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Filed Pursuant to Rule 424(b)(3)
Registration No. 33-63569
INFORMATION STATEMENT
PROSPECTUS
ULTRAK, INC.
176,470 SHARES
COMMON STOCK, NO PAR VALUE
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INFORMATION STATEMENT
BLC & ASSOCIATES, INC.
This Information Statement is being furnished to shareholders of BLC &
Associates, Inc. (d/b/a G.P.S. Standard U.S.A.), a California corporation
("GPS"), for their review in connection with each shareholder of GPS's approval
and authorization of the Merger (as hereinafter defined).
This Information Statement also relates to the Agreement and Plan of
Reorganization, dated August 1, 1995, attached hereto along with Exhibits
1.01(a) and (b) thereto as Annex A (the "Merger Agreement"), among GPS, Ultrak,
Inc., a Colorado corporation ("Ultrak"), GPS Acquisition Corp., a Texas
corporation and wholly-owned subsidiary of Ultrak ("Ultrak Subsidiary"), and
the following shareholders of GPS: Mathiew Bais and Commodore Investments Ltd.,
a Liberian corporation (the "Signing Shareholders"), which provides for the
merger (the "Merger") of Ultrak Subsidiary with and into GPS. After the Merger,
the separate corporate existence of Ultrak Subsidiary will cease, and GPS 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 ("GPS Common Stock"), will be
converted into the right to receive, as of the Closing Date (as defined
herein), an aggregate of 176,470 shares of common stock, no par value, of
Ultrak ("Ultrak Common Stock") shares, at the rate of .8578 shares of Ultrak
Common Stock for every share of GPS Common Stock ("the Conversion Factor"). See
"MERGER - Terms of the Merger Agreement - Conversion Factor."
SEE "RISK FACTORS" BEGINNING ON PAGE 9 OF THIS INFORMATION STATEMENT
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
HOLDERS OF THE ULTRAK COMMON STOCK TO BE DISTRIBUTED PURSUANT TO THE MERGER.
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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 INFORMATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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THE EFFECTIVE DATE OF THIS INFORMATION STATEMENT IS NOVEMBER 1, 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, information statements, and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements, information 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 Information 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
INFORMATION STATEMENT, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ULTRAK.
THIS INFORMATION 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 INFORMATION 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.
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
INFORMATION STATEMENT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ULTRAK'S REINCORPORATION IN DELAWARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
BUSINESS OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
MANAGEMENT OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
PRINCIPAL SHAREHOLDERS OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
DESCRIPTION OF ULTRAK'S CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
MARKET FOR ULTRAK COMMON STOCK AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SELECTED FINANCIAL DATA OF ULTRAK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . 50
BUSINESS OF GPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
MARKET FOR GPS COMMON STOCK AND RELATED SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
PRINCIPAL SHAREHOLDERS OF GPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SELECTED FINANCIAL DATA OF GPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
GPS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . 58
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
ANNEX
ANNEX A - Merger Agreement and Exhibits 1.01(a) and (b) thereto
ANNEX B - Certificate of Incorporation of GPS
ANNEX C - Bylaws of GPS
ANNEX D - Articles of Incorporation of Ultrak, as amended
ANNEX E - Bylaws of Ultrak
ANNEX F - GPS Shareholders Agreement
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
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INFORMATION STATEMENT SUMMARY
The following is a summary of certain information contained elsewhere in
this Information Statement. The summary is necessarily incomplete and selective
and is qualified in its entirety by the more detailed information contained in
this Information Statement, including the appendices hereto. Unless the context
indicates otherwise, references in this Information Statement to "Ultrak" and
"GPS" refer respectively to Ultrak, Inc. and its subsidiaries and predecessors
and BLC & Associates, Inc. (d/b/a G.P.S. Standard U.S.A.) and its subsidiaries
and predecessors.
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.
GPS
GPS manufactures and sells high-end integrated security and surveillance
systems used by systems integrators for outdoor perimeter protection of power
plants, military installations, commercial security, and high-end residential
applications. GPS has recently introduced a series of technologically advanced
matrix switching systems and a new generation of environmental enclosures made
from aluminum, nylon, and stainless steel. GPS also manufactures water cooled
specialty enclosures and positioning devices used for specific applications
ranging from corrosive to high temperature or explosive environments, such as
refineries, nuclear plants, furnace operations, or marine applications. GPS
has relocated its operations to Dallas, Texas consolidating its headquarters
with Ultrak, located at 1220 Champion Circle, Suite 100, Carrollton, Texas
75006, and its telephone number is (214) 280-9675.
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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 GPS and the separate corporate existence of Ultrak Subsidiary will cease,
and will continue its existence as a wholly-owned subsidiary of Ultrak. See
"MERGER -Terms of the Merger Agreement -- General." The Merger Agreement
provides that upon the Merger becoming effective, each outstanding share of GPS
Common Stock will be converted into the right to receive .8578 shares of Ultrak
Common Stock. See "MERGER - Terms of the Merger Agreement -- Conversion
Factor." The holders of record of GPS Common Stock as of the Closing Date (as
defined herein) (the "GPS 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, the GPS Shareholders receiving Ultrak Common Stock in the Merger
will have different rights than they had as GPS Shareholders under California
corporate law. See "MERGER -- Comparison of Rights of Holders of GPS 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 the GPS 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, GPS will become a wholly-owned
subsidiary of Ultrak, and it is expected that GPS will operate in the same
manner as prior to the Merger.
Federal Income Tax Consequences of the Merger. It is intended that 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 GPS Shareholders are summarized under
"MERGER - Certain Federal Income Tax Consequences."
Rights of Dissenting Shareholders. Subject to certain other conditions, if a
GPS Shareholder had not voted his or its shares of GPS Common Stock in favor of
the Merger, such GPS Shareholder would have been eligible to make a written
demand on GPS for payment to him or it of the fair cash value of his or its GPS
Common Stock within a certain time period. A GPS Shareholder who seeks to
assert dissenters' rights must take certain other steps in the manner required
by California law. However, because each GPS Shareholder voted in favor of the
Merger, in the form of a unanimous written consent of the GPS Shareholders,
each GPS Shareholder has waived his or its dissenters' rights. See "MERGER -
Rights of Dissenting Shareholders."
Conditions to the Merger. 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. See "MERGER - Terms of the Merger
Agreement --Conditions to the Merger."
Accounting Treatment. Ultrak intends to account for the Merger as a pooling of
interests. See "MERGER - Accounting Treatment."
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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 GPS
Shareholders.
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ULTRAK AND GPS
PRO FORMA FINANCIAL INFORMATION
Since the Merger does not constitute a Significant Business Combination (as
defined herein) under Regulation S-X of the Exchange Act ("Regulation S-X"), a
presentation of the pro forma combined financial statements of Ultrak and GPS
is unnecessary. Under Regulation S-X, a business combination, such as the
Merger, shall be considered a Significant Business Combination if a comparison
of the most recent annual financial statements of the business acquired or to
be acquired and the registrant's most recent annual consolidated financial
statements filed at or prior to the date of acquisition indicates that the
business would be a Significant Subsidiary (as defined herein) pursuant to the
conditions specified in Regulation S-X. Under Regulation S-X, if GPS had met
one of the following conditions, it would have been considered a Significant
Subsidiary:
(i) The number of Ultrak Common Shares exchanged by Ultrak in the
Merger exceeded ten percent (10%) of the total number of outstanding shares
of Ultrak Common Stock as of the Closing Date;
(ii) As of the end of the most recently completed fiscal year, the
proportionate share of the total assets of GPS exceeded ten percent (10%)
of the total assets of Ultrak; and
(iii) As of the end of the most recently completed fiscal year, the
proportionate share of Ultrak's equity in the income from continuing
operations before income taxes, extraordinary items, and cumulative effect
of a change in accounting principle of GPS exceeded ten percent (10%) of
such income of Ultrak.
Since none of these factors are applicable to GPS or the Merger, GPS is not
a Significant Subsidiary and the Merger is not a Significant Business
Combination.
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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 six months ended June 30, 1995 and 1994, respectively, and for GPS
for the fiscal year ended June 30, 1995. Such information should be read in
conjunction with the selected financial statement information of Ultrak and GPS
and the notes thereto which are included elsewhere herein. See "Selected
Financial Data of Ultrak" and "Selected Financial Data of GPS."
ULTRAK:
<TABLE>
<CAPTION>
ULTRAK
SIX MONTHS ------------------------------
ENDED JUNE 30, FISCAL YEAR ENDED DECEMBER 31,
------------------------- -------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA: 1995 1994 1994 1993 1992 1991 1990
----------- ----------- --------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $44,135,033 $36,757,219 $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
Gross profit 10,644,936 9,191,288 19,444,003 12,858,457 7,367,629 4,613,904 2,494,659
Operating income (loss) 2,774,376 2,589,221 5,109,687 3,655,020 1,278,618 694,728 (318,905)
Income (loss) from
continuing operations 1,267,677 1,453,568 2,789,512 2,638,860 543,500 470,942 (775,196)
Income (loss) per
common share from
continuing operations $.18 $.20 $0.39 $0.37 $0.07 $0.06 $(0.15)
Weighted average shares
outstanding 6,863,251 6,809,242 6,818,999 6,789,872 6,845,550 5,864,399 5,286,561
<CAPTION>
AS OF JUNE 30, AS OF DECEMBER 31,
-------------- ------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
-------------- ----------- ----------- ----------- ----------- ----------
BALANCE SHEET DATA: (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Total assets $36,735,781 $36,352,690 $25,384,794 $16,198,851 $8,054,270 $4,567,900
Short-term debt 18,548,544 $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 11,292,947 $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>
GPS:
<TABLE>
<CAPTION>
GPS
---
FISCAL YEAR ENDED JUNE 30, 1995
-------------------------------
(unaudited)
STATEMENT OF OPERATIONS DATA:
<S> <C>
Net sales $1,293,882
Gross profit 438,408
Operating loss (191,315)
Net loss (185,565)
Loss per
common share (.97)
Weighted average shares
outstanding 192,000
<CAPTION>
AS OF JUNE 30, 1995
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BALANCE SHEET DATA: (unaudited)
<S> <C>
Total assets $692,110
Short-term debt 122,947
Long-term debt 0
Stockholders' Equity 354,899
Cash dividends declared
per common share 0
</TABLE>
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PLAN OF DISTRIBUTION
This Information Statement may be used by Ultrak for distribution of up to
176,470 shares of Ultrak Common Stock pursuant to the Merger Agreement. Ultrak
Common Stock issued under this Information 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 GPS 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 GPS. 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.
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
As of September 30, 1995, George K. Broady, the Chairman of the Board,
President, Chief Executive Officer, and principal shareholder of Ultrak, is the
beneficial owner of approximately 30% 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 the shareholders of Ultrak, and will continue to
control at least 50% of such votes immediately after the Closing 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."
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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 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 its Secretary-Treasurer, Vice
President-Finance, and Chief Financial Officer, Tim D. Torno; 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. GPS
Shareholders who anticipate the need for immediate dividend income should not
rely on their shares
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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 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 4.7 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
Information 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 GPS
As a condition to the obligations of Ultrak and Ultrak Subsidiary under the
Merger Agreement, Mathiew Bais, the President of GPS ("Bais"), will enter into
an employment agreement with Ultrak, which provides for Bais to continue to be
employed with GPS 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 GPS will not
receive any material benefits from the Merger that are not received by
shareholders of GPS in general.
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<PAGE> 12
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 September 30, 1995, Ultrak was
in compliance with all loan covenants.
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<PAGE> 13
MERGER
BACKGROUND OF THE MERGER AND RELATED MATTERS
During the months of June 1995, Ultrak and GPS 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 GPS in a merger transaction in which the holders of GPS Common Stock
and holders of options, warrants, and other rights to acquire GPS 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 June 14, 1995.
Following the execution of the letter of intent, Ultrak and GPS 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 GPS mutually concluded that there were synergistic
advantages to the Merger.
At a special meeting held on August 18, 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.
GPS's Board of Directors met on August 1, 1995, to review the results of
GPS's special review of Ultrak's business and operations that had been
conducted by representatives of the Board and senior management of GPS at
Ultrak's headquarters in Dallas in May 1995. At that meeting, GPS's Board also
discussed Ultrak's business and the market for the Ultrak Common Stock with
George Broady, the Chief Executive Officer, Chairman of the Board, and
President of Ultrak. GPS's Board of Directors authorized execution of the
Merger Agreement on August 1, 1995, after considering the operating results of
Ultrak and of GPS for the period ended June 30, 1995, and the terms of the
Merger Agreement. In reaching its decision to approve and adopt the Merger
Agreement, the Board of Directors of GPS, 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 GPS AND ULTRAK. The Board believed that the
businesses of GPS and Ultrak were well matched because of synergy of
product lines. After reviewing the historical and current financial
condition and results of operations of GPS and Ultrak, the Board of
Directors believed that, 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) 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 GPS SHAREHOLDERS IN THE MERGER, THE
ASSUMPTION BY ULTRAK OF THE OUTSTANDING OBLIGATIONS AND LIABILITIES OF GPS
IN CONNECTION WITH THE MERGER, AND THE CONDITIONS TO THE MERGER AND GPS'S
ABILITY TO SATISFY SUCH CONDITIONS. In particular, the Board considered
favorably the commitment of Ultrak to use reasonable efforts to cause the
Ultrak Common Stock to
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<PAGE> 14
be registered under the Securities Act, thereby making Ultrak Common Stock
freely transferable for most non-controlling shareholders of GPS following
the Merger (see "PLAN OF DISTRIBUTION").
(iii) THE QUALITY OF AND RISKS ASSOCIATED WITH ULTRAK COMMON STOCK TO
BE RECEIVED BY THE GPS 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 Ultrak Common Stock to be received by the GPS
Shareholders in the Merger was supported by (a) the Board's favorable
impression of the quality of the executive officers of Ultrak based on the
numerous personal discussions conducted by representatives of GPS with
them, and (b) the existence of an established public trading market for
Ultrak Common Stock, unlike GPS 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 GPS SHAREHOLDERS IN CONNECTION WITH THE
EXCHANGE OF GPS 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 GPS Shareholders and the satisfaction or waiver of the
other conditions to the Merger, Ultrak Subsidiary will be merged with and into
GPS at the Effective Time in accordance with the California General Corporation
Law (the "CGCL") and the Texas Business Corporation Act (the "TBCA"). GPS will
be the surviving corporation in the Merger. As a result of the Merger, the
separate corporate existence of Ultrak Subsidiary will cease, and GPS will
become a wholly-owned subsidiary of Ultrak.
Conversion Factor. Each share of GPS Common Stock issued and outstanding at
the time of the Merger will be converted into the right to receive .8578 shares
of Ultrak Common Stock. It is a condition to consummation of the Merger that
shares of Ultrak Common Stock be exchanged for at least 99% of the GPS Common
Stock.
The "Conversion Factor" shall mean .8578, which is determined by dividing
176,470 (the aggregate number of shares of Ultrak Common Stock to be exchanged
in the Merger as of the Closing Date) by 205,714 (the aggregate number of
shares of GPS Common Stock to be exchanged in the Merger as of the Closing
Date).
Conditions to the Merger. The obligations of Ultrak and GPS 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 GPS
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) shares of Ultrak
Common Stock shall be exchanged for at least ninety-nine percent (99%) of GPS
Common Stock.
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<PAGE> 15
The obligation of Ultrak to consummate the Merger is subject to certain
additional conditions, including, among others, that: (i) GPS'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 Closing Date; (ii) GPS 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 GPS's business, properties, assets, liabilities,
results of operations, or condition, financial or otherwise; (iv) Mathiew Bais
shall have executed and delivered an employment agreement in the form attached
to the Merger Agreement; (v) the Board of Directors Ultrak shall have approved
the Merger; (vi) CIL shall have converted the Note (as defined on the Merger
Agreement) into GPS Common Stock; (vii) the Signing Shareholders, individually
and collectively, shall have transferred 100% of the ownership of Fully
Integrated Security Technologies, Inc., a California corporation ("FIST") to
Ultrak; (viii) each of Profubel, a Belgian corporation, Sicurit Alarmitalia, an
Italian corporation, and Video Engineering, an Italian corporation, shall have
consented in writing (in a form and substance satisfactory to Ultrak) to the
transfer of ownership of FIST to Ultrak and to the modifications to the Joint
Venture Agreement requested by Ultrak; and (ix) VIDEOTEC, s.r.l., an Italian
corporation, shall have executed the Supply Agreement.
The obligation of GPS 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 Closing Date;
(ii) Ultrak shall have performed in all material respects all covenants and
agreements required to be performed by it under the Merger Agreement; and (iii)
there shall have been no material adverse change in Ultrak's business,
properties, assets, liabilities, results of operations or condition, financial
or otherwise.
Amendment. The Merger Agreement may be amended by the written agreement of
all the parties to the Merger Agreement.
Fees and Expenses. Each of Ultrak and GPS 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 GPS's legal fees
and expenses in connection with the Merger Agreement and the transactions
contemplated thereby exceed Ten Thousand Dollars ($10,000), such excess shall
be paid by the Signing Shareholders.
Exchange of GPS Stock Certificates. As soon as practicable after the
Closing Date, instructions and a letter of transmittal will be furnished to the
Closing 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 GPS 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 Closing Date,
neither GPS 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: (a) directly or indirectly, encourage, solicit, or
initiate discussions or negotiations with any corporation, partnership, person,
or other entity or group concerning any merger, sale of all or substantially
all of the assets, business combination, sale of shares of capital stock, or
similar transactions involving GPS, 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 GPS receives any
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<PAGE> 16
offer or inquiry for a transaction of the type referred to in (a) above, then
the Merger Agreement provides that GPS 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 California and articles of
merger relating thereto with the Secretary of State of Texas (the "Closing
Date"). 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 GPS 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 GPS BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF GPS HAS DETERMINED THAT THE MERGER IS IN THE BEST
INTERESTS OF GPS AND THE GPS SHAREHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, AND HAS RECOMMENDED TO THE GPS SHAREHOLDERS THAT EACH VOTE FOR THE
PROPOSAL TO APPROVE THE MERGER AGREEMENT AND THE MERGER.
RIGHTS OF DISSENTING SHAREHOLDERS
Dissenters Rights. Pursuant to Chapter 13 of the CGCL, shareholding of a
California corporation entitled to vote on a transaction, such as a merger,
have certain dissenter's rights. However, since all of the GPS Shareholders
have approved the merger, in the form of a unanimous written consent, none of
the GPS Shareholders are eligible to exercise dissenter's rights under
California law.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The GPS Shareholders should be aware that certain executive officers and
directors of GPS have certain interests that may present them with potential
conflicts of interests with respect to the Merger.
Ownership of GPS Common Stock. As of the Record Date, executive officers
and directors of GPS beneficially owned an aggregate of 46.7% of the shares of
GPS Common Stock. Mathiew Bais, an executive officer and director of GPS and
the beneficial owner of 46.7% of the shares of GPS Common Stock, will be,
pursuant to the Merger Agreement, entering into an employment agreement with
Ultrak.
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both Ultrak and GPS 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 GPS believe that no such regulatory and
other approvals are required by applicable law.
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<PAGE> 17
ACCOUNTING TREATMENT
For financial reporting purposes, the Merger will be accounted for by the
pooling of interests method of accounting in accordance with generally accepted
accounting principles. Accordingly, the assets or liabilities of GPS will be
carried forward at their historical recorded amounts.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
General. The following is a summary of the intended material federal income
tax consequences of the Merger to the GPS Shareholders. This summary is based
on provisions of the Code, The Treasury Regulations promulgated thereunder, and
administrative and judicial interpretations thereof, all as in effect as of the
date hereof. Such provisions and the interpretation of the Code, the Treasury
Regulations promulgated thereunder may differ as of the Closing Date, and
relevant facts may also differ.
The tax treatment of the Merger with respect to each GPS Shareholder will
depend in part upon each such GPS 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 GPS
Shareholders who acquired their shares through the exercise of employee stock
options or otherwise as compensation. All GPS 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.
TAX CONSEQUENCES TO GPS SHAREHOLDERS
The following are the intended material federal income tax consequences of
the Merger to the GPS Shareholders.
1. No gain or loss will be recognized by the GPS Shareholders.
2. The basis of the Ultrak Common Stock to be received by the GPS
Shareholder will be the same, in each instance, as the basis of GPS Common
Stock surrendered in exchange therefor.
3. The holding period for the Ultrak Common Stock will include the
holding period of GPS Common Stock surrendered in exchange therefor, provided
such GPS Common Stock was held as a capital asset on the date of the Merger.
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 GPS SHAREHOLDER SHOULD CONSULT HIS OR ITS OWN
TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
GPS SHAREHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, AND
FOREIGN TAX LAWS.
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RESALE OF ULTRAK COMMON STOCK
Shares of Ultrak Common Stock to be issued to the GPS 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 Closing Date, may be deemed to be an affiliate ("Affiliate") of GPS
within the meaning of Rule 145 under the Securities Act. In general, Affiliates
of GPS 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, GPS. 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 GPS in the Merger will be subject
to the applicable resale limitations of Rule 145.
Ultrak may place legends on certificates representing shares of Ultrak
Common Stock which are issued to Affiliates of GPS in the Merger to restrict
transfers in accordance with the foregoing.
COMPARISON OF RIGHTS OF HOLDERS OF GPS COMMON STOCK AND ULTRAK COMMON STOCK
Ultrak is incorporated under the laws of the State of Colorado, and GPS is
incorporated under the laws of the State of California. GPS Shareholders'
rights are currently governed by the CGCL, GPS's Articles of Incorporation,
attached hereto as Annex B (the "GPS Charter"), and GPS's Bylaws (the "GPS
Bylaws"), attached hereto as Annex C. Upon consummation of the Merger and to
the extent they receive shares of Ultrak Common Stock, the GPS Shareholders
will become shareholders of Ultrak, and their rights from the Closing 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 D (the "Ultrak Charter"), and the Bylaws of Ultrak (the "Ultrak
Bylaws"), attached hereto as Annex E.
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, the GPS 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 GPS are of the opinion that, except as described
below, there are no substantial differences relating to the rights of the
holders of GPS 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 California 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 GPS believe the
following
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to be a fair summary of the significant differences in the corporate laws of
those states which would affect the GPS Shareholders. As a result of the Merger
and the subsequent Reincorporation, the GPS 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 GPS 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. See "ULTRAK'S
REINCORPORATION IN DELAWARE."
<TABLE>
<CAPTION>
CALIFORNIA (GPS) COLORADO (ULTRAK) DELAWARE (ULTRAK-DELAWARE)
---------------- ----------------- --------------------------
<S> <C> <C> <C>
Dissenters' Rights Yes. Yes. Only in limited circumstances.
Special Requirements for No. No. Yes (statutory).
Business Combinations
Amendment of Governing Affirmative vote of Affirmative vote of a Affirmative vote of a
Documents all of shares majority of shares majority of shares
entitled to vote. entitled to vote. entitled to vote.
(Under GPS Share-
holders' Agreement).
</TABLE>
Authorized Shares. Under the Ultrak Charter, Ultrak is authorized to issue
20 million shares of Ultrak Common Stock and 2,000,000 shares of preferred
stock, $5.00 par value per share, of which 195,351 shares of Series A Preferred
Stock are currently issued and outstanding. The powers, preferences, and rights
of the Ultrak Common Stock and the Series A Preferred Stock are identical
except that holders of the Series A Preferred Stock are entitled (i) to
quarterly preferential dividends and upon liquidation, dissolution, or winding
up of Ultrak, (ii) to receive the original purchase price of $5.00 plus any
unpaid dividends accruing to that date, and (iii) to voting rights equal to
16.667 shares of Ultrak Common Stock. See "DESCRIPTION OF ULTRAK'S CAPITAL
STOCK - General."
Under the GPS Charter, GPS is authorized to issue one million shares of GPS
Common Stock and no other series or class of shares.
General and Close Corporation. Under the Ultrak Charter and Ultrak Bylaws,
Ultrak is a general corporation, and, as such, under the CBCA, there are no
restrictions as to the number of possible shareholders of record of Ultrak.
Other than the CBCA, the Ultrak Charter and Ultrak Bylaws provide guidance for
the Ultrak Shareholders regarding the management and division of profits of
Ultrak.
As a result of the election by GPS to be a "close corporation" under the
CGCL, issued shares of GPS Common Stock cannot be held of record by more than
thirty-five (35) persons. In a close corporation, the provisions for management
of the corporation may be included in a shareholders' agreement, rather than the
articles of incorporation or bylaws of a corporation. Generally, notwithstanding
the express limitations of the CGCL on the exercise of corporate powers, a
written shareholders' agreement may provide for the management of the business
and the division of profits or distribution of assets in liquidation in a
different manner. The shareholders of GPS entered into that certain
shareholders' agreement, dated May 1994, attached hereto as Annex F (the "GPS
Shareholders' Agreement").
Preemptive Rights. Under the CBCA, the Ultrak Shareholders are permitted to
have preemptive rights to purchase new shares unless prohibited in the
articles of incorporation; the Ultrak Charter does prohibit such rights.
Under the CGCL, preemptive rights do not exist unless a special provision
is made in the corporation's articles of incorporation or in the case of a
close corporation, in the corporation's
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shareholder agreement. The GPS Charter does not provide for preemptive rights;
however, the GPS Shareholders' Agreement does provide for such rights.
Amendment of Governing Documents. Under the CBCA, the affirmative vote of
two-thirds of the outstanding shares entitled to vote is required to amend a
corporation's bylaws or articles of incorporation, unless the articles of
incorporation or the bylaws of a corporation provide for a lower percentage.
Under the Ultrak Charter and Ultrak 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 CGCL, a proposed amendment to the articles of incorporation or
the bylaws must generally be approved by the affirmative vote of a majority of
the outstanding shares entitled to vote. Under the CGCL, bylaws may, in certain
cases, be amended by the approval of the Board of Directors. Under the GPS
Shareholders' Agreement, the GPS Charter cannot be amended without the consent
of all shareholders.
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 CGCL, a majority of the corporation's shareholders, unless
otherwise specified in its articles of incorporation, bylaws, or, in the case
of a close corporation, shareholders' agreement, may voluntarily wind up and
dissolve a corporation. However, pursuant to the GPS Shareholders' Agreement,
GPS cannot be dissolved without the unanimous consent of the shareholders of
GPS.
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."
California does not have an anti-takeover statute that attempts to prohibit
a third party from effecting a takeover or a change in control of GPS without
the consent of the management and shareholders of GPS.
Special Meetings of Shareholders. Under the Ultrak Bylaws, a special
meeting of the Ultrak Shareholders 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 GPS Bylaws, a special meeting of the GPS Shareholders may be
called by order of the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the President, the Secretary, any officer of GPS
instructed to so call a special meeting by the Board of Directors, or the
request of the holders of at least 10% of the outstanding shares of GPS Common
Stock entitled to vote at such meeting.
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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 GPS Bylaws contain no restrictions on the ability of shareholders
to nominate persons for election as a director of GPS; however, the GPS
Shareholders' Agreement provides that each shareholder of GPS shall designate a
director of GPS to perform those duties required under the CGCL.
Shareholder Proposals. The Ultrak Bylaws contain no restrictions on the
ability of shareholders to make shareholder proposals. The GPS Bylaws 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
GPS Bylaws and the GPS Charter, the authorized number of directors constituting
the initial Board of Directors of GPS shall be three, and thereafter the
authorized number of directors which may be at least three provided that,
whenever GPS shall have only two shareholders, the number of directors may be
at least two, and, whenever GPS shall have only one shareholder, the number of
directors may be at least one. Under the GPS Bylaws, directors may be removed
at any time by the holders of a majority of the outstanding GPS Common Stock
entitled to vote. The Board of Directors of GPS currently consists of two
members, all of whom are elected at each annual meeting of Shareholders.
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 GPS Bylaws, the presence of a majority of the
total number of directors comprising the Board of Directors of GPS is necessary
to constitute a quorum, provided such majority shall constitute at least either
one-third of the authorized number of directors or at least two directors,
whichever is larger, or one director if the authorized number of directors is
only one.
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.
Under the CGCL, the articles of incorporation of a corporation may
include a provision limiting or eliminating the personal liability of a
director from monetary damages in an action brought by or in the right of the
corporation for a breach of a director's duties to the corporation or the
shareholders. Such a provision is subject to specified exceptions, including
acts or omissions involving intentional misconduct, knowing and culpable
violations of the law, absence of good faith, reckless disregard for the
director's duty, and an unexcused pattern of inattention amounting to an
abdication of duty. The GPS Charter, however, does not provide for such a
limitation of a director's personal liability.
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
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<PAGE> 22
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 CGCL governs the indemnification of corporate officers and
directors, but the CGCL is not exclusive of any indemnification rights
authorized in the GPS Charter. A corporation's articles of incorporation,
under California law, may authorize indemnification of agents for breaches of
duty to the corporation or its shareholders in excess of that expressly
permitted by the CGCL. The GPS Charter, however, does not provide for such
indemnification in excess of that expressly permitted by the CGCL.
Dissenters Rights. The Ultrak Shareholders are entitled under the CBCA to
receive payment for their shares if they dissent from certain corporate
actions, such as a reincorporation, consolidation, merger, or sale of all or
substantially all of Ultrak's assets. Any shareholder of Ultrak wishing to
dissent from such a transaction and obtain cash payment for his shares must
file with Ultrak, prior to the vote on such transaction, a written notice of
his intention to demand that he be paid fair compensation for his shares if the
transaction is effectuated and must refrain from voting his shares in approval
of such transaction. A shareholder who fails to demand payment or fails to
deposit his certificate for payment within 30 days of mailing of such notice by
Ultrak will have no right to receive payment for his shares but will retain all
other rights of a shareholder of Ultrak.
The GPS Shareholders are entitled under the CGCL to receive payment for
their shares if they dissent from certain corporate actions, such as
reincorporation. Any shareholder of GPS wishing to dissent from such a
transaction may require the corporation to purchase for cash, at the fair
market value, the shares owned by such shareholder.
After the Reincorporation, the Ultrak Shareholders, including the GPS
Shareholders that receive Ultrak Common Stock pursuant to the Merger, will have
more limited dissenters' rights than are presently available under either
Colorado or California corporate law. See "ULTRAK'S REINCORPORATION IN DELAWARE
- - Significant Differences in Corporate Law of Colorado and Delaware -- Rights
of Dissenting Shareholders."
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.
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The merger of Ultrak into Ultrak-Delaware (the "Reincorporation") will be
effected pursuant to the Plan and Agreement of Merger (the "Reincorporation
Agreement") between Ultrak and Ultrak-Delaware attached hereto as Annex G. The
Reincorporation Agreement provides that, when the Reincorporation becomes
effective, Ultrak-Delaware will continue as the Surviving Corporation under the
name "Ultrak, Inc." The Reincorporation Agreement also provides that Ultrak and
Ultrak Delaware may terminate the Reincorporation Agreement upon mutual written
consent. Because Ultrak's Board of Directors is the same as Ultrak-Delaware's
Board of Directors, the Board of Directors effectively has the right to
terminate the Reincorporation Agreement and abandon the Reincorporation for any
reason whatsoever notwithstanding shareholder approval.
The summary of the Reincorporation contained herein accurately describes
the material effect of the Reincorporation on shareholders of Ultrak. For a
complete description of the terms of the Reorganization, shareholders of Ultrak
should refer to the Reincorporation Agreement.
