO FORMA PRO FORMA
DIAMOND DIAMOND
(ADJUSTED (ADJUSTED
FOR FOR
ISSUANCE OF ISSUANCE OF
50,000 100,000
SHARES OF SHARES OF
PRO EQUIVALENT ULTRAK ULTRAK
FORMA PRO FORMA COMMON COMMON
ULTRAK DIAMOND COMBINED DIAMOND STOCK) STOCK)
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations per common
share:
December 31, 1994 . . . . . . . . . . $ 0.39 $ 0.07 $ 0.40 $ 0.05 $ 0.05 $ 0.06
March 31, 1995 . . . . . . . . . . . . $ .11 $ .02 $ .11 $ .01 .01 .02
Dividends declared per common share:
December 31, 1994 . . . . . . . . . . 0 0 0 0 0 0
March 31, 1995 . . . . . . . . . . . . 0 0 0 0 0 0
Book value per common share as of:
December 31, 1994 . . . . . . . . . . $ 1.47 $ 0.68 $ 1.92 $ 0.24 $ 0.26 $ 0.28
March 31, 1995 . . . . . . . . . . . . $ 1.58 $ .70 $ 2.02 $ .25 $ .27 $ .29
Market value per common share as of:
December 31, 1994 (1) . . . . . . . . $ 7.125 (2) (2) (2) (2) (2)
February 9, 1995 (3) . . . . . . . . . $ 6.25 (2) (2) (2) (2) (2)
March 31, 1995 (4) . . . . . . . . . . $ 7.00 (2) (2) (2) (2) (2)
- -------------------------------
</TABLE>
(1) Based on the closing price of $7.125 per share of Ultrak Common Stock
as reported on Nasdaq as of December 31, 1994.
(2) No active trading exists for Diamond Common Stock.
(3) Based on the closing price of $6.25 per share of Ultrak Common Stock
as reported on Nasdaq on the business day immediately preceding public
announcement of the proposed Merger.
(4) Based on the closing price of $7.00 per share of Ultrak Common Stock
as reported on Nasdaq as of March 31, 1995.
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. Persons who are deemed to be "affiliates," as that
term is defined in the Securities Act, of Diamond shall be deemed to be an
"underwriter" within the meaning of Section 2(11) of the Securities Act if such
persons publicly offer or sell the shares of Ultrak Common Stock received by
such persons pursuant to the Merger Agreement, subject to the exceptions of
Rule 145(d) of the Securities Act. Generally, these are persons who are deemed
to control, to be controlled by, or to be under common control with Diamond.
Thus, Ultrak Common Stock issued in connection with the Merger to persons who
constitute "underwriters" within the meaning of Section 2(11) and Rule 145(c)
may not be publicly reoffered or resold by such persons except pursuant to an
effective registration statement under the Securities Act covering such shares
or, in certain circumstances, pursuant to Rule 145(d) or any other applicable
exemption under the Securities Act. Ultrak does not intend for such persons to
be able to resell the shares of Ultrak Common Stock they receive in the Merger
pursuant to this Prospectus/Proxy Statement, and any representation to the
contrary should be disregarded.
RISK FACTORS
DEPENDENCE ON PRODUCT SUPPLIERS
Ultrak purchases the products it markets and sells from a limited
number of non-affiliated foreign manufacturers and will continue to depend
substantially upon such manufacturers in the future. Ultrak does not itself
manufacture the products which it markets and sells. Ultrak has in the past
and may in the future experience difficulties obtaining, in a timely manner,
those components which are necessary for its finished products. The loss of
any one supplier of components or an inability of suppliers to provide Ultrak
with the required quantity or quality of components could have a material
adverse effect on Ultrak's business until such time as an alternate source of
supply for such components is found. See "BUSINESS OF ULTRAK - Suppliers and
Distribution."
CONTROL BY PRINCIPAL SHAREHOLDER
George K. Broady, the Chairman of the Board, President, Chief Executive
Officer, and principal shareholder of Ultrak, is the beneficial owner of
approximately 33% of the Ultrak Common Stock and 100% of the Series A 12%
Cumulative Convertible Preferred Stock, $5.00 par value (the "Series A
Preferred Stock"), of Ultrak. Each share of the Series A Preferred Stock has
voting rights equal to 16.667 shares of Ultrak Common Stock. Mr. Broady
therefore controls over 50% of the votes on all matters which are or may be
submitted to a vote of shareholders of Ultrak, and will continue to control at
least 50% of such votes immediately after the Effective Date. The holders of
shares controlling a majority of the votes of the shareholders of Ultrak can
elect all of the directors of Ultrak and approve or disapprove certain
fundamental corporate transactions, including mergers, liquidation, a "going
private" transaction, the sale of substantially all of Ultrak's assets, and the
authorization, issuance, and sale of new securities of Ultrak, and may delay or
prevent a change in control of Ultrak. See "PRINCIPAL SHAREHOLDERS OF ULTRAK"
and "DESCRIPTION OF ULTRAK'S CAPITAL STOCK."
PREFERRED STOCK
Ultrak's Articles of Incorporation authorize 2,000,000 shares of
Preferred Stock, $5.00 par value, of which 195,351 shares of Series A Preferred
Stock are currently issued and outstanding. Ultrak's Preferred Stock may be
issued in series from time to time with such designation, rights, preferences,
and limitations as the Board of Directors of Ultrak may determine by
resolution. The potential exists, therefore, that additional series of
Ultrak's Preferred Stock might be issued that would grant dividend preferences
and liquidation preferences to preferred shareholders over holders of Ultrak
Common Stock. Unless the nature of a particular transaction and applicable
statutes require otherwise, the Board of Directors has the authority to
issue Preferred Stock without shareholder approval. The issuance of Preferred
Stock may have the effect of delaying
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, Walmart Stores, Inc. and Sam's Wholesale Club, a division of
Walmart Stores, Inc., accounted for 21% of Ultrak's sales. During 1993, sales
to the same customer accounted for 18% of Ultrak's sales. An unexpected
decline of sales to this customer could have a material adverse effect on
Ultrak. See "BUSINESS OF ULTRAK."
NO DIVIDENDS
Ultrak has not paid any dividends on the Ultrak Common Stock since its
inception. At the present time, Ultrak does not anticipate paying dividends on
Ultrak Common Stock in the foreseeable future. Any future dividends will
depend upon the earnings of Ultrak, its financial requirements, and other
factors. Diamond Shareholders who anticipate the need for immediate dividend
income should not rely on their shares of Ultrak Common Stock obtained pursuant
to the Merger for such income. See "MARKET FOR ULTRAK COMMON STOCK AND RELATED
SHAREHOLDER MATTERS."
IMPORTATION OF PRODUCTS
The importation of products into the United States and into other
jurisdictions in which Ultrak's products are sold is subject to numerous risks
including labor strikes or shipping delays, fluctuation in currency exchange
rates, and import duties. There is no assurance that the United States, Korea,
Japan, Hong Kong, or other governments will not in the future impose trade
restrictions which could adversely affect Ultrak's operations. Currently,
there is a 3% to 6% United States duty on imported products, and there are no
United States quotas on the types of products distributed by Ultrak. However,
there can be no assurance that quotas, taxes, or further or greater duties or
taxes will not be imposed in the future. Ultrak imports approximately 60% of
its products. See "BUSINESS OF ULTRAK-Suppliers and Distribution."
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 who are not "affiliates," as that term is defined under
the Securities Act, of Ultrak. The historically low trading volume of Ultrak
Common Stock makes it susceptible to substantial market price swings should
volume of any size and frequency occur in the offering, buying, or selling of
shares of Ultrak Common Stock. Ultrak is not able to predict the effect on
market prices of the distribution of the shares of Ultrak Common Stock covered
by this Prospectus/Proxy Statement. Further, factors such as new product
announcements by Ultrak or its competitors, quarterly fluctuations in Ultrak's
operating results, and general conditions in the securities markets may have a
significant impact on the market price of the Ultrak Common Stock. See "MARKET
FOR ULTRAK COMMON STOCK AND RELATED SHAREHOLDER MATTERS."
MATERIAL BENEFITS OF MERGER TO AFFILIATES OF DIAMOND
As a condition to the obligations of Ultrak and Ultrak Subsidiary under
the Merger Agreement, Richard Tompkins, the President and Chief Executive
Officer of Diamond, will enter into an employment agreement with Ultrak, which
provides for Tompkins to continue to be employed with Diamond after the Merger
in the same capacities, and under similar terms and conditions, as he had prior
to the Merger. Other than such employment agreement, the officers, directors,
and other affiliates of Diamond will not receive any material benefits from the
Merger that are not received by shareholders of Diamond in general.
FINANCING
Although Ultrak's indebtedness owed to NationsBank and Petrus Fund,
L.P., its two primary lenders, is payable on demand, Ultrak believes it has an
excellent relationship with both of its lenders. Ultrak's indebtedness to
Petrus Fund, L.P. and NationsBank has been in existence since 1992 and 1993,
respectively, and management believes that Ultrak's lenders will not demand
payment without Ultrak being in violation of material loan covenants. At
December 31, 1994 Ultrak was in violation of certain loan covenants and both
lenders granted waivers of the violations. As of March 31, 1995, Ultrak was in
compliance with all loan covenants.
11
<PAGE> 17
SPECIAL MEETING OF DIAMOND SHAREHOLDERS
TIME, DATE, PLACE, AND PURPOSE
The Special Meeting will be held on June __, 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,
which represents 61.9% of the Diamond Common Stock outstanding as of the Record
Date. Each of these executive officers and directors of Diamond has advised
Diamond that he intends to vote his shares of Diamond Common Stock to approve
and adopt the Merger Agreement and the Merger.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is enclosed with this Prospectus/Proxy Statement. All
shares of Diamond Common Stock represented by properly executed proxies will,
unless such proxies have been previously revoked, be voted in accordance with
the instructions indicated on such proxies. If no instructions are indicated,
such shares will be voted FOR the approval and adoption of the Merger Agreement
and FOR the approval and adoption of the Merger and, in the discretion of the
proxy holder, as to any other matter which may properly come before the Special
Meeting.
Any Diamond Shareholder that has previously delivered a properly
executed proxy may revoke such proxy at any time before its exercise. A proxy
may be revoked either by (i) filing with the Secretary of Diamond prior to the
Special Meeting, at Diamond's principal executive offices, either a written
revocation of such proxy or a duly executed proxy bearing a later date or (ii)
attending the Special Meeting and voting in person. Presence at the Special
Meeting will not revoke a Diamond Shareholder's proxy unless such Diamond
Shareholder votes in person.
12
<PAGE> 18
MERGER
BACKGROUND OF THE MERGER AND RELATED MATTERS
Upon emerging from its bankruptcy proceedings in 1993, as the result
of which Diamond acquired many new shareholder accounts, the Board of Directors
of Diamond began examining its strategic alternatives for developing liquidity
for its shareholders. In view of Diamond's small size and its recent emergence
from bankruptcy proceedings, the Board of Directors determined that it might
be some time before Diamond could create a public market for the Diamond Common
Stock. Therefore, the Board of Directors was receptive to Ultrak's indication
of interest in acquiring Diamond in order to provide Diamond shareholders with
liquidity.
During the months of December 1994 and January 1995, Ultrak and Diamond
negotiated the preliminary terms and conditions of the Merger. In general,
these terms and conditions contemplated, among other things, that Ultrak or a
subsidiary of Ultrak would acquire Diamond in a merger transaction in which the
holders of Diamond Common Stock and holders of options, warrants, and other
rights to acquire Diamond Common Stock would receive shares of newly issued and
registered Ultrak Common Stock. These terms and conditions were set forth in a
letter of intent which was executed by the parties on or about February 2,
1995.
Following the execution of the letter of intent, Ultrak and Diamond
each conducted a due diligence review of the other. Among other things, each
considered the other's financial condition and results of operations,
contracts, leases, litigation, and employee relations. On the basis of those
reviews, Ultrak and Diamond mutually concluded that there were synergistic
advantages to the Merger.
At a special meeting held on April 26, 1995, the Board of Directors of
Ultrak unanimously determined that the Merger Agreement was in the best
interests of Ultrak and its shareholders and approved and adopted the Merger
Agreement. Approval of the Merger Agreement and the Merger by the shareholders
of Ultrak is not required; however, Ultrak, as the sole shareholder of
Ultrak Subsidiary, has approved the Merger and the terms of the Merger
Agreement.
Diamond's Board of Directors met on February 21, 1995, to review the
results of Diamond's special review of Ultrak's business and operations that
had been conducted by representatives of the Board and senior management of
Diamond at Ultrak's headquarters in Dallas on February 8, 9 and 10. At that
meeting, Diamond's Board also discussed Ultrak's business and the market for
the Ultrak Common Stock with George Broady, the President of Ultrak. Diamond's
Board of Directors authorized execution of the Merger Agreement on April 10,
1995, after considering the operating results of Ultrak and of Diamond for the
first quarter ended March 31, 1995, and the terms of the Merger Agreement. In
reaching its decision to approve and adopt the Merger Agreement and to
recommend to the Diamond Shareholders that they approve and adopt the Merger
Agreement, the Board of Directors of Diamond, without assigning any relative or
specific weights, considered a number of factors, including, among others, the
following four factors:
(i) THE HISTORICAL AND CURRENT FINANCIAL CONDITION, RESULTS OF
OPERATIONS, AND BUSINESS OF DIAMOND AND ULTRAK. The Board believed that the
businesses of Diamond and Ultrak were well matched because of (a)
Diamond's manufacturing capacity and proprietary CCTV product lines and
Ultrak's strengths in marketing and selling CCTV products purchased from
non-related manufacturers for resale; and (b) Diamond's
comparatively-larger base of plant and equipment and other tangible assets
associated with its manufacturing operations and its ability to borrow
against those fixed assets on a long-term basis, as contrasted with
Ultrak's comparatively-smaller base of tangible assets and its reliance
upon short-term debt to finance its sales. After reviewing the historical
and current financial condition and results of operations of Diamond and
Ultrak, the Board of Directors believed that, although the historical per
share stockholders equity and per share net income of the Diamond Common
Stock would be diluted by the exchange of the Ultrak Common Stock under the
Merger Agreement on a pro forma equivalent basis (see "SUMMARY -
Comparative Per Share Data"), the rapid growth of Ultrak in sales and
earnings (and the potential for increased sales and profitability of Ultrak
as the result of the perceived synergies of the acquisition of Diamond)
justified the exchange ratio included in the Merger Agreement.
(ii) THE TERMS OF THE MERGER AGREEMENT, INCLUDING, AMONG OTHER THINGS,
THE CONSIDERATION TO BE RECEIVED BY THE DIAMOND SHAREHOLDERS IN THE
MERGER, THE ASSUMPTION BY ULTRAK OF THE OUTSTANDING OBLIGATIONS AND
LIABILITIES OF DIAMOND IN CONNECTION WITH THE MERGER, AND THE CONDITIONS
TO THE MERGER AND DIAMOND'S ABILITY TO SATISFY SUCH CONDITIONS. In
particular, the Board considered favorably the price protection afforded to
the holders of the Diamond Common Stock through Ultrak's agreement to issue
additional shares of Ultrak Common Stock to the Diamond stockholders if
the stock received in the merger did not achieve certain price levels on
Nasdaq during designated time periods immediately prior to the dates that
are six months and twelve months following the Effective Date (see "MERGER
- Terms of the Merger Agreement -- Adjustments"), the commitment of Ultrak
to cause the offer and sale of the Ultrak Common Stock to be registered
under the Securities Act, thereby making the Ultrak Common Stock freely
transferable for most non-controlling stockholders of Diamond following the
Merger (see "PLAN OF DISTRIBUTION"), and the Board's view that all of the
conditions to the obligations of Ultrak to close the Merger would likely be
satisfied, thereby minimizing the risk that Diamond might incur significant
expense or cost in connection with a terminated transaction.
(iii) THE QUALITY OF AND RISKS ASSOCIATED WITH THE ULTRAK COMMON STOCK
TO BE RECEIVED BY THE DIAMOND SHAREHOLDERS IN THE MERGER. In addition to the
Board's favorable opinion of Ultrak's historical financial condition,
results of operations, liquidity and capital resources, the Board believed
that the quality of the Ultrak Common Stock to be received by the Diamond
Common Stockholders in the Merger was supported by (a) the Board's favorable
impression of the quality of the executive officers of Ultrak based on the
numerous personal discussions conducted by representatives of Diamond with
them, and (b) the existence of an established public trading market for the
Ultrak Common Stock pursuant to which the non-controlling stockholders of
Diamond would have an opportunity to dispose of their Ultrak Common Stock
received in the Merger promptly following the Effective Date should they so
desire (subject to possible price volatility that could result from such
sales or other factors due to the historically low trading volume in the
shares of Ultrak), unlike the Diamond Common Stock for which there is no
established trading market and for which the Board believed there would be
no prospect of establishment of public trading market for the foreseeable
future.
(iv) THE LIKELIHOOD THAT THE MERGER WILL BE TREATED AS A TAX-FREE
REORGANIZATION FOR FEDERAL INCOME TAX PURPOSES SO THAT GENERALLY NO GAIN OR
LOSS WILL BE RECOGNIZED BY THE DIAMOND SHAREHOLDERS IN CONNECTION WITH THE
EXCHANGE OF DIAMOND COMMON STOCK FOR ULTRAK COMMON STOCK IN THE MERGER.
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 the Texas Business Corporation Act (the "TBCA"). Diamond will
be the surviving corporation in the Merger. As a result of the Merger, the
separate corporate existence of Ultrak Subsidiary will cease, and Diamond will
become a wholly-owned subsidiary of Ultrak.
CONVERSION FACTOR. Except as set forth below, each share of Diamond
Common Stock issued and outstanding at the time of the Merger (other than
treasury shares and shares held by persons who perfect their appraisal rights
under the ORC) will be converted into the right to receive 0.125 shares of
Ultrak Common Stock. Cash will be paid in lieu of issuing fractional shares of
Ultrak Common Stock in an amount equal to the Determination Price (as defined
herein) of Ultrak Common Stock multiplied by the fraction of a share. Cash
will also be paid in lieu of Ultrak Common Stock to any Diamond Shareholder who
would receive ten (10) or fewer shares of Ultrak Common Stock in the Merger
(the "Cash Out") in an amount equal to the product of (i) the average closing
price of Ultrak Common Stock as reported for Nasdaq in the Wall Street Journal,
Southwest Edition, for each of the ten (10) trading days ending on the trading
day which is five (5) days prior to the Effective Date, multiplied by (ii) the
number of shares of Ultrak Common Stock that such Diamond Shareholder is
entitled to receive pursuant to the Merger Agreement. It is a condition to
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<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 (as defined herein) shall be the average
closing price, as reported for Nasdaq in the Wall Street Journal, Southwest
Edition, for each of the ten (10) trading days ending on the First Adjustment
Date; and (iii) the Determination Price on the Second Adjustment Date (as
defined herein) shall be the average closing price, as reported for Nasdaq in
the Wall Street Journal, Southwest Edition, for each of the ten (10) trading
days ending on the Second Adjustment Date.
The "Conversion Factor" shall mean 0.125, which is determined by
dividing 600,000 (the aggregate number of shares of Ultrak Common Stock to be
exchanged in the Merger as of the Effective Date) by 4,809,219 (the aggregate
number of shares of Diamond Common Stock to be exchanged in the Merger).
ADJUSTMENTS. If the average closing price of Ultrak Common Stock as
reported for 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.
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<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) Diamond shall deliver to Ultrak evidence that any and all options,
warrants, or other rights to acquire the capital stock of Diamond have been
cancelled or terminated.
The obligation of Diamond to consummate the Merger also is subject to
certain additional conditions, including, among others, that: (i) Ultrak's
representations and warranties contained in the Merger Agreement shall be true
and correct as of the date of the Merger Agreement and as of the Effective
Date; (ii) Ultrak shall have performed in all material respects all covenants
and agreements required to be performed by it under the Merger Agreement; (iii)
there shall have been no material adverse change in Ultrak's business,
properties, assets, liabilities, results of operations or condition, financial
or otherwise; (iv) Diamond shall have received legal opinions with respect to
various matters; and (v) Diamond shall have received a tax opinion of Leagre &
Barnes with respect to various matters.
AMENDMENT. The Merger Agreement may be amended by the written
agreement of all the parties to the Merger Agreement.
TERMINATION. The Merger Agreement may be terminated (i) by mutual
written consent of the Boards of Directors of Diamond and Ultrak, (ii) by
either Diamond or Ultrak if the Effective Date has not occurred on or before
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-Terms of the Merger Agreement--Conditions to
the Merger." Thus, there can be no assurance as to whether or when the Merger
will become effective.
RECOMMENDATION OF THE DIAMOND BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF DIAMOND HAS DETERMINED THAT THE MERGER IS IN
THE BEST INTERESTS OF DIAMOND AND THE DIAMOND SHAREHOLDERS, HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT, AND RECOMMENDS THAT THE DIAMOND SHAREHOLDERS
VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE MERGER.
RIGHTS OF DISSENTING SHAREHOLDERS
DISSENTERS RIGHTS. A Diamond Shareholder who does not vote in favor
of the Merger Proposal at the Diamond Special Meeting has the right under
Section 1701.85 of the ORC to demand the fair cash value for his shares of
Diamond Common Stock. To perfect these dissenters' rights, the dissenting
Diamond Shareholder must deliver to Diamond a written demand for payment to him
of the fair cash value of his shares of Diamond Common Stock, stating in such
notice the amount claimed by him as the fair cash value for such shares. Such
written demand must be delivered to Diamond not later than ten days after the
Special Meeting.
If Diamond and the Dissenting Shareholder do not come to an agreement
on the fair cash value of the shares of Diamond Common Stock, then within three
months of the demand by the dissenting Diamond Shareholder, either party may
file a complaint in the Court of Common Pleas of Fairfield County, Ohio.
Diamond presently intends not to institute such a complaint against any
Dissenting Shareholder and Diamond is not required to do so under Section
1701.85 of the ORC; therefore, each Dissenting Shareholder will be responsible
for initiating any such action in a timely manner and bear the related
attorneys' fees and other costs of litigation if the Dissenting Shareholder
wishes to receive the fair cash value for his or her shares of Diamond Common
Stock under Section 1701.85 of the ORC. If the court finds that the dissenting
Diamond Shareholder is entitled to receive fair value for his shares of Diamond
Common Stock, the court may appoint one or more appraisers to recommend a
determination of the amount of the fair cash value. The court will then render
a judgment against Diamond for payment of the fair cash value, as determined by
the court, with interest at such rate and from such date as the court considers
equitable. Court costs, including costs of the appraisers, will be assessed or
apportioned as the Court considers equitable. Section 1701.85 of the ORC does
not specify whether the Court may assess or apportion attorneys' fees and other
litigation expenses of the Dissenting Shareholder to Diamond in any proceeding
brought under Section 1701.85 by a Dissenting Shareholder against Diamond.
Neither Ultrak nor Diamond is aware of any judicial precedent under Ohio law
that would permit the court in any proceeding brought under Section 1701.85 of
the ORC to assess or apportion such attorneys' fees or other litigation
expenses in a manner that varies from the generally applicable common law
principle in the United States that each party must bear its own attorneys'
fees and other litigation expenses. Diamond would take the position in any such
proceeding that the Dissenting Shareholder would not be entitled to recover the
Dissenting Shareholder's attorneys' fees or litigation expenses incurred in
connection with the bringing of any such proceeding against Diamond.
The procedure set forth in Section 1701.85 of the ORC should be
complied with strictly. Failure to follow any of such procedures may result
in the termination or waiver of dissenters' rights. The Diamond Shareholders
should note that failure to execute and return a proxy does not perfect
dissenters' rights. In addition, neither voting against the Merger Proposal
nor abstaining from voting will constitute a demand for payment. However,
voting in favor of the Merger Proposal will waive a Diamond Shareholder's
dissenters' rights. If a Diamond Shareholder returns a signed proxy card but
does not specify a vote, the proxy will be voted in favor of the Merger
Proposal which will have the effect of waiving such Diamond Shareholder's
dissenters' rights.
A condition to the obligation of Diamond to consummate the Merger is
that the shares held by the Diamond Shareholders who have dissented and
demanded fair cash value of their shares pursuant to the ORC
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<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. Subject to subsequent adjustments, the
executive officers and directors of Diamond would therefore be entitled to
receive in the Merger an aggregate of 371,600 shares of Ultrak Common Stock
having an aggregate market value of $3,019,250 (based on the closing price per
share of Ultrak Common Stock reported on the Nasdaq on May 3, 1995). See
"PRINCIPAL SHAREHOLDERS OF DIAMOND."
BONUS AND EMPLOYMENT AGREEMENT. The Merger Agreement contemplates the
execution by Ultrak of a new employment agreement with Diamond's President,
Richard Tompkins. Diamond has paid Mr. Tompkins a bonus of $16,800 for several
reasons, including the following: (i) to recognize his services in negotiating
the terms of the Merger Agreement and (ii) to facilitate the exercise of his
stock options for shares of Diamond Common Stock prior to the execution of the
Merger Agreement.
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both Ultrak and Diamond
to consummate the Merger are conditioned upon receipt of all required
regulatory approvals (with certain exceptions). Other than the approval of
certain state securities commissions, Ultrak and Diamond believe that no such
regulatory and other approvals are required by applicable law.
ACCOUNTING TREATMENT
For financial reporting purposes, the Merger will be accounted for by
the purchase method of accounting in accordance with generally accepted
accounting principles. Accordingly, the purchase price will be allocated to
the assets and liabilities of Diamond acquired based on their estimated fair
values with the excess of cost over the net assets acquired being allocated to
goodwill.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL. The following is a summary of the intended material federal
income tax consequences of the Merger to the Diamond Shareholders. This
summary is supported by the opinion of Leagre & Barnes, the form of which has
been filed as an exhibit to the Registration Statement of which this
Prospectus/Proxy Statement is a part. The summary is based on the provisions
of the Code, the Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect as of the
date hereof, and on the accuracy of certain factual representations made to
Leagre & Barnes by Ultrak, Ultrak Subsidiary, Diamond, and certain shareholders
of Diamond. Such laws or interpretations may differ as of the Effective Date,
and relevant facts may also differ.
The tax treatment of the Merger with respect to each Diamond
Shareholder will depend in part upon each such Diamond Shareholder's particular
situation. Special tax consequences not described below may be applicable to
particular classes of taxpayers, including financial institutions,
broker-dealers, persons who are not citizens or residents of the United States
or who are legal entities formed under the laws of jurisdictions outside the
United States, and the Diamond Shareholders who acquired their shares through
the exercise of employee stock options or otherwise as compensation. All
Diamond Shareholders should consult with their own tax advisors as to the
particular tax consequences of the Merger to them, including the applicability
and effect of any state, local, and foreign tax laws.
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<PAGE> 23
OPINION OF LEAGRE & BARNES. Pursuant to the terms of the Merger
Agreement, Diamond and Ultrak will receive the opinion of Leagre & Barnes,
dated as of the Effective Date, to the effect that, subject to the assumptions,
qualifications, and limitations set forth therein, the Merger will be treated
as a tax-free reorganization for federal income tax purposes so that no gain or
loss will be recognized by the Diamond Shareholders, except in respect of cash
received in lieu of fractional shares, cash received pursuant to the Cash Out,
or payments received by the Diamond Shareholders exercising dissenters' rights.
However, although the obligations of Ultrak and Diamond to consummate the
Merger are conditioned upon the receipt of the tax opinion of Leagre & Barnes
regarding the intended federal income tax consequences of the Merger, that
opinion is not binding upon the Internal Revenue Service and no ruling has been
sought from the Internal Revenue Service regarding the tax-free nature of the
Merger. If the Merger is consummated, and it is later determined that the
Merger did not qualify as a tax-free reorganization under the Code, Diamond
Shareholders would recognize taxable gain or loss in the Merger equal to the
difference between the fair market value of the Ultrak Common Stock such
Diamond Shareholder received and such Diamond Shareholder's basis in his or her
Diamond Common Stock.