Pursuant to the Reincorporation Agreement, the Board of Directors of Ultrak
will become the Board of Directors of the Surviving Corporation. The management
of Ultrak will continue as the management of the Surviving Corporation. The
Reincorporation will not involve any change in the business or properties of
Ultrak. The Surviving Corporation will succeed to all the assets and be
responsible for all the liabilities of Ultrak, including obligations under
Ultrak's 1988 Nonqualified Stock Option Plan. Although the purposes of the
Surviving Corporation set forth in its Certificate of Incorporation will permit
it in the future to enter into any lawful business activity, no change in the
present business of Ultrak is now contemplated, except as new developments and
opportunities may occur.
There are certain differences between the Certificate of Incorporation and
the By-Laws of Ultrak and the Surviving Corporation, as well as differences in
the corporate law of the States of Colorado and Delaware, which will affect
Ultrak and its shareholders. See "- Significant Differences in Corporate Law of
Colorado and Delaware" and "- Certificate of Incorporation and By-Laws."
The Surviving Corporation is authorized to issue 20,000,000 shares of
common stock, $0.01 par value, and 2,000,000 shares of Preferred Stock, $5.00
par value, including 195,351 shares of Series A Preferred Stock. See
"Certificate of Incorporation and By-Laws." Upon the Reincorporation becoming
effective, Ultrak's shareholders will become shareholders of the Surviving
Corporation, and each outstanding share of Ultrak Common Stock will become one
share of Common Stock of the Surviving Corporation and each outstanding share
of Series A Preferred Stock of Ultrak will become one share of Series A
Preferred Stock of the Surviving Corporation. The Common Stock of the Surviving
Corporation will have the same relative rights, preferences, privileges and
restrictions as the Ultrak Common Stock. The Series A Preferred Stock of the
Surviving Corporation will have the same relative rights, preferences,
privileges and restrictions as Ultrak's Series A Preferred Stock. The
Reincorporation will not cause any change in the qualification of Ultrak Common
Stock on Nasdaq. It will not be necessary for holders of Ultrak Common Stock to
exchange their existing certificates for new certificates representing Common
Stock of the Surviving Corporation. It is anticipated that delivery of the
present stock certificates of Ultrak will constitute "good delivery" for
transactions in shares of Common Stock of the Surviving Corporation after the
effective date of the Reincorporation.
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.
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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 58% 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 BYLAWS
The Reincorporation Agreement provides that the Certificate of
Incorporation and the By-Laws of Ultrak-Delaware will be the Certificate of
Incorporation and the By-Laws of the Surviving Corporation. The Certificate of
Incorporation and By-Laws of Ultrak and the Certificate of Incorporation and
By-Laws of the Surviving Corporation are substantially similar; however, some
differences do exist. Among other things, the By-Laws of the Surviving
Corporation contain indemnification provisions, whereas the By-Laws of Ultrak
do not address indemnification (although the Certificate of Incorporation of
each addresses indemnification), and the By-Laws of the Surviving Corporation
do not have certain provisions contained in the By-Laws of Ultrak restricting
the officers of Ultrak from entering into certain contracts and
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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
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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.
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.
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The anti-takeover statute provides that the Certificate of Incorporation of
a Delaware corporation may provide that the corporation expressly elects not to
be governed by the statute. The Certificate of Incorporation of the Surviving
Corporation does not include such a provision.
The effect of the Reincorporation, and thereby subjecting Ultrak to the
anti-takeover statute, will make it more difficult for a person who seeks to
acquire control of Ultrak or to effect a business combination with Ultrak, such
as a tender offer, to do so without management's approval, thereby making it
more difficult to remove existing management of Ultrak. The Delaware statute
could, therefore, potentially have an adverse impact on shareholders who wish
to participate in any such tender offer or other transactions even where such
transaction may be favorable to the interests of shareholders.
The Reincorporation could have the effect of discouraging hostile tender
offers, proxy contests, or other transactions by forcing potential 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
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law, provide indemnification in derivative suits for fines, judgments, and
amounts paid in settlement. Under Colorado law, a director who is adjudged
liable to the corporation for deriving an improper personal benefit can only be
reimbursed for expenses and only upon determination of a court that
indemnification is proper in Delaware. Such a director would also be
indemnified for fines, judgments, and amounts paid in settlement and a court
determination is not necessary.
The Certificate of Incorporation and By-Laws of Ultrak-Delaware, like the
Ultrak Charter, contain broad indemnification provisions which (i) obligate
Ultrak-Delaware to indemnify any of its officers, directors, employees, or
agents for all expenses (including legal fees) and liabilities (including
fines, judgments, and amounts paid in settlement) incurred in connection with
any pending or completed suit, action, or proceeding, including derivative
suits; provided, however, that such person is entitled to indemnification only
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of Ultrak-Delaware and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful; (ii) provides for indemnification rights for as long as any such
person shall be subject to any possible claim or threatened suit or proceeding
by reason of the fact that such person was or is a director, officer, employee,
or agent of Ultrak-Delaware; (iii) requires Ultrak-Delaware to advance expenses
to any person entitled to indemnification provided that such person undertakes
to repay the amount advanced if it is ultimately determined that he is not
entitled to indemnification; (iv) provides for the determination of whether
indemnification is proper because the requisite standard of conduct has been
met to be made by a majority vote of a quorum of directors who were not parties
to such action, suit, or proceeding, or by independent legal counsel or by the
shareholders of Ultrak-Delaware; and (v) provides that such charter and by-law
provisions shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may legally be entitled.
Differences include, the Ultrak Charter requires the unanimous vote of each
class of shares entitled to vote to amend the indemnification provision of the
Ultrak Charter, while the Certificate of Incorporation of Ultrak-Delaware
provides that a written request for indemnification should be responded to
within 60 days. No such provision exists in the Ultrak Charter.
To the knowledge of management of Ultrak, no actions are pending or
threatened which would affect in any way the rights of any person entitled to
indemnification, whether under Colorado or Delaware law.
Dissolution. Under Colorado corporation law and the Ultrak Charter Ultrak
can voluntarily dissolve upon its board of directors adopting a resolution
setting forth a proposal to dissolve which proposal is approved 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
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director, as there are under Delaware law, and directors are not liable as long
as they did not vote for or assent to any of the illegal acts. Colorado law,
unlike Delaware law, allows a director who was present at a meeting which
approved an illegal act to avoid liability, even if he does not register his
dissent in the minutes of the meeting by voting against the illegal act.
Rights of Dissenting Shareholders. Shareholders of Ultrak are presently
entitled under Colorado corporation law to receive payment for their shares if
they dissent from certain corporate actions, such as reincorporations,
consolidations or sales of all or substantially all of Ultrak's assets. Under
Delaware corporation law, there is no such right to receive payment in a sale
of assets, and there is no such right to receive payment in a reincorporation
or consolidation if the common stock of the surviving corporation in the
reincorporation or consolidation is listed on a national securities exchange or
is held of record by 2,000 or more persons and the only consideration received
by the shareholders in the reincorporation or consolidation is stock of the
corporation resulting from the reincorporation or consolidation or stock of a
listed company with 2,000 or more shareholders, and cash in lieu of fractional
shares.
EFFECTIVE DATE OF THE REINCORPORATION
Subject to the satisfaction of the conditions of the Reincorporation, it is
contemplated that the Reincorporation will be made effective as of December 29,
1995. The Board of Directors chose this date in order to simplify the transfer
of Ultrak's books and records, and to correspond with the end of Ultrak's
fiscal year.
FEDERAL INCOME TAX CONSEQUENCES
Under current federal income tax law, Ultrak, Ultrak-Delaware, the
shareholders of Ultrak who did not exercise their rights as shareholders
dissenting from the Reincorporation pursuant to Section 7-113-102 of the CBCA,
attached hereto as Annex J, and the GPS 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.
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PRO FORMA FINANCIAL INFORMATION
Since the Merger does not constitute a Significant Business Combination
under Regulation S-X, a presentation of the pro forma combined financial
statements of Ultrak and GPS is unnecessary. Under Regulation S-X, a business
combination, such as the Merger, shall be considered a Significant Business
Combination if a comparison of the most recent annual financial statements of
the business acquired or to be acquired and the registrant's most recent annual
consolidated financial statements filed at or prior to the date of acquisition
indicates that the business would be a Significant Subsidiary pursuant to the
conditions specified in Regulation S-X. Under Regulation S-X, if GPS had met
one of the following conditions, it would have been considered a Significant
Subsidiary:
(i) The number of Ultrak Common Shares exchanged by Ultrak in the
Merger exceeded ten percent (10%) of the total number of outstanding shares
of Ultrak Common Stock as of the Closing Date;
(ii) As of the end of the most recently completed fiscal year, the
proportionate share of the total assets of GPS exceeded ten percent (10%)
of the total assets of Ultrak; and
(iii) As of the end of the most recently completed fiscal year, the
proportionate share of Ultrak's equity in the income from continuing
operations before income taxes, extraordinary items, and cumulative effect
of a change in accounting principle of GPS exceeded ten percent (10%) of
such income of Ultrak.
Since none of these factors are applicable to GPS or the Merger, GPS is not
a Significant Subsidiary and the Merger is not a Significant Business
Combination.
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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
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amendments to both loan agreements, certain financial and operational covenants
were modified. All other terms and conditions of the loan agreements were
unchanged.
On March 10, 1995, the Board of Directors of Ultrak approved a proposal to
change Ultrak's state of incorporation from Colorado to Delaware effective
December 29, 1995, and to submit such proposal to Ultrak's shareholders. At the
Annual Meeting of Shareholders of Ultrak held on May 25, 1995 (the "Annual
Meeting"), the shareholders of Ultrak approved the proposal to change the state
of incorporation of Ultrak from Colorado to Delaware. The change will be
accomplished by merging Ultrak into a wholly-owned subsidiary of Ultrak
incorporated in Delaware that was formed solely for the purpose of merging with
Ultrak. See "ULTRAK'S REINCORPORATION IN DELAWARE." NONE OF THE GPS
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."
On July 14, 1995, Diamond Purchasing Corp., a Texas corporation and a
wholly owned subsidiary of Ultrak, merged ("Diamond Merger") with and into
Diamond Electronics, Inc., an Ohio corporation ("Diamond"), whereby all the
outstanding shares of common stock of Diamond were converted into the right to
receive 600,000 shares of Ultrak Common Stock, subject to certain upward
adjustments. Diamond is in the business of manufacturing and selling high speed
commercial security and surveillance systems used by large retailers,
metropolitan surveillance systems for traffic control, and hazardous viewing
systems used by the industry.
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,
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<PAGE> 33
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 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.
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<PAGE> 34
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; southern Florida;
Atlanta, Georgia; Chicago, Illinois; and Carroll, Ohio.
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 operations
for the next twelve month period. 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
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.
EMPLOYEES
As of December 31, 1994, Ultrak had 148 full-time employees employed at
five primary locations and five field sales offices, of which 88 were sales and
support personnel, 17 were warehouse/assembly personnel, 17 were
technical/service personnel, and 26 were administrative and managerial
personnel.
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MANAGEMENT OF ULTRAK
The directors and executive officers of Ultrak are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
George K. Broady 56 Chairman of the Board, Chief Executive Officer, and President
James D. Pritchett 48 Director, Executive Vice President and Chief Operating Officer
William C. Lee 55 Director
Charles C. Neal 36 Director
Robert F. Sexton 60 Director
Tim D. Torno 37 Secretary-Treasurer and Chief Financial Officer
</TABLE>
George K. Broady. Mr. Broady became President and Chief Executive Officer
of Ultrak on March 18, 1991. Prior to that date, Mr. Broady was actively
involved as the owner and president of Geneva Merchant Bankers, Dallas, Texas.
Until December 1987, he was chairman and chief executive officer of Network
Security Corporation, a company that he founded in 1970. Network Security
Corporation and the publicly held stock of its controlled subsidiary were sold
to Inspectorate International, a Swiss company, in 1987 and 1988 for $165
million. During 1988, Network Security Corporation sold its majority ownership
interest in Ultrak to Mr. Broady for $662,000 in cash. He received his BS (cum
laude) from Iowa State University in 1960. Mr. Broady devotes substantially all
of his executive time to the business and affairs of Ultrak.
James D. Pritchett. Mr. Pritchett joined Ultrak in August 1988 as Chief
Operating Officer. He was promoted to Executive Vice President in October 1991.
Mr. Pritchett was appointed to the Board of Directors of Ultrak on August 14,
1989. From October 1, 1980 to September 1, 1988, Mr. Pritchett was executive
vice president and chief operating officer of Booth, Inc., Carrollton, Texas, a
manufacturer of electronic equipment. Mr. Pritchett received his Bachelor of
Science Degree in Mechanical Engineering from the University of Texas at
Arlington in 1969, and his Masters in Mechanical Engineering in 1972 from
Southern Methodist University, Dallas, Texas. From 1969 to 1972, he was an
engineer with LTV Aerospace and from 1972 to 1978, he was product manager for
Thermalloy, Inc. He was a research and development engineer with Glitech, Inc.
from 1978 to 1980.
Tim D. Torno. Mr. Torno has been the Secretary-Treasurer and Chief
Financial Officer of Ultrak since August 1988. From May 1980 to August 1988,
Mr. Torno was employed by KPMG Peat Marwick in Denver, New York, and Corpus
Christi, Texas, in various capacities including senior manager. Mr. Torno
received a BBA in Accounting (cum laude) from Texas A & M University, College
Station, Texas, in 1979 and a Masters of Business Administration (with honors)
in 1993 from the University of Phoenix, Denver, Colorado. Mr. Torno is a CPA in
the States of Texas and Colorado, and is a member of the American Institute of
CPAs and the Texas Society of CPAs. He currently serves on the Executive Board
of the Distribution Resources Company Group.
William C. Lee. Mr. Lee has served as a Director of Ultrak since June 1994.
Mr. Lee has been the Senior Vice President of the Annuity Board of the Southern
Baptist Convention of Dallas, Texas, a $4.5 billion dollar pension and
insurance management company, since July 1991. Mr. Lee served as Managing
Director of Geneva Merchant Bankers of Dallas, Texas from 1989 until 1991 and
as an executive officer of San Jacinto Savings from 1988 to 1989. Mr. Lee
earned his BBA from Texas A & M University in 1962 and his MBA from Southern
Methodist University in 1966. Mr. Lee is a CPA in the State of Texas
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<PAGE> 36
and a member of the American Institute of CPAs, the Texas Society of CPAs, the
Financial Executives Institute and the American Institute of Image Management.
Charles C. Neal. Mr. Neal has served as a Director of Ultrak since June
1994. Mr. Neal has been President of Chas. A. Neal & Company of Miami,
Oklahoma, a company which owns interests in oil and gas properties and in
various corporations in several industries, including banking, since 1989. From
1985 to 1989, Mr. Neal was with Merrill Lynch & Co. in New York City,
performing investment banking, general corporate finance and mergers and
acquisitions services for a variety of clients. Mr. Neal is also a director of
several privately held companies. Mr. Neal received his BA in Economics in 1981
from the University of Oklahoma and a JD/MBA from the University of Chicago Law
School and Graduate School of Business in 1985.
Robert F. Sexton. Mr. Sexton has served as a Director of Ultrak since May
1995. Mr. Sexton has been President of Bakery Associates, Inc. of Dallas,
Texas, a company which brokers bakery packaging goods, since 1983. From 1973 to
1983, Mr. Sexton was Executive Vice President and a director of Campbell
Taggart, Inc. of Dallas, Texas, one of the nation's largest baking companies.
Campbell Taggart was listed on the New York Stock Exchange prior to its
acquisition by Anheuser Busch in 1982. Mr. Sexton is also a director of
Republic Gypsum Company, a corporation which manufactures and distributes
paperboard. Mr. Sexton earned his BBA in industrial management in 1956 from the
University of Texas.
All directors of Ultrak hold office until the next annual meeting of the
shareholders and until their successors have been elected and qualified. The
officers of Ultrak are elected by the Board of Directors at its first meeting
after each annual meeting of Ultrak's shareholders and hold office until their
successor is chosen and qualified or until their death or until they shall
resign or have been removed from office.
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.
At the May 25, 1995 meeting of the Board of Directors of Ultrak, Robert F.
Sexton was selected to the Audit and Compensation Committees, replacing James
D. Pritchett on the Compensation Committee.
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<PAGE> 37
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).
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.
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<PAGE> 38
As of December 31, 1994, options relating to 532,959 shares were
outstanding at exercise prices ranging from $1.20 per share to $7.50 per share.
Of the total outstanding options, options to purchase 313,851 shares were held
by the three executive officers of Ultrak. The option exercise price is set by
the Board of Directors on the date of grant near or at the then verifiable
market price of Ultrak Common Stock. During 1994, 47,500 options were granted
to employees of Ultrak. During 1994, 600 options were exercised by two
employees. In 1994, 14,167 options which had been granted to one former
employee were cancelled.
OPTION/SAR GRANTS, EXERCISES AND HOLDINGS
There were no exercises of stock options (or tandem SARs) and freestanding
SARs during 1994 by each of the named executive officers. The unexercised
options owned by the named executive officers as of December 31, 1994 are
presented below:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
VALUE UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED REALIZED OPTIONS/SARS AT 12/31/94 OPTIONS/SARS AT 12/31/94
NAME ON EXERCISE # ($) 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 subjective informal criteria applied by the Compensation Committee.
EMPLOYEE BENEFIT PLANS
Ultrak does not sponsor any defined benefit or actuarial plans. However,
Ultrak does sponsor a 401(k) plan for all eligible employees whereby Ultrak
matched 30% during 1994 of the 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
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<PAGE> 39
benefit retirement or pension plans for its employees, officers, or directors
other than a key-man life insurance policy on George K. Broady in the amount of
$1.0 million.
Ultrak has a policy that all loans from Ultrak or its subsidiaries to its
officers, directors, and key employees or their affiliates must be approved by
a majority of disinterested directors. There were no loans to officers,
directors, and/or key employees or their affiliates during 1994.
COMPENSATION OF DIRECTORS
Each director of Ultrak serves until the next annual meeting of Ultrak's
shareholders or until his successor is elected and qualified. Each independent
director receives a fee of $1,000 for each Board of Directors' meeting and $500
for each committee meeting attended, and officers and directors are generally
reimbursed for out-of-pocket expenses incurred in connection with attendance at
Board of Directors and committee meetings.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Messrs. James D. Pritchett, Executive Vice President of Ultrak, and Tim D.
Torno, Secretary-Treasurer and Chief Financial Officer of Ultrak, 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
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<PAGE> 40
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 Robert F. Sexton
are members of the Compensation Committee. Messrs. Lee, Sexton, and Neal are
independent directors. 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, and Mr. Pritchett is the Executive
Vice President and Chief Operating Officer of Ultrak.
Since July 1993, Ultrak has provided Veravision, Inc. ("Veravision") with a
working capital line of credit in return for interest on the borrowed funds and
warrants to purchase Veravision's capital stock. On December 30, 1994, Mr.
Broady, the Chairman of the Board, Chief Executive Officer, and President of
Ultrak, guaranteed the repayment of certain indebtedness of Veravision to
Ultrak. Prior to Ultrak making the line of credit available to Veravision, Mr.
Broady had no relationship with Veravision. Prior to Mr. Broady's guarantee,
Veravision had granted Ultrak warrants to purchase 59% of Veravision's capital
stock on a fully-diluted basis. Mr. Broady guaranteed certain amounts due under
notes made by Veravision to Ultrak. At December 31, 1994, the amount guaranteed
by Mr. Broady was approximately $470,000 and the total amount of indebtedness
of Veravision to Ultrak was $900,000. In consideration of his guaranty, Ultrak
transferred warrants to purchase approximately 30% of Veravision's capital
stock to Mr. Broady. Should the amount covered by Mr. Broady's guaranty
increase, Ultrak would be obligated to transfer warrants to purchase additional
shares of Veravision stock to Mr. Broady. Veravision is a supplier of certain
dental camera products to Ultrak. Purchases by Ultrak of Veravision products
totaled $875,000 during 1994 and were made on an arms-length, negotiated basis
and allow a reasonable gross profit margin to Veravision. Other terms of the
purchases from Veravision are similar to terms of similar transactions with
other, non-affiliated entities. At present, Mr. Broady's only relationship with
Veravision is in his capacity as a guarantor of certain debt owed to Ultrak by
Veravision (as described above) and as the holder of warrants to acquire
approximately 30% of Veravision's stock. Mr. Broady is neither an officer nor
director of Veravision.
During 1994, Ultrak made purchases of approximately $265,000 from Ultrak
Electronics Limited, a Hong Kong corporation of which Mr. Broady owns
approximately 30% of the outstanding capital stock. Ultrak believes that the
purchases were made at prices and on terms at least as favorable to Ultrak as
those which could have been obtained in an arm's length transaction with an
unaffiliated party.
During 1994, Mr. Broady acted as guarantor in part on both of Ultrak's
credit facilities as well as its trade line of credit with one of its principal
domestic suppliers. As of March 31, 1995, Mr. Broady has guaranteed
approximately $9.2 million in liabilities of Ultrak. Mr. Broady receives no
consideration for his guarantees on behalf of Ultrak.
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<PAGE> 41
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
41
<PAGE> 42
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
Robert F. Sexton
42
<PAGE> 43
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>
43
<PAGE> 44
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 F. Sexton 103,066 1.42 -0- -0-
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%
44
<PAGE> 45
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.
45
<PAGE> 46
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.
46
<PAGE> 47
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
Second quarter $9.50 $6.38
</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 September 30, 1995,
was approximately 3,500, comprised of approximately 1,800 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,
47
<PAGE> 48
Ultrak does intend to pay dividends on its shares of Series A Stock all of
which are owned by George K. Broady, the Chairman of the Board, Chief Executive
Officer, and President of Ultrak. Annual preferred stock dividends in the
amount of $117,210 were paid to Mr. Broady during each of 1994, 1993, and 1992.
48
<PAGE> 49
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 Information Statement and "ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" which are included elsewhere
herein.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- ------------------------------------------------------------
1995 1994 1994 1993 1992* 1991(1) 1990
---- ---- ---- ---- ----- ------- ----
STATEMENT OF (unaudited)
OPERATIONS DATA
- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $44,135,033 $36,757,219 $78,793,711 $52,411,971 $28,864,478 $18,003,952 $9,765,978
----------- ----------- ----------- ----------- ----------- ----------- ----------
Gross profit $10,644,936 $ 9,191,288 $19,444,003 $12,858,457 $ 7,367,629 $ 4,613,904 $2,494,659
----------- ----------- ----------- ----------- ----------- ----------- ----------
Operating income (loss) $ 2,774,376 $ 2,587,221 $ 5,109,687 $ 3,655,020 $ 1,278,618 $ 694,728 $ (318,905)
----------- ----------- ----------- ----------- ----------- --------- -----------
Income from continuing
operations before income
taxes 1,994,436 2,194,123 $ 4,302,532 $ 3,020,403 $ 569,843 $ 470,942 $ (775,196)
Income taxes 726,759 740,555 1,513,020 381,543 26,343 - -
----------- ----------- ----------- ----------- ----------- --------- -----------
Income (loss) from
continuing operations 1,267,677 1,453,568 2,789,512 2,638,860 543,500 470,942 (775,196)
Discontinued operations - - (190,000) (1,834,370) 294,255 - -
----------- ----------- ----------- ----------- ----------- --------- -----------
Net income (loss) 1,267,677 1,453,568 2,599,512 804,490 837,755 470,942 (775,196)
Dividend requirements on
preferred stock 58,604 58,604 117,210 117,210 117,210 117,210 -
----------- ----------- ----------- ----------- ----------- --------- -----------
Net income (loss) allocated
to common shareholders $1,209,073 $1,394,964 $ 2,482,302 $ 687,280 $ 720,545 $ 353,732 $ (775,196)
========== ========== =========== ========= ========= ========= ===========
Income (loss) per common
share from continuing
operations $ .18 $ .20 $ .39 $ .37 $ .07 $ .06 $ (0.15)
========= ========= ========= ========= ========= ========= ========
Net income (loss) per common
share $ .18 $ .20 $ .36 $ .10 $ .11 $ .06 $ (0.15)
========= ========= ========= ========= ========= ========= ========
<CAPTION>
AS OF
JUNE 30, AS OF DECEMBER 31,
-------- ------------------------------------------------------------
1995 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ----
BALANCE SHEET DATA (unaudited)
- ------------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $36,735,781 $36,352,690 $25,384,794 $16,198,851 $ 8,054,270 $4,567,900
Short-term debt 18,548,544 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 11,292,947 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.
49
<PAGE> 50
ULTRAK MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 COMPARED TO SIX MONTHS ENDED JUNE 30, 1994
Results of Operations - Continuing Operations:
For the six months ended June 30, 1995, net sales increased $7,377,814
(20%) over the comparable 1994 period. This growth was due primarily (90%) to
increased volume of sales of existing CCTV products to all of the markets that
Ultrak serves. New products introduced by Ultrak during the first and second
quarters of 1995 contributed approximately (10%) of the increase in net sales.
In comparison, for the six months ended June 30, 1995, cost of goods sold
increased $5,924,166 (21%) over the comparable 1994 period. This increase was
essentially in direct relationship to the overall CCTV increase in net sales.
The overall gross profit percentage decreased to (24.12%) for the six
months ended June 30, 1995 from (25.01%) for the six months ended June 30,
1994. The decrease in gross profit percentages was due primarily to competitive
market conditions and a strategic decision by Ultrak to be the industry value
leader.
For the six months ended June 30, 1995, other operating expenses increased
$1,268,493 (19%) over the comparable 1994 period. This increase was primarily
due to increased engineering, product development, and 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 and second quarters including advertising, printing,
product shows, and other promotional activities.
For the six months ended June 30, 1995, other (income) expenses increased
$384,842 (97%) over the comparable 1994 period because of increased interest
expense on higher borrowings due to greater prime interest rates offset
somewhat 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 six month period
ended June 30, 1995 of $642,241. Net cash used in operating activities was
$135,139, primarily because of increases in accounts and notes receivable,
prepaid expenses and inventory on hand related to higher sales during the
period and reductions in advances for inventory.
Net cash used in investing activities for the six months ended June 30,
1995 was $766,345 primarily for capital expenditures for office and warehouse
equipment, upgrades to Ultrak's computer system, leasehold improvements, and
increases in noncurrent notes receivable.
Net cash provided by financing activities for the six months ended June 30,
1995 was $259,243 from a net increase during the quarter in borrowings on
Ultrak's two lines of credit and payment of dividends on preferred stock.
50
<PAGE> 51
As of June 30, 1995, Ultrak had unused available lines of credit totaling
approximately $3.5 million.
On July 18, 1995, Ultrak's credit facility with its bank was amended as
follows:
(i) The revolving line of credit facility was increased to $17.5 million
from $15.0 million;
(ii) A new term loan facility secured by real estate and equipment of up to
$2.5 million was established with a payout on a ten year amortization
and a due date of July 31, 1997;
(iii) The contract interest rate for both facilities was lowered to floating
prime plus .25%, from prime plus .50%, with an option at LIBOR plus
2.50%;
(iv) The due date of the revolving line of credit facility was extended to
July 31, 1997 from September 27, 1995; and
(v) Certain financial and operation covenants were modified.
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.
51
<PAGE> 52
Other expenses were $807,155 for the year ended December 31, 1994, an
increase of $172,538 (27%) over 1993. This increase was due primarily to
increased interest costs on borrowings offset by interest income on notes
receivable.
Results of Operations - Discontinued Operations. On July 22, 1993, Ultrak
announced that it would discontinue its personal computer ("PC") products
business segment and concentrate its resources on the CCTV business segment. As
a result of this decision, the operations and net assets of the PC business
segment have been classified as discontinued operations for all periods
presented.
During the year ended December 31, 1994, Ultrak recorded an additional
provision of $190,000, net of income tax benefit, to reflect costs of
dissolution of the business as well as provision for expected settlement costs
of the remaining lawsuit relating to the discontinued operations.
Sales included in discontinued operations for the year ended December 31,
1994, 1993, and 1992 were $110,720, $19,232,836 and $9,677,585, respectively
(not included in net sales reported from continuing operations above).
Liquidity and Capital Resources:
Ultrak had a net increase in cash for the year ended December 31, 1994 of
approximately $142,000. Cash used in operating activities during 1994 was
approximately $3,517,000, primarily because of increases in accounts
receivable, inventory, and advances for inventory required by the significantly
higher sales volume. Cash used in investing activities was approximately
$1,925,000 for capital expenditures for furniture, fixtures, tooling, leasehold
improvements, and other fixed assets and acquisition of business. Cash provided
by financing activities was approximately $5,584,000, consisting of net
borrowings from Ultrak's bank and other lenders. It is expected that the
Company should begin to generate positive annual operating cash flows when its
growth slows to a more traditional level.
During 1994, Ultrak advanced a net total of $699,000 on notes receivable to
three parties. The largest advance ($500,000) was to Veravision, Inc., a
California corporation, for a working capital line of credit in consideration
of interest on the borrowed funds and warrants to purchase Veravision's capital
stock. Veravision, formed in 1993, is a manufacturer of dental camera products
for which Ultrak has exclusive United States marketing rights. All of the notes
have varying repayment terms, interest rates and other terms. See Note H to
Notes to Consolidated Financial Statements for the years ended December 31,
1994, 1993, and 1992.
As of December 31, 1994, Ultrak had unused available lines of credit
totaling approximately $1,956,000.
On October 31, 1994, Ultrak's revolving line of credit with NationsBank 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.
52
<PAGE> 53
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.
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
53
<PAGE> 54
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.
BUSINESS OF GPS
GENERAL
GPS manufactures and sells high-end integrated security and surveillance
systems used by systems integrators for outdoor perimeter protection of power
plants, military installations, commercial security, and high-end residential
applications. Effective August 1, 1995, GPS relocated its operations to Dallas,
Texas consolidating its headquarters with Ultrak, located at 1220 Champion
Circle, Suite 100, Carrollton, Texas 75006, and its telephone number is (214)
280- 9675.
OUTDOOR PERIMETER PRODUCTS
GPS manufactures a series of sophisticated outdoor perimeter sensors which
include the Ground Pressure System, Infrared Pulsed System, and the Wire
Protection System. These sensors using multiplexed technology offer state of
the art perimeter protection for facilities ranging from power plants, to
refineries, to high security prisons. GPS customers have freedom and
flexibility as to the application of these systems due to their ease of
installation and immunity to environmental disturbances.
DIGITAL VIDEO ACQUISITION AND TRACKING SYSTEMS
The VISI-TRAK (a registered trademark of GPS) family of digital video
acquisition and tracking ("DVAT") processors offers state of the art automated
surveillance and perimeter protection. A high speed 32-bit processor digitizes
and analyzes standard video signals searching for moving targets within the
video picture while ignoring the natural movement of shadows, clouds, rain, and
lightning. At the heart of the system is the proprietary DVAT visualizer which
identifies moving objects in a succession of video frames and produces
targeting data (location, size, velocity, and trajectory) for each object.
Using an automatic tracking pan tilt and zoom device, the system predicts
and anticipates a target's movement and automatically, without a user's
interface, develops a trajectory and follows it. Continuous variable zoom and
focus capability allows the VISI-TRAK system to automatically adjust the zoom
factor based on the target's position within the observed scene.
54
<PAGE> 55
COMPUTERIZED GUARD TOUR FOR AUTOMATED VIDEO SURVEILLANCE
The VISI-TOUR (a registered trademark of GPS) console system is a WINDOWS
(a registered trademark of MicroSoft Corporation) based powerful platform
providing highly compatible and advanced graphics with on-screen command and
control functions for CCTV cameras, matrix switchers, and video recording.
VISI-TOUR allows the user to create computerized guard tours for automated
video surveillance. By simply saving a "shot," VISI-TOUR saves all pertinent
information about the camera including pan, tilt, zoom, and focus settings. As
a result, the operator can create custom or random video guard tours with
individual viewing times and titles for each camera location and position.
INDUSTRIAL VIEWING SYSTEMS
GPS's specialty enclosures and positioning devices made from stainless
steel provide the necessary protected environment for camera viewing systems
under harsh conditions, including, but not limited to, high temperature furnace
operations, volatile and explosive conditions in refineries and fuel processing
plants, marine environments, and other corrosive environments.
CCTV ACCESSORIES AND CONTROLS
GPS has recently introduced MEGA MATRIX (a registered trademark of GPS),
which is a series of technologically advanced matrix switching systems and a
new generation of miniaturized environmental enclosures made from nylon. These
products offer advanced features over similar existing technologies at a
fraction of the cost. Their versatility and unique distributed intelligence and
architecture will offer GPS customers greater flexibility and features over
conventional systems.
OPERATIONS
GPS's operations are located in Dallas, Texas, and its manufacturing/
suppliers are located in the valley of Aosta, Northern Italy and Venice, Italy,
respectively. The design and prototype fabrication is led by a group of
engineers in the Dallas facility. After the manufacturing process is
completed, a series of products are imported for final assembly and testing in
the US based facility. GPS's computer design facilities include all hardware
and software necessary to develop and test the integrated systems both for
local and remote operations.
DISTRIBUTION
GPS's products are sold to wholesale distributors (which supply dealers
that sell to the end user), installing system integrators (which deal directly
with the end user), and large dealers (which deal directly with the end user),
and directly to the end user (typically large corporations which have their own
installing capacity and internal security).
INTELLECTUAL PROPERTY
GPS relies upon the trademarks "GPS, WPS, IPS, MEGA MATRIX, ULTRADUR,
VISI-TOUR, VISI-TRAK, AND VISI-PHONE" for its products.
55
<PAGE> 56
GOVERNMENTAL REGULATIONS
GPS's business is not materially affected by existing or probable
government regulations on GPS or its products.
COMPARISON WITH ULTRAK'S PRODUCTS
GPS's products compliment and enhance the use and sale of Ultrak's
products. As a result, the GPS product line will greatly expand Ultrak's
product line with products that offer enhanced features at competitive prices
in the market place. There is minimal overlap between GPS's and Ultrak's
products.
MARKET FOR GPS COMMON STOCK AND
RELATED SHAREHOLDER MATTERS
GPS Common Stock is held of record by three shareholders. GPS presently has
no outstanding options, warrants, or other rights to purchase shares of GPS
Common Stock. There is no established trading market for GPS Common Stock. GPS
has never declared a dividend on its common stock, and it is expected by GPS's
Board of Directors that no dividends will be declared or paid in the foreseeable
future.
PRINCIPAL SHAREHOLDERS OF GPS
The following table sets forth certain information as to the number of
shares of GPS Common Stock beneficially owned as of September 30, 1995, by (i)
each executive officer of GPS, (ii) each person or entity who is known to GPS
to beneficially own any outstanding shares of GPS Common Stock, and (iii) all
officers and directors as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF ULTRAK COMMON STOCK
NAME SHARES PERCENTAGE
- ---- ------ ----------
<S> <C> <C>
Mathiew Bais
President,Chief Executive Officer,
and Director 96,000 46.7%
Houssam Aboukhater
Shareholder 1,920 1.0%
Commodore Investments Ltd.
Shareholder 107,794 52.3%
All executive officers and directors,
as a group 96,000 46.7%
------------ ----------
Total 205,714 100%
============ ==========
</TABLE>
56
<PAGE> 57
SELECTED FINANCIAL DATA OF GPS
The following table sets forth for the fiscal year ended June 30, 1995,
selected financial and operating data for GPS. This information should be read
in conjunction with the financial statements of GPS included elsewhere in this
Information Statement and "GPS MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS" which are included elsewhere
herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
JUNE 30, 1995
-------------
(UNAUDITED)
<S> <C>
STATEMENT OF
OPERATIONS DATA
- ---------------
Net Sales $1,293,882
----------
Gross Profit $ 438,408
----------
Operating loss $ (191,351)
----------
Loss from continuing
operations before income
taxes (184,765)
==========
Income taxes 800
Net loss (185,565)
==========
Loss per common share $ (.97)
==========
</TABLE>
<TABLE>
<CAPTION>
AS OF FISCAL YEAR ENDED
-----------------------
JUNE 30, 1995
-------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA
- ------------------
Total assets $692,110
Short-term debt 122,947
Long-term debt 0
Stockholders' equity 354,899
Cash dividends declared
per common share 0
</TABLE>
57
<PAGE> 58
GPS MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 1995 COMPARED TO YEAR ENDED JUNE 30, 1994
Results of Operations - Continuing Operations:
For the year ended June 30, 1995, net sales increased $398,429 (31%) over
the comparable 1994 period. This growth was due primarily (80%) to increased
volume of sales of existing products to all of the markets that GPS serves. New
products introduced by GPS during fiscal 1995 contributed approximately (20%)
of the increase in net sales.
In comparison, for the year ended June 30, 1995, cost of goods sold
increased $322,884 (38%) over the comparable 1994 period. This increase was
essentially in direct relationship to the overall increase in net sales, net of
provisions recorded for physical inventory adjustments.
The overall gross profit percentage decreased to (33.88%) for the year
ended June 30, 1995 from (40.52%) for the year ended June 30, 1994. The
decrease in gross profit percentages in 1995 was due primarily to competitive
market conditions and certain inventory adjustments taken in conjunction with
the year end physical count.
For the year ended June 30, 1995, operating expenses increased $288,780
(47%) over the comparable 1994 period. This increase was primarily due to
increased sales and marketing costs including advertising, promotion,
personnel, travel, and other related costs commensurate with the overall
increase in sales and certain research and development costs for new product
development.
For the year ended June 30, 1995, other (income) expense decreased $2,869
(41%) over the comparable 1994 period because of certain non operating income
earned during the period.
Liquidity and Capital Resources:
GPS had a net increase in cash for the year ended June 30, 1995 of $67,002.
Net cash used in operating activities was $285,000, primarily because of
increases in prepaid expenses and inventory on hand related to higher sales
during the period and reductions in trade accounts payable offset by a
reduction in trade accounts receivable and an increase in accrued liabilities.
Net cash used in investing activities for the year ended June 30, 1995 was
$104,000 primarily for capital expenditures for tooling and molds, office and
warehouse equipment, upgrades to GPS's computer system, and the purchase of
certain OEM license agreements.
Net cash provided by financing activities for the year ended June 30, 1995
was $456,000 primarily from $400,000 in new capital contributed by the primary
investor and a net increase during the period in borrowings on GPS's note with
its primary investor.
58
<PAGE> 59
As of June 30, 1995, GPS continues to be dependent upon its primary
investor and internally generated cash to fund its operations. GPS believes
such sources of funds will be adequate for its projected needs for the next
twelve (12) months.
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, 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.
59
<PAGE> 60
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 Stockholders' Equity for the years ended December 31, 1994, 1993 and 1992 . . . . . . F-6
Consolidated Statements of Cash Flow for the years ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8
For the Three and Six Months Ended June 30, 1995 and 1994:
- ---------------------------------------------------------
Consolidated Balance Sheets at June 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . F-18
Consolidated Statements of Income for the three and six months ended June 30, 1995 and 1994 . . . . . . . . . . . F-19
Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1994 . . . . . . . . . . . . . . F-20
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-21
B.L.C. & ASSOCIATES, INC. (D/B/A G.P.S. STANDARD U.S.A.)
For the Year Ended June 30, 1995:
- --------------------------------
Balance Sheet as of June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-23
Statement of Income for the year ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Supplemental Schedule of Cost of Goods Sold for the Year Ended June 30, 1995 . . . . . . . . . . . . . . . . . . F-26
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-27
</TABLE>
<PAGE> 61
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> 62
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> 63
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> 64
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> 65
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> 66
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> 67
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> 68
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> 69
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> 70
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> 71
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> 72
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> 73
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> 74
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> 75
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> 76
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> 77
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets June 30, Dec. 31,
1995 1994
(Unaudited)
------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash deposits $0 $642,241
Accounts receivable, net 11,358,601 10,743,091
Inventories, net 15,521,701 14,396,438
Advances for inventory purchases 3,661,966 5,381,437
Prepaid expenses and other current assets 955,612 432,469
Deferred income taxes 362,988 362,988
------- -------
Total Current Assets 31,860,868 31,958,664
------------------------------------
Furniture and Equipment, net 2,090,664 1,971,393
Goodwill, net 1,510,834 1,259,969
Notes Receivable, Noncurrent (Note 2) 1,141,000 984,208
Other Assets 132,415 178,456
------------------------------------
Total Assets $36,735,781 $36,352,690
====================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable-trade $5,667,277 $6,531,779
Notes payable (Note 3) 18,548,544 18,244,183
Accrued liabilities 530,678 664,740
Other current liabilities 696,335 841,600
------------------------------------
Total Current Liabilities 25,442,834 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;
6,560,619 and 6,555,619 issued and outstanding
at June 30, 1995 and December 31, 1995,
respectively 73,441 73,254
Additional Paid-in Capital 7,227,047 7,213,747
Retained Earnings 3,015,704 1,806,632
------------------------------------
Total Stockholders' Equity 11,292,947 10,070,388
------------------------------------
Total Liabilities and Stockholders' Equity $36,735,781 $36,352,690
====================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-18
<PAGE> 78
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS SIX MONTH SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
--------------------------------------------------------------
1995 1994 1995 1994
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $22,305,871 $18,992,246 $44,135,033 $36,757,219
Cost of Sales 16,983,013 13,973,002 33,490,097 27,565,931
--------------------------------------------------------------
Gross Profit 5,322,858 5,019,244 10,644,936 9,191,288
--------------------------------------------------------------
Other Operating Expenses 4,157,148 3,552,642 7,870,560 6,602,067
--------------------------------------------------------------
Operating Income 1,165,710 1,466,602 2,774,376 2,589,221
--------------------------------------------------------------
Other (Income) Expense:
Other (Income) Expense, (11,988) (43,033) (31,543) (48,637)
Net Interest Expense 414,654 238,143 811,483 443,735
--------------------------------------------------------------
Other Expenses 402,666 195,110 779,940 395,098
--------------------------------------------------------------
Net Income before Income Taxes 763,044 1,271,492 1,994,436 2,194,123
--------------------------------------------------------------
Income Taxes 277,300 445,981 726,759 740,555
--------------------------------------------------------------
Net Income 485,744 825,511 1,267,677 1,453,568
Dividend Requirements on
Preferred Stock 29,302 29,302 58,604 58,604
--------------------------------------------------------------
Net Income Allocable to
Common Stockholders 456,442 796,209 1,209,703 1,394,964
======= ======= ========= =========
Income per Share-Primary .07 .12 .18 .20
=== === === ===
Income per Share-Assuming
Full Dilution .07 .12 .17 .20
=== === === ===
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-19
<PAGE> 79
ULTRAK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30 June 30
------------------------------------
1995 1994
------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $1,267,677 1,453,568
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 285,458 191,406
Changes in operating assets and liabilities:
(Increase), decrease in accounts receivable (615,510) (3,176,125)
(Increase), decrease in inventory (1,125,263) 2,620,124
(Increase), decrease in advances for inventory 1,719,471 (2,380,985)
(Increase), decrease in prepaid expenses (523,143) (248,588)
Increase, (decrease) in trade accounts payable (864,502) 982,871
Increase, (decrease) in accrued liabilities (279,327) 987,878
(Increase), decrease in discontinued operations 0 150,537
------------------------------------
Net cash provided by (used in) operating activities (135,139) 580,686
------------------------------------
Cash Flows from Investing Activities:
Capital expenditures for furniture and equipment (404,729) (548,549)
Investment in other assets (361,616) (263,438)
------------------------------------
Net cash used in investing activities (766,345) (811,987)
------------------------------------
Cash Flows from Financing Activities:
Issuance of common stock, net of issuance costs 13,486 (29,694)
Changes in notes payable 304,361 583,495
Payment of dividends on preferred stock (58,604) (58,604)
------------------------------------
Net cash provided by financing activities 259,243 495,197
------------------------------------
------------------------------------
Net increase (decrease) in cash (642,241) 263,896
------------------------------------
------------------------------------
Cash and Cash Equivalents at Beginning of the Period 642,241 500,106
------------------------------------
Cash and Cash Equivalents at End of the Period 0 764,002
===================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-20
<PAGE> 80
ULTRAK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Bases of Presentation:
The accompanying unaudited interim consolidated financial statements include
the accounts of Ultrak, Inc. and its subsidiaries ("Ultrak" or "the Company").
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 Annual Report on Form 10-K.
2. Notes Receivable-Noncurrent:
Notes receivable-noncurrent consists of the following as of June 30, 1995:
<TABLE>
<S> <C>
$1,000,000 notes receivable, principal payments due and payable
annually beginning in July 1995 until July 1998; interest pay-
able monthly at 10% per annum, collateralized by substantially
all assets of the maker $750,000
$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
$275,000 note receivable, principal payments due and payable on January
14, 1997, interest payable annually at 8%, partially collateralized by
certain assets of the maker 275,000
----------
$1,141,000
==========
</TABLE>
In connection with the $1,000,000 notes receivable, the Company has received
warrants to purchase up to 59% of the common stock of the maker. The chairman
of the Board of the Company has guaranteed approximately $470,000 of the notes
and has received approximately 50% of the warrants.
3. Notes Payable:
Notes payable consists of the following as of June 30, 1995:
<TABLE>
<S> <C>
$15.0 million revolving line of credit, due upon demand or
September 27, 1995; interest at floating prime plus .50% payable
monthly; collateralized by substantially all assets (see below) $11,894,448
$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 6,654,096
-----------
$18,548,544
===========
</TABLE>
F-21
<PAGE> 81
Both 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 June 30, 1995, the Company was in
compliance with all of its covenants with its lenders.
At June 30, 1995, the Company had unused available lines of credit totalling
approximately $3.5 million.
On July 18, 1995, the Company's credit facility with its bank was amended as
follows:
* The revolving line of credit facility was increased to $17.5 million from
$15.0 million.
* A new term loan facility secured by real estate and equipment of up to $2.5
million was established with a payout on a ten year amortization and a due
date of July 31, 1997.
* The contract interest rate for both facilities was lowered to floating prime
plus .25% from prime plus .50% with an option at LIBOR plus 2.50%.
* The due date of the revolving line of credit facility was extended to July
31, 1997 from September 27, 1995, and
* Certain financial and operational covenants were modified.
4. Acquisition of Diamond Electronics, Inc.:
On July 13, 1995, shareholders of Diamond Electronics, Inc. ("Diamond"), an
Ohio corporation, voting at a Special Meeting of Shareholders, approved and
adopted the terms of an Agreement and Plan of Reorganization (the "Agreement")
with Diamond, Ultrak, Diamond Purchasing Corp., a Texas corporation and wholly
owned subsidiary of Ultrak ("Diamond Purchasing Corp."), and certain
stockholders of Diamond, pursuant to which (i) Diamond Purchasing Corp. would
merge with and into Diamond, (ii) Diamond would become a wholly owned
subsidiary of Ultrak, and (iii) the outstanding shares of common stock, no par
value, of Diamond would be converted into the right to receive an aggregate of
600,000 shares of common stock, no par value, of Ultrak ("Ultrak Common Stock")
pursuant to the formula described in the Agreement.
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. The
transaction will be accounted for as a purchase effective as of July 1, 1995.
5. Acquisition of G.P.S. Standard U.S.A.:
On June 14, 1995, the Company signed a letter of intent with BLC & Associates,
Inc., a California corporation doing business as G.P.S. Standard U.S.A.
("GPS"), to purchase 100% of the outstanding stock of GPS for consideration of
176,470 shares of registered Ultrak Common Stock. For the year ended June 30,
1995, GPS has unaudited revenues of approximately $1.3 million and unaudited
net loss of approximately $185,000. GPS is a manufacturer of a line of
surveillance camera housings, pan and tilt devices, matrix switchers, and other
advanced software driven camera control systems. A definitive agreement is
expected to be signed by August 22, 1995. The transaction is expected to be
accounted for as a pooling of interests.
F-22
<PAGE> 82
B.L.C. & ASSOCIATES, INC.
DBA G.P.S. STANDARD U.S.A.
BALANCE SHEET
JUNE 30, 1995
ASSETS
<TABLE>
<S> <C>
Current Assets
Cash $101,561
Accounts receivable 193,752
Inventory - Note 1 275,633
Prepaid Expenses 4,799
--------
Total Current Assets $575,745
Plant and Equipment - Note 1
Automobiles and trucks 15,831
Building improvements 1,693
Furniture and fixtures 15,818
Machinery and equipment 25,499
Tools, molds, jigs & dyes 50,000
Computer equipment 33,692
--------
Total Property, Plant and Equipment 142,534
Less: Accumulated depreciation (59,502)
Net Property, Plant and Equipment 83,032
Other Assets
OEM Licenses - Note 1 50,000
Less: Accumulated amortization (16,667)
--------
Total Other Assets 33,333
--------
TOTAL ASSETS $692,110
========
</TABLE>
F-23
<PAGE> 83
B.L.C. & ASSOCIATES, INC.
DBA G.P.S. STANDARD U.S.A.
BALANCE SHEET
JUNE 30, 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
Current Liabilities
Trade accounts payable $126,683
Current portion of long-
term-debt - Note 2 122,947
Accrued interest payable 7,000
Due to stockholder 3,581
Accrued salaries and bonuses 30,000
Accrued expenses 37,000
Sales tax payable 10,000
--------
Total Current Liabilities $337,211
--------
Total Liabilities $337,211
--------
Stockholders' Equity
Common Stock 500,000
Less: Treasury Stock (12,000)
Retained Earnings:
Beginning Balance $52,465
Net Income (185,565)
--------
Ending Retained Equity (133,101)
--------
Total Stockholders' Equity 354,899
--------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $692,110
========
</TABLE>
F-24
<PAGE> 84
B.L.C. & ASSOCIATES, INC.
DBA G.P.S. STANDARD U.S.A.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
YEAR
TO DATE %
<S> <C> <C>
Sales $1,293,882 50.0
Cost of Goods Sold - Supplemental
Schedule Attached 855,474 33.1
---------- ----
Gross Profit 438,408 16.9
---------- ----
Operating Expenses
Advertising 18,850 .7
Amortization expense 16,667 .6
Auto and truck expense 21,894 .9
Bad debts expense 26,793 1.0
Bank charges 3,649 .1
Business promotion 22,883 .9
Charitable contributions 200 .0
Entertainment 33,267 1.3
Employee benefits 1,323 .1
Dues and subscriptions 773 .0
Insurance 1,519 .1
Interest expense 13,496 .5
Legal and accounting 11,899 .5
Licenses 1,725 .1
Medical reimbursements costs 1,857 .1
Miscellaneous accrued expenses 25,000 1.0
Moving expense 12,000 .5
Office salaries 116,617 4.5
Office supplies 23,754 .9
Officers' salaries 144,167 5.6
Payroll taxes 18,649 .7
Postage 9,549 .4
Research and development 60,000 2.3
Rent - office 6,557 .3
Repairs and maintenance 1,222 .1
Telephone 20,228 .8
Sales tax expense 10,000 .4
Storage 5,188 .2
---------- ----
Total Operating Expenses 629,722 24.3
---------- ----
Loss from Operations (191,315) (7.4)
Non-operating income 6,549 .3
---------- ----
Loss before Income Taxes (184,765) (7.1)
---------- ----
Provision for taxes - state 800 .0
---------- ----
Net Loss $ (185,565) (7.2)
========== ====
</TABLE>
F-25
<PAGE> 85
B.L.C. & ASSOCIATES, INC.
DBA G.P.S. STANDARD U.S.A.
SUPPLEMENTAL SCHEDULE OF
COST OF GOODS SOLD
FOR THE YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
YEAR
TO DATE %
<S> <C> <C>
Cost of Goods Sold:
Beginning inventory $57,906 2.2
Depreciation - Note 1 24,149 .9
Direct labor 2,833 .1
Freight-in 109,953 4.3
Insurance - general liability 13,668 .5
Purchases 847,501 32.8
Rent 37,155 1.4
Sub-contract labor 893 .0
Trade shows 6,404 .3
Travel and lodging 30,646 1.2
---------- ----
Cost of Goods Available 1,131,107 43.7
Less: Ending inventory (275,633) (10.7)
---------- ----
Total Cost of Goods Sold $855,474 33.1
========== ====
</TABLE>
F-26
<PAGE> 86
B.L.C. & ASSOCIATES, INC.
DBA G.P.S. STANDARD U.S.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
STRUCTURAL PROFILE
GPS Standard USA was founded by Mathiew Bais for the purpose of importing and
distributing security equipment. Additionally, the company engineers and
develops security systems.
INVENTORY
The Company values its inventory using the lower of cost (first-in, first-out)
or market.
DEPRECIATION AND AMORTIZATION
The cost of property and equipment is depreciated or amortized using straight
line and accelerated methods over their estimated service lives of the assets.
The estimated service lives used in computing depreciation are as follows:
<TABLE>
<CAPTION>
Classification Estimated Service Lives
-------------- -----------------------
<S> <C>
Automobiles and trucks 5 years
Building improvements 7 years
Furniture and fixtures 5 years
Machinery and equipment 5 to 7 years
Computer equipment 5 years
OEM licenses 3 years
</TABLE>
Repairs and maintenance are charges to expense in the year incurred. Major
renewals and betterments are charged and written off over their estimated
useful lives.
F-27
<PAGE> 87
B.L.C. & ASSOCIATES, INC.
DBA G.P.S. STANDARD U.S.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1995
NOTE 2 - CONTRACTS AND NOTES PAYABLE
As of the balance sheet date, contracts and notes payable consisted of the
following:
<TABLE>
<CAPTION>
==============================================================================================================
Principal at Principal & Interest Rate Due Date Security
Balance Sheet Interest
Date Payment Amount
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Wells Fargo $22,947* $300 Variable Annually Unsecured
Line of Credit Renewable
- --------------------------------------------------------------------------------------------------------------
Commodore Line $100,000 $100,000 Prime August 95 Unsecured
of Credit
- --------------------------------------------------------------------------------------------------------------
Total notes and $122,947
contracts
payable:
Less current (122,947)
portion: ---------
Non current $ -0-
portion: =========
</TABLE>
*Maximum approved line of credit $50,000.00 as of the balance sheet date
NOTE 3 - PROVISION FOR INCOME TAXES
The provision for income taxes is calculated as follows:
<TABLE>
<S> <C>
Federal income tax provision $ 0
California franchise tax 800
----
Total provision for income taxes $800
----
</TABLE>
F-28
<PAGE> 88
B.L.C. & ASSOCIATES, INC.
DBA G.P.S. STANDARD U.S.A.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 1995
NOTE 4 - COMMITMENTS AND CONTINGENCIES
The company's three year facility lease expires on August 31, 1995. The minimum
annual commitment for the next five years is as follows:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1995 $1,093
1996 -0-
1997 -0-
1998 -0-
1999 -0-
</TABLE>
NOTE 5 - MERGERS AND ACQUISITIONS (SUBSEQUENT EVENTS)
On August 22, 1995, the shareholders of BLC & Associates, Inc. (d/b/a G.P.S.
Standard U.S.A.) ("GPS") fully executed a definitive agreement, whereby 100% of
GPS is to be acquired by Ultrak, Inc.
F-29
<PAGE> 89
ANNEX A - MERGER AGREEMENT AND EXHIBITS 1.01(A) AND (B) THERETO
ANNEX B - CERTIFICATE OF INCORPORATION OF GPS
ANNEX C - BYLAWS OF GPS
ANNEX D - ARTICLES OF INCORPORATION OF ULTRAK, AS AMENDED
ANNEX E - BYLAWS OF ULTRAK
ANNEX F - GPS SHAREHOLDERS AGREEMENT
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> 90
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT, dated August 1, 1995 (the "Signing Date"), is among
BLC & Associates, Inc., a California corporation doing business as G.P.S.
Standard U.S.A. ("GPS"), Mathiew Bais ("Bais"), Commodore Investments Ltd., a
Liberian corporation ("CIL") (Bais and CIL are collectively referred to as the
"Signing Shareholders"), Ultrak, Inc., a Colorado corporation ("Ultrak"), and
GPS Acquisition Corp., a Texas corporation and wholly-owned subsidiary of
Ultrak ("Newco").
Recitals. The Boards of Directors of GPS, Ultrak, and Newco deem it
in the best interests of their respective shareholders that a merger (the
"Merger") is consummated whereby Newco is merged with and into GPS. GPS, the
Signing Shareholders, Ultrak, and Newco desire to set forth the terms of the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the terms of
this Agreement, 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 Closing Date (as hereinafter defined) and pursuant to the provisions of
the Texas Business Corporation Act (the "TBCA") and the California General
Corporation Law (the "CGCL"), Newco will be merged with and into GPS, 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 California (collectively, the "Certificates of Merger"). The
"Closing Date" means such date, as provided in Subsection 1.03(e) of this
Agreement, on which the Certificates of Merger shall be filed in accordance
with the TBCA and the CGCL, and the date the Merger will become effective in
accordance with the Certificates of Merger.
1.02. Effect on Stock. As a result of the Merger, on the Closing Date
and without any action on the part of GPS, Ultrak, or Newco, or any holder of
any of the following securities, the following will occur:
(a) Except as provided in Section 1.06, each share of
Common Stock, no par value per share, of GPS ("GPS Stock") issued and
outstanding immediately prior to the Closing 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 Stock") as is equal to the
quotient of (i) 176,470 divided by (ii) the total number of issued and
outstanding shares of GPS Stock as of the Closing Date. If all shares
of GPS Stock issued and outstanding on the Closing 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 176,470.
(b) Any treasury stock of GPS will be cancelled and
retired and cease to exist. No cash, securities, or other
consideration will be delivered in exchange for such treasury shares.
A-1
<PAGE> 91
(c) Each share of Common Stock, no par value, of Newco
("Newco Stock") issued and outstanding immediately prior to the
Closing 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. Exchange and Cancellation of Certificates.
(a) Ultrak shall authorize Securities Transfer Corp. to serve as
exchange agent hereunder (the "Exchange Agent"). Promptly after the Closing
Date, Ultrak shall deposit with the Exchange Agent certificates representing
the shares of Ultrak Stock to which the holders of GPS Stock (other than
holders of Dissenting Shares) are entitled pursuant to this Article I.
(b) As soon as practicable after the Closing Date, the Exchange
Agent shall mail and otherwise make available to each record holder who, as of
the Closing Date, was a holder ("Shareholder") of certificates representing
outstanding shares of GPS 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 Nasdaq National Market ("NASDAQ")
rules. Upon proper delivery of the letter of transmittal to the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing the shares of Ultrak Stock to which such
holder of GPS Stock shall have become entitled pursuant to the provisions of
this Article I and the Certificates surrendered shall be cancelled. No
interest will be paid or accrued on the cash payable upon surrender of the
Certificates. Ultrak shall pay any transfer taxes required by reason of the
issuance of a certificate representing Ultrak 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 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"). From the Closing Date until surrender in accordance with
the provisions of this Section 1.03, each Certificate (other than Certificates
representing treasury shares of GPS and Certificates representing Dissenting
Shares) shall represent for all purposes only the right to receive the
consideration provided in this Article I. All payments in respect of shares of
GPS 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 Closing Date, there shall be no transfers on the
stock transfer books of the Surviving Corporation of the shares of GPS Stock
that were outstanding immediately prior to the Closing Date. If, after the
Closing 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) If the Registration Statement (as hereinafter defined) is
declared effective by the Securities and Exchange Commission (the "SEC") on or
before the 120th day after the Signing Date, GPS, Newco, and Ultrak, as soon as
practicable after such date that the SEC declares the Registration Statement
A-2
<PAGE> 92
effective, shall cause the Certificates of Merger to be filed in accordance
with the TBCA and the CGCL and the Shareholders shall receive the number of
shares of Ultrak Stock equal to the number of shares set forth in Subsection
1.02(a) of this Agreement. Notwithstanding anything to the contrary contained
herein, if the Registration Statement is not declared effective by the SEC on
or before the 120th day after the Signing Date, then GPS, Newco, and Ultrak, as
soon as practicable after the 120th day following the Signing Date, shall cause
the Certificates of Merger to be filed in accordance with the TBCA and the CGCL
and the Shareholders shall receive the number of restricted shares of Ultrak
Stock equal to the number of shares set forth in Subsection 1.02(a) of this
Agreement. If the Shareholders receive restrictive shares of Ultrak Stock as
set forth in the immediately preceding sentence, then the Shareholders shall
also receive such registration rights as set forth in Article II of this
Agreement.
1.04. S-4 Registration Statement; Information Statement; Blue Sky
Laws. Ultrak and GPS acknowledge that the transactions contemplated hereby are
subject to the provisions of the Securities Act of 1933, as amended (the
"Securities Act"). GPS, 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 an information statement to
be delivered to GPS's Shareholders (the "Information 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
SEC and the Information Statement therein cleared by the SEC as promptly as
possible. GPS 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 GPS, 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. Each affiliate of GPS ("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 Stock acquired pursuant to the Merger.
1.05. Tax Consequences. It is intended that the Merger shall
constitute a reorganization within the meaning of Section 368(a)(2)(E) of the
Code, and that this Agreement shall constitute a "plan of reorganization" for
the purposes of Section 368 of the Code.
1.06. Dissenting Shares. To the extent that appraisal rights are
available under the CGCL, shares of GPS Stock that are issued and outstanding
immediately prior to the Closing 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 CGCL ("Dissenting
Shares") shall not be converted into the right to receive the consideration
provided for in this Article I at or after the Closing Date unless and until
the holder of such shares withdraws his demand for such appraisal (in
accordance with the applicable provisions of the CGCL) 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 CGCL) or
becomes ineligible for such appraisal, then, as of the Closing Date or the
occurrence of such event, whichever later occurs, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the consideration provided for in this Article
I. If any holder of GPS Stock shall assert the right to be paid for the fair
value of such GPS Stock as described above, GPS shall give Ultrak notice
thereof and Ultrak shall have the right to participate in all negotiations and
proceedings with respect to any such demands. GPS shall not, except with the
prior
A-3
<PAGE> 93
written consent of Ultrak, voluntarily make any payment with respect to, or
settle or offer to settle, any such demand for payment.
1.07. Signing Shareholders' Approval. The Signing Shareholders agree
to the terms of the Merger and this Agreement and agree to vote all of their
shares of GPS Stock in favor of the Merger.
1.08. Effective Date for Accounting Purposes. To the fullest extent
possible, the effective date of the Merger for accounting purposes will be July
1, 1995 and the effective date of the transfer of control of GPS will be July
1, 1995.
ARTICLE II: REGISTRATION RIGHTS
2.01. Registration.
(a) If, at any time within two (2) years after the
Closing Date, Ultrak proposes to file a registration statement (on any
form other than Form S-4 or Form S-8) relating to any of the Ultrak
Stock or other securities under the Securities Act, whether or not for
sale for its own account, Ultrak will promptly, but in any event not
less than 30 days prior to the initial filing of such registration
statement, deliver written notice of such intention to the holders of
Registrable Shares (as hereinafter defined) setting forth the type of
securities proposed to be registered, the intended method of
disposition, the maximum proposed offering price, commissions and
discounts in connection therewith and other relevant information.