TAX CONSEQUENCES TO DIAMOND SHAREHOLDERS
The following are the intended material federal income tax
consequences of the Merger to the Diamond Shareholders.
1. No gain or loss will be recognized by the Diamond Shareholders,
except in respect of cash received as described in paragraph 4 below.
2. The basis of the Ultrak Common Stock to be received by the
Diamond Shareholder will be the same, in each instance, as the basis of
Diamond Common Stock surrendered in exchange therefor.
3. The holding period for the Ultrak Common Stock will include the
holding period of Diamond Common Stock surrendered in exchange therefor,
provided such Diamond Common Stock was held as a capital asset on the date of
the Merger.
4. Cash received in the Merger by a Diamond Shareholder in lieu
of a fractional share of Ultrak Common Stock or pursuant to the Cash Out will
be treated under Section 302 of the Code as having been received by the Diamond
Shareholder in exchange for such fractional share or shares subject to the Cash
Out, and the Diamond Shareholder generally will recognize capital gain or loss
in such exchange equal to the difference between the cash received and the
Diamond Shareholder's tax basis allocable to the fractional share or the shares
subject to the Cash Out. A Diamond Shareholder who perfects his dissenters'
rights under the ORC and who receives payment in cash for the "fair cash value"
of his Diamond Common Stock will be treated as having received such payment in
a redemption of the Diamond Common Stock subject to the provisions of Section
302 of the Code. In general, a dissenting Diamond Shareholder will recognize
capital gain or loss measured by the difference between the amount received by
such Diamond Shareholder in payment for his shares of Diamond Common Stock and
the tax basis of such shares of Diamond Common Stock. Any gain or loss
recognized will be capital gain or loss if the Diamond Common Stock or Ultrak
share interest was a capital asset in the hands of the Diamond Shareholder, and
will be long-term capital gain or loss if the Diamond Common Stock was held by
such Diamond Shareholder for more than one year. In general, the federal
income tax rates applicable to long-term capital gains and ordinary income
(including short-term capital gains) of taxpayers that are individuals may
differ, while for corporations capital gains and ordinary income are generally
taxed at the same rate. The deductibility of capital losses is subject to
limitations for both individuals and corporations.
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE STATE, LOCAL, OR
FOREIGN TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY
EXISTING PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS
THEREUNDER, AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE
FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE CONTINUING
VALIDITY OF THIS DISCUSSION. EACH DIAMOND SHAREHOLDER SHOULD CONSULT HIS OR
HER OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER
TO SUCH DIAMOND SHAREHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE,
LOCAL, AND FOREIGN TAX LAWS.
RESALE OF ULTRAK COMMON STOCK
Shares of Ultrak Common Stock to be issued to the Diamond Shareholders
in connection with the Merger will be freely transferrable under the Securities
Act, except for shares issued to the Signing Shareholders or to any person who,
as of the Effective Date, may be deemed to be an affiliate ("Affiliate") of
Diamond within the meaning of Rule 145 under the Securities Act. In general,
Affiliates of Diamond include certain of its executive officers, each member of
its board of directors, and any other person or entity who controls, is
controlled by, or is under 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.
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<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 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 from the Effective Date until December 29, 1995, will
be governed by the Colorado Business Corporation Act (the "CBCA"), Ultrak's
Articles of Incorporation, as amended, attached hereto as Annex E (the "Ultrak
Charter"), and the Bylaws of Ultrak (the "Ultrak Bylaws"), attached hereto as
Annex F.
Effective as of December 29, 1995, Ultrak will reincorporate in
Delaware by merging with a wholly-owned subsidiary incorporated in Delaware
solely for that purpose, unless the Board of Directors of Ultrak determines
that it is inadvisable to do so. See "ULTRAK'S REINCORPORATION IN DELAWARE -
General." The Board of Directors chose to delay the effectiveness of the
Reincorporation until that date in order to simplify the transition from
Delaware to Colorado corporate law and particularly to correspond with Ultrak's
fiscal year. See "ULTRAK'S REINCORPORATION IN DELAWARE - Effective Date of
the Reincorporation." Upon Ultrak's reincorporation in Delaware, all persons
owning Ultrak Common Stock will be subject to Delaware corporate law rather
than Colorado corporate law. See "ULTRAK'S REINCORPORATION IN DELAWARE -
General." Therefore, although certain significant differences between the
rights of Ultrak's shareholders before and after the Merger are discussed
below, Diamond Shareholders receiving Ultrak Common Stock in the Merger should
note the differences in the charter documents and corporate laws that will
govern them as a result of the Reincorporation discussed under the caption
"ULTRAK'S REINCORPORATION IN DELAWARE - Significant Differences in Corporate
Law of Colorado and Delaware."
Management of Ultrak and Diamond are of the opinion that, except as
described below, there are no substantial differences relating to the rights of
the holders of Diamond Common Stock and the holders of Ultrak Common Stock.
There are a number of significant differences between the applicable
corporate laws of the State of Ohio and the States of Colorado and Delaware.
Although no attempt has been made to summarize all differences in the corporate
laws of such states, management of Ultrak and Diamond believe the following to
be a fair summary of the significant differences in the corporate laws of those
states which would affect the Diamond Shareholders. As a result of the Merger
and the subsequent Reincorporation, Diamond Shareholders will be subject to
different rights as holders of capital stock of Ultrak, which is governed by the
laws of Colorado (and subsequently Delaware), than they have presently as
holders of Diamond Common Stock. The most significant of such changes are
outlined below and, along with several other less material changes, are
discussed in greater detail in the narrative below and under the caption
"ULTRAK'S REINCORPORATION IN DELAWARE."
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<PAGE> 25
<TABLE>
<CAPTION>
Ohio (Diamond) Colorado (Ultrak) Delaware (Ultrak-Delaware)
-------------- ----------------- --------------------------
<S> <C> <C> <C>
Dissenters' Rights Yes. Yes. Only in limited circumstances.
Special Requirements for Yes (both statutory No. Yes (statutory).
Business Combinations and under charter
documents).
Amendment of Governing Affirmative vote of Affirmative vote of a Affirmative vote of a
Documents two-thirds of shares majority of shares majority of shares
entitled to vote. entitled to vote. entitled to vote.
</TABLE>
<R/>
AUTHORIZED SHARES. Under the Ultrak Charter, Ultrak is authorized to
issue 20 million shares of Ultrak Common Stock and 2,000,000 shares of
preferred stock, $5.00 par value per share, of which 195,351 shares of Series A
Preferred Stock are currently issued and outstanding. The powers, preferences,
and rights of the Ultrak Common Stock and the Series A Preferred Stock are
identical except that holders of the Series A Preferred Stock are entitled to
quarterly preferential dividends and upon liquidation, dissolution, or winding
up of Ultrak, and the holders of the Series A Preferred Stock are entitled to
receive the original purchase price of $5.00 plus any unpaid dividends accruing
to that date. See "DESCRIPTION OF ULTRAK'S CAPITAL STOCK - General."
Under the Diamond Charter, Diamond is authorized to issue 5,000,000
shares of Diamond Common Stock and 100,000 shares of Preferred Stock, par value
$100.00 per share. None of these shares of Preferred Stock of Diamond are
presently issued and outstanding.
PREEMPTIVE RIGHTS. Under Colorado corporation law, shareholders of
Ultrak are permitted to have preemptive rights to purchase new shares unless
prohibited in the Certificate of Incorporation; the Ultrak Charter does not
prohibit such rights.
Under the ORC and Diamond's corporate documents, Diamond Shareholders
have no preemptive rights to purchase or subscribe for shares of any class of
capital stock of Diamond.
AMENDMENT OF GOVERNING DOCUMENTS. Under the CBCA, the affirmative
vote of two-thirds of the outstanding shares entitled to vote is required to
amend a corporation's bylaws or articles of incorporaiton, unless the charter
or the bylaws of a corporation provide for a lower percentage. Under Ultrak's
charter and bylaws, only a vote of a majority of the shares outstanding and
entitled to vote is required to amend either its bylaws or its articles of
incorporation.
Under the ORC, a corporation's articles of incorporation may be
amended by the Board of Directors and by the affirmative vote of the holders
of at least two-thirds of the outstanding shares entitled to vote or, if the
corporation's articles of incorporation so provide, any other proportion not
less than a majority. The Diamond Charter does not specify a lesser vote to
amend the Diamond Charter, and a supermajority vote is required to amend the
"fair price" provisions of the Diamond Charter. See "-- Anti-Takeover
Legislation." The Diamond Regulations provide that they may be amended by the
affirmative vote of a majority of the shares outstanding, except for amendments
altering the shareholders' rights under the "fair price" provisions of the
Diamond Charter.
DISSOLUTION. Under the CBCA, the Board of Directors of a corporation
such as Ultrak may adopt a resolution to dissolve the corporation, which must
be approved by a majority of the corporation's shareholders to become
effective. As a result of the Reincorporation, the shareholders, upon a
unanimous vote, will be empowered to cause the corporation to dissolve without
the support of the Board of Directors. See "ULTRAK'S REINCORPORATION IN
DELAWARE - Votes of Shareholders."
Under the ORC, a corporation may be dissolved by the vote of
two-thirds of the shares outstanding, unless a lesser percentage is permitted
under the charter documents. Diamond's charter does not provide for a lesser
percentage to approve a dissolution.
ANTI-TAKEOVER LEGISLATION. Colorado does not have an anti-takeover
statute that attempts to prohibit a third party from effecting a takeover or
a change in control of Ultrak without the consent of the management and
shareholders of Ultrak. A significant change resulting from the
Reincorporation is that shareholders of Ultrak-Delaware will be protected by
Delaware's anti-takeover statute. See "ULTRAK'S REINCORPORATION IN DELAWARE -
Significant Differences in Corporate Law of Colorado and Delaware --
Anti-Takeover Legislation."
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Article VII of the Diamond Charter has a "fair price" provision that
restricts certain business combinations; however, such restrictions operate
differently than those under Delaware law. Diamond's "fair price" provision is
intended to provide reasonable assurances to shareholders that in the event any
shareholder or group of shareholders acquired 10% or more of the Diamond Common
Stock (an "Acquiror") and then seeks to acquire all or a part of the remaining
common stock through a merger or other transaction that would force a change or
termination of the other shareholders' ownership interests (a "Business
Combination"), such transaction must be approved (i) by the affirmative vote of
80% of all the votes entitled to be cast by all holders of Diamond Common Stock
and (ii) a majority of the votes entitled to be cast by all holders of Diamond
Common Stock held by shareholders other than the Acquiror, unless (i) the
Business Combination has been approved by two-thirds of Diamond's directors who
are unrelated to the Acquiror, (ii) the Business Combination is solely between
Diamond and a wholly-owned subsidiary, or (iii) the Acquiror complies with the
conditions of the "fair price" section of Article VII. The "fair price" section
of Article VII requires that, pursuant to a Business Combination, the
shareholders other than the Acquiror receive consideration at least equal to
(i) the highest per share price paid for its shares of Diamond Common Stock or
(ii) the fair market value of such shares as determined by the Board of
Directors in good faith. The Acquiror is also required to maintain a ratio of
directors that are independent from the Acquiror to the total number of
Directors on the Board of Directors, which is equal to or greater than the
ratio of shares of Diamond Common Stock held by perons not affiliated with the
Acquiror to the total number of shares of Diamond Common Stock outstanding.
Article VII of Diamond's Articles of Incorporation, which contains the
"fair price" provision, may be amended only by a vote of 80% of the votes
entitled to be cast by all holders of voting stock and a majority of the
shareholders not affiliated with the Acquiror.
Chapter 1704 of the ORC (the "Ohio Business Combination Statute") is
similar to the "fair price" provision contained in Diamond's Articles of
Incorporation. The Ohio Business Combination Statute prohibits an "issuing
public corporation" from engaging in a "Chapter 1704 Transaction" with an
"interested shareholder" for a period of three years following the date on which
the person becomes an interested shareholder unless, prior to such date, the
directors of the issuing public corporation approve either the Chapter 1704
Transaction or the acquisition of shares pursuant to which such person became
an interested shareholder. After the initial three-year moratorium has expired,
an issuing public corporation may engage in a Chapter 1704 Transaction if (i)
the acquisition of shares pursuant to which the person became an interested
shareholder received the prior approval of the board of directors of the
issuing public corporation, (ii) the Chapter 1704 Transaction is approved by
the affirmative vote of the holders of shares representing at least two-thirds
of the voting power of the issuing public corporation and by the holders of at
least a majority of voting shares that are not beneficially owned by an
interested shareholder or an affiliate or associate of an interested
shareholder, or (iii) the Chapter 1704 Transaction meets certain statutory
tests designed to ensure that it be economically fair to all shareholders.
For the purpose of the Ohio Business Combination Statute, an "issuing
public corporation" is any Ohio corporation with 50 or more shareholders that
has its principal place of business, principal executive offices or substantial
assets within the State of Ohio. Diamond currently is such an issuing public
corporation. An "interested shareholder" is any person who is the beneficial
owner of a sufficient number of shares to allow such person, directly or
indirectly, alone or with others, including affiliates and associates, to
exercise or direct the exercise of 10% of the voting power of the issuing
public corporation. A "Chapter 1704 Transaction" includes any merger,
consolidation, combination or majority share acquisition between or involving
an issuing public corporation and an interested shareholder or an affiliate or
associate of an interested shareholder. A Chapter 1704 Transaction also
includes certain transfers of property, dividends and issuance or transfers of
shares, from or by an issuing
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public corporation or a subsidiary of an issuing public corporation to, with or
for the benefit of an interested shareholder or an affiliate or associate of an
interested shareholder unless such transaction is in the ordinary course of
business of the issuing public corporation on terms no more favorable to the
interested shareholder than those acceptable to third parties as demonstrated
by contemporaneous transactions. Finally, Chapter 1704 Transactions include
certain transactions which (i) increase the proportionate share ownership of an
interested shareholder, (ii) result in the adoption of a plan or proposal for
the dissolution, winding up of the affairs or liquidation of the issuing public
corporation if such plan is proposed by or on behalf of the interested
shareholder, or (iii) pledge or extend the credit or financial resources of the
issuing public corporation to or for the benefit of the interested shareholder.
[/R]
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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SHAREHOLDER NOMINATIONS. The Ultrak Bylaws contain no restrictions on
the ability of shareholders to nominate persons for election as a director of
Ultrak. The Diamond Regulations contain no restrictions on the ability of
shareholders to nominate persons for election as a director of Diamond.
SHAREHOLDER PROPOSALS. The Ultrak Bylaws contain no restrictions on
the ability of shareholders to make shareholder proposals. The Diamond
Regulations contain no restrictions on the ability of shareholders to make
shareholder proposals.
BOARD OF DIRECTORS. Under the Ultrak Bylaws, the Board of Directors
of Ultrak consists of such number of directors as determined from time to time
by the Board of Directors, which cannot in any case be less than three. The
Board of Directors of Ultrak currently consists of five members, all of whom
are elected at each annual meeting of shareholders. Under the Ultrak Bylaws,
directors may be removed with or without cause at any time by the holders of a
majority of the outstanding Ultrak Common Stock entitled to vote. Under the
Diamond Regulations, the Board of Directors of Diamond consists of five
directors.
Under the Ultrak Bylaws, the presence of a majority of the total
number of directors currently comprising the Board of Directors is necessary to
constitute a quorum. Under the Diamond Regulations, a majority of the total
number of directors currently comprising the Board of Directors is necessary to
constitute a quorum.
LIMITATION ON PERSONAL LIABILITY OF DIRECTORS. Under Colorado law,
there is no express standard of conduct which can protect a director from
liability nor any express statute of limitations with respect to any illegal
acts by a director, and directors are not liable for illegal acts of the
corporation if they did not assent to or vote for such acts. Under the Ultrak
Charter, no director of Ultrak will be personally liable to Ultrak or its
shareholders for monetary damages for breach of fiduciary duty as a director,
except in limited circumstances.
The Diamond Charter does not address the personal responsibility of
directors of Diamond for breaches of their fiduciary duties.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under the Ultrak Charter,
Ultrak is required to indemnify, to the fullest extent permitted by the CBCA,
any person who is involved in any action, suit, or proceeding by reason of the
fact that the person is or was a director, officer, employee, or agent of
Ultrak, provided that such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the interests of Ultrak, and had
no reason to believe his conduct was unlawful. Ultrak may advance the
reasonable expenses to any such director, officer, employee, or agent of Ultrak
provided that, in the case of a director or officer of Ultrak, he or she
delivers the undertaking required by the CBCA. After the Reincorporation,
Ultrak will have a much broader right to indemnify its directors under
Delaware law than it presently has under Colorado law. See "ULTRAK'S
REINCORPORATION IN DELAWARE - Significant Differences in Corporate Law of
Colorado and Delaware -- Indemnification of Directors and Officers."
The Diamond Regulations require that Diamond indemnify any officer or
director of Diamond, to the fullest extent permitted by the ORC, who is
involved in any action, suit, or proceeding by reason of the fact that the
person is or was a director, officer, employee, or agent of Diamond (or of
another corporation while serving at the request of Diamond). Diamond is
required to reimburse the expenses of any officer or director of Diamond who
has been successful on the merits or otherwise in defense of any action, suit,
or proceeding.
DISSENTERS RIGHTS. Shareholders of Ultrak are entitled under
Colorado corporation law to receive payment for their shares if they dissent
from certain corporate actions, such as a reincorporation, consolidation,
merger, or sale of all or substantially all of Ultrak's assets. Any
shareholder of Ultrak wishing to dissent from such a transaction and obtain
cash payment for his shares must file with Ultrak, prior to the vote on such
transaction, a written notice of his intention to demand that he be paid fair
compensation for his shares if the transaction
Subject to certain conditions contained in the ORC, holders of Diamond
Common Stock who do not vote their shares in favor of a merger or consolidation
are eligible to make a written demand on Diamond for payment of the fair cash
value of such shares within ten days after the meeting at which the proposal
for Diamond to engage in a merger or consolidation is considered. A
shareholder seeking to assert appraisal rights under Ohio law must deliver a
written demand for payment to him of the fair cash value of his shares of
stock, stating in such notice the amount claimed by him as the fair cash value
for such shares. Failure to execute and return a proxy does not perfect
dissenters' rights. In addition, if a shareholder of an Ohio corporation votes
in favor of such a proposal, then such shareholder will be deemed to have
waived his dissenters' rights. Also, if a shareholder returns a signed proxy
card but does not specify a vote, the proxy will be voted in favor of the
proposal, which will have the effect of waiving the shareholder's dissenters'
rights.
After the Reincorporation, the shareholders of Ultrak, including
Diamond Shareholders that receive Ultrak Common Stock pursuant to the Merger,
will have more limited dissenters' rights than are presently available under
either Colorado or Ohio corporate law. See "ULTRAK'S REINCORPORATION IN
DELAWARE - Significant Differences in Corporate Law of Colorado and Delaware
- -- Rights of Dissenting Shareholders."
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<PAGE> 29
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.
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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 of Ultrak approved the
proposal to change the state of incorporation of Ultrak from Colorado to
Delaware. This change will be accomplished by merging Ultrak into Ultrak,
Inc., a Delaware corporation (herein referred to as "Ultrak-Delaware" or the
"Surviving Corporation"), which is a wholly-owned Delaware subsidiary of Ultrak
formed solely for that purpose.
The merger of Ultrak into Ultrak-Delaware (the "Reincorporation") will
be effected pursuant to the Plan and Agreement of Merger (the "Reincorporation
Agreement") between Ultrak and Ultrak-Delaware attached hereto as Annex G. The
Reincorporation Agreement provides that, when the Reincorporation becomes
effective, Ultrak-Delaware will continue as the Surviving Corporation under the
name "Ultrak, Inc." The Reincorporation Agreement also provides that Ultrak and
Ultrak Delaware may terminate the Reincorporation Agreement upon mutual written
consent. Because Ultrak's Board of Directors is the same as Ultrak-Delaware's
Board of Directors, the Board of Directors effectively has the right to
terminate the Reincorporation Agreement and abandon the Reincorporation for any
reason whatsoever notwithstanding shareholder approval.
The summary of the Reincorporation contained herein accurately
describes the material effect of the Reincorporation on shareholders of Ultrak.
For a complete description of the terms of the Reorganization, shareholders of
Ultrak should refer to the Reincorporation Agreement.
Pursuant to the Reincorporation Agreement, the Board of Directors of
Ultrak will become the Board of Directors of the Surviving Corporation. The
management of Ultrak will continue as the management of the Surviving
Corporation. The Reincorporation will not involve any change in the business
or properties of Ultrak. The Surviving Corporation will succeed to all the
assets and be responsible for all the liabilities of Ultrak, including
obligations under Ultrak's 1988 Nonqualified Stock Option Plan. Although the
purposes of the Surviving Corporation set forth in its Certificate of
Incorporation will permit it in the future to enter into any lawful business
activity, no change in the present business of Ultrak is now contemplated,
except as new developments and opportunities may occur.
There are certain differences between the Certificate of Incorporation and
the By-Laws of Ultrak and the Surviving Corporation, as well as differences in
the corporate law of the States of Colorado and Delaware, which will affect
Ultrak and its shareholders. See "- Significant Differences in Corporate Law
of Colorado and Delaware" and "- Certificate of Incorporation and By-Laws."
The Surviving Corporation is authorized to issue 20,000,000 shares of
common stock, $0.01 par value, and 2,000,000 shares of Preferred Stock, $5.00
par value, including 195,351 shares of Series A Preferred Stock. See
"Certificate of Incorporation and By-Laws." Upon the Reincorporation becoming
effective, Ultrak's shareholders will become shareholders of the Surviving
Corporation, and each outstanding share of Ultrak Common Stock will become one
share of Common Stock of the Surviving Corporation and each outstanding share
of Series A Preferred Stock of Ultrak will become one share of Series A
Preferred Stock of the Surviving Corporation. The Common Stock of the
Surviving Corporation will have the same relative rights, preferences,
privileges and restrictions as the Ultrak Common Stock. The Series A Preferred
Stock of the Surviving Corporation will have the same relative rights,
preferences, privileges and restrictions as Ultrak's Series A Preferred Stock.
The Reincorporation will not cause any change in the qualification of Ultrak
Common Stock on Nasdaq. It will not be necessary for holders of Ultrak Common
Stock to exchange their existing certificates for new certificates representing
Common Stock of the Surviving Corporation. It is anticipated that delivery
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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.
Ultrak has reserved the right to abandon the Reincorporation if
circumstances arise which in the opinion of the Board of Directors make it
inadvisable to proceed.
REASONS FOR REINCORPORATION
The Board of Directors of Ultrak believes that the best interests of
Ultrak and its shareholders will be served by reincorporating in Delaware in
order to have the benefits afforded by a more flexible corporation law.
Delaware has a well-established policy of continuously reviewing and updating
its corporate laws. Consistent with this policy, the corporate laws of
Delaware are frequently revised and Delaware currently has a flexible and
modern statute governing the conduct of corporate affairs.
Thousands of corporations, including a great many of the larger
corporations in this country, are now incorporated in Delaware. The number of
corporations maintaining their domicile in Delaware over the years has resulted
in a judiciary particularly familiar with many phases of corporate matters and
a substantial body of decisions construing its laws and establishing public
policy affecting its corporations. Based on the well developed and predictable
nature of the Delaware corporate law, management believes that the ongoing
operations and business of Ultrak can be carried on to better advantage if
Ultrak is incorporated under the laws of Delaware. See "Significant
Differences in Corporate Law of Colorado and Delaware."
Delaware has in effect an anti-takeover statute that would, following the
Reincorporation, make it difficult for a potential acquirer to effect a
takeover or change in control of Ultrak without management's consent and the
consent of Ultrak's shareholders. Accordingly, the Reincorporation will have
the effect of making it more difficult to remove the existing management of
Ultrak. Colorado does not have a comparable statute. Management is unaware of
any person accumulating Ultrak's voting securities or seeking to take control
of Ultrak, but believes that reincorporation in Delaware is still desirable for
the reasons described above, notwithstanding the anti-takeover effect of the
Reincorporation. Since current management beneficially owns approximately 28%
of the Ultrak Common Stock and 100% of the Series A Preferred Stock,
representing approximately 52% of the votes in matters to be voted upon by the
shareholders of Ultrak, the reincorporation will not have a practical effect on
the likelihood of success of an unfriendly attempt to effect a takeover or
change in control of Ultrak.
BOARD OF DIRECTORS
The Reincorporation Agreement provides that upon the effective date of the
Reincorporation, the Board of Directors of the Surviving Corporation shall be
composed of those members of the Board of Directors of Ultrak who are elected
at the meeting.
CERTIFICATE OF INCORPORATION AND BY-LAWS
The Reincorporation Agreement provides that the Certificate of
Incorporation and the By-Laws of Ultrak-Delaware will be the Certificate of
Incorporation and the By-Laws of the Surviving Corporation. The Certificate of
Incorporation and By-Laws of Ultrak and the Certificate of Incorporation and
By-Laws of the Surviving Corporation are substantially similar; however, some
differences do exist. Among other things, the By-Laws of the Surviving
Corporation contain indemnification provisions, whereas the By-Laws of Ultrak
do not address indemnification (although the Certificate of Incorporation of
each addresses indemnification), and
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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
Ultrak-Delaware, the vote of a majority of the outstanding stock
entitled to vote is required to amend the corporate charter, to dissolve a
corporation, to effect a reincorporation or consolidation, or to sell,
lease, or exchange all or substantially all of the corporation's assets.
Under both Colorado and Delaware law, action by the Board of Directors, as
well as the shareholders, is required to amend the corporate charter, to
effect a reincorporation or consolidation, or to sell, lease, or exchange
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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<PAGE> 33
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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<PAGE> 35
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.
30
<PAGE> 36
EFFECTIVE DATE OF THE REINCORPORATION
Subject to the satisfaction of the conditions of the Reincorporation, it
is contemplated that the Reincorporation will be made effective as of December
29, 1995. The Board of Directors chose this date in order to simplify the
transfer of Ultrak's books and records, and to correspond with the end of
Ultrak's fiscal year.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax law, Ultrak, Ultrak-Delaware, the
shareholders of Ultrak who did not exercise their rights as shareholders
dissenting from the Reincorporation pursuant to Section 7-113-102 of the CBCA,
and the Diamond Shareholders who own Ultrak Common Stock after the Merger
(since they are not entitled to such dissenters' rights) will not, by reason of
the Reincorporation, realize any gain or loss which will be recognized for
federal income tax purposes. With respect to each dissenting 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
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.
31
<PAGE> 37
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements
assume the Merger is accounted for as a purchase. See "MERGER-Terms of the
Merger and Accounting Treatment." The unaudited pro forma condensed combined
financial statements are based on the respective historical financial
statements and the notes thereto of Ultrak and Diamond, included elsewhere
herein. The unaudited pro forma condensed combined balance sheets combine
Ultrak's December 31, 1994 consolidated balance sheet with Diamond's January 1,
1995 consolidated balance sheet and Ultrak's March 31, 1995 consolidated
balance sheet with Diamond's March 31, 1995 consolidated balance sheet. The
unaudited pro forma condensed combined statements of income combine Ultrak's
consolidated statement of income for the fiscal year ended December 31, 1994
with the corresponding Diamond consolidated statements of operations for the
fifty-two weeks ended January 1, 1995 and Ultrak's consolidated statement of
income for the three months ended March 31, 1995 with Diamond's consolidated
statement of operations for the three months ended March 31, 1995. The amounts
included as Diamond historical amounts have been reclassified to conform to
classifications used by Ultrak.
The unaudited pro forma combined information is presented for illustrative
purposes only and is not necessarily indicative of the operating results that
would have occurred if the business combination had been consummated at the
beginning of the periods presented, nor is it necessarily indicative of future
operating results or financial position.
These unaudited pro forma combined financial statements should be read in
conjunction with the historical financial statements and the related notes
thereto of Ultrak and Diamond included elsewhere herein.
32
<PAGE> 38
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
For the Year Ended December 31, 1994
<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 (39,651) 4,802,043
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 (24,187) 3,090,966
Dividend Requirements on Preferred Stock (117,210) 0 0 (117,210)
------------ ------------ ---------- ------------
NET INCOME FROM CONTINUING OPERATIONS
ALLOCABLE TO COMMON STOCKHOLDERS $ 2,672,302 $ 325,641 $ (24,187) $ 2,973,751
============ ============ =========== ============
Primary Net Income per Share $ .39 - 0 $ .40
============ ============
Fully Diluted Net Income per Share $ .39 - 0 $ .39
============ ============
Primary Weighted Average Shares Outstanding 6,818,999 0 600,000 7,418,999
Fully Diluted Weighted Average Shares 7,236,985 0 600,000 7,836,985
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.
33
<PAGE> 39
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF INCOME
For the Three Months Ended March 31, 1995
<TABLE>
<CAPTION>
Ultrak Diamond Pro Forma Pro Forma
3/31/95 3/31/95 Adjustments Combined
------- ------- ----------- ------------
<S> <C> <C> <C> <C>
SALES 21,829,162 2,959,586 $ 24,788,748
COST OF SALES 16,507,084 2,017,935 18,525,019
----------- ---------- --------- ------------
GROSS PROFIT 5,322,078 941,651 6,263,729
---------- ---------- --------- ------------
TOTAL OPERATING EXPENSES 3,713,412 751,162 8,647 (1) 4,473,221
----------- ---------- --------- ------------
OPERATING INCOME 1,608,666 190,489 (8,647) 1,790,508
----------- ---------- --------- ------------
TOTAL OTHER (INCOME) EXPENSE 377,274 51,386 428,660
----------- ---------- --------- ------------
NET INCOME before TAXES
FROM CONTINUING OPERATIONS 1,231,392 139,103 (8,647) 1,361,848
INCOME TAXES 449,459 53,780 (3,372)(2) 499,867
----------- ---------- --------- ------------
NET INCOME after TAXES
FROM CONTINUING OPERATIONS 781,933 85,323 (5,275) 861,981
Dividend Requirements on Preferred Stock 29,302 0 0 29,302
----------- ---------- ---------- ------------
NET INCOME FROM CONTINUING
OPERATIONS ALLOCABLE TO COMMON
STOCKHOLDERS 752,631 85,323 (5,275) 832,679
=========== ========== ========== ============
Primary Net Income per Share $ .11 -- $ .11
=========== ============
Fully Diluted Net Income per Share $ .11 -- $ .11
=========== ============
Primary Weighted Average Shares Outstanding 6,821,027 -- 600,000 7,421,027
Fully Diluted Weighted Average Shares Outstanding 7,245,063 -- 600,000 7,845,063
</TABLE>
____________________
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(1) Adjustment to depreciate property and equipment written up to its fair
value over 30 years ($2,033) and to amortize goodwill over 25 years
($6,614).
(2) The tax effect of pro forma adjustments to earnings before taxes is
based on the estimated federal and state statutory tax rate.
34
<PAGE> 40
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
As of December 31, 1994
<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:
Preferred Stock 976,755 0 976,755
Common Stock 73,254 3,189,084 -3,189,084 (4) 115,254
42,000 (5)
Additional Paid in Capital 7,213,747 120,000 -120,000 (4) 11,421,747
4,208,000 (5)
Retained Earnings 1,806,632 -91,037 91,037 (4) 1,806,632
----------- ------------ ----------- -----------
Total stockholders' equity 10,070,388 3,218,047 1,031,953 (4) 14,320,388
----------- ------------ ----------- -----------
TOTAL LIABILITIES AND $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) To eliminate the historical equity of Diamond.
(5) To reflect the issuance of 600,000 shares of Ultrak Common Stock.
35
<PAGE> 41
ULTRAK AND DIAMOND
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
As of March 31, 1995
<TABLE>
<CAPTION>
Ultrak Diamond Pro forma Pro forma
ASSETS 3/31/95 3/31/95 Adjustments Combined
------- ------- ----------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash 0 33,791 33,791
Accounts Receivable, net 11,157,231 1,687,672 12,844,903
Prepaids and Other Current Assets 1,039,010 300,518 1,339,528
Inventories, net 15,545,294 2,714,360 18,259,654
Advances for Inventory 3,784,540 -- 3,784,540
----------- ------------ ----------- -----------
Total current assets 31,526,075 4,736,341 36,262,416
----------- ------------ ----------- -----------
PROPERTY and EQUIPMENT, NET 2,034,403 1,775,338 400,000 (1) 4,209,741
----------- ------------ ----------- -----------
NOTES RECEIVABLE, NONCURRENT 1,054,205 -- 1,054,205
OTHER ASSETS:
Goodwill, net 1,339,819 -- 661,428 (2) 2,001,247
Other Assets 157,930 45,873 203,803
----------- ------------ ----------- -----------
Total other assets 1,497,749 45,873 661,428 2,205,050
----------- ------------ ----------- -----------
TOTAL ASSETS 36,112,432 6,557,552 1,061,428 43,731,412
=========== ============ =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade Accounts Payable 5,946,711 952,786 6,899,497
Notes Payable 17,882,187 782,409 18,664,596
Current Portion of Long Term Debt -- 105,960 105,960
Accrued Liabilities 567,314 211,425 778,739
Other Current Liabilities 893,201 284,206 1,177,407
----------- ------------ ----------- -----------
Total current liabilities 25,289,413 2,336,786 27,626,199
----------- ------------ ----------- -----------
LONG TERM LIABILITIES -- 876,194 156,000 (3) 1,032,194
STOCKHOLDERS' EQUITY:
Preferred Stock 976,755 -- 976,755
Common Stock 73,254 3,230,286 (3,230,286)(4) 115,254
42,000 (5)
Additional Paid in Capital 7,213,747 120,000 (120,000)(4) 11,421,747
4,208,000 (5)
Retained Earnings 2,559,263 (5,714) 5,714 (4) 2,559,263
----------- ------------ ----------- -----------
Total stockholders' equity 10,823,019 3,344,572 905,428 15,073,019
----------- ------------ ----------- -----------
TOTAL LIABILITIES AND 36,112,432 6,557,552 1,061,428 43,731,412
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) To eliminate the historical equity of Diamond.
(5) To reflect the issuance of 600,000 shares of Ultrak Common Stock.
36
<PAGE> 42
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 personal computer products, including desktop and tower
computers, disk drives, CD-ROM drives, printers and monitors sold under its
private brand name [X] Smart Choice. Ultrak discontinued this business in July
1993. See "ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS" and Note I of Notes to 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
Video Warranty and Repair Services, Inc., a California corporation ("JAK"), for
total cash consideration of $573,000. JAK is in the business of providing
warranty and repair services for CCTV equipment for a line of products
manufactured by a Korean based company. JAK also has exclusive marketing and
sales rights for certain products in the United States. The operations of JAK
were merged with the existing operations of Ultrak's facility in southern
California. The transaction was accounted for as a purchase. Ultrak has an
option to acquire the remaining 44% of JAK for cash consideration of $500,000,
which will expire on December 31, 1995.
In July 1994, Ultrak exercised its option, in accordance with the terms of
an Option Agreement, to acquire an additional 2.2% of the outstanding stock of
Dental Vision Direct, Inc. ("DVD") from the minority shareholders of DVD,
thereby increasing Ultrak's ownership in DVD from 80% to 82.2%. DVD is in the
business of manufacturing, marketing, and selling an intraoral video hand piece
(sold under the Ultracam trade name) and related accessories used by dentists
in their practices. Effective December 30, 1994, Ultrak acquired the remaining
17.8% interest in DVD from the minority owners for total cash consideration of
$5,000.
On October 31, 1994, Ultrak's revolving line of credit with NationsBank 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 held on May 25, 1995 (the "Annual
Meeting"), the shareholders of Ultrak approved the proposal to change the state
of incorporation of Ultrak from Colorado to Delaware. The change will be
accomplished by merging Ultrak into a wholly-owned subsidiary of Ultrak
incorporated in Delaware that was formed solely for the purpose of merging with
Ultrak. See "ULTRAK'S REINCORPORATION IN DELAWARE."
37
<PAGE> 43
NONE OF THE DIAMOND SHAREHOLDERS RECEIVING SHARES OF ULTRAK COMMON STOCK
PURSUANT TO THE MERGER WILL BE ELIGIBLE TO VOTE FOR OR AGAINST THE
REINCORPORATION. For a summary of certain changes in the rights of the holders
of shares of Ultrak Common Stock as a result of the 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 to its design specifications by manufacturer suppliers located
in Korea, Japan, England, Hong Kong, Taiwan, China, and the United States.
According to a Smith Barney Shearson Electronic Security Industry Report,
dated January 25, 1994, by the year 2000, the CCTV industry is expected to be a
$755 million annual sales component of the expected $17 billion total U.S.
security industry. The CCTV segment of the security industry has experienced
rapid growth since the early 1980s. CCTV sales represent a significant portion
of the total security industry, trailing only intrusion detection devices and
fire detection apparatus in terms of sales. Included in the CCTV category are
CCTV cameras, lenses, monitors, switchers, time lapse recorders, multiplexers,
video transmission systems, and various types of peripheral equipment used for
CCTV installations. Ultrak's business is not generally seasonal in nature,
except that sales in December and January are typically 15-20% lower than other
months.
Ultrak believes that it is an important factor within the CCTV industry
and that it is one of the three largest in terms of CCTV sales in the United
States. However, many of its competitors are divisions of much larger
companies.
Ultrak has trademark registration on its Ultrak, [X] Smart Choice,
Beck, Ultracam, the Witness, Video Butler, and BabyWatch trade names. In
addition, Ultrak has been issued a patent on its Ultracam intraoral hand piece
and has patents pending on a multiple operator dental system, the Witness, a
security observation system that records activity upon activation of an
alarming input signal, and several other devices.
SUPPLIERS AND DISTRIBUTION
Ultrak's product development staff designs and then coordinates with its
non-affiliated suppliers to manufacture certain of its private branded products
as well as coordinates and supervises the assembly and packaging of certain
products by its own employees. Ultrak has been and will continue to be
substantially dependent upon its manufacturer suppliers. Ultrak has exclusive
and non-exclusive sales and marketing rights for certain of the CCTV products
it sells, including certain CCTV cameras and systems manufactured in Japan and
Korea. Ultrak has in the past experienced, and may in the future experience,
short-term difficulties in obtaining some products from some manufacturers. In
general, Ultrak's suppliers are constantly developing new products that advance
the state of technology in security products and offer improved value. Ultrak
has in the past issued letters of credit or placed funds on deposit with its
suppliers to attempt to insure itself a constant and consistent supply of
products.
Approximately 95% of Ultrak's purchases from its non-affiliated suppliers
are made in US dollars with the remaining 5% purchased in Japanese yen. To
date, Ultrak has not been materially adversely affected by fluctuations in
the valuation of the Japanese yen. It is expected that the Company will
continue to purchase the vast majority of its products in US dollars.
Ultrak believes that it has close relationships with its suppliers. In
some cases, Ultrak is the exclusive or semi-exclusive marketer of its
suppliers' products in the United States. Ultrak's trading agreements with its
suppliers are both written and oral. In most of these relationships, Ultrak
believes that the relationship
38
<PAGE> 44
is as important to the supplier as it is to Ultrak. Thus, Ultrak believes that
there is a strong, mutually advantageous basis for the trading relationship to
exist and grow.
Ultrak imports its private branded security products primarily from Korea,
Japan, England, Hong Kong, and Taiwan. Because of foreign production lead
times, Ultrak normally makes purchase commitments to these foreign suppliers
three to six months in advance. Products ordered by Ultrak and manufactured by
others in Asia are shipped to warehouses of Ultrak located in the United States
for subsequent delivery to customers of Ultrak.
Delivery times on these products to the United States vary from one week
to two months, depending on the mode of transportation used. Therefore, it is
necessary for Ultrak to commit to and carry larger levels of inventory than
would be necessary if it used strictly domestic suppliers.
The nature of Ultrak's business is to ship most orders within 24 hours of
receipt of the order. As of December 31, 1994 and 1993, Ultrak had
approximately $3,939,000 and $2,093,000, respectively, in backlog for its
products which it considers to be firm.
Ultrak can ship its CCTV products from one of five warehouse locations
operated by it: Carrollton, Texas; Broomfield, Colorado; Annapolis, Maryland;
southern California; or Chicago, Illinois. Currently over 90% of all shipments
are made from the Carrollton, Texas, centralized warehouse. Inventory,
accounts receivable, purchasing, payroll, and other corporate business
functions are controlled on Ultrak's integrated computer system located in its
Carrollton headquarters. All sales locations are linked real time through a
nationwide network which allows for orders to be entered and shipped from
multiple locations.
Approximately 21% of Ultrak's 1994 sales were to Walmart Stores, Inc. and
Sam's Wholesale Club, a division of Walmart Stores, Inc. No other single
customer accounted for more than 10% of total sales in 1994.
PROPERTY
Ultrak does not own any real property or own or operate any production
facilities. Ultrak or its subsidiaries lease office/warehouse space in
Carrollton, Texas; Broomfield, Colorado; Annapolis, Maryland; Boston,
Massachusetts; southern Florida; Atlanta, Georgia; Chicago, Illinois; and
southern California.
In January, 1994, Ultrak amended its existing lease covering approximately
69,000 square feet of office and warehouse space at its headquarters in
Carrollton, Texas. The amended lease extended the lease term until May 1999
and provided a build out allowance of up to $75,000 to be used for office
expansion and 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
39
<PAGE> 45
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.
40
<PAGE> 46
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.
During 1988, Network Security Corporation sold its majority ownership interest
in Ultrak to Mr. Broady for $662,000 in cash. He received his BS (cum laude)
from Iowa State University in 1960. Mr. Broady devotes substantially all of
his executive time to the business and affairs of Ultrak.
James D. Pritchett, 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.
41
<PAGE> 47
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 of San Jacinto Savings from 1988 to
1989. Mr. Lee earned his BBA from Texas A & M University in 1962 and his MBA
from Southern Methodist University in 1966. Mr. Lee is a CPA in the State of
Texas and a member of the American Institute of CPAs, the Texas Society of
CPAs, the Financial Executives Institute and the American Institute of Image
Management.
Charles C. Neal, 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.
42
<PAGE> 48
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).
43
<PAGE> 49
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 $7.50 per share.
Of the total outstanding options, options to purchase 313,851 shares were held
by the three executive officers of Ultrak. The option exercise price is set by
the Board of Directors on the date of grant near or at the then verifiable
market price of Ultrak Common Stock. During 1994, 47,500 options were granted
to employees of Ultrak. During 1994, 600 options were exercised by two
employees. In 1994, 14,167 options which had been granted to one former
employee were cancelled.
44
<PAGE> 50
OPTION/SAR GRANTS, EXERCISES AND HOLDINGS
There were no exercises of stock options (or tandem SARs) and
freestanding SARs during 1994 by each of the named executive officers. The
unexercised options owned by the named executive officers as of December 31,
1994 are presented below:
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Value Underlying Unexercised In-the-Money
Shares Acquired Realized Options/SARs at 12/31/94 Options/SARs at 12/31/94
Name on Exercise # ($) 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.
45
<PAGE> 51
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. James D. Pritchett, Executive Vice President of Ultrak, and
Tim D. Torno, Secretary-Treasurer and Chief Financial Officer, have entered
into written employment agreements with Ultrak with varying terms and
provisions summarized below. Ultrak has no termination of employment or
change-in-control arrangements, except as to the substantive effect of Mr.
Broady's stock ownership and the fact that Mr. Pritchett may not be terminated
without cause except as of January 1 of a year, upon 12 months' prior written
notice, after January 1, 1997, and Mr. Torno may not be terminated without
cause except as of January 1 of a year, upon three months' prior written notice,
after January 1, 1996.
Mr. Pritchett's employment agreement, dated May 25, 1995, provides
for a two-year term beginning as of January 1, 1995, but automatically extends
for one-year periods with Ultrak having the right to terminate Mr. Pritchett's
employment agreement upon 12 months' written notice prior to the beginning of a
year. Mr. Torno's employment agreement, also dated May 25, 1995 but effective
as of January 1, 1995, is for a one-year term but automatically extends for
one-year periods with Ultrak having the right to terminate Mr. Torno's
employment agreement upon three months' written notice prior to the beginning
of a year. The employment agreements set Mr. Pritchett's and Mr. Torno's base
salaries at $198,000 and $138,000, respectively.
The employment agreements also contain standard provisions relating to
the employee being entitled to participation in 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. The employment agreements further provide
for standard paid vacations, car allowances, other health and accident
coverage, and insurance benefits.
Ultrak may terminate the employment agreements if the employee commits
a breach of the agreement, is convicted of a criminal offense, becomes
bankrupt, grossly neglects the performance of his duties, or becomes chemically
addicted to alcohol, drugs, or any controlled substance. If terminated by
Ultrak for any of those reasons, it is considered cause, and upon termination
for cause, all benefits, including all stock options previously granted to the
employee (subject to the thirty-day permitted exercise period), are cancelled
and rendered null and void. If the employee dies or Ultrak terminates the
employee without cause or if the employee terminates as a result of a material
breach by Ultrak, then all options become exercisable for the full amount of
the optioned shares and the employee is entitled to receive within 15 days all
compensation he would otherwise have been entitled to receive under the terms
of the agreement for such year and all other benefits. If the employee
terminates the agreement for any reason (other than as a result of a material
breach by Ultrak), he is entitled to exercise only those options which have
been fully vested at the time of termination and he must exercise them within
30 days of the date of termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In June 1994, the Board of Directors created a Compensation Committee
of the Board of Directors. William C. Lee, Charles C. Neal, and James D.
Pritchett are members of the Compensation Committee. Messrs. Lee and Neal are
independent directors. Mr. Pritchett is the Executive Vice President and Chief
Operating Officer of Ultrak. Prior to the creation of the Compensation
Committee, the entire Board of Directors, then composed of George K. Broady and
Mr. Pritchett, established executive salaries. Mr. Broady is the Chairman of
the Board, Chief Executive Officer, and President of Ultrak.
Since July 1993, Ultrak has provided Veravision, Inc. ("Veravision")
with a working capital line of credit in return for interest on the borrowed
funds and warrants to purchase Veravision's capital stock. On December 30,
1994, Mr. Broady, the Chairman of the Board, Chief Executive Officer, and
President of Ultrak, guaranteed the repayment of certain indebtedness of
Veravision to Ultrak. Prior to Ultrak making the line of credit available to
Veravision, Mr. Broady had no relationship with Veravision. Prior to Mr.
Broady's guarantee, Veravision had granted Ultrak warrants to purchase 59% of
Veravision's capital stock on a fully-diluted basis. Mr. Broady guaranteed
certain amounts due under notes made by Veravision to Ultrak. At December 31,
1994, the amount guaranteed by Mr. Broady was approximately $470,000 and the
total amount of indebtedness of Veravision to Ultrak was $900,000. In
consideration of his guaranty, Ultrak transferred warrants to purchase
approximately 30% of Veravision's capital stock to Mr. Broady. Should the
amount covered by Mr. Broady's guaranty increase, Ultrak would be obligated to
transfer warrants to purchase additional shares of Veravision stock to Mr.
Broady. Veravision is a supplier of certain dental camera products to Ultrak.
Purchases by Ultrak of Veravision products totaled $875,000 during 1994 and
were made on an arms-length, negotiated basis and allow a reasonable gross
profit margin to Veravision. Other terms of the purchases from Veravision are
similar to terms of similar transactions with other, non-affiliated entities. At
present, Mr. Broady's only relationship with Veravision is in his capacity as a
guarantor of certain debt owed to Ultrak by
46
<PAGE> 52
Veravision (as described above) and as the holder of warrants to acquire
approximately 30% of Veravision's stock. Mr. Broady is neither an officer nor
director of Veravision.
During 1994, Ultrak made purchases of approximately $265,000 from
Ultrak Electronics Limited, a Hong Kong corporation of which Mr. Broady owns
approximately 30% of the outstanding capital stock. Ultrak believes that the
purchases were made at prices and on terms at least as favorable to Ultrak as
those which could have been obtained in an arm's length transaction with an
unaffiliated party.
During 1994, Mr. Broady acted as guarantor in part on both of Ultrak's
credit facilities as well as its trade line of credit with one of its principal
domestic suppliers. As of March 31, 1995, Mr. Broady has guaranteed
approximately $9.2 million in liabilities of Ultrak. Mr. Broady receives no
consideration for his guarantees on behalf of Ultrak.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Prior to June 1994, Ultrak did not have a Compensation Committee.
Consequently, the base salary and the bonus criteria for each of Ultrak's
executive officers for 1994 were established by Ultrak's Board of Directors. At
that time, Ultrak's Board of Directors consisted of George K. Broady and James
D. Pritchett. Compensation of the Chief Executive Officer was determined by
Ultrak's Board of Directors using subjective, informal criteria which were
loosely based on Ultrak's performance a comparison of the salary paid to chief
executive officers of corporations with revenues and assets comparable to
Ultrak based on a survey published by a big six accounting firm and limitations
provided in Ultrak's Loan Agreement with Petrus Fund, L.P. Ultrak's loan
agreement with Petrus Fund, L.P. restricts the maximum salary that may be paid
to the Chief Executive Officer of Ultrak without breaching the loan agreement
to $350,000 per annum in the aggregate, so long as there is no default under
such Loan Agreement; the maximum aggregate compensation permitted to Mr. Broady
in the event of such a default is $225,000 per annum. The increase in salaries
and bonuses for the named executive officers from 1993 to 1994, was determined
by arriving at an appropriate base salary for the Chief Executive Officer based
on a survey published by a big six accounting firm and then determining the
other officers' base salary based on a subjectively determined percentage of
the Chief Executive Officer's salary.
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
47
<PAGE> 53
PERFORMANCE GRAPH
The following chart compares the cumulative total shareholder return on
Ultrak Common Stock during the five fiscal years ended December 31, 1994 with
the cumulative total return on the NASDAQ market index and a peer group index.
The peer group consists of all of the publicly-traded companies with the same
two digit SIC code (wholesale trade - durable goods). A listing of the
companies in the peer group can be obtained without charge by writing Ultrak,
Inc., 1220 Champion Circle, Suite 100, Carrollton, Texas 75006, Attention:
Investor Relations. Ultrak relied upon information provided by the University
of Chicago Center for Research in Securities Prices with respect to the peer
group stock performance. Ultrak did not attempt to validate the information
supplied to it other than to review it for reasonableness. The comparison
assumes $100 was invested on December 29, 1989 in Ultrak Common Stock and in
each of the foregoing indices and assumes reinvestment of dividends, if any.
Adjustments have been made to give retroactive effect to the December 1993
one-for-six reverse stock split.
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>
48
<PAGE> 54
PRINCIPAL SHAREHOLDERS OF ULTRAK
The following table sets forth certain information as to the number of
shares of Ultrak Common Stock beneficially owned as of December 31, 1994, by
(i) each person who is known to Ultrak to own beneficially more than five
percent of the outstanding shares of Ultrak Common Stock or the outstanding
shares of Series A Preferred Stock of Ultrak and their address, (ii) each
executive officer and director, and (iii) all officers and directors as a
group.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
of Ultrak Common 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) 32.55 193,351 100%
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 38.83 193,351 (7) 100%
and directors as a
group (five persons)(2)(4)(6)(7)
</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, Mr.
Broady holds 53.7% of the voting power of all of the outstanding
capital stock of Ultrak. All of the executive officers and directors of
Ultrak as a group hold 58.4% of the power of all of the outstanding
capital stock of Ultrak.
- ------------------------
* less than 1%
49
<PAGE> 55
DESCRIPTION OF ULTRAK'S CAPITAL STOCK
GENERAL
COMMON STOCK. The Ultrak Charter authorizes 50,000,000 shares of
Common Stock with no par value. Effective as of December 28, 1993, the Ultrak
Charter was amended to, among other things, eliminate the Class A Non-Voting
Stock. None of these shares are issued and outstanding. Each record holder of
shares of Ultrak Common Stock is entitled to one vote for each share held of
record on all matters properly submitted to the shareholders of Ultrak for
their vote. Cumulative voting is not authorized by the Articles of
Incorporation. A quorum at any shareholders meeting consists of more than a
majority of the stock outstanding and entitled to vote at such meeting.
PREFERRED STOCK. The Ultrak Charter authorizes 2,000,000 shares of
Preferred Stock, $5.00 par value. As of December 28, 1993, there was one
series of Preferred Stock designated: Series A Preferred Stock. The
Series A Preferred Stock is entitled to 16.667 votes per share. As of December
31, 1994, there were 195,351 shares of Series A Preferred Stock issued and
outstanding and all of such shares are owned by Mr. Broady. Holders of the
Series A Preferred Stock are entitled to preferential dividends payable
quarterly and accruing at a rate of 12% per annum on the original purchase
price of $5.00 per share. Upon liquidation, dissolution, or winding up of
Ultrak, holders of the Series A Preferred Stock are entitled to receive the
original purchase price of $5.00 plus any unpaid dividends (the "Liquidation
Value") accruing to that date in preference to holders of Ultrak Common Stock.
Each share of Series A Preferred Stock is convertible into 2.083 shares of
Ultrak Common Stock at the option of the holder. Ultrak's Preferred Stock may
be issued in series from time to time with such designation, rights,
preferences, and limitations as the Board of Directors of Ultrak may determine
by resolution. The potential exists, therefore, that additional Preferred
Stock might be issued which would grant dividend preferences and liquidation
preferences to preferred shareholders over holders of Ultrak Common Stock.
Unless the nature of a particular transaction and applicable statutes require
such approval, the Board of Directors has the authority to issue Preferred
Stock without shareholder approval. The issuance of Preferred Stock may have
the effect of delaying or preventing a change in control of Ultrak without any
further action by shareholders.
DIVIDENDS
Holders of Ultrak Common Stock are entitled to receive dividends when
and as declared by Ultrak's Board of Directors out of legally available funds
after all dividends to holders of Ultrak's Preferred Stock have been paid. Any
such dividends may be paid in cash, property, or shares of Ultrak Common Stock.
MISCELLANEOUS RIGHTS AND PROVISIONS
The shares of Ultrak Common Stock have no preemptive or conversion
rights, no redemption or sinking fund provisions, and are not liable to further
call or assessment. The outstanding shares of Ultrak Common Stock are, and any
shares of Ultrak Common Stock issued pursuant to the Merger will be, fully paid
and nonassessable. Each share of Ultrak Common Stock is entitled to share
ratably in any asset available for distribution to holders of Ultrak Common
Stock upon liquidation of Ultrak after holders of Ultrak's Preferred Stock have
received the liquidation value of their shares.
REPORTS TO SHAREHOLDERS
Ultrak is subject to the reporting requirements of the Exchange Act and
therefore makes available annual reports to its shareholders containing audited
financial statements reported upon by its independent auditors. In addition to
Ultrak's reporting obligations under the Exchange Act, Ultrak intends to
release unaudited quarterly or other interim reports to its shareholders as it
deems appropriate.
TRANSFER AGENT AND REGISTRAR
Securities Transfer Corporation, 16910 Dallas Parkway, Suite 100,
Dallas, Texas 75248 is the transfer agent and registrar for Ultrak Common
Stock.
50
<PAGE> 56
MARKET FOR ULTRAK COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
PRICE RANGE OF ULTRAK COMMON STOCK.
Ultrak Common Stock became listed on the Nasdaq on January 18, 1994.
Prior to that time, Ultrak Common Stock was traded in the over-the-counter
market and price quotations for the two-year period shown below were reported
on Nasdaq under the symbol "ULTK." The quotations shown below, which are the
range of the high and low bid prices for 1993 and high and low closing prices
thereafter, were compiled by Ultrak from Monthly Statistical Reports supplied
by Nasdaq. All quotes for 1993 represent inter-dealer quotations, without
retail markup, mark-down, or commission and may not necessarily represent
actual transactions in the Ultrak Common Stock. All prices in 1993 have been
retroactively restated to reflect the one-for-six reverse stock split, which
was effected on December 28, 1993.