Such notice must indicate that such holders of Registrable Shares have
piggyback registration rights pursuant to this Subsection 2.01(a). As
used in this Agreement, "Registrable Shares" shall at any point in
time mean shares of the Ultrak Stock which are either held by the
Shareholders or held by persons to whom the Shareholders have
transferred, in a private transaction, shares of the Ultrak Stock. If
all, and not less than all, of the holders of Registrable Shares so
request within 20 days after such notification, Ultrak hereby agrees
to include in such registration statement all of the Registrable
Shares and to use its best efforts to register such Registrable Shares
so that such Registrable Shares may be sold at such times and in such
manner as the holder or holders thereof shall determine; provided
however each Affiliate, as the term "affiliate" is defined pursuant to
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 the Ultrak Stock acquired pursuant to the
Merger. In the event that the proposed registration by Ultrak is, in
whole or in part, an underwritten public offering of securities of
Ultrak, any request pursuant to this Subsection 2.01(a) to register
may specify that the Registrable Shares be included in the
underwriting on the same terms and conditions as the shares of the
Ultrak Stock, if any, otherwise being sold through underwriters under
such registration; provided however each Affiliate, as the term
"affiliate" is defined pursuant to 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 the
Ultrak Stock acquired pursuant to the Merger.
(b) One (1) year following the Closing Date and
thereafter, the holders of Registrable Shares may request, one time
and one time only, that Ultrak promptly file and use its best efforts
to cause to become effective an appropriate registration statement
under the Securities Act covering all and not less than all of the
Registrable Shares as such holders shall request and to register the
sale of such Registrable Shares so that such Registrable Shares may be
sold at such
A-4
<PAGE> 94
times and in such manner as the holders thereof shall determine;
provided however each Affiliate, as the term "affiliate" is defined
pursuant to 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 the Ultrak Stock acquired
pursuant to the Merger and provided further that Ultrak shall not be
required to obtain or continue the effectiveness of such registration
statement after two (2) years from the Closing Date. Registrations
under this Subsection 2.01(b) shall be on an appropriate registration
form of the SEC. Ultrak agrees to include in any such registration
statement all information which holders of Registrable Shares being
registered shall reasonably request. If the registration pursuant to
this Subsection 2.01(b) involves an underwritten offering, the
underwriter or underwriters shall be selected by the holders of a
majority of Registrable Shares to be included in such registration.
(c) If (i) a registration pursuant to this Section 2.01
either involves an underwritten offering, or would be in effect at the
same time as another underwritten offering, of the Ultrak Stock,
whether or not for sale by Ultrak, to be distributed on a firm
commitment basis by or through one or more underwriters of recognized
standing under underwriting terms that are typical for such a
transaction and (ii) the managing underwriter of such underwritten
offering informs Ultrak and the holders of Registrable Shares
requesting such registration by letter of its reasonable belief that
the effect of including all of the Registrable Shares so requested to
be included in the registration statement will materially and
adversely affect the sale of the shares of the Ultrak Stock proposed
to be sold by Ultrak and shareholders of Ultrak (other than
management) having contractual registration rights, then the number of
shares of the Ultrak Stock that a holder of Registrable Shares may
have included in such registration shall be reduced (and the number of
shares of the Ultrak Stock to be sold by other selling shareholders
shall also be reduced) to a number determined by multiplying (x) the
total number of shares held by all selling shareholders having
contractual registration rights (including the holders of Registrable
Shares) which the managing underwriter is willing to have included in
such registration, times (y) a fraction, the numerator of which is the
number of Registrable Shares which such holder requested to be
included in such registration statement and the denominator of which
is the number of all shares (including the Registrable Shares) which
all the selling shareholders having contractual registration rights
(other than management) have requested to be included in such
registration.
(d) In connection with any registrations under this
Section 2.01, the parties and their respective affiliates shall
cooperate and furnish information in the manner provided in Section
1.04 of this Agreement.
2.02. Costs and Expenses. All costs and expenses in connection with
the registration of any Registrable Shares under Section 2.01 of this Agreement
or the performance of Ultrak's obligations under Section 2.01 of this
Agreement, including, but not limited to, all registration, filing, stock
exchange and NASD fees; all fees and expenses of complying with securities or
blue sky laws; fees and disbursements of counsel for Ultrak, counsel
responsible for qualifying the Registrable Shares under blue sky laws, not more
than one firm of attorneys retained by the holders of Registrable Shares being
registered, and of independent accountants and other experts of Ultrak; and all
other reasonable expenses in connection with the transfer and delivery of the
Registrable Shares, shall be borne by Ultrak; provided, however, that Ultrak
shall not be obligated to pay any underwriting commissions or discounts
relating to the Registrable Shares.
2.03. Indemnification.
A-5
<PAGE> 95
(a) Ultrak hereby agrees to indemnify and hold harmless
each holder of Registrable Shares requesting or joining in a
registration hereunder and each other person, if any, who controls
such holder within the meaning of the Securities Act, against all
losses, liabilities, claims, damages, and expenses, joint or several,
to which such holder or controlling person may become subject under
the Securities Act or otherwise, insofar as such loss, liability,
claim, damage or expense arises out of or is based upon any untrue
statement of any material fact contained in any registration statement
covering the Registrable Shares, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or in an amendment
or supplement thereto executed by or on behalf of Ultrak or based upon
written information furnished by or on behalf of Ultrak filed in any
jurisdiction in order to qualify the Registrable Shares under the
securities laws thereof or filed with the SEC, or arises out of or is
based upon the omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided, however, that Ultrak shall not be obligated to indemnify the
holder of Registrable Shares in any such case to the extent that any
such loss, liability, claim, damage or expense arises out of or is
based upon any untrue statement or omission relating to such holder or
the holder's method of distributing the Registrable Shares, or
otherwise, that was made in reliance upon, and in conformity with,
written information duly executed and furnished by the holder of
Registrable Shares specifically for use in the registration statement,
or any amendment or supplement thereto, or any application, as the
case may be.
(b) By requesting Registrable Shares to be covered by any
registration statement in accordance with this Agreement, each such
holder agrees to indemnify and hold harmless Ultrak, each of its
directors and each of its officers who have signed said registration
statement, and each person, if any, who controls Ultrak within the
meaning of the Securities Act or the Exchange Act, to the same extent
as the indemnification by the Ultrak provided for in Subsection
2.03(a) above, but only with respect to untrue statements or
omissions, if any, relating to such holder or the holder's method of
distributing the Registrable Shares, or otherwise, made in such
registration statement, prospectus contained therein, or amendment or
supplement thereto, or in any application, in reliance upon, and in
conformity with, written information duly executed and furnished by
the holder of Registrable Shares against whom indemnification is
sought to Ultrak specifically for use in the registration statement,
in the prospectus contained therein, or any amendment or supplement
thereto, or any application, as the case may be.
(c) Promptly after the receipt by an indemnified party
under Subsection 2.03(a) or (b) above of notice of the commencement of
any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such
subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such
action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to
the extent that it shall wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party; provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party or parties shall have
been advised by its counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the indemnifying party, the indemnified party or
parties shall have the right
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to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties (it being
understood, however, that the indemnifying party shall not be liable
for the fees and expenses of more than one separate counsel, which, in
the case of Subsection 2.03(a) above, shall be designated by the
Shareholder and which, in the case of Subsection 2.03(b) above, shall
be designated by the Ultrak). After notice from the indemnifying
party to such indemnified party of its election so to assume the
defense of any such action, the indemnifying party shall not be liable
to such indemnified party under Subsection 2.03(a) or (b) above for
any legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable
costs of investigation, unless (i) the indemnified party shall have
employed counsel in accordance with the proviso in the immediately
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of
commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party. The indemnification required by
this Article II shall be made by periodic payments during the course
of the investigation or defense, as and when bills are received or
losses, liabilities, claims, damages or expenses are incurred.
2.04. Exchange Act Registration. Ultrak agrees to maintain
registration of the Ultrak Stock under the Exchange Act, to timely file and
maintain all required reports and other filings with the SEC, and to take such
action as may from time to time be necessary to enable holders of Registrable
Shares to be able to sell pursuant to Rule 144 promulgated by the SEC under the
Securities Act, unless otherwise restricted by this Agreement or unless sales
can be made without compliance with Rules 144 and 145 promulgated by the SEC
under the Securities Act.
ARTICLE III: REPRESENTATIONS AND WARRANTIES OF GPS AND BAIS
Each of GPS and Bais jointly and severally represents and warrants to
each of Ultrak and Newco that the following are true and correct as of the
Signing Date and will be true and correct as of the Closing Date as if made on
that date:
3.01. Organization, Qualification, and Good Standing. GPS is a
corporation duly organized, validly existing, and in good standing under
California law, 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.
3.02. Investments or Subsidiaries. GPS 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.
3.03. Corporate Records. Copies of the Articles of Incorporation and
all amendments thereto and the Bylaws of GPS have been delivered to Ultrak and
such copies are true, correct, and complete. The minute books of GPS 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 GPS since the formation of GPS.
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3.04. Corporate Authority Relative to This Agreement; No Violation.
GPS 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 GPS's Board of Directors and, except for the approval
of the Shareholders, no other corporate proceedings on the part of GPS 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 GPS
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 GPS,
enforceable against GPS in accordance with their terms. 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 GPS, (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 GPS is a party or by which GPS is bound, or result in the
creation of any lien, charge or encumbrance upon the properties or assets of
GPS 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 GPS or its assets. Other than in connection with or in compliance
with the provisions of the CGCL, 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 GPS of the transactions contemplated herein.
3.05. Capitalization. The authorized capital stock of GPS consists
solely of 1,000,000 shares of GPS Stock, 192,000 shares of which are issued and
outstanding. All outstanding shares of GPS Stock are duly authorized, validly
issued, fully paid, and nonassessable and have been offered, issued, sold, and
delivered by GPS in compliance with applicable federal and state securities
laws. There are no preemptive rights in respect of the capital stock of GPS.
There are no outstanding subscriptions, options, warrants, rights, or other
arrangements or commitments, whether express or implied, obligating GPS to
issue any shares of its capital stock or securities exchangeable for or
convertible into its capital stock. Section 3.05 of GPS's Disclosure Schedule
(the "Disclosure Schedule") lists all of the Shareholders, the address of each
Shareholder as shown in GPS's books and records, and the number of shares of
GPS Stock owned by each Shareholder. As of the date hereof, each Shareholder
is the lawful record and beneficial owner of the share of GPS Stock set forth
by his name on Section 3.05 of the Disclosure Schedule, all free and clear of
all liens, proxies, claims, and encumbrances of any kind. The transfer as of
the Closing Date of the Certificates will transfer to Ultrak good and
indefeasible title to such shares of GPS Stock, free and clear of all liens,
claims, and encumbrances of every kind, and GPS and the Shareholders will
forever warrant and defend such title against any claimants thereto.
3.06. GPS Financial Statements. GPS has previously furnished to
Ultrak true and complete copies of unaudited balance sheets of GPS as of
December 31, 1994, May 31, 1995, and June 30, 1995, and the statements of
income, for the periods then ended (collectively, the "Financial Statements").
The Financial Statements are attached as Section 3.06 of the Disclosure
Schedule.
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3.07. Compliance with Laws. To the best knowledge of GPS and Bais,
GPS has complied with all laws, rules, and/or regulations applicable to it or
its business, and has received no notice of any alleged violation of any such
laws, rules, or regulations.
3.08 Taxes. GPS has duly filed when due all income, excise,
corporate, franchise, property, sales, payroll, withholding, and other tax
returns and reports required to be filed by it as of the date hereof by the
United States of America or any state or any political subdivision thereof and
has paid or established adequate reserves for all taxes (including penalties
and interest) which have or may become due for the tax periods covered by such
returns, and any assessments which have been received by it. All such tax
returns or reports which are income tax returns or reports fairly reflect the
taxable income generated by GPS and the taxes of GPS for the periods covered
thereby. GPS is not delinquent in the payment of any tax, assessment, or
governmental charge, there is no tax deficiency or delinquency asserted against
GPS and there is no unpaid assessment, proposal for additional taxes,
deficiency or delinquency in the payment of any of the taxes of GPS that could
be asserted by any taxing authority, nor of any violation of any tax law.
There are no waivers or agreements by GPS for the extension of time for the
assessment of any tax as shown on such returns or reports with respect to GPS.
No audit of GPS with respect to taxes is pending or threatened. All monies
required to be withheld or collected by GPS 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 GPS 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 GPS.
3.09. Liabilities and Obligations. The Financial Statements reflect
all material liabilities or obligations of GPS, 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 GPS since July 1,
1995, which liabilities and obligations are not, individually or in the
aggregate, material to the condition (financial or otherwise), business or
operations of GPS. 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, GPS 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 GPS 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 GPS.
3.10. Employee Benefit Plans and Arrangements; ERISA. GPS does not
sponsor or maintain and GPS 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. GPS does not have any commitment
to create any such Plan. GPS 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. GPS 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
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provisions of Title IV of ERISA. GPS 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. GPS does not have any obligation in connection with
any Plan pursuant to the terms of a collective bargaining agreement. To the
best of GPS's knowledge, no Plan previously sponsored or maintained by GPS, or
to which GPS has otherwise been a party, has resulted in any material liability
or obligation for GPS other than as reflected on the Financial Statements.
3.11. Absence of Certain Changes. Since July 1, 1995, GPS 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 $3,000 or total capital expenditures in excess
of $10,000; (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 GPS; (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 GPS.
3.12. Title and Related Matters. GPS has good and marketable title
to all assets reflected in the Financial Statements as owned by GPS and to
those other assets reflected in GPS'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 GPS 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 GPS's
books and records (except as they have since been affected by transactions in
the ordinary course of business and consistent with past practices).
3.13. Insurance. GPS 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 GPS's industry. All of such policies
are, and will be maintained through the Closing Date, in full force and effect.
All premiums due thereon have been paid and no notice of cancellation has been
received with respect thereto.
3.14. Patents, Trademarks, Copyrights, Etc. Except as set forth in
Section 3.14 of the Disclosure Schedule, GPS 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"). Except
as set forth in Section 3.14 of the
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Disclosure Schedule, GPS 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 GPS,
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 GPS 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. There is no claim that, or inquiry
as to whether, any product, activity or operation of GPS 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 GPS
with respect thereto.
3.15. Consents. GPS 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 GPS, 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.
3.16. Labor Relations. GPS is not a party to any collective
bargaining agreements with any union and no collective bargaining agreement is
currently being negotiated by GPS. There are no unfair labor practice charges,
complaints, or proceedings against GPS pending or threatened before the
National Labor Relations Board. There are no discrimination charges (relating
to sex, age, race, national origin, handicap, or veteran status) pending before
any federal or state agency or authority. There is no pending representation
question involving an attempt to organize a bargaining unit including any
employees of GPS and no labor grievance has been filed.
3.17. Litigation and Claims. GPS is not a party to, and the business
and assets of GPS 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. GPS is not (a) subject to any continuing court or administrative
order, writ, injunction, or decree applicable specifically to GPS or to its
business, assets, operations, or employees, or (b) in default with respect to
any such order, writ, injunction, or decree. GPS does not know of any basis
for any such action, proceeding, or investigation.
3.18. Employees and Consultants. Except as set forth in Section 3.18
of the Disclosure Schedule, GPS has no direct or indirect, express or implied,
obligation to pay severance or termination pay to any officer or employee of
GPS, or to pay any termination or severance payments to any consultant, agent,
or other person or entity.
3.19. Books of Account. The books of account of GPS 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 GPS have been properly recorded in such books.
3.20. Distributions. Since July 1, 1995, no distribution, payment or
dividend of any kind has been declared, paid or distributed by GPS on or with
respect to any of its capital stock at any time.
3.21. Corporate Name. There are no actions, suits, or proceedings
pending or threatened against or affecting GPS which may result in any
impairment of the right of GPS to use its corporate name.
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3.22. Compliance with Environmental Laws. GPS has not obtained and
has not been required to have obtained any permits, licenses, or similar
authorizations by reason of any applicable federal or state environmental laws,
rules, or regulations. In connection with the real property leased by GPS
("Real Property"), GPS has not placed any asbestos- containing thermal
insulation or building products or PCB-containing products on the Real
Property, and GPS 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. GPS has not ever been refused,
nor does it 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. GPS has not installed or maintained any
active or inactive hazardous waste receptacles on the Real Property, and GPS
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. There have been no spills, discharges or other
releases of hydrocarbons or hazardous or toxic substances onto or from the Real
Property and GPS does not have any knowledge of any spills, discharges, or
releases by any owner, prior lessee, or user of the Real Property. 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 GPS or against the Real Property, and
GPS does not have any knowledge of any such documents prepared by any owner,
prior lessee, or user of the Real Property.
3.23. Condition of Fixed Assets. All of the fixed assets owned or
leased by GPS 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.
3.24. Registration Statement; Other Information. None of the
information with respect to GPS or the Merger supplied by GPS 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 Closing Date, will contain any untrue statement
of a material fact required to be stated therein or necessary in order to make
the statements therein or omit to state any material 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.
3.25. Brokers and Finders. None of GPS, the Signing Shareholders, or
any of GPS' officers, directors, shareholders, 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 IV: REPRESENTATIONS AND WARRANTIES OF CIL
CIL 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 Closing Date as if made on that date:
4.01. Miscellaneous Representations. CIL has no actual knowledge of
nor has it made any specific inquiries or investigations relating to: (i) any
material error in the Financial Statements, (ii) any material liability or
obligation of GPS that is not disclosed in the Financial Statements, (iii) any
pending or
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threatened suite, claim, action, proceeding, investigation, or inquiry against
GPS that is reasonably likely to be material to the condition (financial or
otherwise), business, or operations of GPS, (iv) any customer or supplier
material to the condition (financial or otherwise), business, or operations of
GPS that has indicated it will no longer purchase from or sell to GPS, and/or
(v) any provision of or the execution, amendment, modification, breach,
violation, or effectiveness of the Joint Venture Agreement "Polyvideo" among
Fully Integrated Security Technologies, Inc., a California corporation
("FIST"), Profabel, Sicurit Alarmitalia, and Video Engineering.
4.02. Stock Ownership. As of the date hereof, CIL is the lawful
record and beneficial owner of the number of shares of GPS Stock set forth by
its name in Section 3.05(d) of the Disclosure Schedule, free and clear of all
proxies, claims, voting agreements, options, and rights of first refusal of any
kind.
4.03 Corporate Authority; No Violation. CIL has the corporate power
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by CIL's
Board of Directors and shareholders, and no other corporate proceedings on the
part of CIL are necessary to authorize this Agreement or the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by CIL and, assuming this Agreement constitutes a valid and binding
agreement of the other parties hereto, this Agreement constitutes a valid and
binding agreement of CIL, enforceable against CIL in accordance with its terms.
Neither the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby (including without limitation the Merger)
will: (x) violate or conflict with any provision of the Articles of
Incorporation or Bylaws of CIL, (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 CIL is a party
or by which CIL is bound, or result in the creation of any lien, charge or
encumbrance upon the GPS Stock owned by CIL 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 CIL or its assets. Other than
in connection with or in compliance with the provisions of the CGCL, 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 CIL of the
transactions contemplated herein.
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF ULTRAK
Ultrak represents and warrants to GPS that the following are true and
correct as of the Signing Date and will be true and correct as of the Closing
Date as if made on that date:
5.01. Organization, Qualification, and Good Standing. Ultrak is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Colorado, and Newco is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Texas,
and each of Ultrak and Newco has the corporate power and authority to own or
hold under lease its properties and assets and to carry on its business as it
is now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such qualification.
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5.02. Capitalization of Ultrak. The authorized capital stock of
Ultrak consists of 20,000,000 shares of Ultrak 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 June 30, 1995, there were issued and outstanding
6,555,619 shares of Ultrak Stock and 195,351 shares of Series A Preferred
Stock. All outstanding shares of Ultrak Stock are duly authorized, validly
issued, fully paid, and nonassessable. All outstanding shares of capital stock
of Newco are validly issued, fully paid and nonassessable and are owned by
Ultrak directly, free and clear of all liens, claims, charges, or encumbrances.
5.03. Corporate Authority Relative to This Agreement; No Violation.
Ultrak and Newco have the corporate power to enter into this Agreement and the
Certificates of Merger and to carry out their respective obligations hereunder
and thereunder. The execution and delivery of this Agreement and the
Certificates of Merger and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by Ultrak's and
Newco's Boards of Directors and no other corporate proceedings on the part of
Ultrak or Newco are necessary to authorize this Agreement or the Certificates
of Merger or the transactions contemplated hereby and thereby. This Agreement
and the Certificates of Merger have been duly and validly executed and
delivered by Ultrak and Newco and, assuming this Agreement and the Certificates
of Merger constitute valid and binding agreements of the other parties hereto
and thereto, this Agreement and the Certificates of Merger constitute valid and
binding agreements of Ultrak and Newco, enforceable against Ultrak in
accordance with their terms. 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 TBCA, the CGCL, 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.
5.04. Ultrak Reports and Financial Statements. Ultrak has previously
furnished to GPS true and complete copies of Ultrak's annual report on Form
10-K, as amended, filed with the SEC for the year ended December 31, 1994; and
Ultrak's quarterly report on Form 10-Q filed with the SEC for the quarter ended
March 31, 1995 (the "SEC Filings"). 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).
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5.05. 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 thereof.
5.06. Absence of Certain Changes. Except as otherwise contemplated by
this Agreement, since December 31, 1994, Ultrak has not: (a) suffered any
material adverse change in its business or operations; (b) contracted for or
paid any single capital expenditure in excess of $100,000 or total capital
expenditures in excess of $500,000; or (c) entered into or terminated any other
commitment or transaction or experienced any other event that is material to
the business or operations of Ultrak.
5.07. Consents. 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.
5.08. 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 GPS. No representation is made
by Ultrak with respect to any forward looking information which may have been
supplied to GPS.
5.09. 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 VI: JOINT COVENANTS OF ULTRAK AND GPS
6.01. Access. Each of Ultrak and GPS 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 Closing Date, 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 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.
6.02. Notice of any Material Change. Each of Ultrak and GPS, promptly
after the first notice or occurrence thereof, but not later than the Closing
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;
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<PAGE> 105
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 GPS, 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.
6.03. Cooperation. Ultrak and GPS 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 Closing 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.
6.04. Confidentiality. Each party to this Agreement will take all
reasonable precautions to maintain the confidentiality of any information
concerning any other party or any affiliate of any other party provided to or
discovered by it or its representatives and will not disclose such information
to anyone other than those people directly involved in the investigation and
negotiations pertaining to the transactions contemplated hereby. Each party
further agrees that in the event the transactions contemplated by this
Agreement are not consummated, it will return or destroy all documents and
records obtained from any other party during the course of its investigation or
negotiations pertaining to the transactions contemplated hereby and will use
all its reasonable efforts to cause all information with respect to such other
party and its businesses which it obtained pursuant to this Agreement to be
kept confidential. Notwithstanding the foregoing, the obligation of any party
to maintain confidentiality with respect to information received by it will not
apply to any disclosure of information required to be disclosed in the
Registration Statement or that is required to be disclosed by applicable state
blue sky statutes or other applicable law in connection with the transactions
described in the Registration Statement.
6.05. No Solicitation. Until the Closing Date, GPS covenants that
neither it nor its officers, directors, agents, or affiliates, will: (a)
directly or indirectly, encourage, solicit or initiate discussion or
negotiations with any corporation, partnership, person or other entity or group
concerning any merger, sale of all or substantially all of the assets, business
combination, sale of shares of capital stock or similar transactions involving
GPS, 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 GPS 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.
6.06. Public Announcements. Both GPS and Ultrak will consult with the
other before issuing any press release, public announcement, or make any public
filing regarding this Agreement and the Merger, and will not, unless otherwise
required by law, issue any such press release prior to such consultation.
ARTICLE VII: COVENANTS OF GPS
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<PAGE> 106
7.01 Conduct of Business by GPS. Prior to the Closing 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, GPS:
(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 as described inSection 3.05 of the Disclosure Schedule;
(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;
(g) will not make any loan or advance to any shareholder,
officer, director, or employee;
(h) will not increase the compensation of or pay or
accrue any bonus to any employee other than in accordance with past
established practices; and/or
(i) 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.
7.02. Videotec. GPS will assist Ultrak in obtaining a direct Supply
Agreement (the "Supply Agreement") between Ultrak and Videotec, S.R.I.
("Videotec") under terms and conditions which are similar to the terms and
conditions to GPS in the Distribution Agreement, dated July 1, 1994, between
GPS and Videotec.
ARTICLE VIII: JOINT CONDITIONS PRECEDENT
Except as may be waived by all parties, the obligations of Ultrak,
Newco, and GPS to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction, on or before the Closing Date, of each of
the following conditions:
8.01. Shareholder Approval. The stockholders of GPS shall have duly
approved the Merger and the Certificates of Merger.
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<PAGE> 107
8.02. 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 otherwise would materially
interfere with the operation of the assets and business of Newco and Ultrak
after the Merger.
8.03. Shares Exchanged. There will be Ultrak Stock exchanged for at
least ninety-nine percent (99%) of the GPS Stock on the Closing Date.
ARTICLE IX: CONDITIONS PRECEDENT TO ULTRAK'S OBLIGATIONS
The obligations of Ultrak and Newco to consummate the transactions
contemplated by this Agreement will be subject to the satisfaction on or before
the Closing Date of each of the following conditions:
9.01. Representations and Warranties; Compliance. The representations
and warranties of GPS and the Signing Shareholders in this Agreement shall have
been true and correct in all material respects on and as of the Signing Date
and shall be true and correct in all material respects as of the Closing Date
as though made on and as of the Closing Date, and the covenants and agreements
of GPS in this Agreement shall have been complied with in all material
respects. On the Closing Date, GPS will provide Ultrak with a Certificate of
Compliance in the form of Exhibit 9.01-A and a certificate of the Signing
Shareholders to such effect in the form of Exhibit 9.01-B.
9.02. No Material Adverse Change. There shall have been no material
adverse change in GPS's business, properties, assets, liabilities, results of
operations or condition, financial or otherwise, including, but not limited to,
the financial information set forth in the Financial Statements as of May 31,
1995 and June 30, 1995.
9.03. Employment Agreement. Bais shall have executed an Employment
Agreement with Ultrak in form acceptable to Ultrak.
9.04. Board Approval. Ultrak's Board of Directors shall have approved
the Merger.
9.05 Conversion of the Note. CIL shall have converted the Note into
GPS Stock.
9.06 FIST. Bais and CIL will transfer 100% of the ownership of FIST,
to Ultrak. Bais and CIL shall have executed a Certificate in the form of
Exhibit 9.06-A. Each of Profabel, Sicurit Alarmitalia, and Video Engineering
shall have executed the Consent and Agreement, in substantially the form
attached hereto as Exhibit 9.06-B.
9.07 Videotec. VideoTec shall have executed the Supply Agreement.
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<PAGE> 108
ARTICLE X: CONDITIONS PRECEDENT TO GPS'S OBLIGATIONS
The obligations of GPS to consummate the transactions contemplated by
this Agreement will be subject to the satisfaction on or before the Closing
Date of each of the following conditions:
10.01. Representations and Warranties; Compliance. The representations
and warranties of Ultrak in this Agreement shall have been true and correct in
all material respects on and as of the Signing Date and shall be true and
correct in all material respects as of the Closing Date as though made on and
as of the Closing Date, and the covenants and agreements of Ultrak in this
Agreement shall have been complied with in all material respects. On the
Closing Date, Ultrak will provide GPS with a Certificate of Compliance to such
effect in the form of Exhibit 10.01.
10.02. 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.
ARTICLE XI: WAIVER AND AMENDMENT
11.01. Modification, Amendment and Waiver. This Agreement may not be
modified unless such modification is in writing and signed by all parties
hereto. No waiver of any term of this Agreement shall be enforceable unless in
writing and 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 shall not
operate or be construed as a waiver of any subsequent breach by such other
party.
ARTICLE XII: MISCELLANEOUS
12.01. 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, GPS's legal fees and
expenses in connection with this Agreement and the transactions contemplated
hereby shall not exceed $10,000. To the extent legal fees and expenses of GPS
exceed $10,000, then such excess shall be paid by the Signing Shareholders.
12.02. 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.
12.03. GOVERNING LAW. TEXAS LAW GOVERNS THIS AGREEMENT.
12.04. Notices. All notices 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.
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12.05. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable,
and this Agreement shall be construed and enforced as if such illegal, invalid,
or unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance; and in lieu
of such illegal, invalid, or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
12.06. Assignments; Entire Agreement; Headings. This Agreement shall
not be assignable by operation of law or otherwise. Any attempted assignment
of this Agreement shall be void. 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. The headings contained in this Agreement are for
reference purposes and will not affect in any way the meaning or interpretation
of this Agreement. Use of "herein," "hereof" or similar terms refer to this
Agreement as a whole.
[SIGNATURES ON THE FOLLOWING PAGE]
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<PAGE> 110
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
BLC & ASSOCIATES, INC.
d/b/a G.P.S. STANDARD U.S.A.
8939 S. Sepulveda Blvd. By: /s/ Mathiew Bais
Los Angeles, CA 90045 -----------------------------------
Mathiew Bais, President
GPS ACQUISITION 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/ Mathiew Bais
8939 S. Sepulveda Blvd. ----------------------------------
Los Angeles, CA 90045 MATHIEW BAIS
COMMODORE INVESTMENTS LTD.
B. Wirth, Buelstrasse 21, By: /s/ Bruno Wirth and /s/ Hans Haag
8966 Oberwil-Lieli, Switzerland -----------------------------------
H. Haag, Berninastrasse 61, Printed Name: Bruno Wirth and Hans Haag
8057 Zurich-Switzerland -------------------------
Its: Directors
----------------------------------
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<PAGE> 111
EXHIBIT 1.01(A)
ARTICLES OF MERGER OF
BUSINESS CORPORATIONS
Pursuant to Article 5.04 of the Texas Business Corporation Act, as
amended, the undersigned domestic corporations hereby adopt the following
Articles of Merger for the purpose of merging them into one of such
corporations:
1. The names of the undersigned corporations are as follows:
Name of Corporation
BLC & Associates, Inc. (d/b/a G.P.S. Standard U.S.A.) ("GPS")
GPS Acquisition Corp. ("Acquisition")
2. The name of the surviving corporation after the merger shall
be BLC & Associates, Inc. (d/b/a G.P.S. Standard U.S.A.), a California
corporation, and it shall be governed by the laws of the State of California.
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 August 1,
1995 (the "Plan"), a copy of which is attached as Exhibit A hereto, was
approved by the shareholders of Acquisition in the manner prescribed by the
Texas Business Corporation Act, as amended and was approved by the shareholders
of GPS in the manner prescribed by the California 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>
No. of Shares
No. of Shares Entitled
Outstanding to Vote
------------- -------------
<S> <C> <C>
GPS 205,714 205,714
Acquisition 1,000 1,000
</TABLE>
Each of the undersigned corporations has only one class of capital stock
outstanding.
<PAGE> 112
5. As to each of the undersigned corporations, the numbers of
shares voted for and against the Plan, respectively, are:
<TABLE>
<CAPTION>
Voted For Voted Against
--------- -------------
<S> <C> <C>
GPS 205,714 0
Acquisition 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 Articles of Merger to be executed by and on its behalf and in its
corporate name as of _____________, 1995.
BLC & ASSOCIATES, INC.,
(d/b/a G.P.S. Standard U.S.A.),
a California corporation
By:
-----------------------------------
Mathiew Bais, President
GPS ACQUISITION CORP.,
a Texas corporation
(d/b/a G.P.S. Standard U.S.A.)
By:
-----------------------------------
George K. Broady, President
2
<PAGE> 113
EXHIBIT 1.01(B)
OFFICERS' CERTIFICATE
OF
BLC & ASSOCIATES, INC.