<TABLE>
<CAPTION>
High bid Low bid
-------- -------
<S> <C> <C>
1993*
First quarter $7.50 $4.31
Second quarter 9.75 5.64
Third quarter 9.00 5.25
Fourth quarter 7.62 5.63
</TABLE>
<TABLE>
<CAPTION>
High Close Low Close
---------- ---------
<S> <C> <C>
1994
First quarter $8.63 $5.75
Second quarter 7.13 4.50
Third quarter 7.63 6.13
Fourth quarter 8.00 6.75
1995
First quarter $7.13 $5.75
</TABLE>
*Retroactively restated to reflect the one-for-six reverse stock split, which
was effected on December 28, 1993.
The total number of holders of Ultrak Common Stock as of May 31, 1995, was
approximately 3,200, comprised of approximately 1,500 shareholders of record
and approximately 1,700 not of record.
ULTRAK'S DIVIDEND POLICY.
Ultrak has never paid any dividends to its common shareholders.
Currently, it is the intention of Ultrak not to pay any dividends to the
holders of Ultrak Common Stock in the foreseeable future. Management of Ultrak
intends to reinvest earnings available to common shareholders in the
development and expansion of Ultrak's business. The declaration in the future
of any cash dividends on Ultrak Common Stock will be at the discretion of the
board of directors and will depend upon the earnings, capital requirements and
financial position of Ultrak, general economic conditions, and other pertinent
factors. Ultrak's loan and security agreements with its financial institutions
require the lender's prior written consent to Ultrak's payment of cash
dividends on Ultrak Common Stock. To the extent allowed by Ultrak's loan
agreements, Ultrak does intend to pay dividends on its shares of Series A Stock
all of which are owned by George K. Broady, the Chairman of the Board, Chief
Executive Officer, and President of Ultrak. Annual preferred stock dividends
in the amount of $117,210 were paid to Mr. Broady during each of 1994, 1993,
and 1992.
51
<PAGE> 57
SELECTED FINANCIAL DATA OF ULTRAK
The following table sets forth for the periods and the dates
indicated, selected financial and operating data for Ultrak. This information
should be read in conjunction with the financial statements of Ultrak included
elsewhere in this Prospectus/Proxy Statement and "ULTRAK MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" which
are included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------- -----------------------------------------------------------------
1995 1994 1994 1993 1992* 1991(1) 1990
----------- ----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA
- ---------------
Net sales $21,829,162 $17,764,973 $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
----------- ----------- ----------- ----------- ----------- ----------- ----------
Gross profit $ 5,322,078 $ 4,172,044 $19,444,003 $12,858,457 $ 7,367,629 $ 4,613,904 $2,494,659
----------- ----------- ----------- ----------- ----------- ----------- ----------
Operating income (loss) $ 1,608,666 $ 1,122,619 $ 5,109,687 $ 3,655,020 $ 1,278,618 $ 694,728 $ (318,905)
----------- ----------- ----------- ----------- ----------- ----------- ----------
Income from continuing
operations before income
taxes 1,231,392 922,631 $ 4,302,532 $ 3,020,403 $ 569,843 $ 470,942 $ (775,196)
Income taxes 449,459 294,574 1,513,020 381,543 26,343 - -
----------- ----------- ----------- ----------- ----------- ----------- ----------
Income (loss) from
continuing
operations 781,933 628,057 2,789,512 2,638,860 543,500 470,942 (775,196)
Discontinued operations - - (190,000) (1,834,370) 294,255 - -
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss) 781,933 628,057 2,599,512 804,490 837,755 470,942 (775,196)
Dividend requirements on
preferred stock 29,302 29,302 117,210 117,210 117,210 117,210 -
----------- ----------- ----------- ----------- ----------- ----------- ----------
Net income (loss) allocated
to common shareholders $ 752,631 $ 598,755 $ 2,482,302 $ 687,280 $ 720,545 $ 353,732 $ (775,196)
=========== =========== =========== =========== =========== =========== ==========
Income (loss) per common
share from continuing
operations $ .11 $ .09 $ .39 $ .37 $ .07 $ .06 $ (0.15)
=========== =========== =========== =========== =========== =========== ==========
Net income (loss) per common
share $ .11 $ .09 $ .36 $ .10 $ .11 $ .06 $ (0.15)
=========== =========== =========== =========== =========== =========== ==========
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, -----------------------------------------------------------------
1995 1994 1993 1992 1991 1990
----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
- ------------------
Total assets $36,112,432 $36,352,690 $25,384,794 $16,198,851 $ 8,054,270 $4,567,900
Short-term debt 17,882,187 18,244,183 12,875,039 7,134,701 2,218,599 1,140,000
Long-term debt - - - 285,000 285,000 -
Shareholder's equity 10,823,019 10,070,388 7,541,339 6,817,683 4,177,044 2,881,847
Cash dividends declared
per common share - - - - - -
</TABLE>
* Reclassified to reflect discontinued operations; see Note I of Notes to
Consolidated Financial Statements.
(1) Effective January 1, 1991, Ultrak acquired all of the outstanding common
stock of CCTV Source, Inc. (CCTV). CCTV's sales and loss before income
taxes for the year ended December 31, 1991 were $5,716,000 and $38,000,
respectively.
52
<PAGE> 58
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
Results of Operations - Continuing Operations:
For the three months ended March 31, 1995, net sales increased
$4,064,189 (23%) over the comparable 1994 period. This growth was due primarily
(90%) to increased volume of sales of existing closed circuit television (CCTV)
products to all of the markets that Ultrak serves. New products introduced by
Ultrak during the first quarter of 1995 contributed approximately 10% of the
increase in net sales.
In comparison, for the three months ended March 31, 1995, cost of goods
sold increased $2,914,155 (21%) over the comparable 1994 period. This increase
was in virtual direct relationship to the overall CCTV increase in net sales.
The overall gross profit percentage increased to 24.38% in 1995 from
23.48% in 1994 for the comparable three month period ended March 31, primarily
because of increased sales of Ultrak branded products that carry higher gross
profit margins and the higher margins earned on new product sales. In general,
gross profit margins on non Ultrak branded products have decreased during 1995
due to competition in the industry and a strategic decision by Ultrak to be the
industry value leader.
For the three months ended March 31, 1995, other operating expenses
increased $663,987 (22%) from the comparable 1994 period. This increase was
primarily due to increased sales and marketing costs including personnel,
travel and other related costs commensurate with the overall increase in sales
and the strategic plan to build the market for greater sales in the future. In
addition, new product promotion costs were incurred during the first quarter
including advertising, printing, product shows and other promotional
activities.
For the three months ended March 31, 1995, other (income) expenses
increased $177,286 (89%) from the comparable 1994 period because of increased
interest expense on borrowings due to higher prime interest rates offset by
interest income on notes receivable and miscellaneous income.
Liquidity and Capital Resources:
Ultrak's cash management policy is to directly apply all cash proceeds
to offset bank debt. Ultrak had a net decrease in cash for the three month
period ended March 31, 1995 of $642,241. Net cash provided by operating
activities was $79,345, primarily because of net cash profits and reductions
in advances for inventory partially offset by significant increases in accounts
and notes receivable and inventory on hand related to higher sales during the
period and reductions in trade accounts payable.
Net cash used in investing activities for the three months ended March
31, 1995 was $330,288 primarily for capital expenditures for office and
warehouse equipment, upgrades to Ultrak's computer system and leasehold
improvements.
Net cash used in financing activities for the three months ended March
31, 1995 was $391,298 from a net reduction during the quarter in borrowings on
Ultrak's two lines of credit and payment of dividends on preferred stock.
As of March 31, 1995, Ultrak had unused available lines of credit
totaling approximately $4.1 million.
On February 9, 1995, Ultrak's line of credit with NationsBank of Texas,
N.A. was increased from $13.2 million to $15.0 million under the same terms and
conditions.
Ultrak will continue to be dependent upon its bank and other lender
financing to fund its operations. Ultrak anticipates that its current
operations and future growth will be financed through increased lines of credit
and internally generated profits. Ultrak believes such sources of funds will be
adequate for its projected needs for the next twelve (12) months. Ultrak may
attempt to raise additional equity capital if sales increase faster than
planned or if it is otherwise deemed advantageous to do so.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Results of Operations - Continuing Operations:
For the year ended December 31, 1994, sales from continuing operations
were $78,793,711, an increase of $26,381,740 (50%) over 1993. This growth was
due primarily (70%) to increased volume of sales of existing CCTV products to
all of the markets that Ultrak serves. New products introduced by Ultrak
during 1994 contributed approximately 30% of the increase in sales.
In comparison, cost of sales were $59,349,708 for the year ended
December 31, 1994, an increase of $19,796,194 (50%) over 1993. This increase
was in a virtual direct relationship to the overall CCTV increase in sales.
Gross margins on sales increased to 24.68% in 1994 from 24.53% in 1993,
primarily because of new product sales at higher margins, offset by competition
in the CCTV market and a strategic decision by Ultrak to be an industry value
leader.
Marketing and sales expenses were $11,201,460 for the year ended
December 31, 1994, an increase of $4,175,946 (59%) over 1993. This increase
was due to additional CCTV sales and sales support staff and related costs
incurred to support the increased level of CCTV sales, travel, and related
costs and increased marketing, advertising, and promotional costs.
General and administrative expenses were $3,132,857 for the year ended
December 31, 1994, an increase of $954,934 (44%) from 1993 due to additional
administrative staff and related costs necessary to support the increase in
sales.
Other expenses were $807,155 for the year ended December 31, 1994, an
increase of $172,538 (27%) over 1993. This increase was due primarily to
increased interest costs on borrowings offset by interest income on notes
receivable.
Results of Operations - Discontinued Operations. On July 22, 1993,
Ultrak announced that it would discontinue its personal computer ("PC")
products business segment and concentrate its resources on the CCTV business
segment. As a result of this decision, the operations and net assets of the PC
business segment have been classified as discontinued operations for all
periods presented.
During the year ended December 31, 1994, Ultrak recorded an additional
provision of $190,000, net of income tax benefit, to reflect costs of
dissolution of the business as well as provision for expected settlement costs
of the remaining lawsuit relating to the discontinued operations.
Sales included in discontinued operations for the year ended December
31, 1994, 1993, and 1992 were $110,720, $19,232,836 and $9,677,585,
respectively (not included in net sales reported from continuing operations
above).
Liquidity and Capital Resources:
Ultrak had a net increase in cash for the year ended December 31, 1994
of approximately $142,000. Cash used in operating activities during 1994 was
approximately $3,517,000, primarily because of increases in accounts
receivable, inventory, and advances for inventory required by the significantly
higher sales volume. Cash used in investing activities was approximately
$1,925,000 for capital expenditures for furniture, fixtures, tooling, leasehold
improvements, and other fixed assets and acquisition of business. Cash provided
by financing activities was approximately $5,584,000, consisting of net
borrowings from Ultrak's bank and other lenders. It is expected that the
Company should begin to generate positive annual operating cash flows when its
growth slows to a more traditional level.
As of December 31, 1994, Ultrak had unused available lines of credit
totaling approximately $1,956,000.
53
<PAGE> 59
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.
Both of Ultrak's amended credit facilities contain financial covenants,
including leverage ratios, as defined, of not more than 2.75 to 1.0; current
ratios, as defined, of at least 1.20 to 1.0, working capital requirements,
limitations on capital expenditures and minimum net income requirements, among
others. Operational covenants contained in the credit agreements include
limitations on the sale of assets, prohibitions against liens on collateral,
limitations on indebtedness and contingent liabilities, prohibitions against
changes in management, payment of dividends and acquisitions of assets, among
others.
As of March 31, 1995, Ultrak was in compliance with all of its
covenants with its lenders.
Ultrak will continue to be dependent upon its bank and other lender
financing to fund its operations. Ultrak anticipates that its current
operations and future growth will be financed primarily through increased lines
of credit and internally generated profits. Ultrak believes such sources of
funds will be adequate for its projected needs for the next twelve (12) months.
Ultrak may attempt to raise additional equity capital if sales increase faster
than planned or if it is otherwise deemed advantageous to do so.
YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992
Results of Operations - Continuing Operations:
For the year ended December 31, 1993, sales from continuing
operations were $52,411,971, an increase of $23,547,493 (82%) over 1992. This
growth was due to increased sales of CCTV products to all of the markets that
Ultrak serves.
In comparison, cost of sales were $39,553,514 for the year ended
December 31, 1993, an increase of $18,056,665 (84%) over 1992. This increase
was due to overall CCTV sales increases, new product sales, and new mass retail
outlet sales. Gross margins on sales decreased to 24.5% in 1993 from 25.5% in
1992, primarily because of competition in the CCTV market and a strategic
decision by Ultrak to be an industry value leader.
Marketing and sales expenses were $7,025,514 for the year ended
December 31, 1993, an increase of $2,446,861 (53%) over 1992. This increase
was due to additional CCTV sales and sales support staff and related costs
incurred to support the increased level of CCTV sales, marketing costs to
support sales, and increased advertising and promotional costs.
General and administrative expenses were $2,177,923 for the year ended
December 31, 1993, an increase of $667,565 (44%) from 1992 due to additional
administrative staff and related costs necessary to support the increase in
sales.
Other expenses were $634,617 for the year ended December 31, 1993, a
decrease of $74,158 (10%) over 1992. This decrease was due primarily to
interest income on notes receivable offset by increased interest costs.
During the fourth quarter of 1993, Ultrak determined it was more
likely than not that a portion of its deferred tax valuation allowance was
realizable. This determination was a result of the profits from continuing
operations in 1993 and the forecasted profits for 1994. A deferred tax
valuation allowance still remains for deferred tax assets related to net
operating loss carryforwards, use of which are limited by Section 382 of the
Code.
Liquidity and Capital Resources:
Ultrak had a net decrease in cash for the year ended December 31,
1993 of approximately $323,000. Cash used in operating activities during 1993
was approximately $4,394,000, primarily because of increases in accounts
receivable, inventory and advances for inventory required by the significantly
higher sales volume. Cash used in investing activities was approximately
$1,309,000, primarily for capital expenditures for furniture, fixtures and
other fixed assets and funding of notes receivable. Cash provided by financing
activities was approximately $5,380,000, consisting of net borrowings from
Ultrak's bank and other lenders.
As of December 31, 1993, Ultrak had unused available lines of credit
totaling approximately $5,410,000.
54
<PAGE> 60
BUSINESS OF DIAMOND
GENERAL
Diamond manufactures and sells high-speed commercial security and
surveillance systems used by large retailers, metropolitan surveillance systems
for traffic control, and hazardous viewing systems used by industry. Diamond's
commercial security and surveillance systems are utilized in monitoring indoor
and outdoor areas of large retailers. Diamond's industrial viewing systems are
utilized in observing furnace operation, gauge monitoring, smoke stack
monitoring and tower plant inspection. Diamond's headquarters are housed in a
72,000 square foot building located 20 miles southeast of Columbus, Ohio in
Carroll, Ohio. Diamond employs approximately 100 people.
SURVEILLANCE SYSTEMS FOR LARGE RETAILERS
Diamond's FastScan(TM) was the first high-speed remote-controlled pan
(sideways movement), tilt (up/down movement), and zoom product of its kind.
Their Intelli-vision(TM) System features a one-way mirrored dome housing that
conceals a variable high-speed tracking device. This device is controlled by a
joy stick and provides continuous 360 degree right and left pans, plus direct
tilt down and a wide range of zooms. During the development of the Scan family
of products, three major patents were awarded.
SURVEILLANCE SYSTEMS FOR TRAFFIC CONTROL AND CRIME PREVENTION
Diamond's high-speed camera domes are used for crime prevention in
downtown areas and for traffic observation. This system permits police or
emergency vehicles to be rapidly dispatched from a central control room
monitoring the traffic. The taped recordings from these cameras are also used
in traffic pattern studies and for risk managment.
INDUSTRIAL VIEWING SYSTEMS
Diamond's industrial viewing systems are utilized in observing furnace
operation, gauge monitoring, smoke stack monitoring and power plant inspection.
Typically industrial viewing systems are:
- The Diamond furnace system provides an accurate and convenient
means to accomplish visual monitoring of flame inside of a
furnace to ensure proper combustion.
- Guage Viewing Systems provide centrally located visual
monitoring of the boiler drum water and steam level enabling
the continuous check of boiler water levels to prevent tube
damage in boilers.
- The StackScan(TM) System provides complete visual monitoring of
all flue gas emission stacks within the view of a single camera.
- A complete line of radiation resistant cameras, lenses,
camerahousings, plans and tilts are available for nuclear
inspection applications requiring high radiation and
contamination resistance.
OPERATIONS
Diamond's design/manufacturing operations are located in Carroll,
Ohio. Production areas use such contemporary equipment as the latest Hollis
wave-soldering equipment; ultrasonic vapor degreasers; axial and radial
lead-preparation machines; complete wire-harness assembly jigs; and
silkscreening equipment. Diamond's Materials Control organization ensures
excellent quality from the pruchase of components to the delivery of complete
systems. Diamond's computer design facilities include all hardware and
software necessary to develop and test the computer systems and remote stations
required for any DEI security or process monitoring system.
DISTRIBUTION
Diamond's surveillance products are sold to wholesale distributors
(which supply dealers that sell to the end user), and installing dealers (which
deal direct with the end user) and directly to the end user (typically large
retail chains). Diamond's industrial viewing systems are nearly all sold to the
end user (such as power plants, steel mills, and paper and pulp plants) through
contracted manufacturers representatives or Diamond's sales managers.
INTELECTUAL PROPERTY. Diamond relies upon the trademarks "FastScan,"
"SmartScan," "Intell-vision," and "StackScan" for its products. Diamond
claims protection of key elements of its "Scan" family of products under three
major patents developed or acquired by Diamond.
GOVERNMENTAL REGULATIONS. Diamond's business is not materially
affected by existing or probable government regulations on Diamond or its
products.
COMPARISON WITH ULTRAK'S PRODUCTS. Generally, Diamond's products are
used in more technical applications than Ultrak's products and are more highly
automated than Ultrak's products. As a result, the Diamond product line will
expand Ultrak's product line. There is little overlap between Ultrak's
products and Diamond's products.
EMERGENCE FROM BANKRUPTCY
During 1991 Diamond began to experience significant declines in its
revenue base ($12,861,108 - 1990, $8,554,592 - 1991, a $4,306,516 decline, or
33%) primarily as the result of weakness in the market for large-scale nuclear
power plant security surveillance systems and process automation control
systems. With virtually no reduction in operating expenses during 1991 Diamond
incurred a catastrophic loss of $1,219,647 for the year. This loss adversely
affected the ability of Diamond to restructure its subordinated debt and
led to its insolvency and Chapter 11 filing in July 1991.
Just prior to its Chapter 11 filing Diamond replaced its President and
Chief Executive Officer with its current President, Richard Tompkins, who was
experienced in business turnaround management.
Diamond, under its new President, immediately began a vigorous program
to eliminate unprofitable and technologically obsolete product lines and to
replace executive management in the sales and marketing area. Nuclear security
surveillance and process automation control segments were eliminated with
accompanying cost and overhead reductions. Also at this time Diamond began to
emphasize its pan-tilt-zoom (PTZ) FastScan/SmartScan product lines which
accounts for a significant portion of total revenue. A new Vice President of
Sales and Marketing was hired in May 1992 to increase Diamond's sales back to
its pre-bankruptcy levels but only into profitable CCTV business segments. As
a result of these changes, Diamond's net sales and operating expenses have
changed since the year of the Chapter 11 filing as follows:
<TABLE>
<CAPTION>
Three Months
Ended March
-----------------
$(000's) 1991 1992 1993 1994 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Sales $8,555 $8,748 $9,368 $11,774 2,321,700 2,959,586
Operating
Expenses 3,361 2,254 2,418 3,197 685,467 751,162
</TABLE>
MARKET FOR DIAMOND COMMON STOCK AND RELATED SHAREHOLDER MATTERS
Diamond Common Stock is held of record by approximately 380
shareholders. Diamond presently has no outstanding options, warrants, or other
rights to purchase shares of Diamond Common Stock. There is no established
trading market for Diamond Common Stock. Diamond has not declared any cash
dividends on its common stock since the time of acquisition of Diamond by an
investor group in 1986, and it is expected by Diamond's Board of Directors that
no dividends will be declared or paid in the foreseeable future.
55
<PAGE> 61
PRINCIPAL SHAREHOLDERS OF DIAMOND
The following table sets forth certain information as to the number of
shares of Diamond Common Stock beneficially owned as of April 28, 1995, by (i)
each person who is known to Diamond to own beneficially more than five percent
of the outstanding shares of Diamond Common Stock and their address, (ii) each
executive officer and Director of Diamond, and (iii) all executive officers and
Directors of Diamond as a group.
<TABLE>
<CAPTION>
Name Shares Percentage
---- ------ ----------
<S> <C> <C>
John W. Biddinger 1,018,003(1) 21.2%
Director
7491 Albert Tillinghast Drive
Sarasota, FL 34240
Computer Products, Inc. (2) 625,667 13.0%
7900 Glade Road
Boca Raton, FL 33434
Robert N. Davies 367,475 7.6%
Director
3307 Bay Road North
Indianapolis, IN 46240
H. Charles Koehler 634,801 13.2%
Director
4511 Briarwood Drive
Indianapolis, IN 46250
William Muirhead, III 653,120 13.6%
Director
304 Long Cove Drive
Hilton Head, SC 29928
Richard M. Tompkins 305,124 6.3%
Director and Executive Officer
6171 Zachary Woods Lane
Columbus, OH 43232
All Directors and Executive 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.
(2) Computer Products, Inc. is a publicly-held company which, to the best of
Diamond's knowledge based upon publicly available information, has no single
controlling person who would be in a position to direct the disposition or
voting of the shares of Diamond Common Stock owned by Computer Products, Inc.
56
<PAGE> 62
SELECTED FINANCIAL DATA OF DIAMOND
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, FISCAL YEAR ENDED
------------------------- --------------------------------------------------------------------
1995 1994 01/01/95 01/02/94 01/03/93 12/29/91 12/30/90
----------- ----------- ------------ ----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Date
- ---------------
Net Sales $ 2,959,586 $ 2,321,700 $11,774,691 $ 9,367,799 $ 8,747,964 $ 8,554,592 $ 12,861,108
=========== =========== =========== =========== =========== ============ ============
Gross Profit $ 941,651 $ 730,009 $ 3,765,223 $ 2,940,844 $ 2,539,546 $ 2,389,684 $ 3,871,562
=========== =========== =========== =========== =========== ============ ============
Operating Income (loss) $ 190,489 $ 44,542 $ 761,371 $ 523,319 $ 285,679 ($ 971,207) $ 341,348
=========== =========== ========== =========== =========== ============ ============
Income (loss) from continuing
operations before income
taxes $ 139,103 $ 4,454 $ 539,162 $ 384,145 ($ 29,664) ($1,219,647) ($ 266,357)
Income taxes 53,780 1,693 213,521 154,276 72,011 0 0
----------- ----------- ---------- ----------- ----------- ------------ ------------
Income (loss) from
continuing operations 85,323 2,761 325,641 229,869 ( 101,675) ( 1,219,647) ( 266,357)
Extraordinary items 0 0 0 0 1,272,480 0 0
Cumulative effect adjustment 0 0 0 610,100 0 0 0
----------- ----------- ----------- ----------- ----------- ------------ ------------
Net Income (loss) $ 85,323 $ 2,761 $ 325,641 $ 839,969 $ 1,170,805 $( 1,219,647) ( 266,357)
=========== =========== =========== =========== =========== ============ ============
Income (loss) per common share
from continuing operations $ .02 $ .00 $ 0.07 $ 0.05 $( 0.03) $( 0.90) $( 0.20)
=========== =========== =========== =========== =========== ============ ============
Income (loss) per common
share $ .02 $ .00 $ 0.07 $ 0.19 $ 0.41 $( 0.90) $( 0.20)
=========== =========== =========== =========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF FISCAL YEAR END
MARCH 31, --------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data
- ------------------
Total assets $ 6,557,552 $ 6,766,688 $ 5,648,036 $ 5,131,878 $ 5,627,012 $ 7,492,489
Short-term debt 888,369 1,273,122 1,238,216 1,432,567 2,064,051 2,556,566
Long-term debt 859,596 884,548 592,033 774,660 1,699,948 1,842,430
Stockholders' equity (deficit) 3,344,572 3,218,047 3,013,410 2,150,965 ( 578,662) 640,985
Cash dividends declared
per common share 0 0 0 0 0 0
</TABLE>
57
<PAGE> 63
DIAMOND MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Three months ended March 31, 1995 compared to three months ended March 31, 1994
Results of Operations - Continuing Operations:
For the three months ended March 31, 1995, sales from continuing operations
were $2,959,586, an increase of $637,886 (27%) over the comparable period of
1994. The growth was mostly due to increased volume of sales to existing CCTV
markets.
Cost of goods sold for the three months ended March 31, 1995 was $2,017,935, an
increase of $426,244 (27%) over that of the same period in 1994. This increase
was almost directly proportional to the increase in sales. Gross margin on
sales increased to 31.8% in 1995 versus 31.4% in 1994. Manufacturing efficiency
improvements, better overhead absorption, and reduced warranty costs almost
directly offset cost increases due to inflation.
Sales and marketing expenses were $431,826 for the three months ended March 31,
1995, an increase of $1,309 (.3%) over that of 1994. Cost reductions related to
Diamond's termination of an unprofitable distribution channel offset
increased costs due to inflation.
General and administrative expenses were $260,791 for the three months ended
March 31, 1995, an increase of $42,960 (20%) over that of 1994. Increased costs
due to inflation and increased legal and professional fees all contributed to
the increase.
Research and development expenses were $58,545 for the three months ended March
31, 1995, an increase of $21,426 (58%) over that of 1994. Research and
development increased on a planned basis to support future strategic product
improvement plans.
Interest expense was $43,180 for the three months ended March 31, 1995, an
increase of $3,954 (10%) over that of 1994. Increased rates of interest on the
revolving line of credit and increased borrowings on the term loan did not
quite offset reduced borrowings on the revolving line of credit.
58
<PAGE> 64
Other (Income) Expense was $8,206 for the three months ended March 31, 1995, an
increase of $7,344 over that of 1994.
Liquidity and Capital Resources:
Diamond had a net increase in cash for the three months ended March 31,
1995 of approximately $3,000. Cash provided by operating activities during the
three months ended March 31, 1995, was approximately $431,000 consisting of a
net cash inflow from net income before depreciation, amortization, and deferred
taxes of approximately $191,000 plus a cash inflow of approximately $240,000
for decreased net working capital mostly due to an account receivable reduction
and accounts payable increase offset by higher inventory levels.
Cash used by investing activities was approximately $59,000 for capital
expenditures for machinery and equipment.
Cash used by financing activities was approximately $369,000 consisting of net
repayments to Diamond's bank and other lenders of approximately $410,000
offset by an equity issuance of approximately $41,000.
As of March 31, 1995, Diamond had an unused available line of credit on its
revolving credit facility of approximately $1,354,000 and an unused capital
expenditure note facility of $100,000. Diamond will continue to be dependent on
its bank to fund its working capital needs and to maintain the existing term
loan facility. Diamond's current operations and future sales volume expansion
will be funded by its lender and by profits. Diamond believes its sources of
financing for the next 12 months will be adequate.
59
<PAGE> 65
DIAMOND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Emergence From Bankruptcy:
During 1991 Diamond began to experience significant declines in its
revenue base ($12,861,108 - 1990, $8,554,592 - 1991, a $4,306,516 decline, or
33%) primarily as the result of weakness in the market for large-scale nuclear
power plant security surveillance systems and process automation control
systems. With virtually no reduction in operating expenses during 1991 Diamond
incurred a catastrophic loss of $1,219,647 for the year. This loss adversely
affected the ability of Diamond to restructure its subordinated debt and
lead(led) to its insolvency and Chapter 11 filing in July 1991.
Just prior to its Chapter 11 filing Diamond replaced its President and
Chief Executive Officer with its current President, Richard Tompkins, who was
experienced in business turnaround management.
Diamond, under its new President, immediately began a vigorous program
to eliminate unprofitable and technologically obsolete product lines and to
replace executive management in the sales and marketing area. Nuclear security
surveillance and process automation control segments were eliminated with
accompanying cost and overhead reductions. Also at this time Diamond began to
emphasize its pan-tilt-zoom (PTZ) FastScan/SmartScan product lines which
accounts for a significant portion of total revenue. A new Vice President of
Sales and Marketing was hired in May 1992 to increase Diamond's sales back to
its pre-bankruptcy levels but only into profitable CCTV business segments. As
a result of these changes, Diamond's net sales and operating expenses have
changed since the year of the Chapter 11 filing as follows:
<TABLE>
<CAPTION>
Three Months
Ended March
-----------------------
$(000's) 1991 1992 1993 1994 1994 1995
---- ---- ---- ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $8,555 $8,748 $9,368 $11,774 $2,321,700 $2,959,586
Operating
Expenses 3,361 2,254 2,418 3,197 685,467 751,162
</TABLE>
YEAR ENDED JANUARY 1, 1995 (1994) COMPARED TO YEAR ENDED JANUARY 2, 1994 (1993)
Results of Operations - Continuing Operations:
For the year ended January 1, 1995, sales from continuing operations
were $11,774,691, an increase of $2,406,892 (26%) over 1993. The growth was
mostly (75%) due to increased volume of sales to existing CCTV markets. The
remainder of the increase (25%) related to Diamond's penetration into new
markets.
Cost of goods sold for the year ended January 1, 1995, was $8,009,468,
an increase of $1,582,513 (24.6%) over 1993. This increase was almost directly
proportional to the increase in sales. Gross margin on sales increased to
32.0% in 1994 versus 31.4% in 1993. Higher material, labor, and certain
overhead costs due to inflation were offset by efficiency and overhead
absorption improvements due to increased sales volume. Sales and marketing
expenses were $1,882,860 for the year ended January 1, 1995 (1994), an increase
of $489,020 (35%) over 1993. This increase was due to increased personnel,
travel, advertising, and promotional activities required to support the sales
volume increase.
General and administrative expenses were $936,488 for the year ended
January 1, 1995 (1994), an increase of $52,265 (6%) over 1993. Administrative
controls and systems in place allowed significant sales volume growth without a
corresponding increase in expenses.
To enable Diamond to supply competitive products to an ever more
sophisticated marketplace, research and development expenses were $184,504 for
the year ended January 1, 1995 (1994), an increase of $45,042 (32%) over 1993.
Research and development were increased on a planned basis.
Interest expense was $193,392 for the year ended January 1, 1995
(1994), a decrease of $6,124 (3%) over 1993. Increased rates of interest on
the revolving line of credit were offset by reduced borrowings during 1994
versus 1993. Increased borrowings on the term loan were offset by reduced
interest rates obtained on refinancing.
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.
60
<PAGE> 66
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.
Liquidity and Capital Resources:
Diamond had a net decrease in cash for the year ended January 2, 1994
of approximately $294,000. Cash provided by operating activities was
approximately $120,000 consisting of a net cash inflow from net income before
depreciation, amortization and deferred taxes of approximately $553,000 offset
by a net cash outflow of approximately $433,000 for increased net working
capital primarily due to increased inventories.
Cash used by investing activities was approximately $60,000 for
capital expenditures for tooling, machinery and equipment and furniture and
fixtures.
Cash used by financing activities was approximately $354,000,
consisting of net repayments to Diamond's bank and other lenders of
approximately $377,000 offset by an equity issuance of approximately $23,000.
As of January 2, 1994, Diamond had an unused available line of credit
on its revolving credit facility of approximately $777,000. Diamond will
continue to be dependent on its bank to fund its working capital needs and to
maintain the existing term loan facility. Diamond's current operations and
future sales volume expansion will be funded by its lender and by its operating
profits. Diamond believes its sources of financing for the next twelve (12)
months will be adequate.
61
<PAGE> 67
LEGAL MATTERS
The validity of the shares of Ultrak Common Stock offered hereby has
been passed upon for Ultrak by Gardere & Wynne, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements and schedules of Ultrak as of
December 31, 1994 and 1993, and for each of the years in the three-year period
ended December 31, 1994, included herein and elsewhere in the Registration
Statement, have been audited by Grant Thornton LLP, independent certified
public accountants, as set forth in their reports appearing elsewhere herein,
and are included upon the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of Diamond as of January 1,
1995, and January 2, 1994, and for each of the years in the two years ended
January 1, 1995, included herein and elsewhere in the Registration Statement,
have been included in reliance upon the reports of Norman, Jones, Enlow & Co.,
independent certified public accountants, appearing elsewhere herein, and given
on the authority of that firm as experts in accounting and auditing.
62
<PAGE> 68
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ULTRAK, INC. AND SUBSIDIARIES PAGE
----
<S> <C>
For the Years ended December 31, 1994, 1993 and 1992:
- -----------------------------------------------------
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at December 31, 1994 and 1993 F-3
Consolidated Statements of Income for the years
ended December 31, 1994, 1993, and 1992 F-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
For the Three Months Ended March 31, 1995 and 1994:
- ---------------------------------------------------
Consolidated Balance Sheets at March 31, 1995
and December 31, 1994 F-18
Consolidated Statements of Income for the
three months ended March 31, 1995 and 1994 F-19
Consolidated Statements of Cash Flows for
the three months ended March 31, 1995
and 1994 F-20
Notes to Consolidated Financial Statements F-21
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
For the 52 Weeks ended January 1, 1995 and January 2, 1994:
- -----------------------------------------------------------
Independent Auditors' Report F-23
Consolidated Balance Sheets F-24
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-25
Consolidated Statements of Changes in
Shareholders' Equity
for the 52 weeks ended January 1, 1995
and the 52 weeks ended January 2, 1994 F-26
Consolidated Statements of Cash Flows
for the 52 weeks ended January 1, 1995
and the 52 weeks ended January 2, 1994 F-27
Notes to Consolidated Financial Statements F-28
For the Three Months ended March 31, 1995 and 1994:
- ---------------------------------------------------
Consolidated Balance Sheets as of March 31, 1995
and December 31, 1994 F-37
Consolidated Statements of Income for the
three months ended March 31, 1995 and 1994 F-38
Consolidated Statements of Cash Flows for the
three months ended March 31, 1995 and 1994 F-39
</TABLE>
F-1
<PAGE> 69
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> 70
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> 71
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> 72
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> 73
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> 74
Ultrak, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 2,599,512 $ 804,490 $ 837,755
Adjustments to reconcile net income to net
cash used in operating activities
Depreciation and amortization 447,280 252,275 155,966
Provision for losses on accounts receivable 532,344 368,814 287,669
Provision (reduction) for inventory obsolescence 52,408 102,295 (6,252)
Deferred income taxes - (590,000) -
Changes in operating assets and liabilities
Increase in accounts and notes receivable (3,705,743) (3,753,654) (1,454,061)
Increase in inventories (3,360,827) (5,216,355) (4,001,847)
Increase in advances for inventory purchases (2,871,341) (182,169) (1,447,845)
Decrease in prepaid expenses and
other current assets 149,209 21,132 170,497
Increase in noncurrent notes and other assets (341,532) (617,489) (27,420)
Increase in accounts payable 2,124,485 3,019,574 219,295
Decrease in other notes payable (285,000) (5,543) (24,356)
Increase (decrease) in accrued liabilities
and other current liabilities 945,218 (12,625) 368,545
Decrease (increase) in net assets of
discontinued operations 197,125 642,103 (839,228)
----------- ----------- -----------
Net cash used in operating activities (3,516,862) (5,167,152) (5,761,282)
Cash flows from investing activities
Purchases of furniture and equipment (1,346,369) (699,311) (254,747)
Acquisitions of businesses (578,315) - -
(Increase) decrease in net assets of
discontinued operations - 163,563 (163,563)
----------- ----------- -----------
Net cash used in investing activities (1,924,684) (535,748) (418,310)
Cash flows from financing activities
Net borrowings on note payable to bank 5,654,144 5,460,881 4,940,458
Net proceeds from sale or subscription of common stock 46,747 36,376 1,920,094
Payment of preferred stock dividends (117,210) (117,210) (117,210)
----------- ----------- -----------
Net cash provided by financing
activities 5,583,681 5,380,047 6,743,342
----------- ----------- -----------
Net increase (decrease) in cash 142,135 (322,853) 563,750
Cash at beginning of year 500,106 822,959 259,209
----------- ----------- -----------
Cash at end of year $ 642,241 $ 500,106 $ 822,959
=========== =========== ===========
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 1,109,361 $ 684,933 $ 450,541
=========== =========== ===========
Income taxes $ 804,158 $ 91,269 $ 25,605
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE> 75
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> 76
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. At the
time of the acquisition, JAK's assets approximated $44,000 and liabilities
approximated $97,000. The transaction was accounted for as a purchase.
The operations of JAK have been included in the Company's statements of income
beginning April 1, 1994. JAK is engaged in sales, service and warranty
repairs of closed circuit television products.
The purchase price was allocated to the acquired assets and assumed
liabilities based upon their respective fair values. The excess of cost over
the net tangible assets acquired of approximately $626,000 is included in
the accompanying balance sheet as goodwill and is being amortized over
twenty years.
The Company has an option to acquire the remaining 44% of the common stock of
JAK in increments of a minimum of 4% per month over the period from January
17, 1995 to December 31, 1995.
The cash consideration for each 4% incremental interest is $45,455 (total
aggregate of $500,000). Amounts paid after January 17, 1995 increase at a
rate of 8% per annum.
During February, 1995, the Company exercised its option to acquire an
additional 4% of the common stock of JAK.
F-9
<PAGE> 77
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> 78
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> 79
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> 80
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> 81
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> 82
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> 83
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> 84
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> 85
ULTRAK, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, Dec. 31,
1995 1994
(Unaudited)
----------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash deposits $ 0 642,241
Accounts receivable, net 11,157,231 10,743,091
Inventories, net 15,545,294 14,396,438
Advances for inventory purchases 3,784,540 5,381,437
Prepaid expenses and other current assets 676,022 432,469
Deferred income taxes 362,988 362,988
----------- ----------
Total Current Assets 31,526,075 31,958,664
----------- ----------
Furniture and Equipment, net 2,034,403 1,971,393
Goodwill, net 1,339,819 1,259,969
Notes Receivable, Noncurrent (Note 2) 1,054,205 984,208
Other Assets 157,930 178,456
----------- ----------
Total Assets $36,112,432 36,352,690
=========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable-trade $ 5,946,711 6,531,779
Notes payable (Note 3) 17,882,187 18,244,183
Accrued liabilities 567,314 664,740
Other current liabilities 893,201 841,600
----------- ----------
Total Current Liabilities 25,289,413 26,282,302
----------- ----------
Stockholders' Equity:
Preferred Stock, $5.00 par value, issuable in series;
2,000,000 shares authorized; Series A 12% cumulative
convertible; 195,351 shares authorized, issued and
outstanding 976,755 976,755
Common Stock, 20,000,000 shares authorized; 6,555,619
issued and outstanding at March 31, 1995 and December
31, 1994, respectively, at stated value 73,254 73,254
Additional Paid-in Capital 7,213,747 7,213,747
Retained Earnings 2,559,263 1,806,632
----------- ----------
Total Stockholders' Equity 10,823,019 10,070,388
----------- ----------
Total Liabilities and Stockholders' Equity $36,112,432 36,352,690
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-18
<PAGE> 86
ULTRAK, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
-----------------------------
1995 1994
-----------------------------
<S> <C> <C>
Net Sales $21,829,162 17,764,973
Cost of Sales 16,507,084 13,592,929
-----------------------------
Gross Profit 5,322,078 4,172,044
-----------------------------
Other Operating Expenses 3,713,412 3,049,425
-----------------------------
Operating Income 1,608,666 1,122,619
-----------------------------
Other (Income) Expense:
Other (Income) Expense (19,555) (19,918)
Interest Expense 396,829 219,906
-----------------------------
Other Expenses, net 377,274 199,988
-----------------------------
Net Income before Income Taxes 1,231,392 922,631
-----------------------------
Income Taxes 449,459 294,574
-----------------------------
Net Income 781,933 628,057
Dividend Requirements on
Preferred Stock 29,302 29,302
-----------------------------
Net Income Allocable to
Common Stockholders $752,631 598,755
========= =========
Net Income per Common Share $.11 .09
========= =========
Number of Common Shares Used
in Computation 6,821,027 6,816,955
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-19
<PAGE> 87
ULTRAK, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
-----------------------------
1995 1994
-----------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $781,933 628,057
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 137,957 81,439
Changes in current assets and liabilities:
(Increase), decrease in accounts receivable (414,140) (2,803,980)
(Increase), decrease in inventory (1,148,856) 3,872,254
(Increase), decrease in advances for inventory 1,596,897 (1,113,094)
(Increase), decrease in prepaid expenses , (243,553) (167,076)
Increase, (decrease) in trade accounts payable (585,068) (25,350)
Increase, (decrease) in accrued liabilities (45,825) 245,315
(Increase), decrease in discontinued operations 0 140,692
-----------------------------
Net cash provided by operating activities 79,345 858,257
-----------------------------
Cash Flows from Investing Activities:
Capital expenditures for furniture and equipment (200,967) (372,644)
Investment in other assets (129,321) (78,285)
-----------------------------
Net cash used in investing activities (330,288) (450,929)
-----------------------------
Cash Flows from Financing Activities:
Issuance of common stock, net 0 (29,693)
Changes in notes payable (361,996) (89,103)
Payment of dividends on preferred stock (29,302) (29,302)
-----------------------------
Net cash used in financing activities (391,298) (148,098)
-----------------------------
-----------------------------
Net increase (decrease) in cash (642,241) 259,230
-----------------------------
Cash and Cash Equivalents at Begin. of the Period 642,241 500,106
-----------------------------
Cash and Cash Equivalents at End of the Period $0 759,336
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-20
<PAGE> 88
ULTRAK, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation:
The accompanying unaudited interim consolidated financial statements include the
accounts of Ultrak, Inc. and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
The interim financial statements are prepared on an unaudited basis and do not
include all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. All adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the interim periods have been made and are of a
recurring nature unless otherwise disclosed herein. The results of operations
for such interim periods are not necessarily indicative of results of operations
for a full year. For further information, refer to the notes to the
consolidated financial statements for the year ended December 31, 1994 included
in the Ultrak, Inc. Annual Report on Form 10-K.
2. Notes Receivable-Noncurrent:
Notes receivable-noncurrent consists of the following as of March 31, 1995:
<TABLE>
<S> <C>
$750,000 notes receivable, principal payments
due and payable annually beginning in July 1995
until July 1998; interest payable monthly at 10%
per annum, collateralized by substantially all assets
of the maker $738,205
$116,000 note receivable, due and payable on April
21, 1996; interest payable quarterly at prime plus
4%, collateralized by certain assets of the maker 116,000
$200,000 note receivable, principal payments due and
payable on January 14, 1997, interest payable annually
at 8%, partially collateralized by certain assets
of the maker 200,000
----------
$1,054,205
==========
</TABLE>
In connection with the $750,000 notes receivable, the Company has received
warrants to purchase up to 59% of the common stock of the maker. The Chairman
of the Board of the Company has guaranteed approximately $470,000 of the notes
and has received approximately 50% of the warrants.
F-21
<PAGE> 89
ULTRAK, INC. and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
3. Notes Payable:
Notes payable consists of the following as of March 31, 1995:
<TABLE>
<S> <C>
$15.0 million revolving line of credit, due upon
demand or September 27, 1995; interest at floating
prime plus 1/2% payable monthly; collateralized by
substantially all assets $11,893,796
$7.0 million revolving line of credit, due upon
demand or April 4, 1996; interest at the greater
of 8.5% or floating prime plus 2.0% per annum
payable monthly; collateralized by inventory 5,988,391
-----------
$17,882,187
===========
</TABLE>
All of the credit facilities are guaranteed in part by the principal stockholder
of the Company. The credit agreements contain certain restrictive covenants and
conditions, including debt to tangible net worth ratios, current ratios and
working capital ratios. At March 31, 1995, the Company was in compliance with
all of its covenants with its lenders.
At March 31, 1995, the Company had unused available lines of credit totalling
approximately $4.1 million.
4. Acquisition of Diamond Electronics, Inc.
On April 28, 1995, the Company signed an Agreement and Plan of Reorganization
(the Agreement) with Diamond Electronics, Inc. (Diamond), an Ohio corporation,
and certain significant Diamond stockholders to acquire through the merger of a
wholly-owned subsidiary of the Company all of the outstanding common stock of
Diamond in exchange for 600,000 shares of registered Ultrak common stock.
Diamond had unaudited revenues of $2,959,000 and unaudited net income of
approximately $85,000 for the quarter ended March 31, 1995. The Agreement
specifies certain conditions under which up to 100,000 additional shares of
Ultrak stock could be issued. Diamond is a manufacturer of commercial video CCTV
security and surveillance systems used by large retailers and hazardous viewing
systems used by industry and municipalities. Subject to compliance with various
closing conditions, the transaction is scheduled to close before June 30, 1995.
The transaction will be accounted for as a purchase.
F-22
<PAGE> 90
(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-23
<PAGE> 91
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-24
<PAGE> 92
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-25
<PAGE> 93
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-26
<PAGE> 94
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-27
<PAGE> 95
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-28
<PAGE> 96
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-29
<PAGE> 97
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-30
<PAGE> 98
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-31
<PAGE> 99
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-32
<PAGE> 100
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-33
<PAGE> 101
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-34
<PAGE> 102
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-35
<PAGE> 103
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 for the year ended January 1, 1995 not
disclosed on the face of the cash flow statement were as follows:
<TABLE>
<S> <C>
Customer deposits converted to common stock $149,996
========
Cost of equipment $ 4,801
Less: accumulated depreciation (1,210)
--------
Net book value 3,591
Proceeds from sale of equipment 1,655
--------
Loss on sale of equipment $ 1,936
========
</TABLE>
F-36
<PAGE> 104
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1995 Dec 31,
(Unaudited) 1994
----------- ------------
<S> <C> <C>
Assets
Current Assets:
Cash $ 33,791 $ 30,549
Accounts receivable, net 1,687,672 2,203,670
Inventories, net 2,714,360 2,370,557
Prepaid expenses and other 35,678 32,529
Deferred income tax benefit 264,840 316,090
----------- -----------
Total Current Assets 4,736,341 4,953,395
Property, plant and equipment, net 1,775,338 1,763,920
Other assets 45,873 49,373
----------- -----------
Total Assets 6,557,552 6,766,688
=========== ===========
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable 782,409 1,167,162
Current portion of long-term debt 105,960 105,960
Accounts payable 952,786 875,852
Accrued liabilities 211,425 279,843
Other current liabilities 284,206 222,072
----------- -----------
Total Current Liabilities 2,336,786 2,650,889
Long-term Debt 859,596 884,548
Deferred Income Taxes 16,598 13,204
Stockholders' Equity:
Common stock, no par value; authorized
11,996,000 shares; issued and out-
standing - 4,762,326 and 4,706,326 shares 3,230,286 3,189,084
Paid-in Capital 120,000 120,000
Accumulated deficit (5,714) (91,037)
----------- -----------
Total Stockholders' Equity 3,344,572 3,218,047
----------- -----------
Total Liabilities and Stockholders' Equity $ 6,557,552 $ 6,766,688
=========== ===========
</TABLE>
F-37
<PAGE> 105
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
Net Sales 2,959,586 2,321,700
Cost of Sales 2,017,935 1,591,691
--------- ---------
Gross Profit 941,651 730,009
Operating Expenses 751,162 685,467
--------- ---------
Operating Income 190,489 44,542
--------- ---------
Other (Income) Expense:
Other (Income) Expense 8,206 862
Interest Expense 43,180 39,226
--------- ---------
Other Expenses, net 51,386 40,088
--------- ---------
Income before Income Taxes 139,103 4,454
Income Taxes 53,780 1,693
--------- ---------
Net Income 85,323 2,761
Dividend Requirement on
Preferred Stock 0 0
--------- ---------
Net Income Allocable to
Common Stockholders 85,323 2,761
========= =========
Net Income per Common Share $0.02 $0.00
========= =========
Number of Common Shares Used
in Computation 4,734,326 4,476,267
========= =========
</TABLE>
F-38
<PAGE> 106
DIAMOND ELECTRONICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1995 1994
--------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income 85,323 2,761
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51,300 43,725
(Increase) decrease in:
Accounts receivable 515,998 (40,043)
Inventories (343,803) (712,412)
Prepaid expenses and other current assets (3,149) 3,554
Deferred income tax benefit 51,250 0
Increase (decrease) in:
Accounts payable 76,934 67,016
Accrued liabilities (68,418) (28,871)
Other current liabilities 62,134 532,033
Deferred income taxes 3,394 0
--------- ---------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES 430,963 (132,237)
--------- ---------
Cash Flows From Investing Activities:
Acquisition of property and equipment (59,218) (39,921)
Acquisition of other assets 0 (11,409)
--------- ---------
NET CASH (USED) BY
INVESTING ACTIVITIES (59,218) (51,330)
--------- ---------
Cash Flows From Financing Activities:
Net increase (decrease) in borrowings under
revolving line of credit (384,753) 362,343
Principal payments on bank term loan (24,952) (34,200)
Principal payments on other notes payable 0 0
Issuance of common stock 41,202 0
--------- ---------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (368,503) 328,143
--------- ---------
NET INCREASE (DECREASE) IN CASH 3,242 144,576
CASH AND CASH EQUIVALENTS AT BEGIN. OF PERIOD 30,549 38,291
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 33,791 182,867
========= =========
</TABLE>
F-39
<PAGE> 107
ANNEXES
ANNEX A - Merger Agreement and Exhibits 1.01(a) and (b) thereto
ANNEX B - Section 1701.85 of the Ohio Revised Code
ANNEX C - Articles of Incorporation of Diamond
ANNEX D - Code of Regulations of Diamond
ANNEX E - Articles of Incorporation of Ultrak, as amended
ANNEX F - Bylaws of Ultrak
ANNEX G - Reincorporation Agreement
ANNEX H - Certificate of Incorporation of Ultrak - Delaware
ANNEX I - Bylaws of Ultrak - Delaware
ANNEX J - Article 113 of Colorado Business Corporation Act
<PAGE> 108
ANNEX A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as
of April 28, 1995 (the "Signing Date"), is among Diamond Electronics, Inc., an
Ohio corporation ("Diamond"), the shareholders of Diamond signing this
Agreement (the "Signing Shareholders"), Ultrak, Inc., a Colorado corporation
("Ultrak"), and Diamond Purchasing Corp., a Texas corporation and wholly-owned
subsidiary of Ultrak ("Newco").
W I T N E S S E T H:
Recitals. The Boards of Directors of Diamond, Ultrak, and Newco deem
it advisable and in the best interests of their respective shareholders that a
merger (the "Merger") is consummated whereby Newco is merged with and into
Diamond pursuant to a reorganization hereafter provided for. Diamond, the
Signing Shareholders, Ultrak, and Newco desire to set forth the terms and
conditions upon which they are willing to consummate the Merger. Ultrak, as
the sole shareholder of Newco, has approved the terms of the Merger and the
execution, delivery, and performance of this Agreement. The Signing
Shareholders constitute the Board of Directors of Diamond.
NOW, THEREFORE, in consideration of the foregoing and the agreements,
provisions, and covenants in this Agreement, and for other consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby covenant and agree as follows:
ARTICLE I: THE MERGER
1.01. The Merger. Upon the performance of all covenants and
obligations of the parties contained herein and upon the fulfillment (or
waiver) of all conditions to the obligations of the parties contained herein,
on the Effective Date (as hereinafter defined) and pursuant to the provisions
of the Texas Business Corporation Act (the "Texas Act") and the Ohio General
Corporation Law (the "Ohio Act"), Newco will be merged with and into Diamond,
which will be the surviving corporation (the "Surviving Corporation"), in
accordance with Articles of Merger to be filed in Texas and the Certificate of
Merger to be filed in Ohio in the forms attached hereto as Exhibits 1.01(a) and
1.01(b), respectively (collectively, the "Certificates of Merger"). As used in
this Agreement, the "Effective Date" shall mean such date as agreed upon by
Diamond, Newco, and Ultrak, on which the Certificates of Merger shall be filed
in accordance with the Texas Act and the Ohio Act, and the date the Merger will
become effective in accordance with the terms of the Certificates of Merger.
<PAGE> 109
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> 110
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> 111
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> 112
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> 113
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> 114
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> 115
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> 116
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
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<PAGE> 130
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
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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
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<PAGE> 132
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
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<PAGE> 133
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
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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.
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<PAGE> 135
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.
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<PAGE> 136
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
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<PAGE> 137
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
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<PAGE> 138
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> 139
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> 140
<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> 141
EXHIBIT 1.01(a)
ARTICLES OF MERGER (TEXAS)
<PAGE> 142
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> 143
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> 144
EXHIBIT 1.01(b)
CERTIFICATE OF MERGER (OHIO)
<PAGE> 145
Prescribed by Approved ______
Bob Taft, Secretary of State Date __________
30 East Broad Street, 14th Floor Fee ___________
Columbus, Ohio 43266-0418
From MER (July 1994)
CERTIFICATE OF MERGER
In accordance with the requirements of Ohio law, the undersigned
corporations, limited liability companies and/or limited partnerships, desiring
to effect a merger, set forth the following facts:
I. SURVIVING ENTITY
A. The name of the entity surviving the merger is:
_______________________________________________________________________
_______________________________________________________________________
(IF THE SURVIVING ENTITY IS AN OHIO LIMITED PARTNERSHIP OR QUALIFIED
FOREIGN LIMITED PARTNERSHIP, ITS REGISTRATION NUMBER MUST BE PROVIDED)
B. Name change: As a result of this merger, the name of the
surviving entity has been changed to the following:____________
_____________________________________________________ (COMPLETE
ONLY IF THE NAME OF SURVIVING ENTITY IS CHANGING THROUGH THE
MERGER)
C. The surviving entity is a: (Please check the appropriate box
and fill in the appropriate blanks)
[ ] Domestic (Ohio) corporation
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of
the state/country of _______________________ and licensed to
transact business in the state of Ohio.
[ ] Foreign (Non-Ohio) corporation incorporated under the laws of
the state/country of _____________________, and NOT licensed
to transact business in the state of Ohio.
[ ] Domestic (Ohio) limited liability company
[ ] Foreign (Non-Ohio) limited liability company organized under
the laws of the state/country of _____________________, and
registered to do business in the state of Ohio.
[ ] Foreign (Non-Ohio) limited liability company organized under
the laws of the state/country of ___________________, and NOT
registered to do business in the state of Ohio.
[ ] Domestic (Ohio) limited partnership, registration number
_______________
<PAGE> 146
[ ] Foreign (Non-Ohio) limited partnership organized under the
laws of the state/country of _____________________, and
registered to do business in the state of Ohio, under
registration number ______________________
[ ] Foreign (Non-Ohio) limited partnership organized under the
laws of the state/country of _______________________, and NOT
registered to do business in the state of Ohio.
II. MERGING ENTITIES
The name, type of entity, and state/country of incorporation or
organization, respectively, of each entity, other than the survivor, which is a
party to the merger are as follows: (IF INSUFFICIENT SPACE TO COVER THIS ITEM,
PLEASE ATTACH A SEPARATE SHEET LISTING THE MERGING ENTITIES; OHIO REGISTERED OR
FOREIGN QUALIFIED LIMITED PARTNERSHIPS MUST INCLUDE REGISTRATION NUMBER)
Name State/Country of Organization Type of Entity
________________________ ____________________ _________________________
________________________ ____________________ _________________________
________________________ ____________________ _________________________
________________________ ____________________ _________________________
________________________ ____________________ _________________________
III. MERGER AGREEMENT ON FILE
The name and mailing address of the person or entity from whom/which
eligible persons may obtain a copy of the agreement of merger upon written
request:
Name Address
___________________ __________________________________________
(street and number)
__________________________________________
(city, village or township) (state) (zip code)
IV. EFFECTIVE DATE OF MERGER
This merger is to be effective:
On _____________________ (if a date is specified, the date must be a
date on or after the date of filing; the effective date of the merger cannot
be earlier than the date of filing; if no date is specified, the date of filing
will be the effective date of the merger).