Mathiew Bais, President and Secretary of BLC & Associates, Inc. (d/b/a
G.P.S. Standard U.S.A.), a corporation duly organized and existing under the
laws of the State of California ("GPS"), does hereby certify:
1. That he is the President and the Secretary of GPS.
2. The total number of outstanding shares of each class of this
corporation entitled to vote on the merger is as follows:
<TABLE>
<CAPTION>
Total number of shares
Class entitled to vote
------- ----------------------
<S> <C>
Common 205,714
</TABLE>
3. That the principal terms of the agreement of merger (the
"Merger Agreement") in the form, attached hereto as Exhibit A, were approved by
the shareholders of GPS by an unanimous vote of shareholders of all the
outstanding common stock of GPS.
4. That each class entitled to vote and the minimum percentage
vote of each such class is as follows:
<TABLE>
<CAPTION>
Minimum percentage vote
required to approve the
Class merger
------- -----------------------
<S> <C>
Common more than 67 percent
</TABLE>
5. That no votes of the shareholders of Ultrak, Inc., a Colorado
corporation and the sole shareholder of GPS Acquisition Corp., a Texas
corporation and the corporation merging with and into GPS pursuant to the
Merger Agreement are required to approve said agreement of merger.
<PAGE> 114
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true of their own
knowledge. Executed at ______________________________________________
__________, on _______________________, 1995.
--------------------------------------
Mathiew Bais, President and Secretary
<PAGE> 115
OFFICERS' CERTIFICATE
OF
GPS ACQUISITION CORP.
We, George K. Broady, President and Tim D. Torno, Secretary of GPS
Acquisition Corp., a corporation duly organized and existing under the laws of
the State of Texas ("GPS Acquisition"), do hereby certify:
1. That they are the President and the Secretary, respectively of
GPS Acquisition.
2. The total number of outstanding shares of each class of this
corporation entitled to vote on the merger is as follows:
<TABLE>
<CAPTION>
Total number of shares
Class entitled to vote
------- ----------------------
<S> <C>
Common 1,000
</TABLE>
3. That the principal terms of the agreement of merger in the
form attached were approved by the shareholders of this corporation by a vote
of the number of shares of each class which equalled or exceeded the vote
required by each class to approve said agreement of merger.
4. That each class entitled to vote and the minimum percentage
vote of each such class is as follows:
<TABLE>
<CAPTION>
Minimum percentage vote
required to approve the
Class merger
------- -----------------------
<S> <C>
Common more than 50 percent
</TABLE>
5. That no votes of the shareholders of Ultrak, Inc., a Colorado
corporation and the sole shareholder of GPS Acquisition are required to approve
said agreement of merger.
<PAGE> 116
Each of the undersigned declares under penalty of perjury that the
statements contained in the foregoing certificate are true of their own
knowledge. Executed at ________________________________________________
____________, on _______________________, 1995.
-----------------------------------
George K. Broady, President
-----------------------------------
Tim D. Torno, Secretary
2
<PAGE> 117
ANNEX B
ARTICLES OF INCORPORATION
OF
BLC & ASSOCIATES, INC.
I.
The name of this corporation is BLC & ASSOCIATES, INC.
This corporation is a close corporation.
II.
The purpose of this corporation is to engage in any lawful act or activity for
which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
The name and address in the State of California of this corporation's initial
agent for the service of process is:
CHRISTINE BUDKA
6917 WEST 85TH STREET
LOS ANGELES, CALIFORNIA 90045
IV.
This corporation is authorized to issue only one class of shares of stock; and
the total number of shares which this corporation is authorized to issue is
1,000,000. All of this corporation's issued shares of all classes shall be
held of record by not more than 35 persons.
V.
The number of directors of this corporation shall be three: the
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<PAGE> 118
name(s) and address(es) of the person(s) who are appointed to act as the first
director(s) of this corporation is/are:
NAME ADDRESS
CHRISTINE BUDKA 6917 W. 85TH STREET-LOS ANGELES, CA 90045
BARON GREY 6917 W. 85TH STREET-LOS ANGELES, CA 90045
DAVID PELKA 6917 W. 85TH STREET-LOS ANGELES, CA 90045
DATED 1 SEPTEMBER 1983
CHRISTINE BUDKA/SIG: /s/ Christine Budka
-----------------------------------------
BARON GREY/SIG: /s/ Baron Grey
-----------------------------------------
DAVID PELKA/SIG: /s/ David Pelka
-----------------------------------------
I/we hereby declare that I/we are the person(s) who executed the foregoing
Articles of Incorporation, which execution is my/our act and deed.
CHRISTINE BUDKA/SIG: /s/ Christine Budka
-----------------------------------------
BARON GREY/SIG: /s/ Baron Grey
-----------------------------------------
DAVID PELKA/SIG: /s/ David Pelka
-----------------------------------------
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<PAGE> 119
ANNEX C
BY LAWS Of
BLC & ASSOCIATES, INC.
(A California Corporation)
ARTICLE I
SHAREHOLDERS' MEETINGS
Section 1. TIME. An annual meeting for the election of directors and for
the transaction of any other proper business and any special meeting shall be
held on the date and at the time as the Board of Directors shall from time to
time fix. Time of Meeting: 09:00 o'clock A.M. Date of Meeting: The day of
September 15th.
Section 2. PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of California, as the Directors may,
from time to time, fix. Whenever the Directors shall fail to fix such place,
the meetings shall be held at the principal executive office of the
corporation.
Section 3. CALL. Annual meetings may be called by the Directors, by the
Chairman of the Board, if any, Vice Chairman of the Board, if any, the
President, if any, the Secretary, or by any officer instructed by the Directors
to call the meeting. Special meetings may be called in like manner and by the
holders of shares entitled to cast not less than ten percent of the votes at
the meeting being called.
Section 4. NOTICE. Written notice stating the place, day and hour of
each meeting, and, in the case of a special meeting, the general nature of the
business to be transacted or, in the case of an Annual Meeting, those matters
which the Board of Directors, at the time of mailing of the notice, intends to
present for action by the shareholders, shall be given not less than ten days
(or not less than any such other minimum period of days as may be prescribed by
the General Corporation Law) or more than sixty days (or more than any such
maximum period of days as may be prescribed by the General Corporation Law)
before the date of the meeting, by mail, personally, or by other means of
written communication, charges prepaid by or at the direction of the Directors,
the President, if any, the Secretary or the officer or persons calling the
meeting, addressed to each shareholder at his address appearing on the books of
the corporation or given by him to the corporation for the purpose
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<PAGE> 120
ANNEX C
of notice, or, if no such address appears or is given, at the place where the
principal executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
said principal executive office is located. Such notice shall be deemed to be
delivered when deposited in the United States mail with first class postage
therein prepaid, or sent by other means of written communication addressed to
the shareholder at his address as it appears on the stock transfer books of the
corporation. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of notice to be
presented by management for election. At an annual meeting of shareholders,
any matter relating to the affairs of the corporation, whether or not stated in
the notice of the meeting, may be brought up for action except matters which
the General Corporation Law requires to be stated in the notice of the meeting.
The notice of any annual or special meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. When a meeting is adjourned to another time or
place, notice of the adjourned meeting need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken;
provided that, if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder. At the adjourned meeting, the corporation may transact any
business which might have been transacted at the original meeting.
Section 5. CONSENT. The transaction of any meeting, however called and
noticed, and wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum is present and if, either
before or after the meeting, each of the shareholders or his proxy signs a
written waiver of notice or a consent to the holding of the meeting or an
approval of the minutes thereof. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Attendance of a person at a meeting constitutes a waiver of notice of
such meeting, except when the person objects, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened and except that attendance at a meeting shall not constitute a
waiver of any right to object to the consideration of matters required by the
General Corporation Law to be included in the notice if such objection is
expressly made at the meeting. Except as otherwise provided in subdivision (f)
of Section 601 of the General Corporation Law, neither the business to be
transacted at nor the purpose of any regular or
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<PAGE> 121
special meeting need be specified in any written waiver of notice.
Section 6. CONDUCT OF MEETING. Meetings of the shareholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting -- the Chairman of the Board, if any, the Vice-Chairman of
the Board, if any, the President, if any, a Vice President, or, if none of the
foregoing is in office and present and acting, by a chairman to be chosen by
the shareholders. The Secretary of the corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but, if neither
the Secretary nor an Assistant Secretary is present, the Chairman of the
meeting shall appoint a secretary of the meeting.
Section 7. PROXY REPRESENTATION. Every shareholder may authorize another
person or persons to act as his proxy at a meeting or by written action. No
proxy shall be valid after the expiration of eleven months from the date of its
execution unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the person executing it prior to the vote or
written action pursuant thereto, except as otherwise provided by the General
Corporation Law. As used herein, a "proxy" shall be deemed to mean a written
authorization signed by a shareholder or a shareholder's attorney in fact
giving another person or persons power to vote or consent in writing with
respect to the shares of such shareholder, and "Signed" as used herein shall be
deemed to mean the placing of such shareholder's name on the proxy, whether by
manual signature, typewriting, telegraphic transmission or otherwise by such
shareholder or such shareholder's attorney in fact. Where applicable, the form
of any proxy shall comply with the provisions of Section 604 of the General
Corporation Law.
Section 8. INSPECTORS - APPOINTMENT. In advance of any meeting, the
Board of Directors may appoint inspectors of election to act at the meeting and
any adjournment thereof. If inspectors of election are not so appointed, or,
if any persons so appointed fail to appear or refuse to act, the Chairman of
any meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election, or persons to
replace any of those who so fail or refuse, at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares
represented shall determine whether one or three inspectors are to be
appointed.
The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares
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represented at the meeting, the existence of a quorum, the authenticity,
validity, and effect of proxies, receive votes, ballots, if any, or consents,
hear and determine all challenges and questions in any way arising in
connection with the right to vote, count and tabulate all votes or consents,
determine when the polls shall close, determine the result, and do such acts as
may be proper to conduct the election or vote with fairness to all
shareholders. If there are three inspectors of election, the decision, act, or
certificate of a majority shall be effective in all respects as the decision,
act, or certificate of all.
Section 9. SUBSIDIARY CORPORATIONS. Shares of this corporation owned by
a subsidiary shall not be entitled to vote on any matter. A subsidiary for
these purposes is defined as a corporation, the shares of which possessing more
than 25% of the total combined voting power of all classes of shares entitled
to vote, are owned directly or indirectly through one or more subsidiaries.
Section 10. QUORUM; VOTE; WRITTEN CONSENT. The holders of a majority of
the voting shares shall constitute a quorum at a meeting of shareholders for
the transaction of any business. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum if any action taken, other than adjournment, is approved by at
least a majority of the shares required to constitute a quorum. In the absence
of a quorum, any meeting of shareholders may be adjourned from time to time by
the vote of a majority of the shares represented thereat, but no other business
may be transacted except as hereinbefore provided.
In the election of directors, a plurality of the votes cast shall
elect. No shareholder shall be entitled to exercise the right of cumulative
voting at a meeting for the election of directors unless the candidate's name
or the candidates' names have been placed in nomination prior to the voting and
the shareholder has given notice at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes
for such candidates in nomination.
Except as otherwise provided by the General Corporation Law, the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at a meeting at which a quorum is present shall be authorized by the
affirmative vote of a majority of the shares represented at the meeting.
Except in the election of directors by written consent in
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lieu of a meeting, and except as may otherwise be provided by the General
Corporation Law, the Articles of Incorporation or these By-Laws, any action
which may be taken at any annual or special meeting may be taken without a
meeting and without prior notice, if a consent in writing, setting forth the
action so taken, shall be signed by holders of shares 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. Directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of directors.
Notice of any shareholder approval pursuant to Section 310, 317, 1201 or 2007
without a meeting by less than unanimous written consent shall be given at
least ten days before the consummation of the action authorized by such
approval, and prompt notice shall be given of the taking of any other corporate
action approved by shareholders without a meeting by less than unanimous
written consent to those shareholders entitled to vote who have not consented
in writing.
Section 11. BALLOT. Elections of directors at a meeting need not be by
ballot unless a shareholder demands election by ballot at the election and
before the voting begins. In all other matters, voting need not be by ballot.
Section 12. SHAREHOLDERS' AGREEMENTS. Notwithstanding the above
provisions in the event this corporation elects to become a close corporation,
an agreement between two or more shareholders thereof, if in writing and signed
by the parties thereof, may provide that in exercising any voting rights the
shares held by them shall be voted as provided therein or in Section 706, and
may otherwise modify these provisions as to shareholders' meetings and actions.
ARTICLE II
BOARD OF DIRECTORS
Section 1. FUNCTIONS. The business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the
direction of its Board of Directors. The Board of Directors may delegate the
management of the day-to-day operation of the business of the corporation to a
management company or other person, provided that the business and affairs of
the corporation shall be managed and all corporate powers shall be exercised
under the ultimate direction of the Board of Directors. The Board of Directors
shall have authority to fix the compensation of directors for services in any
lawful capacity.
Each director shall exercise such powers and otherwise
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perform such duties in good faith, in the manner such director believes to be
in the best interests of the corporation, and with care, including reasonable
inquiry, using ordinary prudence, as a person in a like position would use
under similar circumstances. (Section 309).
Section 2. EXCEPTION FOR CLOSE CORPORATION. Notwithstanding the
provisions of Section 1, in the event that this corporation shall elect to
become a close corporation as defined in Section 158, its shareholders may
enter into a Shareholders' Agreement as provided in Section 300 (b). Said
Agreement may provide for the exercise of corporate powers and the management
of the business and affairs of this corporation by the shareholders, provided
however such agreement shall, to the extent and so long as the discretion or
the powers of the Board in its management of corporate affairs is controlled by
such agreement, impose upon each shareholder who is a party thereof, liability
for managerial acts performed or omitted by such person pursuant thereto
otherwise imposed upon Directors as provided in Section 300(d).
Section 3. QUALIFICATIONS AND NUMBER. A director need not be a
shareholder of the corporation, a citizen of the United States, or a resident
of the State of California. The authorized number of directors constituting
the Board of Directors until further changed shall be . Thereafter, the
authorized number of directors constituting the Board shall be at least three
provided that, whenever the corporation shall have only two shareholders, the
number of directors may be at least two, and, whenever the corporation shall
have only one shareholder, the number of directors may be at least one.
Subject to the foregoing provisions, the number of directors may be changed
from time to time by an amendment of these By-Laws adopted by the shareholders.
Any such amendment reducing the number of directors to fewer than five cannot
be adopted if the votes cast against its adoption at a meeting or the shares
not consenting in writing in the case of action by written consent are equal to
more than sixteen and two-thirds percent of the outstanding shares. No
decrease in the authorized number of directors shall have the effect of
shortening the term of any incumbent director.
Section 4. ELECTION AND TERM. The initial Board of Directors shall
consist of the persons elected at the meeting of the incorporator, all of whom
shall hold office until the first annual meeting of shareholders and until
their successors have been elected and qualified, or until their earlier
resignation or removal from office. Thereafter, directors who are elected to
replace any or all of the members of the initial Board of
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Directors or who are elected at an annual meeting of shareholders, and
directors who are elected in the interim to fill vacancies, shall hold office
until the next annual meeting of shareholders and until their successors have
been elected and qualified, or until their earlier resignation, removal from
office, or death. In the interim between annual meetings of shareholders or of
special meetings of shareholders called for the election of directors, any
vacancies in the Board of Directors, including vacancies resulting from an
increase in the authorized number of directors which have not been filled by
the shareholders, including any other vacancies which the General Corporation
Law authorizes directors to fill, and including vacancies resulting from the
removal of directors which are not filled at the meeting of shareholders at
which any such removal has been effected, if the Articles of Incorporation or a
By-Law adopted by the shareholders so provides, may be filled by the vote of a
majority of the directors then in office or of the sole remaining director,
although less than a quorum exists. Any director may resign effective upon
giving written notice to the Chairman of the Board, if any, the President, the
Secretary or the Board of Directors, unless the notice specifies a later time
for the effectiveness of such resignation. If the resignation is effective at
a future time, a successor may be elected to the office when the resignation
becomes effective.
The shareholders may elect a director at any time to fill any vacancy
which the directors are entitled to fill, but which they have not filled. Any
such election by written consent shall require the consent of a majority of the
shares.
Section 5. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS. The corporation may indemnify any Director, Officer, agent or
employee as to those liabilities and on those terms and conditions as are
specified in Section 317. In any event, the corporation shall have the right
to purchase and maintain insurance on behalf of any such persons whether or not
the corporation would have the power to indemnify such person against the
liability insured against.
Section 6. MEETINGS.
TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
PLACE. Meetings may be held at any place, within or without the State
of California, which has been designated in any notice of the meeting, or, if
not stated in said notice, or, if there is no notice given, at the place
designated by resolution of the
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Board of Directors.
CALL. Meetings may be called by the Chairman of the Board, if any and
acting, by the Vice Chairman of the Board, if any, by the President, if any, by
any Vice President or Secretary, or by any two directors.
NOTICE AND WAIVER THEREOF. No notice shall be required for regular
meetings for which the time and place have been fixed by the Board of
Directors. Special meetings shall be held upon at least four days' notice by
mail or upon at least forty-eight hours notice delivered personally or by
telephone or telegraph. Notice of a meeting need not be given to any director
who signs a waiver of notice, whether before or after the meeting, or who
attends the meeting without protesting, prior thereto or at its commencement,
the lack of notice to such director. A notice or waiver of notice need not
specify the purpose of any regular or special meeting of the Board of
Directors.
Section 7. SOLE DIRECTOR PROVIDED BY ARTICLES OF INCORPORATION. In the
event only one director is required by the By-Laws or Articles of
Incorporation, then any reference herein to notices, waivers, consents,
meetings or other actions by a majority or quorum of the directors shall be
deemed to refer to such notice, waiver, etc., by such sole director, who shall
have all the rights and duties and shall be entitled to exercise all of the
powers and shall assume all the responsibilities otherwise herein described as
given to a Board of Directors.
Section 8. QUORUM AND ACTION. A majority of the authorized number of
directors shall constitute a quorum except when a vacancy or vacancies prevents
such majority, whereupon a majority of the directors in office shall constitute
a quorum, provided such majority shall constitute at least either one-third of
the authorized number of directors or at least two directors, whichever is
larger, or unless the authorized number of directors is only one. A majority
of the directors present, whether or not a quorum is present, may adjourn any
meeting to another time and place. If the meeting is adjourned for more than
twenty-four hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors, if any, who
were not present at the time of the adjournment. Except as the Articles of
Incorporation, these By-Laws and the General Corporation Law may otherwise
provide, the act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present shall be the act of
the Board of Directors. Members of the Board of Directors may participate in
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a meeting through use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear one
another, and participation by such use shall be deemed to constitute presence
in person at any such meeting.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that
any action which may be taken is approved by at least a majority of the
required quorum for such meeting.
Section 9. CHAIRMAN OF THE MEETING. The Chairman of the Board, if any
and if present and acting, the Vice Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the President, if
any and present and acting, or any director chosen by the Board, shall preside.
Section 10. REMOVAL OF DIRECTORS. The entire Board of Directors or any
individual director may be removed from office without cause by approval of the
holders of at least a majority of the shares provided, that unless the entire
Board is removed, an individual director shall not be removed when the votes
cast against such removal, or not consenting in writing to such removal, would
be sufficient to elect such director if voted cumulatively at an election of
directors at which the same total number of votes were cast, or, if such action
is taken by written consent, in lieu of a meeting, all shares entitled to vote
were voted, and the entire number of directors authorized at the time of the
director's most recent election were then being elected. If any or all
directors are so removed, new directors may be elected at the same meeting or
by such written consent. The Board of Directors may declare vacant the office
of any director who has been declared of unsound mind by an order of court or
convicted of a felony.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted by
a majority of the authorized number of directors, may designate one or more
committees, each consisting of two or more directors to serve at the pleasure
of the Board of Directors. The Board of Directors may designate one or more
directors as alternate members of any such committee, who may replace any
absent member at any meeting of such committee. Any such committee, to the
extent provided in the resolution of the Board of Directors, shall have all the
authority of the Board of Directors except such authority as may not be
delegated by the provisions of the General Corporation Law.
Section 12. INFORMAL ACTION. The transactions of any meeting of the Board
of Directors, however called and noticed or
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wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the directors not present signs a written waiver of
notice, a consent to holding the meeting, or an approval of the minutes
thereof. All such waivers, consents, or approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 13. WRITTEN ACTION. Any action required or permitted to be taken
may be taken without a meeting if all of the members of the Board of Directors
shall individually or collectively consent in writing to such action. Any such
written consent or consents shall be filed with the minutes of the proceedings
of the Board. Such action by written consent shall have the same force and
effect as a unanimous vote of such directors.
ARTICLE III
OFFICERS
Section 1. OFFICERS. The officers of the corporation shall be a Chairman
of the Board or a President or both, a Secretary and a Chief Financial Officer.
The corporation may also have, at the discretion of the Board of Directors, one
or more Vice Presidents, one or more Assistant Secretaries and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. One person may hold two or more offices.
Section 2. ELECTION. The officers of the corporation, except such
officers as may be appointed in accordance with the provisions of Section 3 or
Section 5 of this Article shall be chosen annually by the Board of Directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint
such other officers as the business of the corporation may require, each of
whom shall hold office for such period, have such authority and perform such
duties as are provided in the By-Laws or as the Board of Directors may from
time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either
with or without cause, by a majority of the directors at the time in office, at
any regular or special meeting of the Board, or, except in case of an officer
chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors.
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Any officer may resign at any time by giving written notice to the
Board of Directors, or to the President, or to the Secretary of the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and duties as
may be from time to time assigned to him by the Board of Directors or
prescribed by the By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, 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 in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be ex officio a member of all the standing
committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of
President of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-Laws.
Section 8. VICE PRESIDENT. In the absence or disability of the
President, the Vice Presidents, in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President 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 upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the Board of Directors or the By-Laws.
Section 9. SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes at the principal office or such other
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place as the Board of Directors may order, of all meetings of Directors and
Shareholders, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of those
present at Directors' meetings, the number of shares present or represented at
Shareholders' meetings and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the corporation's transfer agent, a share register, or
duplicate share register, showing the names of the shareholders and their
addresses; the number and classes of shares held by each; the number and date
of certificates issued for the same; and the number and date of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors required by the
By-Laws or by law to be given, and he shall keep the seal of the corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-Laws.
Section 10. CHIEF FINANCIAL OFFICER. This officer shall keep and
maintain, or cause to be kept and maintained in accordance with generally
accepted accounting principles, adequate and correct accounts of the properties
and business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, earnings (or
surplus) and shares. The books of account shall at all reasonable times be
open to inspection by any director.
This officer shall deposit all monies and other valuables in the name
and to the credit of the corporation with such depositaries 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, shall render to the
President and directors, whenever they request it, an account of all his
transactions and of the financial condition of the corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-Laws.
ARTICLE IV
CERTIFICATES AND TRANSFERS OF SHARES
Section 1. CERTIFICATES FOR SHARES. Each certificate for shares of the
corporation shall set forth therein the name of the record holder of the shares
represented thereby, the number of shares and the class or series of shares
owned by said holder, the par value, if any, of the shares represented thereby,
and such other statements, as applicable, prescribed by Sections 416 - 419,
inclusive, and other relevant Sections of the General Corporation Law of the
State of California (the
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"General Corporation Law") and such other statements, as applicable, which may
be prescribed by the Corporate Securities Law of the State of California and
any other applicable provision of the law. Each such certificate issued shall
be signed in the name of the corporation by the Chairman of the Board of
Directors, if any, or the Vice Chairman of the Board of Directors, if any, the
President, if any, or a Vice President, if any, and by the Chief Financial
Officer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
Any or all of the signatures on a certificate for shares may be a facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate for shares 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 such
person were an officer, transfer agent or registrar at the date of issue.
In the event that the corporation shall issue the whole or any part of
its shares as partly paid and subject to call for the remainder of the
consideration to be paid therefor, any such certificate for shares shall set
forth thereon the statements prescribed by Section 409 of the General
Corporation Law.
Section 2. LOST OR DESTROYED CERTIFICATES FOR SHARES. The corporation
may issue a new certificate for shares or for any other security in the place
of any other certificate theretofore issued by it, which is alleged to have
been lost, stolen or destroyed. As a condition to such issuance, the
corporation may require any such owner of the allegedly lost, stolen or
destroyed certificate or any such owner's legal representative to give the
corporation a bond, or other adequate security, sufficient to indemnify it
against any claim that may be made against it, including any expense or
liability, on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
Section 3. SHARE TRANSFERS. Upon compliance with any provisions of the
General Corporation Law and/or the Corporate Securities Law of 1968 which may
restrict the transferability of shares, transfers of shares of the corporation
shall be made only on the record of shareholders of the corporation by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation or with
a transfer agent or a registrar, if any, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes, if
any, due thereon.
Section 4. RECORD DATE FOR SHAREHOLDERS. In order that the
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corporation may determine the shareholders entitled to notice of any meeting or
to vote or be entitled to receive payment of any dividend or other distribution
or allotment of any rights or entitled to exercise any rights in respect of any
other lawful action, the Board of Directors may fix, in advance a record date,
which shall not be more than sixty days or fewer than ten days prior to the
date of such meeting or more than sixty days prior to any other action.
If the Board of Directors shall not have fixed a record date as
aforesaid, the record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held; the record date for determining shareholders
entitled to give consent to corporate action in writing without a meeting, when
no prior action by the Board of Directors has been taken, shall be the day on
which the first written consent is given; and the record date for determining
shareholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto, or the
sixtieth day prior to the day of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned
meeting, but the Board of Directors shall fix a new record date if the meeting
is adjourned for more than forty-five days from the date set for the original
meeting.
Except as may be otherwise provided by the General Corporation Law,
shareholders on the record date shall be entitled to notice and to vote or to
receive any dividend, distribution or allotment of rights or to exercise the
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date.
Section 5. REPRESENTATION OF SHARES IN OTHER CORPORATIONS. Shares of
other corporations standing in the name of this corporation may be voted or
represented and all incidents thereto may be exercised on behalf of the
corporation by the Chairman of the Board, the President or any Vice President
or any other person authorized by resolution of the Board of Directors.
Section 6. MEANING OF CERTAIN TERMS. As used in these By-Laws in respect
of the right to notice of a meeting of shareholders or a waiver thereof or to
participate or vote
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thereat or to assent or consent or dissent in writing in lieu of a meeting, as
the case may be, the term "share" or "shares" or "shareholder" or
"shareholders" refers to an outstanding share or shares and to a holder or
holders of record or outstanding shares when the corporation is authorized to
issue only one class of shares, and said reference is also intended to include
any outstanding share or shares and any holder or holders of record of
outstanding shares of any class upon which or upon whom the Articles of
Incorporation confer such rights where there are two or more classes or series
of shares or upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the Articles of Incorporation may provide for more
than one class or series of shares, one or more of which are limited or denied
such rights thereunder.
Section 7. CLOSE CORPORATION CERTIFICATES. All certificates representing
shares of this corporation, in the event it shall elect to become a close
corporation, shall contain the legend required by Section 418 (c).
ARTICLE V
EFFECT OF SHAREHOLDERS' AGREEMENT-CLOSE CORPORATION
Any Shareholders' Agreement authorized by Section 300 (b) shall only be
effective to modify the terms of these By-Laws if this corporation elects to
become a close corporation with appropriate filing of or amendment to its
Articles as required by Section 202 and shall terminate when this corporation
ceases to be a close corporation. Such an agreement cannot waive or alter
Sections 158 (defining close corporations), 202 (requirements of Articles of
Incorporation), 500 and 501 relative to distributions, 111 (merger), 1201(e)
(reorganization) or Chapters 15 (Records and Reports), 16 (Rights of
Inspection), 18 (Involuntary Dissolution) or 22 (Crimes and Penalties). Any
other provisions of the Code or these By-Laws may be altered or waived thereby,
but to the extent they are not so altered or waived, these By-Laws shall be
applicable.
ARTICLE VI
CORPORATE CONTRACTS AND INSTRUMENTS-HOW EXECUTED
The Board of Directors, except as in the By-Laws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute any instrument in the name of and on behalf of the corporation.
Such authority may be general or confined to specific instances. Unless so
authorized by the Board of Directors, no officer, agent or employee shall have
any power or authority to bind the
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corporation by any contract or agreement, or to pledge its credit, or to render
it liable for any purposes or any amount, except as provided in Section 313 of
the Corporations Code.
ARTICLE VII
CONTROL OVER BY-LAWS
After the initial By-Laws of the corporation shall have been adopted by the
incorporator or incorporators of the corporation, the By-Laws may be amended or
repealed or new By-Laws may be adopted by the shareholders entitled to exercise
a majority of the voting power or by the Board of Directors; provided, however,
that the Board of Directors shall have no control over any By-Law which fixes
or changes the authorized number of directors of the corporation; provided,
further, that any control over the By-Laws herein vested in the Board of
Directors shall be subject to the authority of the aforesaid shareholders to
amend or repeal the By-Laws or to adopt new By-Laws; and provided further that
any By-Law amendment or new By-Law which changes the minimum number of
directors to fewer than five shall require authorization by the greater
proportion of voting power of the shareholders as hereinbefore set forth.
ARTICLE VIII
BOOKS AND RECORDS - STATUTORY AGENT
Section 1. RECORDS: STORAGE AND INSPECTION. The corporation shall keep
at its principal executive office in the State of California, or, if its
principal executive office is not in the State of California, the original or a
copy of the By-Laws as amended to date, which shall be open to inspection by
the shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California, and, if
the corporation has no principal business office in the State of California, it
shall upon request of any shareholder furnish a copy of the By-Laws as amended
to date.
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees, if any, of the Board of Directors. The corporation
shall keep at its principal executive office, or at the office of its transfer
agent or registrar, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held by each.
Such minutes shall be in written form. Such other books and records shall be
kept either in written form or in any other form capable of being converted
into written form.
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Section 2. RECORD OF PAYMENTS. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as shall be determined from time to time by
resolution of the Board of Directors.
Section 3. ANNUAL REPORT. Whenever the corporation shall have fewer than
one hundred shareholders, the Board of Directors shall not be required to cause
to be sent to the shareholders of the corporation the annual report prescribed
by Section 1501 of the General Corporation Law unless it shall determine that a
useful purpose would be served by causing the same to be sent or unless the
Department of Corporations, pursuant to the provisions of the Corporate
Securities Law of 1968, shall direct the sending of the same.
Section 4. AGENT FOR SERVICE. The name of the agent for service of
process within the State of California is Christine Budka and the address of
such registered agent is located at 6917 West 85th Street, Los Angeles,
California 90045.
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CERTIFICATE OF ADOPTION OF BY-LAWS
ADOPTION BY INCORPORATOR(S) OR FIRST DIRECTOR(S).
The undersigned person(s) appointed in the Articles of Incorporation
to act as the Incorporator(s) or First Director(s) of the above-named
corporation hereby adopt the same as the By-Laws of said corporation.
Executed this 15 day of September, 1983
/s/ Mathiew Bais
----------------------------------
Mathiew Bais
THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the
above-named corporation; that the foregoing By-Laws were adopted as the By-Laws
of said corporation on the date set forth above by the person(s) appointed in
the Articles of Incorporation to act as the Incorporator(s) or First
Director(s) of said corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the
corporate seal this 15 day of September, 1983
/s/ Christine Bais
----------------------------------
Secretary
(SEAL)
CERTIFICATE BY SECRETARY OF ADOPTION BY SHAREHOLDERS' VOTE. THIS IS TO CERTIFY:
That I am the duly-elected, qualified and acting Secretary of the
above-named corporation and that the above and foregoing Code of By-Laws was
submitted to the shareholders at their first meeting held on the date set forth
in the By-Laws and recorded in the minutes thereof, was ratified by the vote of
shareholders entitled to exercise the majority of the voting power of said
corporation.
IN WITNESS WHEREOF, I have here unto sets my hand this 15
day of September, 1983.