<PAGE> 147
V. MERGER AUTHORIZED
The laws of the state or country under which each constituent entity
exists, permits this merger.
This merger was adopted, approved and authorized by each of the
constituent entities in compliance with the laws of the state under which it is
organized, and the persons signing this certificate on behalf of each of the
constituent entities are duly authorized to do so.
VI. STATUTORY AGENT
The name and address of the surviving entity's statutory agent upon
whom any process, notice or demand may be served is:
Name Address
___________________ ________________________________________________________
(complete street address)
________________________________________________________
(city, village or township) (zip code)
(This item MUST be completed if the surviving entity is a foreign entity which
is not licensed, registered or otherwise authorized to conduct or transact
business in that State of Ohio)
Acceptance of Agent
The undersigned, named herein as the statutory agent for the above
referenced surviving entity, hereby acknowledges and accepts the appointment of
statutory agent for said entity.
______________________________________
Signature of Agent
(The acceptance of agent must be completed by domestic surviving entities if
through this merger the statutory agent for the surviving entity has changed,
or the named agent differs in any way from the name reflected on the Secretary
of State's records.)
VII. STATEMENT OF MERGER
Upon filing, or upon such later date as specified herein, the merging
entity/entities listed herein shall merge into the listed surviving entity.
VIII. AMENDMENTS
The articles of incorporation, articles of organization or certificate
of limited partnership (strike the inapplicable terms) of the surviving
domestic entity herein, are amended as set forth in the attached "Exhibit A"
(Please note that any amendments to articles of incorporation,
articles of organization or to a certificate of limited partnership MUST be
attached if the surviving entity is a DOMESTIC corporation, limited liability
company, or limited partnership.)
<PAGE> 148
IX. QUALIFICATION OR LICENSURE OF FOREIGN SURVIVING ENTITY
A. The listed surviving foreign corporation, limited liability
company, or limited partnership desires to transact business in Ohio as a
foreign corporation, foreign limited liability company, or foreign limited
partnership, and hereby appoints the following as its statutory agent upon whom
process, notice or demand against the entity may be served in the State of
Ohio. The name and complete address of the statutory agent is:
____________________________ __________________________________
(name) (street and number)
_______________________________________, Ohio ___________________
(city, village or township) (zip code)
The subject surviving foreign corporation, limited liability company
or limited partnership irrevocably consents to service of process on the
statutory agent listed above as long as the authority of the agent continues,
and to service of process upon the Secretary of State if the agent cannot be
found, if the corporation, limited liability company or limited partnership
fails to designate another agent when required to do so, or if the
corporation's, limited liability company's, or limited partnership's license or
registration to do business in Ohio expires or is canceled.
B. The qualifying entity also states as follows: (complete only if
applicable)
1. Foreign Qualifying Limited Liability Company
(If the qualifying entity is a foreign limited
liability company, the following information must be
completed)
a. The name of the limited liability company in its
state of organization/registration is ____________
__________________________________________________
b. The name under which the limited liability
company desires to transact business in Ohio is
__________________________________________________
c. The limited liability company was organized or
registered on ________________________ under the
month day year
laws of the state/country of ____________________.
d. The address to which interested persons may
direct request for copies of the articles of
organization, operating agreement, bylaws, or
other charter documents of the company is: _______
__________________________________________________
<PAGE> 149
2. FOREIGN QUALIFYING LIMITED PARTNERSHIP
(If the qualifying entity is a foreign limited
partnership, the following information must be
completed)
a. The name of limited partnership is ___________
______________________________________________
b. The limited partnership was formed on
______________________________ under the laws
month day year
of the state/country of ______________________
c. The address of the office of the limited
partnership in its state/country of
organization is ______________________________
______________________________________________
d. The limited partnership's principal office
address is ___________________________________
______________________________________________
e. The names and business or residence addresses
of the GENERAL partners of the partnership
are as follows:
Name Address
_____________________________________________
_____________________________________________
_____________________________________________
(If insufficient space to cover this item,
please attach a separate sheet listing the
general partners and their respective
addresses)
f. The address of the office where a list of the
names and business or residence addresses of
the limited partners and their respective
capital contributions is to be maintained is:
_____________________________________________
_____________________________________________
The limited partnership hereby certifies that
it shall maintain said records until the
registration of the limited partnership in
Ohio is cancelled or withdrawn.
<PAGE> 150
The undersigned constituent entities have caused this certificate of
merger to be signed by its duly authorized officers, partners and
representatives on the date(s) stated below.
<TABLE>
<S> <C>
___________________________________ ___________________________________
exact name of entity exact name of entity
By:________________________________ By:________________________________
Its:_______________________________ Its:_______________________________
Date:______________________________ Date:______________________________
___________________________________ ___________________________________
exact name of entity exact name of entity
By:________________________________ By:________________________________
Its:_______________________________ Its:_______________________________
Date:______________________________ Date:______________________________
___________________________________ ___________________________________
exact name of entity exact name of entity
By:________________________________ By:________________________________
Its:_______________________________ Its:_______________________________
Date:______________________________ Date:______________________________
___________________________________ ___________________________________
exact name of entity exact name of entity
By:________________________________ By:________________________________
Its:_______________________________ Its:_______________________________
Date:______________________________ Date:______________________________
___________________________________ ___________________________________
exact name of entity exact name of entity
By:________________________________ By:________________________________
Its:_______________________________ Its:_______________________________
Date:______________________________ Date:______________________________
</TABLE>
(Please note that the chairman of the board, the president, vice president,
secretary or an assistant secretary must sign on behalf of each constituent
corporation, and at least on general partner must sign on behalf of each
constituent limited partnership; If insufficient space for signature, a
separate sheet should be attached continuing such signatures)
<PAGE> 151
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> 152
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> 153
(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> 154
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> 155
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> 156
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> 157
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> 158
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> 159
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> 160
(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> 161
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> 162
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> 163
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> 164
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> 165
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> 166
(i) the sale, exchange, lease, transfer or other
disposition to or with a Related Person or any Affiliate or
Associate of such Related Person by the Corporation or any of
its Subsidiaries (in a single transaction or a Series of
Related Transactions) of all or substantially all, or any
Substantial Part, of its or their assets or businesses
(including, without limitation, any securities issued by a
Subsidiary);
(ii) The purchase, exchange, lease or other
acquisition by the Corporation or any of its Subsidiaries (in
a single transaction or a Series of Related Transactions) of
all or substantially all, or any Substantial Part, of the
assets or business of a Related Person or any Affiliate or
Associate of such Related Person;
(iii) Any merger or consolidation of the Corporation
or any Subsidiary thereof into or with a Related Person or any
Affiliate or Associate of such Related Person or into or with
another Person which, after such merger or consolidation,
would be an Affiliate or an Associate of a Related Person, in
each case irrespective of which Person is the surviving entity
in such merger or consolidation;
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(iv) Any reclassification of securities,
recapitalization or other transaction (other than a redemption
in accordance with the terms of the security redeemed) which
has the effect, directly or indirectly, of increasing the
proportionate amount of Voting Shares of the Corporation or
any Subsidiary thereof which are Beneficially Owned by a
Related Person, or any partial or complete liquidation,
spinoff, splitoff or splitup of the Corporation or any
Subsidiary thereof; provided, however, that this Section
4(a)(iv) shall not relate to any transaction that has been
approved by a majority of the Continuing Directors; or
(v) The acquisition upon the issuance thereof of
Beneficial Ownership by a Related Person of Voting Shares or
securities convertible into Voting Shares or any voting
securities or securities convertible into voting securities of
any Subsidiary of the Corporation, or the acquisition upon the
issuance thereof of Beneficial Ownership by a Related Person
of any rights, warrants or options to acquire any of the
foregoing or any combination of the foregoing voting Shares or
voting securities of a Subsidiary.
(b) A "Series of Related Transactions" shall be deemed to
include not only a series of transactions with the same
14
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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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<PAGE> 175
ANNEX D
REGULATIONS
OF
DIAMOND ELECTRONICS, INC.
INDEX
<TABLE>
<CAPTION>
SECTION CAPTION PAGE NO.
- ------- -------------------------------------------------------------------------- --------
<S> <C> <C>
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
1.01 Annual Meetings........................................................... 1
1.02 Call of Meetings.......................................................... 1
1.03 Place of Meetings......................................................... 1
1.04 Notice of Meetings........................................................ 2
1.05 Waiver of Notice.......................................................... 3
1.06 Quorum.................................................................... 3
1.07 Votes Required............................................................ 4
1.08 Order of Business......................................................... 4
1.09 Shareholders Entitled to Vote............................................. 4
1.10 Cumulative Voting......................................................... 5
1.11 Proxies................................................................... 5
1.12 Inspectors of Election.................................................... 6
ARTICLE TWO
DIRECTORS
2.01 Authority and Qualifications.............................................. 6
2.02 Number of Directors and Term of Office.................................... 6
2.03 Election.................................................................. 7
2.04 Removal................................................................... 8
2.05 Vacancies................................................................. 8
2.06 Meetings.................................................................. 9
2.07 Notice of Meetings........................................................ 9
2.08 Waiver of Notice.......................................................... 10
2.09 Quorum.................................................................... 10
2.10 Executive Committee....................................................... 11
2.11 Compensation.............................................................. 12
2.12 Bylaws.................................................................... 12
ARTICLE THREE
OFFICERS
3.01 Officers.................................................................. 12
3.02 Tenure of Office.......................................................... 13
3.03 Duties of the Chairman of the Board....................................... 13
3.04 Duties of the Vice Chairman of the Board.................................. 13
3.05 Duties of the President................................................... 14
3.06 Duties of the Vice Presidents............................................. 14
3.07 Duties of the Secretary................................................... 14
3.08 Duties of the Treasurer................................................... 15
</TABLE>
EXHIBIT B
<PAGE> 176
<TABLE>
<CAPTION>
SECTION CAPTION PAGE NO.
- ------- -------------------------------------------------------------------------- --------
<S> <C> <C>
ARTICLE FOUR
SHARES
4.01 Certificates.............................................................. 15
4.02 Transfers................................................................. 16
4.03 Transfer Agents and Registrars............................................ 17
4.04 Lost, Wrongfully Taken or Destroyed Certificates.......................... 17
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
5.01 Mandatory Indemnification................................................. 18
5.02 Court-Approved Indemnification............................................ 19
5.03 Indemnification for Expenses.............................................. 20
5.04 Determination Required.................................................... 20
5.05 Advances for Expenses..................................................... 22
5.06 Article Five Not Exclusive................................................ 23
5.07 Insurance................................................................. 23
5.08 Certain Definitions....................................................... 24
5.09 Venue..................................................................... 25
ARTICLE SIX
MISCELLANEOUS
6.01 Amendments................................................................ 25
6.02 Action by Shareholders or Directors Without a Meeting..................... 27
</TABLE>
<PAGE> 177
CODE OF REGULATIONS
OF
DIAMOND ELECTRONICS, INC.
ARTICLE I
Meetings of Shareholders
Section 1.01. Annual Meetings. The annual meetings of the shareholders for
the election of directors, for the consideration of reports to be laid before
such meeting and for the transaction of such other business as may properly come
before such meeting, shall be held on the third Thursday in April in each year
or on such other date as may be fixed from time to time by the directors.
Section 1.02. Calling of Meetings. Meetings of the shareholders may be
called only by the chairman of the board, or, in the case of the chairman's
absence, death, or disability, the vice chairman of the board, the president,
or, in the case of the president's absence, death, or disability, the vice
president authorized to exercise the authority of the president; the secretary;
the directors by action at a meeting, or a majority of the directors acting
without a meeting; or the holders of at least 25 percent of all shares
outstanding and entitled to vote on any proposal to be submitted thereat.
Section 1.03. Place of Meetings. All meetings of shareholders shall be
held at the principal office of the corporation, unless otherwise provided by
action of the directors. Meetings of shareholders may be held at any place
within or without the State of Ohio.
<PAGE> 178
Section 1.04. Notice of Meetings.
(A) Written notice stating the time, place and purposes of a meeting of the
shareholders shall be given either by personal delivery or by mail not less than
seven nor more than 60 days before the date of the meeting, (1) to each
shareholder of record entitled to notice of the meeting, (2) by or at the
direction of the president or the secretary. If mailed, such notice shall be
addressed to the shareholder at his address as it appears on the records of the
corporation. Notice of adjournment of a meeting need not be given if the time
and place to which it is adjourned are fixed and announced at such meeting. In
the event of a transfer of shares after the record date for determining the
shareholders who are entitled to receive notice of a meeting of shareholders, it
shall not be necessary to give notice to the transferee. Nothing herein
contained shall prevent the setting of a record date in the manner provided by
law, the Articles or the Regulations for the determination of shareholders who
are entitled to receive notice of or to vote at any meeting of shareholders or
for any purpose required or permitted by law.
(B) The board of directors shall no later than 45 days following receipt by
the president or the secretary of a request in writing, specifying the purpose
or purposes for which the persons properly making such request have called a
meeting of the shareholders, delivered either in person or by registered or
certified mail, return receipt
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requested, to such officer by any persons entitled to call a meeting of
shareholders, set the date, time and place of such meeting and fix a record date
for determining the shareholders entitled to vote at the meeting and to receive
notice thereof. The secretary shall thereafter cause to be given to the
shareholders entitled thereto notice of such meeting in the manner provided by
the law no later than the sixtieth day after the corporation's receipt of such
notice. Such meeting shall be held not less than fifteen nor more than ninety
days after the receipt of such request.
Section 1.05. Waiver of Notice. Notice of the time, place and purpose or
purposes of any meeting of shareholders may be waived in writing, either before
or after the holding of such meeting, by any shareholders, which writing shall
be filed with or entered upon the records of such meeting. The attendance of any
shareholder, in person or by proxy, at any such meeting without protesting the
lack of proper notice, prior to or at the commencement of the meeting, shall be
deemed to be a waiver by such shareholder of notice of such meeting.
Section 1.06. Quorum. At any meeting of shareholders, the holders of a
majority of the voting shares of the corporation then outstanding and entitled
to vote thereat, present in person or by proxy, shall constitute a quorum for
such meeting, except as otherwise provided by law, the Articles or Regulations.
The holders of a majority of the voting shares represented at a meeting, whether
or not a quorum is present, or the chairman of the board, the president, or the
officer of
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the corporation acting as chairman of the meeting, may adjourn such meeting from
time to time, and if a quorum is present at such adjourned meeting any business
may be transacted as if the meeting had been held as originally called.
Section 1.07. Votes Required. Any matter submitted to the shareholders for
their vote shall be decided by the vote of a majority of those present at the
meeting or such greater proportion of the shares, or of any class of shares, or
of each class, as is otherwise required by law, the Articles or the Regulations.
Section 1.08. Order of Business. The order of business at any meeting of
shareholders shall be determined by the officer of the corporation acting as
chairman of such meeting unless otherwise determined by a vote of the holders of
a majority of the voting shares of the corporation then outstanding, present in
person or by proxy, and entitled to vote at such meeting.
Section 1.09. Shareholders Entitled to Vote. Each shareholder of record on
the books of the corporation on the record date for determining the shareholders
who are entitled to vote at a meeting of shareholders shall be entitled at such
meeting to one vote for each share of the corporation standing in his name on
the books of the corporation on such record date. The directors may fix a record
date for the determination of the shareholders who are entitled to receive
notice of and to vote at a meeting of shareholders, which record date shall not
be a date earlier than the date on which the record date is fixed and which
record date may be a maximum
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of sixty days preceding the date of the meeting of shareholders.
Section 1.10. Cumulative Voting. If notice in writing shall be given by a
shareholder to the president, a vice president or the secretary of the
corporation, not less than forty-eight hours before the time fixed for holding a
meeting of the shareholders for the purpose of electing directors if notice of
such meeting shall have been given at least ten days prior thereto, and
otherwise not less than twenty-four hours before such time, that such
shareholder desires that the voting at such election shall be cumulative, and if
an announcement of the giving of such notice is made upon the convening of the
meeting by the chairman or secretary or by or on behalf of the shareholder
giving such notice, each shareholder shall have the right to cumulate such
voting power as he possesses and to give one candidate as many votes as is
determined by multiplying the number of directors to be elected by the number of
votes to which such shareholder is entitled, or to distribute such number of
votes on the same principle among two or more candidates, as he sees fit.
Section 1.11. Proxies. At meetings of the shareholders any shareholder of
record entitled to vote thereat may be represented and may vote by a proxy or
proxies appointed by an instrument in writing signed by such shareholder, but
such instrument shall be filed with the secretary of the meeting before the
person holding such proxy shall be allowed to vote thereunder. No proxy shall be
valid after the expiration of eleven months after the date of its execution,
unless the
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shareholder executing it shall have specified therein the length of time it is
to continue in force.
Section 1.12. Inspectors of Election. In advance of any meeting of
shareholders, the directors may appoint inspectors of election to act at such
meeting or any adjournment thereof; if inspectors are not so appointed, the
officer of the corporation acting as chairman of any such meeting may make such
appointment. In case any person appointed as inspector fails to appear or act,
the vacancy may be filled only by appointment made by the directors in advance
of such meeting or, if not so filled, at the meeting by the officer of the
corporation acting as chairman of such meeting. No other person or persons may
appoint or require the appointment of inspectors of election.
ARTICLE II
Directors
Section 2.01. Authority and Qualifications. Except where the law, the
Articles or the Regulations otherwise provide, all authority of the corporation
shall be vested in and exercised by its directors. Directors need not be
shareholders of the corporation.
Section 2.02. Number of Directors and Term of Office.
(A) Until changed in accordance with the provisions of the
Regulations, the number of directors of the corporation shall be five. Each
director shall be elected to serve until the next annual meeting of
shareholders and
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<PAGE> 183
until his successor is duly elected and qualified or until his earlier
resignation, removal from office, or death.
(B) The number of directors may be fixed or changed at a meeting of
the shareholders called for the purpose of electing directors at which a
quorum is present, only by the affirmative vote of the holders of not less
than a majority of the voting shares which are represented at the meeting,
in person or by proxy, and entitled to vote on such proposal, unless
otherwise provided by law, the Articles or the Regulations.
(C) The directors may fix or change the number of directors, unless
otherwise provided by law, the Articles or the Regulations, and may fill
any director's office that is created by an increase in the number of
directors; provided, however, that the directors may not increase the
number of directors to more than fifteen nor reduce the number of directors
to less than three.
(D) No reduction in the number of directors shall of itself have the
effect of shortening the term of any incumbent director.
Section 2.03. Election. At each annual meeting of shareholders for the
election of directors, the successors to the directors whose term shall expire
in that year shall be elected, but if the annual meeting is not held or if one
or more of such directors are not elected thereat, they may be elected at a
special meeting called for that purpose. The election of directors shall be by
ballot whenever requested by
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<PAGE> 184
the presiding officer of the meeting or by the holders of a majority of the
voting shares outstanding, entitled to vote at such meeting and present in
person or by proxy, but unless such request is made, the election shall be viva
voce.
Section 2.04. Removal. A director or directors may be removed from office,
for good cause, only by the vote of the holders of shares entitling them to
exercise not less than 80 percent of the voting power of the corporation to
elect directors in place of those to be removed, unless otherwise provided by
law, the Articles or the Regulations. Provided that unless all the directors, or
all the directors of a particular class (if the directors of the corporation are
divided into classes), are removed, no individual director shall be removed in
case the votes of a sufficient number of shares are cast against his removal
which, if cumulatively voted at an election of all directors, or all the
directors of a particular class, as the case may be, would be sufficient to
elect at least one director. In the case of any such removal, a new director may
be elected at the same meeting for the unexpired term of each director removed.
Failure to elect a director to fill the unexpired term of any director removed
shall be deemed to create a vacancy in the board.
Section 2.05. Vacancies. The remaining directors, though less than a
majority of the whole authorized number of directors, may, by the vote of a
majority of their number, fill any vacancy in the board for the unexpired term.
A vacancy in the board exists within the meaning of this Section 2.05 in
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<PAGE> 185
case the shareholders increase the authorized number of directors but fail at
the meeting at which such increase is authorized, or an adjournment thereof, to
elect the additional directors provided for, or in case the shareholders fail at
any time to elect the whole authorized number of directors.
Section 2.06. Meetings. A meeting of the directors shall be held
immediately following the adjournment of each annual meeting of shareholders at
which directors are elected, and notice of such meeting need not be given. The
directors shall hold such other meetings as may from time to time be called, and
such other meetings of directors may be called only by the chairman of the
board, the president, or any two directors. All meetings of directors shall be
held at the principal office of the corporation or at such other place within or
without the State of Ohio, as the directors may from time to time determine by a
resolution. Meetings of the directors may be held through any communications
equipment if all persons participating can hear each other and participation in
a meeting pursuant to this provision shall constitute presence at such meeting.
Section 2.07. Notice of Meetings. Notice of the time and place of each
meeting of directors for which such notice is required by law, the Articles, the
Regulations or the Bylaws shall be given to each of the directors by at least
one of the following methods:
A. In writing mailed not less than three days before such meeting and
addressed to the residence or usual place of business of a director, as
such address appears on the records of the corporation; or
9
<PAGE> 186
B. By telegraph, cable, radio, wireless or a writing sent or delivered
to the residence or usual place of business of a director as the same
appears on the records of the corporation, not later than the day before
the date on which such meeting is to be held; or
C. Personally or by telephone not later than the day before the date
on which such meeting is to be held.
Notice given to a director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
directors need not be uniform. Notice of any meeting of directors may be given
only by the chairman of the board, the president or the secretary of the
corporation. Any such notice need not specify the purpose or purposes of the
meeting. Notice of adjournment of a meeting of directors need not be given if
the time and place to which it is adjourned are fixed and announced at such
meeting.
Section 2.08. Waiver of Notice. Notice of any meeting of directors may be
waived in writing, either before or after the holding of such meeting, by any
director, which writing shall be filed with or entered upon the records of the
meeting. The attendance of any director at any meeting of directors without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice, shall be deemed to be a waiver by him of notice of such meeting.
Section 2.09. Quorum. A majority of the whole authorized number of
directors shall be necessary to constitute a quorum for a meeting of directors,
except that a majority of the
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<PAGE> 187
directors in office shall constitute a quorum for filling a vacancy in the
board. The act of a majority of the directors present at a meeting at which a
quorum is present is the act of the board, except as otherwise provided by law,
the Articles or the Regulations.
Section 2.10. Executive Committee. The directors may create an executive
committee or any other committee of directors, to consist of not less than three
directors, and may authorize the delegation to such executive committee or other
committees of any of the authority of the directors, however conferred, other
than that of filling vacancies among the directors or in the executive committee
or in any other committee of the directors.
Such executive committee or any other committee of directors shall serve at
the pleasure of the directors, shall act only in the intervals between meetings
of the directors, and shall be subject to the control and direction of the
directors. Such executive committee or other committee of directors may act by a
majority of its members at a meeting or by a writing or writings signed by all
of its members.
Any act or authorization of any act by the executive committee or any other
committee within the authority delegated to it shall be as effective for all
purposes as the act or authorization of the directors. No notice of a meeting of
the executive committee or of any other committee of directors shall be
required. A meeting of the executive committee or of any other committee of
directors may be called only by the
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<PAGE> 188
president or by a member of such executive or other committee of directors.
Meetings of the executive committee or of any other committee of directors may
be held through any communications equipment if all persons participating can
hear each other and participation in such a meeting shall constitute presence
thereat.
Section 2.11. Compensation. Directors shall be entitled to receive a
compensation for services rendered and expenses incurred as directors in such
amounts as the directors may determine.
Section 2.12. Bylaws. The directors may adopt, and amend from time to time,
Bylaws for their own government, which Bylaws shall not be inconsistent with the
law, the Articles or the Regulations.
ARTICLE THREE
OFFICERS
Section 3.01. Officers. The officers of the corporation to be elected by
the directors shall be a chairman of the board and a vice chairman of the board,
who must be directors, a president, a secretary, a treasurer, and, if desired,
one or more vice presidents and such other officers and assistant officers as
the directors may from time to time elect. Officers need not be shareholders of
the corporation, and may be paid such compensation as the board of directors may
determine. Any two or more officers may be held by the same person, but no
officer shall execute, acknowledge, or verify
12
<PAGE> 189
any instrument in more than one capacity if such instrument is required by law,
the Articles, the Regulations or the Bylaws to be executed, acknowledged or
verified by two or more officers.
Section 3.02. Tenure of Office. The officers of the corporation shall hold
office at the pleasure of the directors. Any officer of the corporation may be
removed, either with or without cause, at any time, by the affirmative vote of a
majority of all the directors then in office; such removal, however, shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 3.03. Duties of the Chairman of the Board. The chairman of the
board shall be the chief executive officer and shall preside at all meetings of
the directors. He shall have such other powers and duties as the directors shall
from time to time assign to him.
Section 3.04. Duties of the Vice Chairman of the Board. In the absence of
the chairman of the board or in the event of his inability or refusal to act,
the vice chairman of the board, if any, shall perform the duties of the chairman
of the board, and when so acting, shall have all the powers of and be subject to
all restrictions upon the chairman of the board. The vice chairman of the board
shall perform such other duties and have such other powers as the directors may
from time to time prescribe.
13
<PAGE> 190
Section 3.05. Duties of the President. The president shall be the chief
operating officer of the corporation and shall exercise supervision over the
business of the corporation and shall have, among such additional powers and
duties as the directors may from time to time assign to him, the power and
authority to sign all certificates evidencing shares of the corporation and all
deeds, mortgages, bonds, contracts, notes and other instruments requiring the
signature of the president of the corporation.
Section 3.06. Duties of the Vice Presidents. In the absence of the
president or in the event of his inability or refusal to act, the vice
president, if any (or in the event there be more than one vice president, the
vice presidents in the order designated, or in the absence of any designation,
then in the order of their election), shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all
restrictions upon the president. The vice presidents shall perform such other
duties and have such other powers as the directors may from time to time
prescribe.
Section 3.07. Duties of the Secretary. It shall be the duty of the
secretary, or of an assistant secretary, if any, in case of the absence or
inability to act of the secretary, to keep minutes of all the proceedings of the
shareholders and the directors and to make a proper record of the same; to
perform such other duties as may be required by law, the Articles or the
Regulations; to perform such other and further duties as may from time to time
be assigned to him by the directors or
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the president; and to deliver all books, papers and property of the corporation
in his possession to his successor, or to the president.
Section 3.08. Duties of the Treasurer. The treasurer, or an assistant
treasurer, if any, in case of the absence or inability to act of the treasurer,
shall receive and safely keep in charge all money, bills, notes, choses in
action, securities and similar property belonging to the corporation, and shall
do with or disburse the same as directed by the president or the directors;
shall keep an accurate account of the finances and business of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, stated capital and shares, together with such other accounts as may be
required and hold the same open for inspection and examination by the directors;
shall give bond in such sum with such security as the directors may require for
the faithful performance of his duties; shall, upon the expiration of his term
of office, deliver all money and other property of the corporation in his
possession or custody to his successor or the president; and shall perform such
other duties as from time to time may be assigned to him by the directors.
ARTICLE FOUR
SHARES
Section 4.01. Certificates. Certificates evidencing ownership of shares of
the corporation shall be issued to those
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entitled to them. Each certificate evidencing shares of the corporation shall
bear a distinguishing number; the signatures of the chairman of the board, the
president, or a vice president, and of the secretary or an assistant secretary
(except that when any such certificate is countersigned by an incorporated
transfer agent or registrar, such signatures may be facsimile, engraved, stamped
or printed); and such recitals as may be required by law. Certificates
evidencing shares of the corporation shall be of such tenor and design as the
directors may from time to time adopt and may bear such recitals as are
permitted by law.
Section 4.02. Transfers. Where a certificate evidencing a share or shares
of the corporation is presented to the corporation or its proper agents with a
request to register transfer, the transfer shall be registered as requested if:
(1) An appropriate person signs on each certificate so presented or signs
on a separate document an assignment or transfer of shares evidenced by each
such certificate, or signs a power to assign or transfer such shares, or when
the signature of an appropriate person is written without more on the back of
each such certificate; and
(2) Reasonable assurance is given that the indorsement of each appropriate
person is genuine and effective; the corporation or its agents may refuse to
register a transfer of shares unless the signature of each appropriate person is
guaranteed by a commercial bank or trust company having an office or a
correspondent in the City of New York or by a firm having membership in the New
York Stock Exchange; and
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(3) All applicable laws relating to the collection of transfer or other
taxes have been complied with; and
(4) The corporation or its agents are not otherwise required or permitted
to refuse to register such transfer.
Section 4.03. Transfer Agents and Registrars. The directors may appoint one
or more agents to transfer or to register shares of the corporation, or both.
Section 4.04. Lost, Wrongfully Taken or Destroyed Certificates. Except as
otherwise provided by law, where the owner of a certificate evidencing shares of
the corporation claims that such certificate has been lost, destroyed or
wrongfully taken, the directors must cause the corporation to issue a new
certificate in place of the original certificate if the owner:
(1) So requests before the corporation has notice that such original
certificate has been acquired by a bona fide purchaser; and
(2) Files with the corporation, unless waived by the directors, an
indemnity bond, with surety or sureties satisfactory to the corporation, in such
sums as the directors may, in their discretion, deem reasonably sufficient as
indemnity against any loss or liability that the corporation may incur by reason
of the issuance of each such new certificate; and
(3) Satisfies any other reasonable requirements which may be imposed by the
directors, in their discretion.
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ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
Section 5.01. Mandatory Indemnification. The corporation shall indemnify
any officer or director of the corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(including, without limitation, any action threatened or instituted by or in the
right of the corporation), by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee or agent of
another corporation (domestic or foreign, nonprofit or for profit), partnership,
joint venture, trust or other enterprise, against expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and with respect to any criminal action
or proceeding, he had no reasonable cause to believe his conduct was unlawful. A
person claiming indemnification under this Section 5.01 shall be presumed, in
respect of any act or omission giving rise to such claim for indemnification, to
have acted in good faith and in a
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manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal matter, to have had no
reasonable cause to believe his conduct was unlawful, and the termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, rebut such
presumption.
Section 5.02. Court-Approved Indemnification. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding:
(A) the corporation shall not indemnify any officer or director of the
corporation who was a party to any completed action or suit instituted by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or other
enterprise, in respect of any claim, issue or matter asserted in such action or
suit as to which he shall have been adjudged to be liable for gross negligence
or misconduct (other than negligence) in the performance of his duty to the
corporation unless and only to the extent that the Court of Common Pleas of
Fairfield County, Ohio or the court in which such action or suit was brought
shall determine upon application that, despite such adjudication of liability,
and in view of all the
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circumstances of the case, he is fairly and reasonably entitled to such
indemnity as such Court of Common Pleas or such other court shall deem proper;
and
(B) the corporation shall promptly make any such unpaid indemnification as
is determined by a court to be proper as contemplated by this Section 5.02.
Section 5.03. Indemnification for Expenses. Anything contained in the
Regulations or elsewhere to the contrary notwithstanding, to the extent that an
officer or director of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section
5.01, or in defense of any claim, issue or matter therein, he shall be promptly
indemnified by the corporation against expenses (including, without limitation,
attorneys' fees, filing fees, court reporters' fees and transcript costs)
actually and reasonably incurred by him in connection therewith.
Section 5.04. Determination Required. Any indemnification required under
Section 5.01 and not precluded under Section 5.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written
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opinion by independent legal counsel other than an attorney, or a firm having
associated with it an attorney, who has been retained by or who has performed
services for the corporation, or any person to be indemnified, within the past
five years, or (C) by the shareholders, or (D) by the Court of Common Pleas of
Fairfield County, Ohio or (if the corporation is a party thereto) the court in
which such action, suit or proceeding was brought, if any; any such
determination may be made by a court under division (D) of this Section 5.04 at
any time [including, without limitation, any time before, during or after the
time when any such determination may be requested of, be under consideration by
or have been denied or disregarded by the disinterested directors under division
(A) or by independent legal counsel under division (B) or by the shareholders
under division (C) of this Section 5.04]; and no failure for any reason to make
any such determination, and no decision for any reason to deny any such
determination, by the disinterested directors under division (A) or by
independent legal counsel under division (B) or by shareholders under division
(C) of this Section 5.04 shall be evidence in rebuttal of the presumption
recited in Section 5.01. Any determination made by the disinterested directors
under division (A) or by independent legal counsel under division (B) of this
Section 5.04 to make indemnification in respect of any claim, issue or matter
asserted in an action or suit threatened or brought by or in the right of the
corporation shall be promptly communicated to the person who threatened or
brought such
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action or suit, and within ten (10) days after receipt of such notification such
person shall have the right to petition the Court of Common Pleas of Fairfield,
County, Ohio or the court in which such action or suit was brought, if any, to
review the reasonableness of such determination.
Section 5.05. Advances for Expenses. Expenses (including, without
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding to or on behalf of the officer or
director promptly as such expenses are incurred by him, but only if such officer
or director shall first agree, in writing, to repay all amounts so paid in
respect of any claim, issue or other matter asserted in such action, suit or
proceeding in defense of which he shall not have been successful on the merits
or otherwise:
(A) unless it shall ultimately be determined as provided in Section 5.04
that he is entitled to be indemnified by the corporation as provided under
Section 5.01; or
(B) if, in respect of any claim, issue or other matter asserted by or in
the right of the corporation in such action or suit, he shall have been adjudged
to be liable for gross negligence or misconduct (other than negligence) in the
performance of his duty to the corporation, unless and only to the extent that
the Court of Common Pleas of Fairfield County, Ohio or the court in which such
action was brought shall
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determine upon application that, despite such adjudication of liability, and in
view of all the circumstances, he is fairly and reasonably entitled to all or
part of such indemnification.
Section 5.06. Article Five Not Exclusive. The indemnification provided by
this Article Five shall not be deemed exclusive of any other rights to which any
person seeking indemnification may be entitled under the Articles or the
Regulations or any agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be an officer or director of the corporation and shall inure
to the benefit of the heirs, executors, and administrators of such a person.
Section 5.07. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article Five.
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Section 5.08. Certain Definitions. For purposes of this Article Five, and
as examples and not by way of limitation:
(A) A person claiming indemnification under this Article 5 shall be deemed
to have been successful on the merits or otherwise in defense of any action,
suit or proceeding referred to in Section 5.01, or in defense of any claim,
issue or other matter therein, if such action, suit or proceeding shall be
terminated as to such person, with or without prejudice, without the entry of a
judgment or order against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based upon
a judicial or other determination of the lack of merit of the claims made
against him or otherwise results in a vindication of him); and
(B) References to an "other enterprise" shall include employee benefit
plans; references to a "fine" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an
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employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the corporation" within the meaning of that term as used
in this Article Five.
Section 5.09. Venue. Any action, suit or proceeding to determine a claim
for indemnification under this Article Five may be maintained by the person
claiming such indemnification, or by the corporation, in the Court of Common
Pleas of Fairfield County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Fairfield County, Ohio in any
such action, suit or proceeding.
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Amendments. The Regulations may be amended, or new
regulations may be adopted, at a meeting of shareholders held for such purpose,
only by the affirmative vote of the holders of shares entitling them to exercise
not less than a majority of the voting power of the corporation on such
proposal, unless otherwise provided by law, the Articles or the Regulations, or
without a meeting by the written consent of the holders of shares entitling them
to exercise not less than a majority of the voting power of the corporation on
such proposal, unless otherwise provided by law, the Articles or the
Regulations.
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Provided that, any amendment, change or repeal of the Regulations which
would have the effect of modifying or permitting circumvention of Article VII of
the Articles of Incorporation of the Company, shall require the affirmative
vote, at a meeting of shareholders of the corporation or without a meeting, by
written consent of the shareholders, as to all shares held:
(a) By the holders of at least 80 percent of the outstanding Voting
Shares of all classes of the corporation considered for purposes of Article
VII as a single class; and
(b) By an Independent Majority of Shareholders (as defined in Article
VII, Section 4(j) of the Articles of Incorporation);
Provided, however, that this paragraph shall not apply to, and such vote shall
not be required for, any such amendment, change or repeal recommended to
shareholders by the favorable vote of not less than two-thirds of the Directors
who then qualify as Continuing Directors (as defined by Article VII Section 4(i)
of the Articles of Incorporation) with respect to all Related Persons and any
such amendment, change or repeal so recommended shall require only the vote, if
any, required under paragraph 1 of this Section 6.01.
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Section 6.02. Action by Shareholders or Directors Without a Meeting.
Anything contained in the Regulations to the contrary notwithstanding, except as
provided in Section 6.01, any action which may be authorized or taken at a
meeting of the shareholders or of the directors or of a committee of the
directors, as the case may be, may be authorized or taken without a meeting with
the affirmative vote or approval of, and in a writing or writings signed by, all
the shareholders who would be entitled to notice of a meeting of the
shareholders held for such purpose, or all the directors, or all the members of
such committee of the directors, respectively, which writings shall be filed
with or entered upon the records of the corporation.
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ANNEX E
ARTICLES OF INCORPORATION
OF
ULTRACOM INC.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned incorporator
being a natural person of the age of eighteen years or more and desiring to
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:
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(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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<PAGE> 215
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> 216
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> 217
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> 218
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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<PAGE> 219
[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> 220
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> 221
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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<PAGE> 222
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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<PAGE> 223
(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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<PAGE> 224
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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<PAGE> 225
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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<PAGE> 226
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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<PAGE> 227
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> 228
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> 229
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, a Notary Public in and for the said County and State, hereby
certify that on the 22nd day of December, 1986, personally appeared before me
Theodore A. Waibel, Jr. and Daniel P. Murphy, who being by me first duly sworn,
declared that they are the persons who signed the foregoing document as
President and Secretary, respectively, that the statements therein contained
are true, and they acknowledged that it was their free and voluntary act and
deed.
WITNESS my hand and official seal.
My commission expires: Nov 20, 1989
/s/ PAUL H. METZINGER
Notary Public
Address: 2410S
600-17th Street
Denver, Colorado 80202
(SEAL)
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<PAGE> 230
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> 231
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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<PAGE> 232
(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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<PAGE> 233
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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<PAGE> 234
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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<PAGE> 235
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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<PAGE> 236
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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<PAGE> 237
(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-
<PAGE> 246
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> 288
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>
<S> <C> <C>
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.
3
<PAGE> 310
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.
4
<PAGE> 311
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;
5
<PAGE> 312
(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> 313
(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> 314
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> 315
___________________________________
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> 316
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS/PROXY STATEMENT
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 3-101.5 of the Colorado Corporation Code provides that any
director, officer, employee or agent of a Colorado corporation may be
indemnified against judgments, settlements, penalties, fines and reasonable
expenses actually incurred by him in connection with or in defending any
action, suit or proceeding in which he is a party by reason of his position.
With respect to any proceeding arising from actions taken in his official
capacity as a director or officer, he may be indemnified so long as it shall be
determined that he conducted himself in good faith and that he reasonably
believed that such conduct was in the corporation's best interests. In cases
not concerning conduct in his official capacity as a director or officer, he
may be indemnified as long as he reasonably believed that his conduct was not
opposed to the corporation's best interests. In the case of any criminal
proceeding, a director or officer may be indemnified if he had no reasonable
cause to believe his conduct was unlawful. If a director or officer is wholly
successful, on the merits or otherwise, in connection with such a proceeding,
such indemnification is mandatory. The Registrant's Articles of Incorporation
provide for indemnification of its present and former directors, employees and
agents to the fullest extent provided by Article 3-101.5.
Colorado corporations are also authorized to obtain insurance to protect
a person who is or was a director, officer, employee, fiduciary, or agent of a
Colorado corporation from certain liabilities, including liabilities against
which the corporation cannot indemnify its directors, officers, employees, or
agents.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Item
- ----------- ----
<S> <C>
**2.1 Agreement and Plan of Reorganization dated April 28, 1995 (the
"Agreement"), among Ultrak, Inc. ("Ultrak"), Diamond
Electronics, Inc. ("Diamond"), Diamond Purchasing Corp., and
certain shareholders of Diamond (the Agreement and Exhibits
1.01(a) and (b) thereto are 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.
*8.1 Legal opinion of Leagre & Barnes
**10.1 Loan Agreement, dated as of July 20, 1992, between Ultrak, CCTV
Source International, Inc. and Loss Prevention Electronics
Corporation and Petrus Fund, L.P.
**10.2 Financing and Security Agreement, dated as of September 24,
1993, by and among NationsBank of Texas, N.A., Ultrak, Loss
Prevention Electronics Corporation, CCTV Source International,
Inc., and Dental Vision Direct, Inc. (with Guaranty by
Individual executed by George K. Broady, for the benefit of
NationsBank of Texas, N.A.)
**10.3 First Amendment to Loan Agreement, dated as of October 4, 1993,
between Ultrak, CCTV Source International, Inc. and Loss
Prevention Electronics Corporation, and Petrus Fund, L.P. (with
related Restated Revolving Credit Note)
**10.4 Second Amendment to Warrant Purchase Agreement, dated as of
October 4, 1993, between Ultrak, George K. Broady, and Petrus
Fund, L.P.
</TABLE>
II-1
<PAGE> 317
<TABLE>
<S> <C>
**10.5 Security Agreement, dated as of October 4, 1993, between Exxis
Technologies, Inc. and Petrus Fund, L.P.
**10.6 Security Agreement, dated as of October 4, 1993, between Dental
Vision Direct, Inc. and Petrus Fund, L.P.
**10.7 Ultrak 1988 Non-Qualified Stock Option Agreement
**10.8 Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option
Plan
**10.9 Warrant Purchase Agreement, dated as of July 20, 1992, between
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.10 Warrant to Purchase Ultrak Common Stock issued to Judith A.
Schindler
**10.11 First Amendment to Financing and Security Agreement, dated
effective October 31, 1994, by and among NationsBank of Texas,
N.A., Ultrak, Loss Prevention Electronics Corporation, CCTV
Source International, Inc. and Dental Vision Direct, Inc.
**10.12 Second Amendment to Loan Agreement, executed November 11, 1994,
to be effective as of October 4, 1994, by and between Ultrak and
Petrus Fund, L.P.
**10.13 Third Amendment to Warrant Purchase Agreement, executed November
11, 1994 to be effective as of October 4, 1994, by and among
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.14 Letter Agreement among Ultrak, Risheq and JAK Pacific Video
Warranty and Repair Services, Inc. ("JAK") regarding Ultrak's
purchase and option to purchase JAK's common stock, dated as of
April 5, 1994
*10.15 Employment Agreement between Ultrak and James D. Pritchett
*10.16 Employment Agreement between Ultrak and Tim D. Torno
**11 Computation of Per Share Data
**21 List of Ultrak's Subsidiaries
*23.1 Consent of Grant Thornton, LLP, dated June 9, 1995
*23.2 Consent of Norman, Jones, Enlow & Co., dated June 9, 1995
**23.3 Consent of Gardere & Wynne, L.L.P. (to be included in Exhibit
5.1)
*23.4 Consent of Leagre & Barnes
</TABLE>
_______________
* Filed herewith
** Filed previously
II-2
<PAGE> 318
(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> 319
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Amendment No. 2 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Dallas, State of Texas on
the 9th day of June, 1995.
ULTRAK, INC.
By: /s/ George K. Broady George K.
Broady, Chief Executive Officer
and President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed below by the
following persons and in the capacities indicated on June 9, 1995.
<TABLE>
<S> <C>
/s/ George K. Broady Chairman of the Board, Chief Executive
George K. Broady Officer, President, and Director (Principal
Executive Officer)
* Executive Vice President, Chief Operating
James D. Pritchett Officer, and Director
* Secretary-Treasurer and Chief Financial
Tim D. Torno Officer (Principal Financial Officer and
Principal Accounting Officer)
* Director
William C. Lee
_______________________ Director
Charles C. Neal
_______________________ Director
Robert F. Sexton
</TABLE>
*By: /s/ GEORGE K. BROADY
George K. Broady
Attorney-In-Fact
II-4
<PAGE> 320
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SCHEDULES
Board of Directors
Ultrak, Inc.
In connection with our audits of the consolidated financial statements
of Ultrak, Inc. and Subsidiaries referred to in our report dated February 17,
1995, we have also audited Schedule II for the three years in the period ended
December 31, 1994. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.
GRANT THORNTON LLP
Dallas, Texas
February 17, 1995
S-1
<PAGE> 321
SCHEDULE II
ULTRAK, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended December 31, 1994, 1993, and 1992
<TABLE>
<CAPTION>
Balance at Balance at
beginning Charge to end
Description of period operations Deductions(1) of period
----------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . $213,607 $532,344 $(422,179) $323,772
======== ======== ========= ========
Year ended December 31, 1993
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . $135,105 $228,814 $(150,312) $213,607
======== ======== ========= ========
Year ended December 31, 1992
Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . $ 61,976 $287,669 $(214,540) $135,105
======== ======== ========= ========
</TABLE>
Notes
- -----
(1) Accounts written off.
S-2
<PAGE> 322
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Item
- ----------- ----
<S> <C>
**2.1 Agreement and Plan of Reorganization dated April 28, 1995 (the
"Agreement"), among Ultrak, Inc. ("Ultrak"), Diamond
Electronics, Inc. ("Diamond"), Diamond Purchasing Corp., and
certain shareholders of Diamond (the Agreement and Exhibits
1.01(a) and (b) thereto are 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.
*8.1 Legal opinion of Leagre & Barnes
**10.1 Loan Agreement, dated as of July 20, 1992, between Ultrak, CCTV
Source International, Inc. and Loss Prevention Electronics
Corporation and Petrus Fund, L.P.
**10.2 Financing and Security Agreement, dated as of September 24,
1993, by and among NationsBank of Texas, N.A., Ultrak, Loss
Prevention Electronics Corporation, CCTV Source International,
Inc., and Dental Vision Direct, Inc. (with Guaranty by
Individual executed by George K. Broady, for the benefit of
NationsBank of Texas, N.A.)
**10.3 First Amendment to Loan Agreement, dated as of October 4, 1993,
between Ultrak, CCTV Source International, Inc. and Loss
Prevention Electronics Corporation, and Petrus Fund, L.P. (with
related Restated Revolving Credit Note)
**10.4 Second Amendment to Warrant Purchase Agreement, dated as of
October 4, 1993, between Ultrak, George K. Broady, and Petrus
Fund, L.P.
**10.5 Security Agreement, dated as of October 4, 1993, between Exxis
Technologies, Inc. and Petrus Fund, L.P.
**10.6 Security Agreement, dated as of October 4, 1993, between Dental
Vision Direct, Inc. and Petrus Fund, L.P.
**10.7 Ultrak 1988 Non-Qualified Stock Option Agreement
**10.8 Amendment No. 2 to Ultrak, Inc. 1988 Non-Qualified Stock Option
Plan
**10.9 Warrant Purchase Agreement, dated as of July 20, 1992, between
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.10 Warrant to Purchase Ultrak Common Stock issued to Judith A.
Schindler
**10.11 First Amendment to Financing and Security Agreement, dated
effective October 31, 1994, by and among NationsBank of Texas,
N.A., Ultrak, Loss Prevention Electronics Corporation, CCTV
Source International, Inc. and Dental Vision Direct, Inc.
**10.12 Second Amendment to Loan Agreement, executed November 11, 1994,
to be effective as of October 4, 1994, by and between Ultrak and
Petrus Fund, L.P.
**10.13 Third Amendment to Warrant Purchase Agreement, executed November
11, 1994 to be effective as of October 4, 1994, by and among
Ultrak, George K. Broady and Petrus Fund, L.P.
**10.14 Letter Agreement among Ultrak, Risheq and JAK Pacific Video
Warranty and Repair Services, Inc. ("JAK") regarding Ultrak's
purchase and option to purchase JAK's common stock, dated as of
April 5, 1994
*10.15 Employment Agreement between Ultrak and James D. Pritchett
*10.16 Employment Agreement between Ultrak and Tim D. Torno
**11 Computation of Per Share Data
**21 List of Ultrak's Subsidiaries
*23.1 Consent of Grant Thornton, LLP, dated June 9, 1995
*23.2 Consent of Norman, Jones, Enlow & Co., dated June 9, 1995
**23.3 Consent of Gardere & Wynne, L.L.P. (to be included in Exhibit
5.1)
*23.4 Consent of Leagre & Barnes
</TABLE>
______________
* Filed herewith
** Filed previously
<PAGE> 1
Ultrak, Inc. -3- ________, 1995
3. All of the factual and legal assumptions set forth
above are material to the opinion herein rendered and have been relied
upon by us in rendering such opinion. Any material inaccuracy in any
one or more of the factual or legal assumptions may render all or part
of our opinion inapplicable to the Merger.
Opinion. Based upon and subject to the foregoing, it is our opinion
that:
1. The Merger will constitute a reorganization within
the meaning of Section 368(a)(1)(A) of the Code.
2. No gain or loss will be recognized by the Diamond
shareholders upon exchange of their Diamond Common Stock solely for
Ultrak Common Stock.
3. The basis of the Ultrak Common Stock to be received
by the Diamond shareholders will be the same, in each instance, as the
basis of Diamond Common Stock surrendered in exchange therefor.
4. The holding period for the Ultrak Common Stock will
include the holding period of Diamond Common Stock surrendered in
exchange therefor, provided Diamond Common Stock was held as a capital
asset on the date of the Merger.
5. No gain or loss will be recognized by Ultrak upon the
receipt Of Diamond stock solely in exchange for the stock of Ultrak.
6. Where a Diamond shareholder receives cash by
exercising statutory dissenter's rights, the cash will be treated as
having been received by such shareholder as a distribution in
redemption of his Diamond stock, subject to the provisions and
limitations of Section 302 of the Code.
7. No gain or loss will be recognized by Newco as a
result of the Merger.
8. No gain or loss will be recognized by Diamond as a
result of the Merger.
9. The payment of cash in lieu of fractional share
interests of Ultrak Common Stock or in lieu of issuing 10 or fewer
shares of Ultrak Common Stock will be treated as if such shares were
distributed as part of the Merger and then were redeemed by Ultrak.
These cash payments will be treated as having been received as
distributions in full payment in exchange for the stock redeemed as
provided in Section 302(a) of the Code.
<PAGE> 2
Ultrak, Inc. -4- ________, 1995
We consent to the reference to this opinion and to our firm in the Registration
Statement.
Very truly yours,
<PAGE> 3
REPRESENTATION CERTIFICATE
Ultrak, Inc. ("Ultrak") and Diamond Purchasing Corp. ("Newco") make
the following representations to Leagre & Barnes to be used by Leagre & Barnes
in rendering its opinion as to certain federal income tax consequences with
respect to certain transactions set forth in the Agreement and Plan of
Reorganization among Diamond Electronics, Inc. ("Diamond"), certain
shareholders of Diamond, Ultrak, and Newco. Ultrak owns all the issued and
outstanding capital stock of Newco. The merger of Newco with and into Diamond
is referred to herein as the "Merger."
Ultrak and Newco acknowledge and agree that each of the following
representations constitutes a material representation to be relied upon by
Leagre & Barnes in rendering its opinion and that any material inaccuracy in
any of the following representations may render the conclusions drawn in the
opinion of Leagre & Barnes inapplicable to the Merger. The representations of
each party hereto are limited to the extent that each specific representation
is made solely with respect to information applicable to itself.
The specific representations made are as follows:
1. The fair market value of the Ultrak Common Stock
received by each Diamond shareholder will be approximately equal to
the fair market value of Diamond Common Stock surrendered in the
exchange.
2. Following the Merger, Diamond will hold at least 90
percent of the fair market value of Newco's net assets and at least 70
percent of the fair market value of Newco's gross assets held
immediately prior to the Merger. For purposes of this representation,
amounts paid by Newco to dissenters, amounts used by Newco to pay
reorganization expenses, and amounts paid by Diamond to shareholders
who receive cash or other property, respectively, immediately
preceding the transfer, will be considered assets held by Newco,
respectively, immediately prior to the Merger. For purposes of this
representation, it is assumed that there will be no dissenters from the
Merger, although that is impossible to ascertain at this time with any
certainty.
3. Prior to the Merger, Ultrak will be in control of
Newco. "Control" for purposes of this Representation Certificate means
the ownership of stock possessing at least 80 percent of the total
combined voting power of all classes of stock entitled to vote and at
least 80 percent of the total number of shares of all other classes
of stock of Newco.
4. Diamond has no plan or intention to issue additional
shares of its stock after the Merger, that would result in Ultrak
losing control of Diamond.
5. Ultrak has no plan or intention to reacquire any of
its Common Stock issued in the Merger.
<PAGE> 4
6. Ultrak has no plan or intention to liquidate Diamond;
to merge Diamond with or into another corporation; to sell or
otherwise dispose of the Common Stock of Diamond except for transfers
of Common Stock to corporations controlled by Ultrak; or to cause
Diamond to sell or otherwise dispose of any of its assets or any of
the assets acquired from Newco, except as set forth in the Agreement
and Plan of Reorganization, as amended, and except for dispositions
made in the ordinary course of business or transfers of assets to a
corporation controlled by Diamond.
7. In the Merger, Newco will have no liabilities assumed
by Diamond, and will not transfer to Diamond any assets subject to
liabilities.
8. Following the Merger, Diamond will continue its
historic business or use a significant portion of its business assets
in a business.
9. Ultrak and Newco will pay their respective expenses,
if any, incurred in connection with the Merger; notwithstanding the
foregoing, to the extent any of the expenses relating to the Merger
(or the "plan of reorganization" within the meaning of Treas. Reg.
Section 1.368-1(c) with respect to the Merger) are funded directly or
indirectly by a party other than the party incurring such expense,
such expenses will be within the guidelines established in Revenue
Ruling 73-54, 1973-1 C.B. 187.
10. There is no intercorporate indebtedness existing
between Ultrak and Diamond or between Newco and Diamond that was
issued, acquired, or will be settled at a discount.
11. In the Merger, shares of Diamond's Common Stock
representing control of Diamond will be exchanged solely for voting
stock of Ultrak. For purposes of this representation, shares of
Diamond's Common Stock exchanged for cash or other property
originating with Ultrak will be treated as outstanding Diamond Common
Stock as of the Effective Time.
12. Other than 392 shares of Diamond Common Stock
acquired as part of Diamond's reorganization, Ultrak does not own nor
has it owned during the past five years any Common Stock of Diamond.
13. Neither Ultrak nor Newco is an investment company
regulated under the Investment Company Act of 1940, a real estate
investment trust, or a corporation 80 percent or more of the value of
whose total assets are held for investment rather than for use in an
active trade or business.
14. The payment of cash in lieu of fractional shares of
Ultrak's Common Stock or in lieu of issuing 10 or fewer shares of
Ultrak Common Stock is solely for the purpose of avoiding the expense
and inconvenience to Ultrak of issuing fractional shares or issuing 10
or fewer shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the
Merger to the
2
<PAGE> 5
Diamond shareholders instead of issuing fractional shares of Ultrak
Common Stock or issuing 10 or fewer shares of Ultrak Common Stock will
not exceed one percent of the total consideration that will be issued
in the Merger to the Diamond shareholders in exchange for their shares
of Diamond Common Stock. The fractional share interests of each
Diamond shareholder will be aggregated, and no Diamond shareholder
will receive cash for fractional shares in an amount equal to or
greater than the value of one full share of Ultrak Common Stock.
15. None of the shares of Ultrak Common Stock received by
any shareholder-employees of Diamond will be separate consideration
for, or allocable to, any employment agreement; and the compensation
paid to any shareholder-employees of Diamond after the Merger will be
for services actually rendered and will be commensurate with amounts
paid to third parties bargaining at arm's-length for similar services.