/s/ Christine Bais
----------------------------------
Secretary
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ANNEX D
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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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> 149
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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ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Ultracom Inc.
SECOND: The following amendment to Article I of the Articles of
Incorporation was adopted by the shareholders of the corporation in the manner
prescribed by the Colorado Corporation Act on July 3, 1980:
The name of the Corporation shall be: Ultrak, Inc.
THIRD: The number of outstanding shares of the corporation at the time
of such adoption was 10,500,000 and the number of shares entitled to vote
thereon was 10,500,000.
FOURTH: The number of shares voted for such amendment was 10,500,000
and the number of shares voted against such amendment was 0.
Dated: July 7, 1980
ULTRACOM, INC.
By /s/ Theodore A. Waibel, Jr.
President
By /s/ Assistant Secretary
Assistant Secretary
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VERIFICATION
STATE OF COLORADO )
CITY AND ) ss.
COUNTY OF DENVER )
I, the undersigned, a Notary Public, hereby certify that on the 7th
day of July, 1980, personally appeared before me, Theodore A. Waibel, Jr., who
being by me first duly sworn, declared that he is the President of Ultracom,
Inc., that he signed the foregoing Articles of Amendment to the Articles of
Incorporation, that it was his free and voluntary act and deed, and that the
statements therein contained are true.
WITNESS my hand and official seal.
My Commission expires: 9-17-83
/s/ LEWIS R. TAYLOR
Notary Public
(NOTARIAL SEAL)
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[STATE SEAL]
STATE OF COLORADO
DEPARTMENT OF
STATE
I hereby certify that this is a true and complete copy of the document
as filed in this office and admitted to record in File No 06885.
DATED: 10/7/1982
[illegible]
Secretary of State
BY Murry Sears
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<PAGE> 153
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".
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This corporation also shall have the authority to issue two million
(2,000,000) shares with a par value of Five Dollars ($5.00) each, which shares
shall be designated "Preferred Stock".
1. Shares of Preferred Stock may be issued from time to
time in one or more series, each such series to have distinctive
serial designations, as shall hereafter be determined in the
resolution or resolutions providing for the issue of such Preferred
Stock from time to time adopted by the Board of Directors pursuant to
authority so to do which is hereby vested in the Board of Directors,
which resolutions shall be filed with the Secretary of State of the
State of Colorado as required by law.
2. Each series of Preferred Stock
(a) may have such number of shares;
(b) may have such voting powers, full or
limited, or may be without voting powers;
(c) may be subject to redemption at such
time or times and at such prices;
(d) may be entitled to receive dividends
(which may be cumulative or noncumulative) at such rate or
rates, on such conditions, from such date or dates, and at
such times, and payable in preference to, or in such relation
to, the dividends
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payable on any other class or classes or series of stock;
(e) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the
Corporation;
(f) may be made convertible into, or
exchangeable for, shares of any other class or classes or of
any other series of the same or any other class or classes of
stock of the corporation at such price or prices or at such
rates of exchange, and with such adjustments;
(g) may be entitled to the benefit of a
sinking fund or purchase fund to be applied to the purchase or
redemption of shares of such series in such amount or amounts;
(h) may be entitled to the benefit of
conditions and restrictions upon the creation of indebtedness
of this corporation or any subsidiary, upon the issue of any
additional stock (including additional shares of such series
or of any other series), and upon the payment of dividends or
the making of other distributions on, and the purchase,
redemption or other acquisition by this corporation or any
subsidiary of any outstanding stock of this corporation; and
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(i) may have such other relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof;
all as shall be stated in said resolution or resolutions providing for
the issue of such Preferred Stock. Except where otherwise set forth
in the resolution or resolutions adopted by the Board of Directors
providing for the issue of any series of Preferred Stock, the number
of shares comprising such series may be increased or decreased (but
not below the number of shares then outstanding) from time to time by
like action of the Board of Directors.
3. Shares of any series of Preferred Stock which have
been redeemed (whether through the operation of a sinking fund or
otherwise) or purchased by the corporation, or which, if convertible
or exchangeable, have been converted into or exchanged for shares of
stock of any other class or classes shall have the status of
authorized and unissued shares of Preferred Stock and may be reissued
as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors
or as part of any other series of Preferred Stock, all subject to the
conditions or restrictions on
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issuance set forth in the resolution or resolutions adopted by the
Board of Directors providing for the issue of any series of Preferred
Stock and to any filing required by law.
4. If the corporation declares or pays a dividend upon
any class of Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied), except for a
stock dividend payable in shares of Common Stock (a "Liquidating
Dividend"), then the corporation will pay to the holders of Preferred
Stock convertible into shares of such class of Common Stock at the
time of payment thereof the Liquidating Dividends which would have
been paid on the Common Stock had the Preferred Stock been converted
immediately prior to the date on which a record is taken, or, if no
such record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
5. If at any time the corporation grants, issues or
sells any Option, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders
of any class of Common Stock (the "Purchase Rights"), then each holder
of Preferred Stock convertible into shares of such class of Common
Stock will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate
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Purchase Rights which such holder could have acquired if such holder
had held the number of shares of Common Stock acquirable upon
conversion of such holder's Preferred Stock immediately before the
date on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
6. Dividends in cash, property or shares of the
corporation may be paid upon the Common Stock, as and when declared by
the Board of Directors, out of funds of the corporation to the extent
and in the manner permitted by law, except that no Common Stock
dividend shall be paid for any year unless the holders of Preferred
Stock, if any, shall receive the maximum allowable Preferred Stock
dividend for such year, plus any required dividends accumulated from
prior years.
7. Upon any liquidation, dissolution or winding up of
the corporation, and after paying or adequately providing for the
payment of all its obligations, the remainder of the assets of the
corporation shall be distributed, either in cash or in kind, first pro
rata to the holders of Preferred Stock until the required amount to be
distributed to the Preferred Stock has
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been distributed, and the remainder pro rata to the holders of the
Common Stock.
8. Each outstanding share of Common Stock shall be
entitled to one vote and each fractional share of Common Stock shall
be entitled to a corresponding fractional vote on each matter
submitted to a vote of shareholders. Cumulative voting shall not be
allowed in the election of directors of the corporation. "Class "A"
Non-Voting Common Stock" shall be identical in all rights and
privileges to and subject to the same restrictions as, the
corporation's Common Stock except such "Class "A" Non-Voting Common
Stock" shall not have voting rights, except as required by law, in
which case each share of "Class "A" Non-Voting Common Stock" shall be
entitled to one vote. Shares of Preferred stock shall not be entitled
to any vote, except as required by law, in which case each share of
Preferred Stock shall be entitled to one vote, or except as otherwise
provided by the resolution or resolutions of the Board of Directors
providing for the issue of any series of the Preferred Stock.
7. No holder of any shares of the corporation, whether
now or hereafter authorized, shall have any preemptive or preferential
right to acquire any shares or securities of the corporation,
including shares or securities held in the treasury of the
corporation.
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ARTICLES OF AMENDMENT
TO THE
AMENDED ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Amended Articles of Incorporation:
FIRST: The name of the corporation is Ultrak, Inc.
SECOND: The following amendment was adopted by the shareholders of
the corporation in the manner prescribed by the Colorado Corporation Act on
December 22, 1986.
The Articles of Incorporation shall be amended by amending the first
paragraph of Article IV to read as follows:
The aggregate number of voting common shares which this Corporation
shall have authority to issue is fifty million (50,000,000) shares of
no par value ($0.00) each, which shares shall be designated "Common
Stock.")
THIRD: The number of outstanding shares of the corporation at the
time of such adoption was 20,370,937 and the number of shares entitled to vote
thereon was 20,370,937.
FOURTH: The designation and number of outstanding shares of each class
entitled to vote thereon as a class were as follows:
CLASS NUMBER OF SHARES
----- ----------------
Common -0-
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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
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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> 163
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
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Preferred Stock thereunder, shall be amended and restated to read as
an entirety as follows:
ARTICLE IV
Capital Stock
1. Common Stock.
The aggregate number of common shares which this corporation
shall have authority to issue is Twenty Million (20,000,000) shares of
no par value each, which shares shall be designated "Common Stock".
2. Preferred Stock.
The aggregate number of preferred shares which this
corporation shall have authority to issue is Two Million (2,000,000)
shares with a par value of Five Dollars ($5.00) each, which shares
shall be designated "Preferred Stock". Included in such number of
shares of Preferred Stock are 195,351 shares which have been
designated as "Series "A" 12% Cumulative Convertible Preferred Stock,"
the rights and preferences of which are set forth in full or referred
to in paragraph 8 of this Article IV.
Shares of Preferred Stock may be issued from time to time in
one or more series, each such series to have distinctive serial
designations (other than a designation containing the term "Series A")
as shall after December 28, 1993 be determined in the resolution or
resolutions providing for the issue of such Preferred Stock from time
to time adopted by the Board of Directors pursuant to authority so to
do which is hereby vested in the Board of Directors, which resolutions
shall be filed with the Secretary of State of the State of Colorado as
required by law.
Each series of Preferred Stock as shall after December 28,
1993 be established by the Board of Directors
(a) may have such number of shares;
(b) may have such voting powers, full or limited, or may
be without voting powers;
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(c) may be subject to redemption at such time or times
and at such prices;
(d) may be entitled to receive dividends (which may be
cumulative or noncumulative) at such rate or rates, on such
conditions, from such date or dates, and at such times, and payable in
preference to, or in such relation to, the dividends payable on any
other class or classes or series of stock;
(e) may have such rights upon the dissolution of, or upon
any distribution of the assets of, the corporation;
(f) may be made convertible into, or exchangeable for,
shares of any other class or classes or of any other series of the
same or any other class or classes of stock of the corporation at such
price or prices or at such rates of exchange, and with such
adjustments;
(g) may be entitled to the benefit of a sinking fund or
purchase fund to be applied to the purchase or redemption of shares of
such series in such amount or amounts;
(h) may be entitled to the benefit of conditions and
restrictions upon the creation of indebtedness of this corporation or
any subsidiary, upon the issue of any additional stock (including
additional shares of such series or of any other series), and upon the
payment of dividends or the making of other distributions on, and the
purchase, redemption or other acquisition by this corporation or any
subsidiary of any outstanding stock of this corporation; and
(i) may have such other relative, participating, optional
or other special rights, qualifications, limitations or restrictions
thereof;
all as shall be stated in said resolution or resolutions providing for
the issue of such Preferred Stock.
3. Treasury Shares.
Shares of any series of Preferred Stock which have been
redeemed (whether through the operation of a sinking fund or
otherwise) or purchased by the corporation, or which, if convertible
or exchangeable, have been converted into or exchanged for shares of
stock of any other class or classes, shall have the status of
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authorized and unissued shares of Preferred Stock and may be reissued
as a part of the series of which they were originally a part or may be
reclassified and reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors
or as part of any other series of Preferred Stock, all subject to the
conditions or restrictions on issuance set forth in the resolution or
resolutions adopted by the Board of Directors providing for the issue
of any series of Preferred Stock and to any filing required by law.
4. Dividends.
Dividends in cash, property or shares of the corporation may
be paid upon the Common Stock as and when declared by the Board of
Directors, out of funds of the corporation to the extent and in the
manner permitted by law, except that no Common Stock dividend shall be
paid for any year unless the holders of Preferred Stock, if any, shall
receive the maximum allowable Preferred Stock dividend for such year
applicable to each respective series, plus any required dividends
accumulated from prior years.
5. Distribution Upon Liquidation.
Except as otherwise provided by the resolution or resolutions
of the Board of Directors providing for the issue of any series of
Preferred Stock, upon any liquidation, dissolution or winding up of
the corporation, and after paying or adequately providing for the
payment of all its obligations, the remainder of the assets of the
corporation shall be distributed, either in cash or in kind, first pro
rata to the holders of Preferred Stock until the required amount to be
distributed to the Preferred Stock has been distributed, and the
remainder pro rata to the holders of the Common Stock.
6. Voting. Each outstanding share of Common Stock shall be
entitled to one vote and each fractional share of Common Stock shall
be entitled to a fractional vote on each matter submitted to a vote of
shareholders. Cumulative voting shall not be allowed in the election
of directors of the corporation. Except as provided in paragraph 8 of
this Article IV with respect to Series A Cumulative Convertible
Preferred Stock, shares of Preferred Stock shall not be entitled to
any vote, except as required by law, in which case each share of
Preferred Stock shall be entitled to one vote, or except as
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otherwise provided by the resolution or resolutions of the Board of
Directors providing for the issue of any series of the Preferred
Stock.
7. Preemptive Rights. Except as otherwise provided by the
resolution or resolutions of the Board of Directors providing for the
issue of any series of Preferred Stock, no holder of any shares of the
corporation, whether now or hereafter authorized, shall have any
preemptive or preferential right to acquire any shares or securities
of the corporation, including shares or securities held in the
treasury of the corporation.
8. Series A 12% Cumulative Convertible Preferred Stock.
One Hundred Ninety-five Thousand Three Hundred Fifty-one
(195,351) shares of the corporation's Preferred Stock shall be
designated as "Series "A" 12% Cumulative Convertible Preferred Stock"
(the "Series A Preferred Stock") and shall have the rights and
preferences set forth or referred to in this paragraph 8. Certain
other capitalized terms used in this paragraph 8 are defined in
subparagraph g of this paragraph 8.
a. Dividends.
(i) When and as declared by the Board of
Directors of the corporation and to the extent permitted under
the Colorado Corporation Code, the corporation will pay
preferential dividends to the holders of Series A Preferred
Stock. Except as otherwise provided herein, dividends on each
share of Series A Preferred Stock will accrue, from and after
January 1, 1991, cumulatively at the rate of $0.15 per fiscal
quarter to and including the earlier of (A) the date on which
the Redemption Price of such share is paid if such share is
redeemed, or (B) the date on which such share is converted or
(C) the date upon which any dissolution, liquidation or
winding up of the corporation is effected. Dividends will be
payable commencing March 31, 1991, and on each subsequent
March 31, June 30, September 30 and December 31. All dividends
will accrue whether or not such dividends have been declared
and whether or not there are profits, surplus or other funds
of the corporation legally available for the payment of
dividends. The date on which the corporation initially issues
any share of Series A Preferred Stock will be deemed to be its
"date of issuance"
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regardless of the number of times a transfer of such share is
made on the stock records maintained by or for the corporation
and regardless of the number of certificates which may be
issued to evidence such share.
(ii) To the extent not paid on each March 31, June
30, September 30 and December 31, beginning January 1, 1991,
all dividends which have accrued on each share of Series A
Preferred Stock then outstanding during the three-month period
ending upon such date will be added to the Liquidation Value
of such share and will remain a part thereof until such
dividends are paid.
(iii) If at any time the corporation pays less than
the total amount of dividends then accrued with respect to the
Series A Preferred Stock, such payment will be distributed
among the holders of the Series A Preferred Stock so that an
equal amount will be paid with respect to each outstanding
share of Series A Preferred Stock.
b. Liquidation.
Upon any liquidation, dissolution or winding up of
the corporation, the holders of Series A Preferred Stock will
be entitled to be paid, before any distribution or payment is
made upon any other equity securities of the corporation, an
amount in cash equal to the sum of the aggregate Liquidation
Value of all shares of Series A Preferred Stock outstanding,
and the holders of Series A Preferred Stock will not be
entitled to any further payment. If upon any such liquidation,
dissolution or winding up, the assets of the corporation to be
distributed among the holders of the Series A Preferred Stock
are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid, then the
entire assets to be distributed will be distributed ratably
among such holders based upon the aggregate Liquidation Value
of the Series A Preferred Stock held by such holder. The
corporation will mail written notice of such liquidation,
dissolution or winding up, not less than 60 days prior to the
payment date stated therein, to each record holder of Series A
Preferred Stock. Neither the consolidation or merger of the
corporation into or with any other corporation or
corporations, nor the sale or
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transfer by the corporation of all or any part of its assets,
nor the reduction of the capital stock of the corporation,
will be deemed to be a liquidation, dissolution or winding up
of the corporation within the meaning of this subparagraph b.
c. Redemptions.
(i) Upon resolution of the Board of Directors,
the corporation may redeem shares of Series A Preferred Stock.
For each such share which may be redeemed, if any, the
corporation will be obligated to pay to the holder thereof the
Redemption Price.
(ii) In the event of redemption the corporation
will mail, unless waived by the holders, written notice (the
"Notice of Redemption") of each such redemption to each record
holder not less than 10 days prior to the date on which such
redemption is to be made. Upon mailing any Notice of
Redemption, the corporation will become obligated (A) to
redeem from each holder the number of shares of Series A
Preferred Stock, as stated in the Notice of Redemption, to be
redeemed from such holder, and (B) to send each record holder
a cashier's or certified check in an amount equal to the
Redemption Price of such number of shares of Series A
Preferred Stock at least five business days prior to the date
specified for redemption in the notice. Upon receipt of such
check, the record holder of the shares of Series A Preferred
Stock to be redeemed will become obligated to surrender the
certificates representing such number of shares on or before
the date specified for redemption in the Notice of Redemption.
In case fewer than the total number of shares represented by
any certificate are redeemed, a new certificate representing
the number of unredeemed shares will be issued to the record
holder thereof in such holder's or such holder's nominee's
name, without cost to such holder.
(iii) No share of Series A Preferred Stock is
entitled to any dividends accruing after redemption. On
redemption all rights of the holder of such share will cease,
and such share will not be deemed to be outstanding.
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(iv) Any shares of Series A Preferred Stock which
are redeemed or otherwise acquired by the corporation will be
cancelled and will not be reissued, sold or transferred.
(v) Neither the corporation nor any Subsidiary
will redeem or otherwise acquire any Series A Preferred Stock,
except as expressly authorized herein or pursuant to a
purchase offer made pro rata to all holders of Series A
Preferred Stock on the basis of the number of shares of such
class owned by each such holder.
d. Conversion.
(i) Any holder of Series A Preferred Stock may
convert all or any of such shares held by such holder into
shares of Common Stock: (A) at any time subsequent to January
1, 1991, or (B) at any time prior to redemption as referred to
in subparagraph c(i) hereof, after receipt of Notice of
Redemption. The number of shares of Common Stock which any
such holder will receive in return for the shares converted by
such holder will be 2.083.
(ii) Each conversion of Series A Preferred Stock
will be deemed to have been effected as of the close of
business on the date on which the certificate or certificates
representing the shares of Series A Preferred Stock to be
converted have been surrendered at the principal office of the
corporation. At such time as such conversion has been
effected, the rights of the holder of such Series A Preferred
Stock as such holder will cease and the Person or Persons in
whose name or names any certificate or certificates for shares
of Common Stock are to be issued upon such conversion will be
deemed to have become the holder or holders of record of the
shares of Common Stock represented thereby.
(iii) As soon as possible after a conversion has
been effected, the corporation will deliver to the converting
holder:
(A) a certificate or certificates
representing the number of shares of Common Stock
issuable by reason of such conversion in such name or
names and such denomination or
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denominations as the converting holder has specified;
(B) payment in an amount equal to all
accrued dividends with respect to such shares of
Series A Preferred Stock converted, which have not
been paid prior thereto; and
(C) a certificate representing any
shares of Series A Preferred Stock which were
represented by the certificate or certificates
delivered to the corporation in connection with such
conversion but which were not converted.
(iv) If for any reason the corporation is unable
to pay any accrued dividends on the Series A Preferred Stock
being converted, the corporation will pay such dividends to
the converting holder as soon thereafter as funds of the
corporation are legally available for such payment and such
obligation will be evidenced by the corporation's promissory
note payable to such holder and bearing interest at the prime
rate of interest at the United Bank of Denver, N.A. as in
effect during the time such note is outstanding.
(v) The issuance of certificates for shares of
Common Stock upon conversion of Series A Preferred Stock will
be made without charge to the holders of such Series A
Preferred Stock for any issuance tax in respect thereof or
other cost incurred by the corporation in connection with such
conversion and the related issuance of shares of Common Stock.
(vi) The corporation will not close its books
against the transfer of Series A Preferred Stock or of Common
Stock issued or issuable upon conversion of Series A Preferred
Stock in any manner which interferes with the timely
conversion of Series A Preferred Stock.
(vii) The conversion Price for the Common Stock
will be $2.40 per share of Common Stock and will not be
subject to adjustment except as otherwise specifically set
forth herein.
(viii) Prior to the consummation of any Organic
Change, the corporation will make appropriate
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provisions (in form and substance satisfactory to the holders
of a majority of the Series A Preferred Stock then
outstanding) to insure that each of the holders of Series A
Preferred Stock will thereafter have the right to acquire and
receive in lieu of or in addition to the shares of Common
Stock immediately theretofore acquirable and receivable upon
the conversion of such holder's Series A Preferred Stock, such
shares of stock, securities or assets as such holder would
have received in connection with such Organic Change if such
holder had converted his Series A Preferred Stock immediately
prior to such Organic Change. In any such case appropriate
provisions (in form and substance satisfactory to the holders
of a majority of the Series A Preferred Stock then
outstanding) will be made to insure that the provisions of
this subparagraph d(viii) will thereafter be applicable to
Series A Preferred Stock (including, in the case of any such
consolidation, merger or sale in which the successor
corporation or purchasing corporation is other than the
corporation, an immediate adjustment of the Conversion Price
to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding
immediate adjustment in the number of shares of Common Stock
acquirable and receivable upon conversion of Series A
Preferred Stock, if the value so reflected is less than the
Conversion Price in effect immediately prior to such
consolidation, merger or sale). The corporation will not
effect any such consolidation, merger or sale, unless prior to
the consummation thereof, the successor corporation (if other
than the corporation) resulting from such consolidation or
merger or the corporation purchasing such assets assumes by
written instrument (in form reasonably satisfactory to the
holders of a majority of the Series A Preferred Stock then
outstanding), the obligation to deliver to each such holder
such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to
acquire.
(ix) if the corporation at any time after
December 28, 1993 subdivides (by any stock split, stock
dividend or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such
subdivision will
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be proportionately reduced, and if the corporation at any time
after December 28, 1993 combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination will be
proportionately increased.
(x) The corporation will send written notice to
all holders of Series A Preferred Stock at least 20 days prior
to the date on which the corporation closes its books or takes
a record for determining rights to vote with respect to any
Organic change, dissolution or liquidation. The corporation
will also give to the holders of shares of Series A Preferred
Stock at least 30 days prior written notice of the date on
which any Organic Change, dissolution or liquidation will take
place.
e. Voting Rights.
Holders of shares of Series A Preferred Stock will be
entitled to vote on all matters which are or may be submitted
to a vote of shareholders of the corporation permitted under
the laws of the State of Colorado. Each share, until redeemed
or converted, shall have voting rights equal to 16.667 shares
of Common Stock. Holders of the shares of Series A Preferred
Stock shall further have the same rights accorded to holders
of Common Stock on all matters relating to the voting of such
Common Stock provided by the laws of the State of Colorado.
f. Purchase Rights.
If at any time the corporation grants, issues or
sells any options, convertible securities or rights to
purchase stock, warrants, securities or other property pro
rata to the record holders of Common Stock (the "Purchase
Rights"), then each holder of Series A Preferred Stock will be
entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such
holder could have acquired if such holder had held the number
of shares of Common Stock acquirable upon conversion of such
holder's Series A Preferred Stock immediately before the date
on which a record is taken for the grant, issuance or sale of
such Purchase Rights, or, if no
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such record is taken,, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or
sale of Purchase Rights.
g. Definitions.
"Conversion Price" means $2.40, subject to adjustment
as provided in subparagraph d(ix) of this paragraph 8.
"Liquidation Value" of any share of Series A
Preferred Stock as of any particular date will be equal to
$5.00 plus any unpaid dividends on such share of Series A
Preferred Stock; and, in the event of any liquidation,
dissolution or winding up of the corporation or the redemption
of such share of Series A Preferred Stock, unpaid dividends on
such share of Series A Preferred Stock, regardless of whether
they have become payable, will be added to the Liquidation
Value of such share of Series A Preferred Stock, on the
payment date in any liquidation, dissolution or winding up, or
on the Redemption Date, as the case may be, accrued to the
close of business on such payment date or Redemption Date.
"Organic Change" means any capital reorganization,
reclassification, consolidation, merger or any sale of all or
substantially all of the corporations assets to another Person
which is effected in such a way that holders of Common Stock
are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in
exchange for Common Stock.
"Redemption Date" as to any share of Series A
Preferred Stock means the date specified in the Notice of any
Redemption provided that no such date will be a Redemption
Date unless the applicable Redemption Price is actually paid
in full on or before such date, and if not so paid in full,
the Redemption Date will be the date on which such Redemption
Price is fully paid. If, however, the full Redemption Price is
not paid on the Redemption Date solely because a holder has
not surrendered his certificate(s) at the corporation's
principal office as provided in subparagraph c(ii) hereof,
then as to such holder the date specified herein for the
scheduled redemption shall be the Redemption Date.
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"Person" means an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated
organization or a government or any department or agency
thereof.
"Redemption Price" means an amount equal to the
Liquidation Value.
"Subsidiary" means any corporation of which shares of
stock having at least a majority of the ordinary voting power
in electing the board of directors, is, at the time as of
which any determination is being made, owned by the
corporation either directly or indirectly through one or more
Subsidiaries.
h. Miscellaneous
(i) The corporation will keep at its principal
office a register for the registration of Series A Preferred
Stock. Upon the surrender of any certificate representing
Series A Preferred Stock at such place, the corporation will,
at the request of the record holder of such certificate,
execute and deliver (at the corporation's expense) a new
certificate or certificates in exchange therefor representing
in the aggregate the number of shares represented by the
surrendered certificate. Each such new certificate will be
registered in such name and will represent such number of
shares of Series A Preferred Stock as is requested by the
holder of the surrendered certificate and will be
substantially identical in form to the surrendered
certificate, and dividends will accrue on the Series A
Preferred Stock represented by such new certificate from the
date to which dividends have been fully paid on such Series A
Preferred Stock represented by the surrendered certificate.
(ii) Upon receipt of evidence and an agreement to
indemnify reasonably satisfactory to the corporation (an
affidavit of the registered holder, without bond, will be
satisfactory) of the ownership and the loss, theft,
destruction or mutilation of any certificate evidencing one or
more shares of Series A Preferred Stock the corporation will
(at its expense) execute and deliver in lieu of such
certificate a new certificate representing the number of
shares of
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Series A Preferred Stock represented by such lost, stolen,
destroyed or mutilated certificate, and dividends will accrue
on the Series A Preferred Stock represented by such new
certificate from the date to which dividends have been fully
paid on such lost, stolen, destroyed or mutilated certificate.
(iii) Amendments, modifications or waivers of any
of the terms hereof will be binding and effective if the prior
written consent of holders of at least 75% of the Series A
Preferred Stock outstanding at the time such action is taken
is obtained; provided that no such action will change (A) the
rate of which or the manner in which dividends on the Series A
Preferred Stock accrue or the times at which such dividends
become payable or the amount payable on redemption of the
Series A Preferred Stock are to occur, unless the prior
written consent of the holders of at least 90% of the Series A
Preferred Stock then outstanding is obtained, (B) except as
set forth in subparagraph d(ix) of this paragraph 8, the
Conversion Price of the Series A Preferred Stock or the number
of shares or class of stock into which the Series A Preferred
Stock is convertible, unless the prior written consent of the
holders of at least 90% of the Series A Preferred Stock then
outstanding is obtained or (C) the percentage required to
approve any change described in clauses (A) and (B) above,
unless the prior written consent of the holders of at least
90% of the Series A Preferred Stock then outstanding is
obtained; and provided further that no such change in the
terms hereof may be accomplished by merger or consolidation of
the corporation with another corporation unless the
corporation has obtained the prior written consent of the
holders of the applicable percentage of the Series A Preferred
Stock.
(iv) All notices referred to herein, except as
otherwise expressly provided, will be hand delivered or mailed
by registered or certified mail, return receipt requested,
postage prepaid, and will be deemed to have been given when so
hand delivered or mailed.
(v) The Board of Directors shall not have any
authority to increase the number of authorized shares of
Series A Preferred Stock.
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(vii) Except as expressly authorized in this
paragraph 8, the shares of Series A Preferred Stock, and the
holders thereof, shall be subject to the provisions of
paragraphs 3, 4, 5, 6, and 7 of this Article IV.
THIRD. The number of shares of Common Stock and the number of shares
of Preferred Stock, voting as a class, voted for this amendment were sufficient
for approval.
FOURTH. Effective as of the Effective Date, each share of the
corporation's Common Stock issued before the Effective Date will be
reclassified, changed and converted so that, from and after the Effective Date,
each one share of the outstanding Common Stock shall be deemed to represent
0.1667 of a share of Common Stock, such reclassification to be effected without
change in the par value of the Common Stock or in the stated capital of the
corporation. Holders of shares of Common Stock issued before the Effective Date
will be asked to surrender the certificates representing such shares for new
certificates representing the number of shares held by them after the Effective
Date. No holders will be issued a fractional share of Common Stock, instead,
any fraction of a share shall be rounded to the next highest whole share, based
upon shares owned of record as reflected on the stock records of the
corporation.
DATED as of the 17th day of December, 1993.
/s/ GEORGE K. BROADY
George K. Broady, President
/s/ TIM D. TORNO
Tim D. Torno, Secretary
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ANNEX E
BYLAWS
OF
ULTRAK, INC.
ARTICLE I
Principal Office and Corporate Seal
Section 1. The principal office and place of business of the
Corporation in the State of Colorado shall be 660 Compton Street, Broomfield,
Colorado 80020. Other offices and places of business may be established from
time to time by resolution of the board of directors or as the business of the
corporation may require.
Section 2. The seal of the corporation shall have inscribed thereon
the name of the corporation and shall be in such form as may be approved by the
board of directors, which shall have power to alter the same at pleasure. The
corporation may use the seal by causing it, or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
ARTICLE II
Shares and Transfer Thereof
Section 1 - Certificates. The shares of this corporation shall be
represented by certificates signed by the president or a vice president and the
secretary or an assis-
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tant secretary of the corporation, and may be sealed with the seal of the
corporation or a facsimile thereof. The signatures of the president or vice
president and the secretary or assistant secretary upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the corporation itself or an employee of
the corporation. In case any officer who has signed a certificate shall have
ceased to be such officer before such certificate is issued, it may be issued
by the corporation with the same effect as if he were such officer at the date
of its issue.
Section 2 - New Certificates. No new certificates evidencing shares
shall be issued unless and until the old certificate or certificates, in lieu
of which the new certificate is issued, shall be surrendered for cancellation,
except as provided in Section 3 of this Article II.
Section 3 - Loss or Destruction. In case of loss or destruction of any
certificate of shares, another certificate may be issued in its place upon
satisfactory proof of such loss or destruction and, at the discretion of the
corporation, upon giving to the corporation a satisfactory bond of indemnity
issued by a corporate surety in an amount and for a period satisfactory to the
board of directors.
Section 4 - Transfer Agent. Unless otherwise specified by the board of
directors by resolution, the secretary of
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the corporation shall act as transfer agent of the certificates representing
the shares of stock of the corporation. He shall maintain a stock transfer
book, the stubs in which shall set forth among other things, the names and
addresses of the holders of all issued shares of the corporation, the number of
shares held by each, the certificate numbers representing such shares, the date
of issue of the certificates representing such shares, and whether or not such
shares originate from original issue or from transfer. Subject to Section 5,
the names and addresses of the shareholders as they appear on the stubs of the
stock transfer book shall be conclusive evidence as to who are the shareholders
of record and as such entitled to receive notice of the meetings of
shareholders; to vote at such meetings; to examine the list of the shareholders
entitled to vote at meetings; to receive dividends; and to own, enjoy and
exercise any other property or rights deriving from such shares against the
corporation. Each shareholder shall be responsible for notifying the secretary
in writing of any change in his name or address and failure so to do will
relieve the corporation, its directors, officers, from liability for failure to
direct notices or other documents, or pay over or transfer dividends or other
property or rights, to a name or address other than the name and address
appearing on the stub of the stock transfer book.
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Section 5 - Close of Transfer Book and Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors may provide that the stock transfer
books shall be closed for a stated period, but not to exceed in any case fifty
days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of, or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting. In lieu of closing the stock transfer books, the board
of directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
days and, in case of a meeting of shareholders, not less than ten days prior to
the date on which the particular action requiring such determination of
shareholders is to be taken. If the board of directors does not order the
stock transfer books closed, or fix in advance a record date, as above
provided, then the record date for the determination of shareholders entitled
to notice of, or to vote at any meeting of shareholders, or any adjournment
thereof, or entitled to receive payment of any dividend, or for the
determination of shareholders for
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any proper purpose shall be thirty days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
ARTICLE III
Shareholders and Meetings Thereof
Section 1 - Shareholders of Record. Only shareholders of record on
the books of the corporation shall be entitled to be treated by the corporation
as holders in fact of the shares standing in their respective names, and the
corporation shall not be bound to recognize any equitable or other claim to, or
interest in, any shares on the part of any other person, firm or corporation,
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of Colorado.
Section 2 - Meetings. Meetings of shareholders shall be held at the
principal office of the corporation, or at such other place as specified from
time to time by the board of directors. If the board of directors shall
specify another location such change shall be recorded on the notice calling
such meeting.
Section 3 - Annual Meeting. In the absence of a resolution of the
board of directors providing otherwise, the annual meeting of shareholders of
the corporation for the election of directors, and for the transaction of such
other
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business as may properly come before the meeting, shall be held on the first
day of the fifth month in each fiscal year, if the same be not a legal holiday,
and if a legal holiday, then on the next succeeding business day, at 9:00
o'clock a.m.
Section 4 - Special Meetings. Special meetings of the shareholders may
be called by the president, the board of directors, the holders of not less
than one-tenth of all the shares entitled to vote at the meeting, or legal
counsel of the corporation as last designated by resolution of the board of
directors.
Section 5 - Notice. Written notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten days nor more
than fifty days before the date of the meeting, either personally or by mail,
by or at the direction of the president, the secretary, or the officer or
person calling the meeting to each shareholder of record entitled to vote at
such meeting; except that, if the authorized shares are to be increased, at
least thirty days' notice shall be given.
Notice to shareholders of record, if mailed, shall be deemed given as
to any shareholder of record, when deposited in the United States mail,
addressed to the shareholder at his address as it appears on the stock transfer
books of the
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corporation, with postage thereon prepaid, but if three successive letters
mailed to the last-known address of any shareholder of record are returned as
undeliverable, no further notices to such shareholder shall be necessary, until
another address for such shareholder is made known to the corporation.
Section 6 - Shareholder Record. The officer or agent having charge of
the stock transfer books for shares of this corporation shall make, at least
ten days before each meeting of shareholders, a complete record of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which record, for a period of ten days before such meeting, shall
be kept on file at the principal office of the corporation, whether within or
outside colorado, and shall be subject to inspection by any shareholder for any
purpose germane to the meeting at any time during usual business hours. Such
record shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder for any
purpose germane to the meeting during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such record or transfer books or to vote at
any meeting of shareholders.
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Section 7 - Quorum and Adjournment. At any meeting of the
shareholders the presence, in person or by proxy of the holders of more than a
majority of the shares outstanding and entitled to vote shall constitute a
quorum. In the absence of a quorum, the meeting may be adjourned by any
officer entitled to preside at, or act as secretary of such meeting, or by a
majority in interest of those shareholders present in person or by proxy.
Section 8 - Voting. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or by his duly authorized attorney
in fact. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
At all meetings of the shareholders, a quorum being present, all
matters shall be decided by a simple majority vote of the then eligible shares,
except as otherwise provided by statute, by the Articles of Incorporation of
the corporation, or by these Bylaws. The vote on any matter need not be by
ballot unless required by statute or requested by a shareholder, in person or
by proxy, who is entitled to vote at the meeting.
Section 9 - Conduct of Meetings. Each meeting of the shareholders
shall be presided over by the president, or if the president shall not be
present, by the vice president. If both the president and vice president are
absent, a
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chairman shall be chosen by a majority in voting interest of those shareholders
present or represented by proxy. The secretary of the corporation shall act as
secretary of each meeting of the shareholders. If he shall not be present the
chairman of the meeting shall appoint a secretary.
ARTICLE IV
Directors, Powers and Meetings
Section 1 - Board of Directors. The business and affairs of the
corporation shall be managed by a board of three directors who need not be
shareholders of the corporation or residents of the State of Colorado and who
shall be elected at the annual meeting of shareholders or some adjournment
thereof. Directors shall hold office until the next succeeding annual meeting
of shareholders and until their successors shall have been elected and shall
qualify. The board of directors may increase or decrease, to not less than
three, the number of directors by resolution.
Section 2 - Regular Meetings. The annual meeting of the board of
directors shall be held at the same place as, and immediately after, the annual
meeting of shareholders, and no notice shall be required in connection
therewith. The annual meeting of the board of directors shall be for the
purpose of electing officers and the transaction of such other business as may
come before the meeting. Regular
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meetings of the board of directors may be held without notice as determined by
resolution adopted by the board.
Section 3 - Special Meetings. Special meetings of the board of
directors or any committee designated by said board may be called at any time
by the president or by any director, and may be held within or outside the
State of Colorado at such time and place as the notice or waiver thereof may
specify. Notice of such meetings shall be mailed or telegraphed to the last
known address of each director at least five days, or shall be given to a
director in person or by telephone at least forty-eight hours, prior to the
date or time fixed for the meeting. special meetings of the board of directors
may be held at any time that all directors are present in person, and presence
of any director at a meeting shall constitute waiver of notice of such meeting
except as otherwise provided by law. Unless specifically required by law, the
Articles of Incorporation or these Bylaws, neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors or any
committee designated by said board need be specified in the notice or waiver of
notice of such meeting.
Section 4 - Special Attendance. Except as may be otherwise provided by
the Articles of Incorporation or Bylaws, members of the board of directors of
any committee designated by such board may participate in a meeting of the
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board or committee by means of conference telephone or similar communications
equipment by which all persons participating in the meeting can hear each other
at the same time. Such participation shall constitute presence in person at
the meeting.
Attendance of a director at a meeting shall constitute a waiver of
notice of such meeting except where a director attends a meeting for the
express purpose of objecting to the transaction of business because the meeting
is not lawfully called or convened.
Section 5 - Quorum and Voting. A quorum at all meetings of the board
of directors shall consist of a majority of the number of directors then
holding office, but a smaller number may adjourn from time to time without
further notice, until a quorum is secured. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the board of directors, unless the act of a greater number is required by the
laws of the State of Colorado or by the Articles of Incorporation or these
Bylaws.
Section 6 - Organization. The president of the corporation, or in his
absence, the vice president, shall preside at each meeting of the board of
directors. The secretary, or in his absence, any person appointed by the
chairman of the meeting, shall act as secretary of the meeting.
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Section 7 - Presumption of Assent. A director of the corporation who
is present at a meeting of the board of directors at which action or any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
Section 8 - Vacancies. Any vacancy occurring in the board of
directors may be filled by the affirmative vote of a majority of the remaining
directors though less than a quorum of the board of directors. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, and shall hold such office until his successor is duly
elected and shall qualify. Any directorship to be filled by reason of an
increase in the number of directors shall be filled by the affirmative vote of
a majority of the directors then in office or by an election at an annual
meeting, or at a special meeting of shareholders called for that purpose. A
director chosen to fill a position resulting from an increase in the number of
direc-
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tors shall hold office until the next annual meeting of shareholders and until
his successor shall have been elected and shall qualify.
Section 9 - Compensation. Directors may receive such compensation and
reimbursement for expenses as may be established by appropriate resolution of
the board of directors and in addition thereto, shall receive reasonable
traveling expense, if any is required, or attendance at such meetings. A
director may serve the corporation in a capacity other than that of a director
and receive compensation for the services rendered in that capacity.
Section 10 - Executive Committees. The board of directors, by
resolution adopted by a majority of the number of directors may designate from
among its members an executive committee, and one or more other committees each
of which, to the extent provided in the resolution shall have all of the
authority of the board of directors; but no such committee shall have the
authority of the board of directors in reference to amending the Articles of
Incorporation, adopting a planof merger or consolidation, recommending to the
shareholders the sale, lease, exchange or other disposition of all or
substantially all of the property and assets of the corporation otherwise than
in the usual and regular course of its business, recommending to the
shareholders a voluntary dissolution of the corporation or a revocation
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thereof, or amending the Bylaws of the corporation. the designation of such
committees and the delegation thereto of authority shall not operate to relieve
the board of directors, or any member thereof, of any responsibility imposed by
law.
Section 11 - Removal of Directors. The shareholders may, at a meeting
called for the express purpose of removing directors, by a majority vote of the
shares entitled to vote at an election of directors, remove the entire board of
directors or any lesser number, with or without cause.
Section 12 - Resignations. A director of the corporation may resign
at any time by giving written notice to the board of directors, president or
secretary of the corporation. The resignation shall take effect upon the date
of receipt of such notice, or at any later period of time specified therein.
The acceptance of such resignation shall not be necessary to make it effective,
unless the resignation requires it to be effective as such.
Section 13 - General Powers. The business and affairs of the
corporation shall be managed by the board of directors which may exercise all
such powers of the corporation and do all such lawful acts and things as are
not by statute or by the Articles of Incorporation or by these Bylaws directed
or required to be exercised or done by the shareholders. The directors shall
pass upon any and all bills or
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claims of officers for salaries or other compensation and, if deemed advisable,
shall contract with officers, employees, directors, attorneys, accountants, and
other persons to render services to the corporation.
ARTICLE V
Waiver of Notice
Notwithstanding any notices required by law or these Bylaws to be
given to any shareholder or director of the corporation, a waiver thereof in
writing signed by the person entitled to such notice, whether before, at, or
after the time stated therein shall be the equivalent to the giving of such
notice.
ARTICLE VI
Action Without a Meeting
Any action required to be taken at a meeting of the directors,
executive committee, or other committee of the directors, or shareholders of
this corporation, or any action which may be taken at a meeting of directors,
executive committee, or other committee of the directors, or shareholders, may
be taken without a meeting if a consent in writing, setting forth the action so
taken shall be signed by all of the directors, executive or other committee
members or shareholders entitled to vote with respect to the subject matter
thereof.
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Such consent shall have the same force and effect as a unanimous vote
of the directors, executive committee or other committee members or
shareholders, as the case may be and may be stated as such in any articles or
document filed with the Secretary of State of Colorado.
ARTICLE VII
Officers
Section 1 - Term and Compensation. The elective officers of the
corporation shall consist of at least a president, a secretary and a treasurer
each of whom shall be eighteen years or older and who shall be elected by the
board of directors at its annual meeting. Unless removed in accordance with
procedures established by law and these Bylaws, the said officers shall serve
until the next succeeding annual meeting of the board of directors and until
their respective successors are elected and shall qualify. Any two offices,
but not more than two, may be held by the same person at the same time, except
that one person may not simultaneously hold the offices of president and
secretary. The board may elect or appoint such other officers and agents as it
may deem advisable, who shall hold office during the pleasure of the board.
All officers shall be paid such compensation as may be directed by the board.
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Section 2 - Powers. The officers of the corporation shall exercise
and perform the respective powers, duties and functions as are stated below,
and as may be assigned to them by the board of directors.
(a) The president shall be the chief executive officer of
the corporation and shall, subject to the control of the board of
directors, have general supervision, direction and control of the
business and officers of the corporation. He shall preside at all
meetings of the shareholders and of the board of directors. The
president or a vice president, unless some other person is
specifically authorized by the board of directors, shall sign all
stock certificates, bonds, deeds, mortgages, leases and contracts of
the corporation. The president shall perform all the duties commonly
incident to his office and such other duties as the board of directors
shall designate.
(b) In the absence or disability of the president, the
vice president or vice president, if any, in order of their rank as
fixed by the board of directors, and if not ranked, the vice
presidents in the order designated by the board of directors, shall
perform all the duties of the president, and when so acting shall have
all the powers of, and be subject to all the restrictions on the
president. Each vice president
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shall have such other powers and preform such other duties as may from
time to time be assigned to him by the president.
(c) The secretary shall keep accurate minutes of all
meetings of the shareholders and the board of directors. He shall
keep, or cause to be kept a record of the shareholders of the
corporation and shall be responsible for the giving of notice of
meetings of the shareholders or the board of directors. The secretary
shall be custodian of the records and of the seal of the corporation
and shall attest the affixing of the seal of the corporation when so
authorized. The secretary or assistant secretary shall sign all stock
certificates. The secretary shall perform all duties commonly
incident to his office and such other duties as may from time to time
be assigned to him by the president.
(d) An assistant secretary may, at the request of the
secretary, or in the absence or disability of the secretary, perform
all of the duties of the secretary. He shall perform such other
duties as may be assigned to him by the president or by the secretary.
(e) The treasurer, subject to the order of the board of
directors, shall have the care and custody of the money, funds,
valuable papers and documents of the
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corporation. He shall keep accurate books of accounts of the
corporation's transactions, which shall be the property of the
corporation, and shall render financial reports and statements of
condition of the corporation when so requested by the board of
directors or president. The treasurer shall perform all duties
commonly incident to his office and such other duties as may from time
to time be assigned to him by the president. In the absence or
disability of the president and vice president or vice presidents, the
treasurer shall perform the duties of the president.
(f) An assistant treasurer may, at the request of the
treasurer, or in the absence or disability of the treasurer, perform
all of the duties of the treasurer. He shall perform such other
duties as may be assigned to him by the president or by the treasurer.
Section 3 - Compensation. All officers of the corporation may receive
salaries or other compensation if so ordered and fixed by the board of
directors. The board shall have authority to fix salaries in advance for
stated periods or render the same retroactive as the board may deem advisable.
Section 4 - Delegation of Duties. In the event of absence or
inability of any officer to act, the board of directors may delegate the powers
or duties of such officer to any other officer, director or person whom it may
select.
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Section 5 - Removal. Any officer or agent may be removed by the board
of directors or by the executive committee, if any, whenever in its judgment
the best interest of the corporation will be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not, of itself,
create contract rights.
ARTICLE VIII
Finance
Section 1 - Reserve Funds. The board of directors, in its uncontrolled
discretion, may set aside from time to time, out of the net profits or earned
surplus of the corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the corporation, and for any other purpose.
Section 2 - Banking. The moneys of the corporation shall be deposited
in the name of the corporation in such bank or banks or trust company or trust
companies, as the board of directors shall designate, and may be drawn out only
on checks signed in the name of the corporation by such person or persons as
the board of directors by appropriate resolution may direct. Notes and
commercial paper, when
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authorized by the board, shall be signed in the name of the corporation by such
officer or officers or agent or agents as shall thereunto be authorized from
time to time.
Section 3 - Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the board of directors.
ARTICLE IX
Dividends
Subject to the provisions of the Articles of Incorporation and the
laws of the State of Colorado, the board of directors may declare dividends
whenever, and in such amounts, as in the board's opinion the condition of the
affairs of the corporation shall render such advisable.
ARTICLE X
Contracts, Loans and Checks
Section 1 - Execution of Contracts. Except as otherwise provided by
statute or by these Bylaws, the board of directors may authorize any officer or
agent of the corporation to enter into any contract, or execute and deliver any
instrument in the name of, and on behalf of the corporation. Such authority
may be general or confined to specific instances and, unless so authorized, no
officer, agent or employee shall have any power to bind the corporation for
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any purpose, except as may be necessary to enable the corporation to carry on
its normal and ordinary course of business.
Section 2 - Loans. No loans shall be contracted on behalf of the
corporation and no negotiable paper shall be issued in its name unless
authorized by the board of directors. When so authorized, any officer or agent
of the corporation may effect loans and advances at any time for the
corporation from any bank, trust company or institution, firm, corporation or
individual. An agent so authorized may make and deliver promissory notes or
other evidence of indebtedness of the corporation and may mortgage, pledge,
hypothecate or transfer any real or personal property held by the corporation
as security for the payment of such loans. Such authority, in the board of
directors discretion, may be general or confined to specific instances.
Section 3 - Checks. Checks, notes, drafts and demands for money
issued in the name of the corporation shall be signed by such person or persons
as designated by the board of directors and in the manner the board of
directors prescribes.
ARTICLE XI
Amendments
Subject to repeal or change by action of the shareholders, these
Bylaws may be altered, amended or repealed at
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the annual meeting of the board of directors or at any special meeting of the
board called for that purpose.
ARTICLE XII
Gender
Whenever in these Bylaws the masculine gender is used, it shall be
deemed to include the feminine gender.
The above Bylaws approved and adopted by the Board of Directors on
April 21, 1980.
/s/ Vincent J. Shanovich
Secretary
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ANNEX F
SHAREHOLDERS AGREEMENT
BLC & ASSOCIATES, INC. dba GPS STANDARD USA
THIS SHAREHOLDERS AGREEMENT (this "Agreement") is entered into as of
May , 1994, by and among BLC & ASSOCIATES, INC., a California corporation,
doing business as GPS STANDARD USA (the "Company"), MATHIEW BAIS ("Bais"), and
COMMODORE INVESTMENTS LIMITED, a company registered under the laws of Liberia
("Commodore"). (Individually, Bais, or Commodore may be referred to herein as
"Shareholder", or, collectively, as "Shareholders".) This Agreement shall apply
to all shares of the Company's Common Stock now or hereafter outstanding and is
for the purpose of providing for the management of the Company and protecting
the Company and the Shareholders in certain events, including, but not limited
to, any attempted sale by any Shareholder of shares of the Company's Common
Stock, or on the occurrence of certain other events as provided in this
Agreement.
RECITALS
A. The Company is in the business of manufacturing
and/or distributing integrated security systems and products related
thereto. The Company is in the process of expanding and diversifying
its business and the products it offers;
B. This Agreement affects all of the Common Stock of the
Company. The Company has 192,000 shares of its Common Stock issued and
outstanding (the "Shares"). (The term "Shares" shall also include any
shares of the Company's Common Stock issued hereafter by way of stock
split, stock dividend, or otherwise if issued pro rata to all
Shareholders or if issued with the consent of all Shareholders.)
C. The Shareholders are all of the record and beneficial
owners of the Company's Common Stock, and together own all of the
outstanding shares of the Company's Common Stock. Bais owns an
aggregate of 96,000 Shares of Common Stock, or 50% of the Shares.
Commodore also owns 96,000 Shares of the Common Stock, or 50% of the
Shares.
D. The parties desire to set forth their agreement with
respect to the ownership and transfer of the Shares and the management
of the Company, as follows:
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AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
undertakings herein, the Company and the Shareholders, individually and
collectively, hereby agree as follows:
1. Management of the Company. The parties acknowledge that Bais has
been the Chief Executive Officer, Chief Financial Officer and controlling
principal of the Company since its inception. The parties desire to continue
the operations, business and management of the Company, except as the
operations and business may be expanded, and except as the management may be
limited by the terms of this Agreement.
a) Board of Directors. Each Shareholder shall designate
a director of the Company to perform those duties imposed by the General
Corporation Law of California. All elections of directors and regular meetings
of directors and shareholders shall be waived, unless specifically requested by
one of the Shareholders.
b) Officers. Bais shall be the President and the Chief
Executive Officer, Kamal Aboukhater shall be Chief Financial Officer, and
Christine Bais shall be the Secretary of the Company. Bais' employment shall be
evidenced by an Employment Agreement, in the form attached as Exhibit "B" to
the Subscription Agreement of even date herewith, pursuant to which Commodore
acquired its Shares. To the extent permitted by the California General
Corporation Law, Bais shall manage the business and affairs of the Company, and
shall exercise all corporate powers, except as set forth in this Agreement and
subject to the position and views of the Chief Financial Officer.
Additionally, Bais shall have the authority to hire such employees, and appoint
such officers of the Company as he may deem appropriate, except as set forth
herein.
c) Limitations on Authority. The following actions may
not be taken without the consent of both Bais and Commodore:
i) Mergers amalgamations or consolidations of
the Company;
ii) Amendment of either the Articles or the
Certificate of Incorporation of the Company;
iii) Issuance of shares of capital stock, loan
stock, debentures, shares or any securities or granting of any rights relating
to the issuance of such shares of the Company,
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other than a pro rata issuance to the Shareholders, or the alteration of the
classification of shares of the Company or the rights pertaining to such
shares;
iv) Entering into any line of credit, term loan,
or other financing or any other material transaction in an amount exceeding
Fifty Thousand Dollars ($50,000);
v) The transfer, sale, lease, pledge, mortgage
or other disposition of any or substantially all of the assets of the Company;
vi) Amendment of this Agreement;
vii) Declaration of any Dividends;
viii) Dissolution of the Corporation;
ix) Appointment of Auditors.
d) Liability. Bais shall be liable and hereby
indemnifies fully both the Company and the other Shareholder for managerial
acts performed or omitted by him in his capacity as President and Chief
Executive Officer of the Company, to the extent and so long as the discretion
or powers of the Board of Directors in its management of corporate affairs is
exercised by Bais pursuant to this Agreement, and the other Shareholder shall
be relieved from such liability, except to the extent that they directly
participate in such management decisions.
2. Restrictions on Sale of Shares. For a period of three (3)
years following the date of this Agreement, none of the Shareholders shall
offer to sell, pledge, hypothecate, assign, transfer, encumber, or otherwise
dispose of any Shares of the Company. Thereafter, no Shareholder shall
transfer any Shares except in accordance with the terms and conditions of this
Agreement set forth in Sections 3, 4, 5 and 6. Any attempted transfer, other
than as permitted herein, shall be null and void. Each Shareholder shall have
and retain all rights with respect to his Shares. In the event that any
additional persons shall become shareholders of the Company, whether by
issuance of additional Shares of the Company's Common Stock, transfer of any
Shares owned by the Shareholders in accordance with the provisions of this
Agreement or otherwise, such person or persons shall hold their Shares subject
to all of the provisions of this Agreement and shall sign a counterpart of this
Agreement acknowledging their agreement to do so.
3. Permitted Transfers. After the initial three (3) year period,
the Shareholders may give, by way of gift without consideration, all or a
portion of the Shares held by that
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Shareholder to a revocable inter vivos trust, provided that (a) the declaration
or agreement of trust is fully disclosed to each of the other Shareholders, (b)
the beneficiaries thereof are limited to the declaring Shareholder and/or the
spouse and/or issue of such Shareholder, and (c) any such trust or the trustee
thereof shall hold such shares subject to all the provisions of this Agreement.
In the event that an individual Shareholder dies, the Shares may be transferred
by Will or by operation of law, provided that the transferee agrees in writing
to be bound by the provisions of this Agreement. It is expressly understood
that the death of any Shareholder-trustor shall constitute a death of a
Shareholder under this Agreement. In the event that a corporate Shareholder is
dissolved, whether voluntarily or by operation of the law, the Shares held by
such corporate Shareholder may be transferred, by distribution or by operation
of law, to the shareholders of the corporate Shareholder, in proportion to
their beneficial ownership interest in the corporate Shareholder, provided that
each transferee agrees in writing to be bound by the provisions of this
Agreement, and the other party to this Agreement is first afforded the right to
purchase the Shares, as set forth in Section 4 of this Agreement.
4. Right of First Refusal.
a) Notice. If after the initial three (3) year period
any Shareholder desires to transfer all or part of his Shares (hereinafter
referred to as the "Selling Shareholder"), the Selling Shareholder shall give
written notice to the Company, identifying the proposed transferee and specify
the number of Shares to be transferred (the "Offered Shares"), the price per
share, the terms of payment, and any other applicable terms or conditions. For
thirty (30) days following receipt of such notice, the Company shall have the
right to purchase all but not part of the Offered Shares either at the price
stated in the notice or at a purchase price agreed by the parties. The
Company's right to purchase the Offered Shares is subject to the restrictions
governing the right of a corporation to purchase its own stock set forth in
California Corporations Code Sections 500 and 501 and such other pertinent
governmental restrictions as are now, or may hereafter become, effective.
b) Exercise of Option. If the Company desires to
purchase all or any part of the Offered Shares, the Secretary of the Company
shall give written notice of that fact to the Selling Shareholder. The Company
shall pay the purchase price in the same manner as provided in the terms of
sale to the proposed transferee.
c) Rights of Remaining Shareholders. If the Company
does not purchase all of the Offered Shares within the thirty (30) day period,
the Company shall send to the remaining Shareholders a notice of the proposed
transfer in the same form as the Selling
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Shareholder's written notice, together with information regarding the number of
Offered Shares, if any, that the Company desires to purchase. The remaining
Shareholders shall then have the option for a period of twenty (20) days after
receipt of such notice by them to purchase all Offered Shares not purchased by
the Company at the same price and under the same terms and conditions as the
Company. If the remaining Shareholders desire to acquire all but not part of
the Offered Shares not purchased by the Company, they shall deliver to the
Secretary of the Company a written election to purchase such Offered Shares.
The remaining Shareholders shall each be entitled to purchase Offered Shares
under this option proportionate to his or its respective shareholders in the
Company. The Secretary shall notify each remaining Shareholder of the number
of Offered Shares as to which the election was effective, and the remaining
Shareholder shall, within ten (10) days thereafter, satisfy the terms and
conditions of such purchase required to be satisfied within such period.
d) Failure to Purchase All Offered Shares. In the event
that the Company and/or the remaining Shareholder does not elect to purchase
all of the Offered Shares, all of the Offered Shares may be transferred to the
bona fide purchaser identified in the notice at any time within ninety (90)
days from the date of the original notice by the Selling Shareholder, but only
on terms and conditions specified in such original notice. Any transfer shall
hold the shares subject to the provisions of this Agreement. No transfer of
Offered Shares shall be made after the end of the ninety (90) day period, nor
shall any change in the terms of transfer be permitted without a new written
notice by the Selling Shareholder and new compliance with all the requirements
of this Section 4.
5. Insurance Policy. For a period of not less than five (5)
years, the Company shall maintain a "Key Man" life insurance policy covering
the life of Bais for an amount not less than One Million Dollars ($1,000,000),
with Commodore identified as the beneficiary thereof in its entirety. Such
policies shall belong solely to the Company, and the Company shall have the
sole responsibility for payment of premiums thereon. The Company shall
maintain the policy in full force and effect, and shall have all incidents of
ownership thereto.
6. Corporate Purchases; Complete Redemption. It is intended that
any purchase of stock under the terms of this Agreement by the Company shall be
a complete redemption of the stock of the Shareholder in the Company, as
contemplated by Section 302 of the Internal Revenue Code of 1986, as amended.
If shares of stock of the Shareholder are purchased in part by the Company and
in part by one or more other Shareholders, the purchase by the Company shall be
deemed to have occurred after the purchase by the other
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Shareholder(s) so that the purchase by the Company is for the total remaining
stock of the Shareholder in the Company.
7. Legend. Each stock certificate, when issued, shall have
conspicuously endorsed on its face the following legend:
"The sale, transfer, or hypothecation of the shares
represented by this certificate is restricted by the
provisions of a Shareholders Agreement, dated as of May 29,
1994, a copy of which may be inspected at the principal office
of the Company, and all the provisions of which are
incorporated by reference in this certificate."
An original of this Agreement, duly executed by all parties, shall be delivered
to the Secretary of the Company, shall be maintained in the records of the
Company and shall be shown by the Secretary to any person inquiring about it.
8. Representations and Warranties. Each of the parties
represents and warrants that he, she or it has full right, power, and authority
to execute this Agreement and consummate the transactions contemplated
hereunder and that this Agreement is valid, binding and enforceable against
such person in accordance with its terms.
9. Termination. This Agreement shall terminate on the occurrence
of one or more of the following:
a) The written agreement of all parties;
b) The dissolution, bankruptcy, or insolvency of the
Company;
c) At such times as only one Shareholder remains, the
Shares of all others having been transferred or redeemed.
Whenever any person ceases to be a Shareholder of the Company in accordance
with the provisions of this Agreement, his or its rights and obligations under
this Agreement shall cease, provided that such rights and obligations are
assumed by any assignee or transferee as set forth herein, and provided,
further, that any attempt to transfer any Shares other than in accordance with
the terms of this Agreement shall not terminate such Shareholder's obligations.
10. Miscellaneous.
a) Agreement to Perform Necessary Acts. Each party to
this Agreement agrees to perform any further acts and execute and
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deliver any documents that may be reasonably necessary to carry out the
provisions of this Agreement.
b) Amendment. The provisions of this Agreement may be
waived, altered, amended, or discharged, in whole or in part, only by a written
consent of all parties to this Agreement.
c) Assignment. Except as specifically set forth herein
or in the Subscription Agreement, and except in compliance with applicable
securities laws, no party may assign or transfer his or its interest in this
Agreement, the Company, or the Shares.
d) Successors and Assigns. This Agreement shall be
binding on, and shall inure to the benefit of, the parties to it and their
respective heirs, legal representatives, successors, and assigns.
e) Notices. All notices, requests, demands, and other
communications desired or required to be given under this Agreement shall be in
writing and shall be deemed to have been duly given on the date of delivery if
personally delivered to the party to whom notice is to be given sent by
commercial courier or facsimile transmittal, or on the earlier of actual
receipt or seventy-two (72) hours after mailing, if mailed by first class,
registered or certified, mail, return receipt requested, postage prepaid, to
the party to whom notice is to be given, and properly addressed to the party at
his address set forth in the corporate records of the Company, or such other
address that such party may designate by written notice to the others.
f) Severability. In the event that any provision of
this Agreement is held to be invalid, void or unenforceable, that provision
shall be modified, if possible, to make enforceable consistent with the intent
of the parties and the other provisions hereof shall remain in full force and
effect, provided that such modification does not substantially affect the
purposes of this Agreement and the intent of the parties hereto.
g) Attorneys' Fees. If any party initiates any action
to enforce, interpret or prevent the breach of, any provision hereof,
including, but not limited to, instituting any action or proceeding, then the
prevailing party shall be entitled to reimbursement of all costs and expenses,
including attorneys' fees, whether such matter is resolved by negotiation,
settlement, award, order or otherwise. Any award of costs and expenses shall
not merge with and into any judgement or order, but shall be separately
enforceable, and the prevailing party shall be entitled to costs and expenses
in any action enforcing such judgement or aware.