IN WITNESS WHEREOF, Ultrak and Newco, each acting by an authorized
officer with full corporate authority, have executed and delivered this
Representation Certificate to Leagre & Barnes as of the date written below.
ULTRAK, INC.
Date: By _________________________
Tim D. Torno, Vice President
and Secretary
DIAMOND PURCHASING CORP.
Date: By _________________________
Tim D. Torno, Vice President
and Secretary
3
<PAGE> 6
REPRESENTATION CERTIFICATE
Diamond Electronics, Inc. ("Diamond") makes the following
representations to Leagre & Barnes to be used by Leagre & Barnes in rendering
its opinion as to certain federal income tax consequences with respect to
certain transactions set forth in the Agreement and Plan of Reorganization
among Diamond, certain shareholders of Diamond, Ultrak, Inc. ("Ultrak"), and
Diamond Purchasing Corp. ("Newco"). Ultrak owns all the issued and outstanding
capital stock of Newco. The merger of Newco with and into Diamond is referred
to herein as the "Merger."
Diamond acknowledges and agrees that each of the following
representations constitutes a material representation to be relied upon by
Leagre & Barnes in rendering its opinion and that any material inaccuracy in
any of the following representations may render the conclusions drawn in the
opinion of Leagre & Barnes inapplicable to the Merger. The representations of
each party hereto are limited to the extent that each specific representation
is made solely with respect to information applicable to itself.
The specific representations made are as follows:
1. The fair market value of the Ultrak Common Stock
received by each Diamond shareholder will be approximately equal to
the fair market value of Diamond Common Stock surrendered in the
exchange.
2. There is no plan or intention by the shareholders of
Diamond who currently own one percent or more of Diamond Common Stock,
and to the best of the knowledge of the management of Diamond, there
is no plan or intention on the part of the remaining shareholders of
Diamond to sell, exchange, or otherwise dispose of a number of shares
of Ultrak Common Stock received in the Merger that would reduce the
Diamond shareholders' ownership of Ultrak Common Stock to a number of
shares having a value, at the close of business on the effective date
of the Merger ("Effective Time"), of less than 50 percent of the value
of all the formerly outstanding Common Stock of Diamond as of the same
date. For purposes of this representation, shares of Diamond Common
Stock surrendered by dissenters, or exchanged for cash in lieu of
fractional shares of Ultrak Common Stock, will be treated as
outstanding Diamond Common Stock as of the Effective Time. Moreover,
shares of Diamond Common Stock and shares of Ultrak Common Stock held
by Diamond shareholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the Merger will be considered in making this
representation.
3. Following the Merger, Diamond will hold at least 90
percent of the fair market value of its net assets and at least 70
percent of the fair market value of its gross assets. For purposes of
this representation, amounts paid by Diamond to dissenters, amounts
used by Diamond to pay reorganization expenses, amounts paid by
Diamond to shareholders who receive cash or other property, and all
redemptions
<PAGE> 7
and distributions (except for regular, normal dividends) made by
Diamond, respectively, immediately preceding the transfer, will be
considered assets held by Diamond immediately prior to the Merger. For
purposes of this representation, it is assumed that there will be no
dissenters from the Merger, although that is impossible to ascertain
at this time with any certainty.
4. Diamond has no plan or intention to issue additional
shares of its stock that would result in Ultrak losing control of
Diamond.
5. Diamond and the shareholders of Diamond will pay their
respective expenses, if any, incurred in connection with the Merger;
notwithstanding the foregoing, to the extent any of the expenses
relating to the Merger (or the "plan of reorganization" within the
meaning of Treas. Reg. Section 1.368-1(c) with respect to the Merger)
are funded directly or indirectly by a party other than the party
incurring such expense, such expenses will be within the guidelines
established in Revenue Ruling 73-54, 1973-1 C.B. 187.
6. There is no intercorporate indebtedness existing
between Ultrak and Diamond or between Newco and Diamond that was
issued, acquired, or will be settled at a discount.
7. In the Merger, shares of Diamond's Common Stock
representing control of Diamond will be exchanged solely for voting
stock of Ultrak. For purposes of this representation, shares of
Diamond's Common Stock exchanged for cash or other property
originating with Ultrak will be treated as outstanding Diamond Common
Stock as of the Effective Time.
8. At the Effective Time, Diamond will not have
outstanding any warrants, options, convertible securities, or any
other type of right pursuant to which any person could acquire stock
in Diamond that, if exercised or converted, would affect Ultrak's
acquisition or retention of control of Diamond.
9. Other than 392 shares of Diamond Common Stock
acquired as part of Diamond's reorganization, Ultrak does not own nor
has it owned during the past five years any Common Stock of Diamond.
10. No party to the Merger is an investment company
regulated under the Investment Company Act of 1940, a real estate
investment trust, or a corporation 80 percent or more of the value of
whose total assets are held for investment rather that for use in an
active trade or business.
11. On the date of the Merger, the fair market value of
the assets of Diamond will exceed the sum of its liabilities, plus the
amount of liabilities, if any, to which the assets are subject.
<PAGE> 8
12. Diamond is not under the jurisdiction of a court in a
case under Title 11 of the United States Code or a receivership,
foreclosure, or similar proceeding.
13. The payment of cash in lieu of fractional shares of
Ultrak's Common Stock or in lieu of issuing 10 or fewer shares of
Ultrak Common Stock is solely for the purpose of avoiding the expense
and inconvenience to Ultrak of issuing fractional shares or issuing 10
or fewer shares and does not represent separately bargained-for
consideration. The total cash consideration that will be paid in the
Merger to the Diamond shareholders instead of issuing fractional
shares of Ultrak Common Stock or issuing 10 or fewer shares of Ultrak
Common Stock will not exceed one percent of the total consideration
that will be issued in the Merger to the Diamond shareholders in
exchange for their shares of Diamond Common Stock. The fractional
share interests of each Diamond shareholder will be aggregated, and no
Diamond shareholder will receive cash for fractional shares in an
amount equal to or greater than the value of one full share of Ultrak
Common Stock.
14. None of the compensation received by any
shareholder-employees of Diamond is separate consideration for, or
allocable to, any of their shares of Diamond Common Stock; none of the
shares of Ultrak Common Stock received by any shareholder-employees of
Diamond will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any
shareholder-employees of Diamond will be for services actually
rendered and will be commensurate with amounts paid to third parties
bargaining at arm's-length for similar services.
IN WITNESS WHEREOF, Diamond, acting by an authorized officer with full
corporate authority, has executed and delivered this Representation Certificate
to Leagre & Barnes as of the date written below.
DIAMOND ELECTRONICS, INC.
Date:_____________ By ______________________________
John W. Biddinger, Chairman of
the Board
<PAGE> 9
REPRESENTATION CERTIFICATE
The undersigned, a shareholder of Diamond Electronics, Inc.
("Diamond"), makes the following representation to Leagre & Barnes to be used
by Leagre & Barnes in rendering its opinion as to certain federal income tax
consequences with respect to certain transactions set forth in the Agreement
and Plan of Reorganization among Diamond, certain shareholders of Diamond,
Ultrak, Inc. ("Ultrak"), and Diamond Electronics Corp. ("Newco"). Ultrak owns
all the issued and outstanding capital stock of Newco. The merger of Newco with
and into Diamond is referred to herein as the "Merger."
The undersigned acknowledges and agrees that the following
representation constitutes a material representation to be relied upon by
Leagre & Barnes in rendering its opinion and that any material inaccuracy in
the representation may render the conclusions drawn in the opinion of Leagre &
Barnes inapplicable to the Merger.
The specific representation made is as follows:
There is no plan or intention by the undersigned to sell,
exchange, or otherwise dispose of any shares of Ultrak Common Stock
received in the Merger.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Representation Certificate to Leagre & Barnes as of the date written below,
________________________________________
(Signature)
________________________________________
(Printed or typed name)
<PAGE> 1
EXHIBIT 10.15
EMPLOYMENT AGREEMENT
THIS AGREEMENT is between Ultrak, Inc., a Colorado corporation (the
"Company"), and James D. Pritchett ("Employee").
In consideration of the terms of this Agreement, and other good and
valuable consideration, the sufficiency of which is hereby acknowledged by each
party, the Company and Employee, intending to be legally bound, hereby covenant
and agree as follows:
1. Employment. The Company hereby agrees to continue to employ
Employee, and Employee hereby accepts continued employment with the Company,
upon the terms and conditions hereinafter set forth.
2. Term. Subject to the other terms of this Agreement, this
Agreement shall be effective for the period from January 1, 1995 through
December 31, 1996. The period from January 1 of a calendar year through
December 31 of such calendar year is hereafter referred to as a "Year." The
period from January 1, 1995 through December 31, 1995 is hereafter referred to
as the "First Year" and the period from January 1, 1996 through December 31,
1996 is hereafter referred to as the "Second Year." The parties hereby
acknowledge and agree it is their intent that this Agreement shall
automatically renew for an additional Year as of each January 1 after the
Second Year; provided, however, that the Company may terminate this Agreement
as of the beginning of a Year by giving Employee written notice at least twelve
(12) months prior to the beginning of such Year. The period during which this
Agreement is effective is hereafter referred to as the "Term."
3. Duties. Employee shall be the Executive Vice President and
Chief Operating Officer of the Company. During the Term, Employee shall be
based in the Dallas, Texas area only and shall perform the duties and exercise
the powers which from time to time may be lawfully assigned to or vested in him
by the Company's Board of Directors (the "Board"). It is agreed that during
the Term, Employee will not accept an officership or directorship or
participate in the operation or management of any other entity, unless it is an
entity either owned or controlled by the Company, without the prior written
consent of the President.
4. Extent of Services. Unless prevented by ill health, Employee
shall devote his entire working time, attention and energies to the business of
the Company, and shall not during the Term engage in any other business
activity whether or not such business activity is pursued for gain, profit or
other pecuniary advantage; provided, however, Employee shall not be prevented
from investing in such form or manner as will not require any services on the
part of Employee in the operation of the affairs of the companies in which such
investments are made, except that in no
1
<PAGE> 2
event may Employee make investments in any firms in competition with, or in the
business of supplying goods or services to the Company, unless such investments
are (a) disclosed in writing to and approved by the Board and (b) do not exceed
$25,000 with respect to each investment.
5. Base Salary. The Company shall pay Employee a salary (the
"Base Salary"), payable in bi-weekly installments. The Base Salary for the
First Year shall be $198,000 and may be increased by the Board without an
amendment to this Agreement. If Employee is absent from his employment because
of illness which prevents Employee from performing his duties described herein,
the Company shall be obligated to pay Employee his Base Salary and other
compensation for all such periods of absence for the balance of the Term less
any applicable disability insurance actually received by Employee. The Base
Salary and any other compensation payable pursuant to this Agreement shall be
subject to appropriate tax withholding.
6. Other Compensation.
(a) The Company currently has in effect certain bonus and
stock option plans. During the Term, Employee will
be eligible to participate in those plans currently
in effect and as they may be amended from time to
time, so long as such plans remain in existence.
Furthermore, during the Term, Employee shall be
entitled to participate in all current or
subsequently enacted benefit programs applicable to
all executive officers of the Company. For purposes
of this Agreement, all references to stock option
plans, bonus plans or benefit programs shall be
deemed to mean that Employee shall be eligible to
participate in such plans or programs of the Company
in which Employee presently participates or is
eligible to participate, or such plans or programs
that may subsequently be adopted in substitution for
such plans or programs.
(b) The Company will provide Employee a $300 per month
car allowance.
(c) Employee shall receive four (4) weeks of paid
vacation each Year.
(d) Employee shall be covered by all existing insurance
programs afforded by the Company to its executive
officers. Employee understands and agrees that he
shall initially pay forty percent (40%) of the
premiums for health insurance coverage.
2
<PAGE> 3
7. Expense Reimbursement. Employee is authorized to incur
reasonable expenses with regard to the business of the Company, including
expenses for entertainment, travel and other items of a similar character in
accordance with the Company's travel and entertainment policies as such
policies shall exist from time to time (the "Policy"). The Company will
reimburse Employee for all such expenses incurred and reported by him in
accordance with the Policy.
8. Termination by the Company. This Agreement may be terminated
by written notice pursuant to Section 11 by the Company as follows:
(a) If Employee breaches this Agreement, and such breach,
if capable of being cured, is not cured within thirty
(30) calendar days of receipt by Employee from the
Company of written notice requiring him to cure such
breach(es);
(b) If Employee shall be convicted of a criminal offense
which in the reasonable opinion of the Board may
injure or tend to injure the reputation or business
of the Company;
(c) If Employee files for bankruptcy or a bankruptcy
petition is filed against Employee and, in either
case, such bankruptcy proceeding is not dismissed
within ninety (90) days of being filed;
(d) If Employee shall grossly neglect the performance of
his duties as set forth or described herein; or
(e) If Employee becomes so addicted to alcohol, drugs or
any controlled substance that it substantially
impairs his abilities to perform his assigned duties.
9. Termination by the Company or Employee. Notwithstanding any
other provision of this Agreement, either party may terminate this Agreement by
giving notice pursuant to the terms and conditions of this Agreement.
10. Payments upon Termination or Death. It is agreed that if this
Agreement is terminated, payments and/or provisions for payments will be made
as follows:
(a) If the Company terminates this Agreement on some
basis other than the reason or reasons as stated in
Section 8, or if the Employee dies, the Company will
take the actions set forth in Paragraphs (1), (2) and
(3) of this Subsection 10(a). If Employee terminates
this Agreement for cause, which shall be
3
<PAGE> 4
limited to a material breach (specified in writing by
Employee) by the Company of the terms of this
Agreement, then the Company will take the actions set
forth in paragraphs (1), (2) and (3) of this
Subsection 10(a).
(1) All stock options presently granted to
Employee will become immediately vested and
shall be exercised, if ever, in accordance
with and subject to the terms and provisions
of the Company's Stock Option Plan and
Employee's Stock Option Agreement; and
(2) Employee will receive within fifteen (15)
days of the effective date of such
termination, all Base Salary and all other
benefits that would have accrued and/or been
payable to Employee during the balance of the
then current Year; and
(3) Any other relocation or other expense amount
specifically agreed to herein.
(b) If the Company terminates this Agreement for a reason
or reasons set forth in Section 8 or Employee
terminates this Agreement without cause, then the
Company will only be obligated to pay to Employee the
actual amount of compensation accrued to the date of
termination, Employee will be bound to the terms of
any Stock Option Agreement as it relates to the
exercise of any vested stock options, and all other
payments or benefits recited herein shall be
cancelled and terminated, without recourse.
11. Notice of Termination. Other than pursuant to Section 1 of
this Agreement, all termination notices provided for in this Agreement must be
in writing and must provide for a minimum notice period of ninety (90) calendar
days between the date of such notification and the effective date of such
termination.
12. Arbitration. Any controversy or claim arising out of, or
relating to this Agreement, or the breach thereof, shall be finally resolved by
binding arbitration in Dallas, Texas in accordance with the then effective
rules of the American Arbitration Association.
13. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and if sent by registered or
certified mail to Employee and/or the Company at their addresses as set forth
on the signature page(s).
4
<PAGE> 5
14. Waiver, Modification or Cancellation. Any waiver, amendment,
modification, or cancellation of any provision of this Agreement shall not be
valid unless in writing and signed by both Employee and the Company; provided,
however, that increases in the Base Salary approved by the Board or the
granting of additional compensation and/or benefits to Employee approved by the
Board need not be in a writing signed by Employee.
15. Binding Effect. This Agreement shall inure to the benefit of
and be binding upon (a) the Company and the Company's successors and assigns,
including but not limited to any entity which may acquire all or substantially
all of the Company's assets and business or with or into which the Company may
be consolidated or merged, and (b) Employee and Employee's heirs, executors,
administrators and legal representatives, provided that the duties of Employee
as described herein may not be delegated.
16. Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision never comprised
a part hereof; and 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 herefrom. Furthermore, 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.
17. Entire Agreement. This Agreement represents the entire
Agreement between the parties with respect to the subject matter hereof. Each
party represents to the other that there are no other oral, written, express or
implied contracts, agreements or understanding between them. This Agreement
supersedes any existing employment agreement between the parties.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF TEXAS (AND NOT THE CONFLICTS OF LAWS RULES OF TEXAS).
19. Specific Representations. Each party represents to the other
that:
(a) The consideration recited herein shall conclusively
be deemed fair, adequate, reasonable and sufficient.
(b) Such party has voluntarily and without fraud, duress,
coercion, undue influence or improper persuasion
executed this Agreement.
5
<PAGE> 6
(c) The signature appearing below is such party's manual,
original, genuine, authentic and undeniable
signature.
(d) Such party is competent, authorized and capable of
executing this Agreement as a valid, binding and
enforceable agreement.
(e) Such party is not aware of any agreement, document or
commitment that would limit such party's ability to
fully comply with the terms of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of May
25, 1995, but effective as of January 1, 1995.
Address:
_________________________ /s/ James D. Pritchett
_________________________ JAMES D. PRITCHETT
Address: ULTRAK, INC.
1220 Champion Circle
Suite 100 By: /s/ George K. Broady
Carrollton, Texas 75006 Its: President
6
<PAGE> 1
EXHIBIT 10.16
EMPLOYMENT AGREEMENT
THIS AGREEMENT is between Ultrak, Inc., a Colorado corporation (the
"Company"), and Tim D. Torno ("Employee").
In consideration of the terms of this Agreement, and other good and
valuable consideration, the sufficiency of which is hereby acknowledged by each
party, the Company and Employee, intending to be legally bound, hereby covenant
and agree as follows:
1. Employment. The Company hereby agrees to continue to employ
Employee, and Employee hereby accepts continued employment with the Company,
upon the terms and conditions hereinafter set forth.
2. Term. Subject to the other terms of this Agreement, this
Agreement shall be effective for the period (the "First Year") from January 1,
1995 through December 31, 1995. The period from January 1 of a calendar year
through December 31 of such calendar year is hereafter referred to as a "Year."
The parties hereby acknowledge and agree it is their intent that this Agreement
shall automatically renew for an additional Year as of each January 1;
provided, however, that the Company may terminate this Agreement as of January
1 of a Year by giving Employee written notice by October 1 of the preceding
Year. The period during which this Agreement is effective is hereafter
referred to as the "Term."
3. Duties. Employee shall be the Vice President-Finance, Chief
Financial Officer, Secretary and Treasurer of the Company. During the Term,
Employee shall be based in the Dallas, Texas area only and shall perform the
duties and exercise the powers which from time to time may be lawfully assigned
to or vested in him by the Company's Board of Directors (the "Board"). It is
agreed that during the Term, Employee will not accept an officership or
directorship or participate in the operation or management of any other entity,
unless it is an entity either owned or controlled by the Company, without the
prior written consent of the President.
4. Extent of Services. Unless prevented by ill health, Employee
shall devote his entire working time, attention and energies to the business of
the Company, and shall not during the Term engage in any other business
activity whether or not such business activity is pursued for gain, profit or
other pecuniary advantage; provided, however, Employee shall not be prevented
from investing in such form or manner as will not require any services on the
part of Employee in the operation of the affairs of the companies in which such
investments are made, except that in no event may Employee make investments in
any firms in competition with, or in the business of supplying goods or
services to the Company, unless such investments are (a) disclosed in writing
to
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and approved by the Board and (b) do not exceed $25,000 with respect to each
investment.
5. Base Salary. The Company shall pay Employee a salary (the
"Base Salary"), payable in bi-weekly installments. The Base Salary for the
First Year shall be $138,000 and may be increased by the Board without an
amendment to this Agreement. If Employee is absent from his employment because
of illness which prevents Employee from performing his duties described herein,
the Company shall be obligated to pay Employee his Base Salary and other
compensation for all such periods of absence for the balance of the Term less
any applicable disability insurance actually received by Employee. The Base
Salary and any other compensation payable pursuant to this Agreement shall be
subject to appropriate tax withholding.
6. Other Compensation.
(a) The Company currently has in effect certain bonus and
stock option plans. During the Term, Employee will
be eligible to participate in those plans currently
in effect and as they may be amended from time to
time, so long as such plans remain in existence.
Furthermore, during the Term, Employee shall be
entitled to participate in all current or
subsequently enacted benefit programs applicable to
all executive officers of the Company. For purposes
of this Agreement, all references to stock option
plans, bonus plans or benefit programs shall be
deemed to mean that Employee shall be eligible to
participate in such plans or programs of the Company
in which Employee presently participates or is
eligible to participate, or such plans or programs
that may subsequently be adopted in substitution for
such plans or programs.
(b) The Company will provide Employee a $300 per month
car allowance.
(c) Employee shall receive four (4) weeks of paid
vacation each Year.
(d) Employee shall be covered by all existing insurance
programs afforded by the Company to its executive
officers. Employee understands and agrees that he
shall, as of the date hereof, be responsible for
paying for forty percent (40%) of the premiums for
health insurance coverage. Employee understands such
percentage may change.
(e) The Company shall pay the cost of all CPE courses for
Employee for up to the minimum hours required
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per calendar year in order for Employee to maintain
his CPA status.
7. Expense Reimbursement. Employee is authorized to incur
reasonable expenses with regard to the business of the Company, including
expenses for entertainment, travel and other items of a similar character in
accordance with the Company's travel and entertainment policies as such
policies shall exist from time to time (the "Policy"). The Company will
reimburse Employee for all such expenses incurred and reported by him in
accordance with the Policy.
8. Termination by the Company. This Agreement may be terminated
by written notice pursuant to Section 11 by the Company as follows:
(a) If Employee breaches this Agreement, and such breach,
if capable of being cured, is not cured within thirty
(30) calendar days of receipt by Employee from the
Company of written notice requiring him to cure such
breach(es);
(b) If Employee shall be convicted of a criminal offense
which in the reasonable opinion of the Board may
injure or tend to injure the reputation or business
of the Company;
(c) If Employee files for bankruptcy or a bankruptcy
petition is filed against Employee and, in either
case, such bankruptcy proceeding is not dismissed
within ninety (90) days of being filed;
(d) If Employee shall grossly neglect the performance of
his duties as set forth or described herein; or
(e) If Employee becomes so addicted to alcohol, drugs or
any controlled substance that it substantially
impairs his abilities to perform his assigned duties.
9. Termination by the Company or Employee. Notwithstanding any
other provision of this Agreement, either party may terminate this Agreement by
giving notice pursuant to the terms and conditions of this Agreement.
10. Payments upon Termination or Death. It is agreed that if this
Agreement is terminated, payments and/or provisions for payments will be made
as follows:
(a) If the Company terminates this Agreement on some
basis other than the reason or reasons as stated in
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Section 8, or if the Employee dies, the Company will
take the actions set forth in Paragraphs (1), (2) and
(3) of this Subsection 10(a). If Employee terminates
this Agreement for cause, which shall be limited to a
material breach (specified in writing by Employee) by
the Company of the terms of this Agreement, then the
Company will take the actions set forth in paragraphs
(1), (2) and (3) of this Subsection 10(a).
(1) All stock options presently granted to
Employee will become immediately vested and
shall be exercised, if ever, in accordance
with and subject to the terms and provisions
of the Company's Stock Option Plan and
Employee's Stock Option Agreement; and
(2) Employee will receive within fifteen (15)
days of the effective date of such
termination, all Base Salary and all other
benefits that would have accrued and/or been
payable to Employee during the balance of the
then current Year; and
(3) Any other relocation or other expense amount
specifically agreed to herein.
(b) If the Company terminates this Agreement for a reason
or reasons set forth in Section 8 or Employee
terminates this Agreement without cause, then the
Company will only be obligated to pay to Employee the
actual amount of compensation accrued to the date of
termination, Employee will be bound to the terms of
any Stock Option Agreement as it relates to the
exercise of any vested stock options, and all other
payments or benefits recited herein shall be
cancelled and terminated, without recourse.
11. Notice of Termination. All termination notices provided for
in this Agreement must be in writing and must provide for a minimum notice
period of ninety (90) calendar days between the date of such notification and
the effective date of such termination.
12. Arbitration. Any controversy or claim arising out of, or
relating to this Agreement, or the breach thereof, shall be finally resolved by
binding arbitration in Dallas, Texas in accordance with the then effective
rules of the American Arbitration Association.
13. Notices. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing, and if sent
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by registered or certified mail to Employee and/or the Company at their
addresses as set forth on the signature page(s).
14. Waiver, Modification or Cancellation. Any waiver, amendment,
modification, or cancellation of any provision of this Agreement shall not be
valid unless in writing and signed by both Employee and the Company; provided,
however, that increases in the Base Salary approved by the Board or the
granting of additional compensation and/or benefits to Employee approved by the
Board need not be in a writing signed by Employee.
15. Binding Effect. This Agreement shall inure to the benefit of
and be binding upon (a) the Company and the Company's successors and assigns,
including but not limited to any entity which may acquire all or substantially
all of the Company's assets and business or with or into which the Company may
be consolidated or merged, and (b) Employee and Employee's heirs, executors,
administrators and legal representatives, provided that the duties of Employee
as described herein may not be delegated.
16. Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision never comprised
a part hereof; and 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 herefrom. Furthermore, 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.
17. Entire Agreement. This Agreement represents the entire
Agreement between the parties with respect to the subject matter hereof. Each
party represents to the other that there are no other oral, written, express or
implied contracts, agreements or understanding between them. This Agreement
supersedes any existing employment agreement between the parties.
18. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE
INTERNAL LAWS OF TEXAS (AND NOT THE CONFLICTS OF LAWS RULES OF TEXAS).
19. Specific Representations. Each party represents to the other
that:
(a) The consideration recited herein shall conclusively
be deemed fair, adequate, reasonable and sufficient.
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(b) Such party has voluntarily and without fraud, duress,
coercion, undue influence or improper persuasion
executed this Agreement.
(c) The signature appearing below is such party's manual,
original, genuine, authentic and undeniable
signature.
(d) Such party is competent, authorized and capable of
executing this Agreement as a valid, binding and
enforceable agreement.
(e) Such party is not aware of any agreement, document or
commitment that would limit such party's ability to
fully comply with the terms of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of May
25, 1995, but effective as of January 1, 1995.
Address:
237 Bay Circle /s/ Tim D. Torno
Coppell, Texas 75019 TIM D. TORNO
Address: ULTRAK, INC.
1220 Champion Circle
Suite 100 By: /s/ George K. Broady
Carrollton, Texas 75006 Its: President
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EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our reports dated February 17, 1995, accompanying the
financial statements and schedules of Ultrak, Inc. and Subsidiaries contained
in the Registration Statement and Prospectus. We consent to the use of the
aforementioned reports in this Registration Statement and Prospectus, and to
the use of our name under the caption "Experts."
/s/ GRANT THORNTON LLP
GRANT THORNTON LLP
Dallas, Texas
June 9, 1995
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
We have issued our reports dated March 17, 1995, on our audits of the
balance sheets of Diamond Electronics, Inc. and Subsidiary as of January 1,
1995, and the related consolidated financial statements and schedules for the
two years then ended, which are contained in this Registration Statement and
Prospectus/Proxy Statement. We consent to the inclusion of the aforementioned
reports in this Registration Statement and Prospectus/Proxy Statement, and to
the reference to our firm under the caption "Experts."
/s/ NORMAN, JONES, ENLOW & CO.
NORMAN, JONES, ENLOW & CO.
Columbus, Ohio
June 9, 1995
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EXHIBIT 23.4
Ultrak, Inc.
Dallas, Texas
Re: Registration Statement on Form S-4 of Ultrak, Inc.
With Respect to 700,000 Shares of its Common
Stock Subject to Issuance to Holders of Common
Stock of Diamond Electronics, Inc.
Gentlemen:
We hereby consent to the references to our firm in the Prospectus/Proxy
Statement included in the above-described Registration Statement on Form S-4
under the heading "MERGER--Certain Federal Income Tax Consequences" and related
references elsewhere in such Prospectus/Proxy Statement.
/s/ Leagre & Barnes
LEAGRE & BARNES
Indianapolis, Indiana
June 7, 1995