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h) Governing Law. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California.
i) Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
j) Equitable Relief. Nothing herein shall prohibit any
party to a dispute from seeking the aid of an appropriate court for injunctive
or other equitable relief, pending the resolution of the dispute by
arbitration. The parties recognize and agree that the Shares are unique and
that legal remedies may be inadequate for the breach of this Agreement, so that
specific performance and/or other equitable remedies are appropriate remedies
for a breach of such obligation.
k) "Shareholders". Any transferee of any Shareholder
under and in accordance with this Agreement or any subsequent purchaser of the
Company's Common Stock shall be, and shall hold his or its shares, subject to
this Agreement and shall be deemed to be a "Shareholder" hereunder from and
after the date of transfer or issuance.
l) Integrated Agreement. This Agreement, together with
the Subscription Agreement and the Exhibits thereto, constitutes the entire
understanding and agreement among the parties hereto with respect to the
subject matter hereof, and there are no agreements, undertakings, restrictions,
representations, or warranties among the parties other than those set forth and
provided for herein.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
BLC & ASSOCIATES, INC., a California
corporation, dba GPS Standard USA
By: /s/ MATHIEW BAIS
------------------------------------
Mathiew Bais, President
8939 South Sepulveda Blvd
Los Angeles, California 90045
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SHAREHOLDER
By: /s/ MATHIEW BAIS
------------------------------------
Mathiew Bais
COMMODORE INVESTMENTS LIMITED, a company
registered under the laws of Liberia
By:
------------------------------------
[Name]
[Title]
By: /s/ H PETER LUGGEN
------------------------------------
[Name]
[Title]
c/o H Peter Luggen
FTZ AG
Residence Park
Post Office Box 4258
CH 6304
Zug
Switzerland
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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)
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<PAGE> 230
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
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Section 13. Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 14. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 15. Quorum and Manner of Acting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 16. Other Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 17. Alternate Members of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 18. Minutes of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
GENERAL
Section 19. Actions Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 20. Presence at Meetings by Means of Communications Equipment . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
NOTICES
Section 1. Type of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3. When Notice Unnecessary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V
OFFICERS
Section 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Election or Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Salaries of Elected Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 7. Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Assistant Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 10. Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 11. Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 13. Controller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 14. Assistant Controllers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the Corporation . . . . . . . . . . . . . . . . . . . 11
Section 2. Actions by or in the Right of the Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Determination of Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Right to Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 5. Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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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
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ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
Corporation shall be in the City of Wilmington, County of New Castle, State of
Delaware.
Section 2. Other Offices. The Corporation may also have offices
at such other place or places, both within and without the State of Delaware,
as the Board of Directors may from time to time determine or the business of
the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Time and Place of Meetings. All meetings of the
shareholders for the election of directors shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Meetings of shareholders for any other purpose may be held at such
time and place, within or without the State of Delaware, as shall be stated in
the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. Annual meetings of shareholders
shall be held on such date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at
which meeting the shareholders shall elect by a plurality vote a Board of
Directors and transact such other business as may properly be brought before
the meeting.
Section 3. Notice of Annual Meetings. Written notice of the
annual meeting, stating the place, date, and hour of the meeting, shall be
given to each shareholder of record entitled to vote at such meeting not less
than 10 or more than 50 days before the date of the meeting.
Section 4. Special Meetings. Special meetings of the
shareholders for any purpose or purposes, unless otherwise prescribed by
statute or by the Certificate of Incorporation, may be called at any time by
order of the Board of Directors and shall be called by the President, the Board
of Directors or at the request in writing of the holders of not less than ten
percent (10%) of the voting power represented by all the shares issued,
outstanding and entitled to be voted at the proposed special meeting, unless
the Certificate of Incorporation provides for a different percentage, in which
event such provision of the Certificate of Incorporation shall govern. Such
request shall state the purpose or purposes of the proposed special meeting.
Business transacted at any special meeting of shareholders shall be limited to
the purposes stated in the notice.
Section 5. Notice of Special Meetings. Written notice of a
special meeting, stating the place, date, and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be given to each
shareholder of record entitled to vote at such meeting not less than 10 or more
than 50 days before the date of the meeting, except that if the authorized
shares are to be increased, at least 30 days notice shall be given.
Section 6. Quorum. Except as otherwise provided by statute or
the Certificate of Incorporation, the holders of stock having a majority of the
voting power of the stock entitled to be
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voted thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of the shareholders.
If, however, such quorum shall not be present or represented at any meeting of
the shareholders, the shareholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time without notice (other than announcement at the meeting at which the
adjournment is taken of the time and place of the adjourned meeting) until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
Section 7. Organization. At each meeting of the shareholders,
the Chairman of the Board or the President, determined as provided in Article V
of these By-Laws, or if those officers shall be absent therefrom, another
officer of the Corporation chosen as chairman present in person or by proxy and
entitled to vote thereat, or if all the officers of the Corporation shall be
absent therefrom, a shareholder holding of record shares of stock of the
Corporation so chosen, shall act as chairman of the meeting and preside
thereat. The Secretary, or if he shall be absent from such meeting or shall be
required pursuant to the provisions of this Section 7 to act as chairman of
such meeting, the person (who shall be an Assistant Secretary, if an Assistant
Secretary shall be present thereat) whom the chairman of such meeting shall
appoint, shall act as secretary of such meeting and keep the minutes thereof.
Section 8. Voting. Except as otherwise provided in the
Certificate of Incorporation, each shareholder shall, at each meeting of the
shareholders, be entitled to one vote in person or by proxy for each share of
stock of the Corporation held by him and registered in his name on the books of
the Corporation on the date fixed pursuant to the provisions of Section 5 of
Article VII of these By-Laws as the record date for the determination of
shareholders who shall be entitled to notice of and to vote at such meeting.
Shares of its own stock belonging to the Corporation or to another corporation,
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held directly or indirectly by the Corporation, shall
not be entitled to vote. Any vote by stock of the Corporation may be given at
any meeting of the shareholders by the shareholder entitled thereto, in person
or by his proxy appointed by an instrument in writing subscribed by such
shareholder or by his attorney thereunto duly authorized and delivered to the
Secretary of the Corporation or to the secretary of the meeting; provided,
however, that no proxy shall be voted or acted upon after three years from its
date, unless said proxy shall provide for a longer period. Each proxy shall be
revocable unless expressly provided therein to be irrevocable and unless
otherwise made irrevocable by law. At all meetings of the shareholders all
matters, except where other provision is made by law, the Certificate of
Incorporation, or these By-Laws, shall be decided by the vote of a majority of
the votes cast by the shareholders present in person or by proxy and entitled
to vote thereat, a quorum being present. Unless demanded by a shareholder of
the Corporation present in person or by proxy at any meeting of the
shareholders and entitled to vote thereat, or so directed by the chairman of
the meeting, the vote thereat on any question other than the election or
removal of directors need not be by written ballot. Upon a demand of any such
shareholder for a vote by written ballot on any question or at the direction of
such chairman that a vote by written ballot be taken on any question, such vote
shall be taken by written ballot. On a vote by written ballot, each ballot
shall be signed by the shareholder voting, or by his proxy, if there be such
proxy, and shall state the number of shares voted.
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Section 9. List of Shareholders. It shall be the duty of the
Secretary or other officer of the Corporation who shall have charge of its
stock ledger, either directly or through another officer of the Corporation
designated by him or through a transfer agent appointed by the Board of
Directors, to prepare and make, at least 10 days before every meeting of the
shareholders, a complete list of the shareholders entitled to vote thereat,
arranged in alphabetical order, and showing the address of each shareholder and
the number of shares registered in the name of each shareholder. Such list
shall be open to the examination of any shareholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least 10 days
before said meeting, either at a place within the city where said meeting is to
be held, which place shall be specified in the notice of said meeting, or, if
not so specified, at the place where said meeting is to be held. The list
shall also be produced and kept at the time and place of said meeting during
the whole time thereof, and may be inspected by any shareholder of record who
shall be present thereat. The stock ledger shall be the only evidence as to
who are the shareholders entitled to examine the stock ledger, such list or the
books of the Corporation, or to vote in person or by proxy at any meeting of
shareholders.
Section 10. Inspectors of Votes. At each meeting of the
shareholders, the chairman of such meeting may appoint two Inspectors of Votes
to act thereat, unless the Board of Directors shall have theretofore made such
appointments. Each Inspector of Votes so appointed shall first subscribe an
oath or affirmation faithfully to execute the duties of an Inspector of Votes
at such meeting with strict impartiality and according to the best of his
ability. Such Inspectors of Votes, if any, shall take charge of the ballots,
if any, at such meeting and, after the balloting thereat on any question, shall
count the ballots cast thereon and shall make a report in writing to the
secretary of such meeting of the results thereof. An Inspector of Votes need
not be a shareholder of the Corporation, and any officer of the Corporation may
be an Inspector of Votes on any question other than a vote for or against his
election to any position with the Corporation or on any other question in which
he may be directly interested.
Section 11. Actions Without a Meeting. Any action required to be
taken at any annual or special meeting of shareholders of the Corporation, or
any action which may be taken at any annual or special meeting of shareholders,
may be taken without a meeting, without prior notice, and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereat were present and voted. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall be given to those shareholders who have not consented in
writing.
ARTICLE III
BOARD OF DIRECTORS
Section 1. Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which shall have and may exercise
all such powers of the Corporation and do all such lawful acts and things as
are not by statute, the Certificate of Incorporation, or these By-Laws directed
or required to be exercised or done by the shareholders.
Section 2. Number, Qualification, and Term of Office. The
number of directors which shall constitute the whole Board of Directors shall
not be less than two (2). Within the limits above specified, the number of
directors which shall constitute the whole Board of Directors shall be
determined by resolution of the Board of Directors. Directors need not be
shareholders. The
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directors shall be elected at the annual meeting of the shareholders, except as
provided in Sections 4 and 5 of this Article III, and each director elected
shall hold office until the annual meeting next after his election and until
his successor is duly elected and qualified, or until his death or retirement
or until he resigns or is removed in the manner hereinafter provided. Directors
shall be elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote on the election of directors at any
annual or special meeting of shareholders. Such election shall be by written
ballot.
Section 3. Resignations. Any director may resign at any time by
giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified therein, or if the time
when it shall become effective shall not be specified therein, then it shall
take effect immediately upon its receipt by the Secretary. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 4. Removal of Directors. Any director may be removed,
either with or without cause, at any time, by the affirmative vote by written
ballot of a majority in voting interest of the shareholders of record of the
Corporation entitled to vote, given at an annual meeting or at a special
meeting of the shareholders called for that purpose. The vacancy in the Board
of Directors caused by any such removal shall be filled by the shareholders at
such meeting or, if not so filled, by the Board of Directors as provided in
Section 5 of this Article III.
Section 5. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office until
the annual meeting next after their election and until their successors are
elected and qualified, unless sooner displaced. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
MEETINGS OF THE BOARD OF DIRECTORS
Section 6. Place of Meetings. The Board of Directors of the
Corporation may hold meetings, both regular and special, either within or
without the State of Delaware.
Section 7. Annual Meetings. The first meeting of each newly
elected Board of Directors shall be held immediately following the annual
meeting of shareholders, and no notice of such meeting to the newly elected
directors shall be necessary in order legally to constitute the meeting,
provided a quorum shall be present. In the event such meeting is not held
immediately following the annual meeting of shareholders, the meeting may be
held at such time and place as shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors, or as
shall be specified in a written waiver signed by all of the directors.
Section 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at such time and at such place as shall
from time to time be determined by the Board of Directors.
Section 9. Special Meetings; Notice. Special meetings of the
Board of Directors may be called by the Chairman of the Board, the President,
or the Secretary on 48 hours' notice to each director, either personally or by
telephone or by mail, telegraph, telex, cable, wireless, or other form of
recorded communication; special meetings shall be called by the President or on
the written
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request of any director. Notice of any such meeting need not be given to any
director, however, if waived by him in writing or by telegraph, telex, cable,
wireless, or other form of recorded communication, or if he shall be present at
such meeting.
Section 10. Quorum and Manner of Acting. At all meetings of the
Board of Directors, a majority of the directors at the time in office (but not
less than one-third of the whole Board of Directors) shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors, except as may be otherwise specifically provided by statute
or by the Certificate of Incorporation. If a quorum shall not be present at
any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement
at the meeting, until a quorum shall be present. A director of the Corporation
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the Secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the Corporation after such
adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 11. Remuneration. The Board of Directors may at any time
and from time to time by resolution provide that a specified sum shall be paid
to any director of the Corporation, either as his annual remuneration as such
director or member of any committee of the Board of Directors or as
remuneration for his attendance at each meeting of the Board of Directors or
any such committee. Further, the Corporation shall reimburse each director for
any expenses paid by him on account of his attendance at any meeting. Nothing
in this Section 11 shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving remuneration therefor.
COMMITTEES OF DIRECTORS
Section 12. Executive Committee; How Constituted and Powers. The
Board of Directors may in its discretion, by resolution passed by a majority of
the whole Board of Directors, designate an Executive Committee consisting of
one or more of the directors of the Corporation. Subject to the provisions of
Section 141 of the General Corporation Law of the State of Delaware, the
Certificate of Incorporation, and these By-Laws, the Executive Committee shall
have and may exercise, when the Board of Directors is not in session, all the
powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation, and shall have the power to authorize
the seal of the Corporation to be affixed to all papers which may require it;
but the Executive Committee shall not have the power to fill vacancies in the
Board of Directors, the Executive Committee, or any other committee of
directors or to elect or approve officers of the Corporation. The Executive
Committee shall have the power and authority to authorize the issuance of
common stock and grant and authorize options and other rights with respect to
such issuance. The Board of Directors shall have the power at any time, by
resolution passed by a majority of the whole Board of Directors, to change the
membership of the Executive Committee, to fill all vacancies in it, or to
dissolve it, either with or without cause.
Section 13. Organization. The Chairman of the Executive
Committee, to be selected by the Board of Directors, shall act as chairman at
all meetings of the Executive Committee and the Secretary shall act as
secretary thereof. In case of the absence from any meeting of the Executive
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Committee of the Chairman of the Executive Committee or the Secretary, the
Executive Committee may appoint a chairman or secretary, as the case may be, of
the meeting.
Section 14. Meetings. Regular meetings of the Executive
Committee, of which no notice shall be necessary, may be held on such days and
at such places, within or without the State of Delaware, as shall be fixed by
resolution adopted by a majority of the Executive Committee and communicated in
writing to all its members. Special meetings of the Executive Committee shall
be held whenever called by the Chairman of the Executive Committee or by any
member of the Executive Committee then in office. Notice of each special
meeting of the Executive Committee shall be given by mail, telegraph, telex,
cable, wireless, or other form of recorded communication or be delivered
personally or by telephone to each member of the Executive Committee not later
than the day before the day on which such meeting is to be held. Notice of any
such meeting need not be given to any member of the Executive Committee,
however, if waived by him in writing or by telegraph, telex, cable, wireless,
or other form of recorded communication, or if he shall be present at such
meeting; and any meeting of the Executive Committee shall be a legal meeting
without any notice thereof having been given, if all the members of the
Executive Committee shall be present thereat. Subject to the provisions of
this Article III, the Executive Committee, by resolution adopted by a majority
of the whole Executive Committee, shall fix its own rules of procedure.
Section 15. Quorum and Manner of Acting. A majority of the
Executive Committee shall constitute a quorum for the transaction of business,
and the act of a majority of those present at a meeting thereof at which a
quorum is present shall be the act of the Executive Committee.
Section 16. Other Committees. The Board of Directors may, by
resolution or resolutions passed by a majority of the whole Board of Directors,
designate one or more other committees consisting of one or more directors of
the Corporation, which, to the extent provided in said resolution or
resolutions, shall have and may exercise, subject to the provisions of Section
141 of the Delaware General Corporation Law, and the Certificate of
Incorporation and these By-Laws, the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
shall have the power to authorize the seal of the Corporation to be affixed to
all papers which may require it; but no such committee shall have the power to
fill vacancies in the Board of Directors, the Executive Committee, or any other
committee or in their respective membership, to appoint or remove officers of
the Corporation, or to authorize the issuance of shares of the capital stock of
the Corporation, except that such a committee may, to the extent provided in
said resolutions, grant and authorize options and other rights with respect to
the common stock of the Corporation pursuant to and in accordance with any plan
approved by the Board of Directors. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Directors. A majority of all the members of any such committee
may determine its action and fix the time and place of its meetings and specify
what notice thereof, if any, shall be given, unless the Board of Directors
shall otherwise provide. The Board of Directors shall have power to change the
members of any such committee at any time to fill vacancies, and to discharge
any such committee, either with or without cause, at any time.
Section 17. Alternate Members of Committees. The Board of
Directors may designate one or more directors as alternate members of the
Executive Committee or any other committee, who may replace any absent or
disqualified member at any meeting of the committee, or if none be so
appointed, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
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Section 18. Minutes of Committees. Each committee shall keep
regular minutes of its meetings and proceedings and report the same to the
Board of Directors at the next meeting thereof.
GENERAL
Section 19. Actions Without a Meeting. Unless otherwise
restricted by the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting, if all members of the
Board of Directors or committee, as the case may be, consent thereto in writing
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or the committee.
Section 20. Presence at Meetings by Means of Communications
Equipment. Members of the Board of Directors, or of any committee designated
by the Board of Directors, may participate in a meeting of the Board of
Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting conducted pursuant
to this Section 20 shall constitute presence in person at such meeting.
ARTICLE IV
NOTICES
Section 1. Type of Notice. Whenever, under the provisions of
any applicable statute, the Certificate of Incorporation, or these By-Laws,
notice is required to be given to any director or shareholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, in
person or by mail, addressed to such director or shareholder, at his address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given in
any manner permitted by Article III hereof and shall be deemed to be given at
the time when first transmitted by the method of communication so permitted.
Section 2. Waiver of Notice. Whenever any notice is required to
be given under the provisions of any applicable statute, the Certificate of
Incorporation, or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent thereto, and transmission of a
waiver of notice by a director or shareholder by mail, telegraph, telex, cable,
wireless, or other form of recorded communication may constitute such a waiver.
Section 3. When Notice Unnecessary. Whenever, under the
provisions of the Delaware General Corporation Law, the Certificate of
Incorporation or these By-Laws, any notice is required to be given to any
shareholder, such notice need not be given to the shareholder if:
(a) notice of two consecutive annual meetings and all notices of
meetings held during the period between those annual meetings,
if any, or
(b) all (but in no event less than two) payments (if sent by first
class mail) of distributions or interest on securities during
a 12-month period,
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have been mailed to that person, addressed at his address as shown on the
records of the Corporation, and have been returned undeliverable. Any action
or meeting taken or held without notice to such a person shall have the same
force and effect as if the notice had been duly given. If such a person
delivers to the Corporation a written notice setting forth his then current
address, the requirement that notice be given to that person shall be
reinstated.
ARTICLE V
OFFICERS
Section 1. General. The elected officers of the Corporation
shall be a President, a Secretary and a Treasurer. The Board of Directors may
also elect or appoint a Chairman of the Board, one or more Vice Presidents, one
or more Assistant Vice Presidents, one or more Assistant Secretaries, a
Treasurer, one or more Assistant Treasurers, a Controller, one or more
Assistant Controllers, and such other officers and agents as may be deemed
necessary or advisable from time to time, all of whom shall also be officers.
Two offices may be held by the same person.
Section 2. Election or Appointment. The Board of Directors at
its annual meeting shall elect or appoint, as the case may be, the officers to
fill the positions designated in or pursuant to Section 1 of this Article V.
Officers of the Corporation may also be elected or appointed, as the case may
be, at any other time.
Section 3. Salaries of Elected Officers. The salaries of all
elected officers of the Corporation shall be fixed by the Board of Directors.
Section 4. Term. Each officer of the Corporation shall hold his
office until his successor is duly elected or appointed and qualified or until
his earlier resignation or removal. Any officer may resign at any time upon
written notice to the Corporation. Any officer elected or appointed by the
Board of Directors or the Executive Committee may be removed at any time by the
affirmative vote of a majority of the whole Board of Directors. Any vacancy
occurring in any office of the Corporation by death, resignation, removal, or
otherwise may be filled by the Board of Directors or the appropriate committee
thereof.
Section 5. Chairman of the Board. The Chairman of the Board, if
one be elected, shall be the chief executive officer of the Corporation and
shall preside when present at all meetings of the Board of Directors and, with
the approval of the President, may preside at meetings of the shareholders. He
shall advise and counsel the President and other officers of the Corporation,
and shall exercise such powers and perform such duties as shall be assigned to
or required of him from time to time by the Board of Directors.
Section 6. President. In the absence of a Chairman of the
Board, the President shall be the ranking and chief executive officer of the
Corporation and shall have the duties and responsibilities, and the authority
and power, of the Chairman of the Board. The President shall be the chief
operating officer of the Corporation and, subject to the provisions of these
By-Laws, shall have general supervision of the affairs of the Corporation and
shall have general and active control of all its business. He shall preside,
when present, at all meetings of shareholders, except when the Chairman of the
Board presides with the approval of the President and as may otherwise be
provided by statute, and, in the absence of any other person designated thereto
by these By-Laws, at all meetings of the Board of Directors. He shall see that
all orders and resolutions of the Board of
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Directors and the shareholders are carried into effect. He shall have general
authority to execute bonds, deeds, and contracts in the name of the Corporation
and affix the corporate seal thereto; to sign stock certificates; to cause the
employment or appointment of such employees and agents of the Corporation as
the proper conduct of operations may require, and to fix their compensation,
subject to the provisions of these By-Laws; to remove or suspend any employee
or agent who shall have been employed or appointed under his authority or under
authority of an officer subordinate to him; to suspend for cause, pending final
action by the authority which shall have elected or appointed him, any officer
subordinate to the President; and, in general, to exercise all the powers and
authority usually appertaining to the chief operating officer of a corporation,
except as otherwise provided in these By-Laws.
Section 7. Vice Presidents. In the absence of the President or
in the event of his inability or refusal to act, the Vice President (or in the
event there be more than one Vice President, the Vice Presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President and, when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board of Directors or the President may from time to time
prescribe.
Section 8. Assistant Vice Presidents. In the absence of a Vice
President or in the event of his inability or refusal to act, the Assistant
Vice President (or in the event there shall be more than one, the Assistant
Vice Presidents in the order designated by the Board of Directors, or in the
absence of any designation, then in the order of their appointment) shall
perform the duties and exercise the powers of that Vice President, and shall
perform such other duties and have such other powers as the Board of Directors,
the President, or the Vice President under whose supervision he is appointed
may from time to time prescribe.
Section 9. Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the shareholders and record all
the proceedings of the meetings of the Corporation and of the Board of
Directors in a book to be kept for that purpose and shall perform like duties
for the Executive Committee or other standing committees when required. He
shall give, or cause to be given, notice of all meetings of the shareholders
and special meetings of the Board of Directors, and shall perform such other
duties as may be prescribed by the Board of Directors or the President, under
whose supervision he shall be. He shall have custody of the corporate seal of
the Corporation, and he, or an Assistant Secretary, shall have authority to
affix the same to any instrument requiring it, and when so affixed, it may be
attested by his signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his signature. The
Secretary shall keep and account for all books, documents, papers, and records
of the Corporation, except those for which some other officer or agent is
properly accountable. He shall have authority to sign stock certificates and
shall generally perform all the duties usually appertaining to the office of
the secretary of a corporation.
Section 10. Assistant Secretaries. In the absence of the
Secretary or in the event of his inability or refusal to act, the Assistant
Secretary (or, if there shall be more than one, the Assistant Secretaries in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
and exercise the powers of the Secretary and shall perform such other duties
and have such other powers as the Board of Directors, the President, or the
Secretary may from time to time prescribe.
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Section 11. Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, he shall give the Corporation a bond
(which shall be renewed every six years) in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in his possession or under his control belonging to the Corporation. The
Treasurer shall be under the supervision of the Vice President in charge of
finance, if one is so designated, and he shall perform such other duties as may
be prescribed by the Board of Directors, the President, or any such Vice
President in charge of finance.
Section 12. Assistant Treasurers. The Assistant Treasurer or
Assistant Treasurers shall assist the Treasurer, and in the absence of the
Treasurer or in the event of his inability or refusal to act, the Assistant
Treasurer (or in the event there shall be more than one, the Assistant
Treasurers in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their appointment) shall perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors, the President, or
the Treasurer may from time to time prescribe.
Section 13. Controller. The Controller, if one is appointed,
shall have supervision of the accounting practices of the Corporation and shall
prescribe the duties and powers of any other accounting personnel of the
Corporation. He shall cause to be maintained an adequate system of financial
control through a program of budgets and interpretive reports. He shall
initiate and enforce measures and procedures whereby the business of the
Corporation shall be conducted with the maximum efficiency and economy. If
required, he shall prepare a monthly report covering the operating results of
the Corporation. The Controller shall be under the supervision of the Vice
President in charge of finance, if one is so designated, and he shall perform
such other duties as may be prescribed by the Board of Directors, the
President, or any such Vice President in charge of finance.
Section 14. Assistant Controllers. The Assistant Controller or
Assistant Controllers shall assist the Controller, and in the absence of the
Controller or in the event of his inability or refusal to act, the Assistant
Controller (or, if there shall be more than one, the Assistant Controllers in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their appointment) shall perform the duties
and exercise the powers of the Controller and perform such other duties and
have such other powers as the Board of Directors, the President, or the
Controller may from time to time prescribe.
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ARTICLE VI
INDEMNIFICATION
Section 1. Actions Other Than by or in the Right of the
Corporation. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (all of such persons being hereafter
referred to in this Article as a "Corporate Functionary"), against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
Section 2. Actions by or in the Right of the Corporation. The
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action or suit by
or in the right of the Corporation to procure a judgment in its favor by reason
of the fact that he is or was a Corporate Functionary against expenses
(including attorneys' fees) judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation, unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
Section 3. Determination of Right to Indemnification. Any
indemnification under Sections 1 or 2 of this Article VI (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that indemnification of a Corporate Functionary is proper
in the circumstances because he has met the applicable standard of conduct set
forth in Sections 1 or 2 of this Article VI. Such determination shall be made
(i) by a majority vote of the directors who are not parties to such action,
suit, or proceeding, even though less than a quorum, or (ii) if there are no
such directors, or if such directors so direct, by independent legal counsel in
a written opinion or (iii) by the shareholders.
Section 4. Right to Indemnification. Notwithstanding the other
provisions of this Article VI, to the extent that a Corporate Functionary has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 1 or 2 of this Article VI (including the
dismissal of a proceeding without prejudice or the settlement of a proceeding
without admission of liability), or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
Section 5. Prepaid Expenses. Expenses incurred by a Corporate
Functionary in defending a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the
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Corporation in advance of the final disposition of such action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the Corporate
Functionary to repay such amount if it shall ultimately be determined he is not
entitled to be indemnified by the Corporation as authorized in this Article VI.
Section 6. Right to Indemnification upon Application; Procedure
upon Application. Any indemnification of a Corporate Functionary under
Sections 2, 3 or 4, or any advance of expenses under Section 5, of this Article
VI shall be made promptly upon, and in any event within 60 days after, the
written request of the Corporate Functionary, unless with respect to
applications under Sections 2, 3 or 5 of this Article VI, a determination is
reasonably and promptly made by the Board of Directors by a majority vote of
the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, that such Corporate Functionary acted in a manner
set forth in such Sections as to justify the Corporation in not indemnifying or
making an advance of expenses to the Corporate Functionary. If there are no
such directors, the Board of Directors shall promptly direct that independent
legal counsel shall decide whether the Corporate Functionary acted in a manner
set forth in such Sections as to justify the Corporation's not indemnifying or
making an advance of expenses to the Corporate Functionary. The right to
indemnification or advance of expenses granted by this Article VI shall be
enforceable by the Corporate Functionary in any court of competent jurisdiction
if the Board of Directors or independent legal counsel denies his claim, in
whole or in part, or if no disposition of such claim is made within 60 days.
The expenses of the Corporate Functionary incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation.
Section 7. Other Rights and Remedies. The indemnification and
advancement of expenses provided by or granted pursuant to this Article VI
shall not be deemed exclusive of any other rights to which any person seeking
indemnification and/or advancement of expenses may be entitled under any other
provision of these By-Laws, or any agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such office, and
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a Corporate Functionary and shall inure to the
benefit of the heirs, executors, and administrators of such a person. Any
repeal or modification of these By-Laws or relevant provisions of the Delaware
General Corporation Law and other applicable law, if any, shall not affect any
then existing rights of a Corporate Functionary to indemnification or
advancement of expenses.
Section 8. Insurance. Upon resolution passed by the Board of
Directors, the Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the Corporation,
or is or was serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article VI or the Delaware General Corporation Law.
Section 9. Mergers. For purposes of this Article VI, references
to "the Corporation" shall include, in addition to the resulting or surviving
corporation, constituent corporations (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent
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corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions of this Article VI with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.
Section 10. Savings Provision. If this Article VI or any portion
hereof shall be invalidated on any ground by a court of competent jurisdiction,
the Corporation shall nevertheless indemnify each Corporate Functionary as to
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit, proceeding or investigation,
whether civil, criminal or administrative, including a grand jury proceeding or
action or suit brought by or in the right of the Corporation, to the full
extent permitted by any applicable portion of this Article VI that shall not
have been invalidated.
ARTICLE VII
CERTIFICATES REPRESENTING STOCK
Section 1. Right to Certificate. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a Vice
President and by the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences, and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations, or restrictions of
such preferences or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock; provided, that, except as otherwise provided in
Section 202 of the Delaware General Corporation Law, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock a
statement that the Corporation will furnish without charge to each shareholder
who so requests the powers, designations, preferences, and relative,
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations, or restrictions of such
preferences or rights.
Section 2. Facsimile Signatures. Any of or all the signatures
on the certificate may be facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the
date of issue.
Section 3. New Certificates. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation and alleged to have been
lost, stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed.
When authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim
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that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen, or destroyed or the issuance of such new
certificate.
Section 4. Transfers. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation, or authority to
transfer, it shall be the duty of the Corporation, subject to any proper
restrictions on transfer, to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction upon its books.
Section 5. Record Date. The Board of Directors may fix in
advance a date, not preceding the date on which the resolution fixing the
record date is adopted, and
(i) not more than 50 days nor less than 10 days preceding
the date of any meeting of shareholders, as a record
date for the determination of the shareholders
entitled to notice of, and to vote at, any such
meeting and any adjournment thereof,
(ii) not more than 10 days after the date on which the
resolution fixing the record date is adopted, as a
record date in connection with obtaining a consent of
the shareholders in writing to corporate action
without a meeting, or
(iii) not more than 50 days before the date for payment of
any dividend or distribution, or the date for the
allotment of rights, or the date when any change, or
conversion or exchange of capital stock shall go into
effect, or the date on which any other lawful action
shall be taken, as the record date for determining
the shareholders entitled to receive payment of any
such dividend or distribution, or to receive any such
allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of
capital stock or other lawful action of the
corporation,
and in such case such shareholders and only such shareholders as shall be
shareholders of record on the date so fixed shall be entitled to such notice
of, and to vote at, any such meeting and any adjournment thereof (provided,
however, that the Board of Directors may fix a new record date for an adjourned
meeting), or to give such consent, or to receive payment of such dividend or
distribution, or to receive such allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation after any such record date fixed as aforesaid. If the
Board of Directors does not order the stock transfer books closed, or fix in
advance a record date, as above provided, then the record date for the
determination of shareholders entitled to notice of, or to vote at any meeting
of shareholders, or any adjournment thereof, or entitled to receive payment of
any dividend, or for the determination of shareholders for any proper purpose
shall be 30 days prior to the date on which the particular action requiring
such determination of shareholders is to be taken.
Section 6. Registered Shareholders. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and to
hold liable for calls and assessments a person registered on its books as the
owner of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not provided by the laws of the State of Delaware.
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ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
Corporation, if any, subject to the provisions of the Certificate of
Incorporation, may be declared by the Board of Directors (but not any committee
thereof) at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation.
Section 2. Reserves. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, thinks proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
Section 3. Annual Statement. The Board of Directors shall
present at each annual meeting, and at any special meeting of the shareholders
when called for by vote of the shareholders, a full and clear statement of the
business and condition of the Corporation.
Section 4. Checks. All checks or demands for money and
promissory notes of the Corporation shall be signed by such officer or officers
or such other person or persons as the Board of Directors may from time to time
prescribe.
Section 5. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors.
Section 6. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization,
and the word "Delaware." The seal may be used by causing it or a facsimile
thereof to be impressed, affixed, reproduced, or otherwise.
ARTICLE IX
AMENDMENTS
These By-Laws may be altered, amended, or repealed or new By-Laws may
be adopted by the Board of Directors at any regular meeting of the Board of
Directors or at any special meeting of the Board of Directors if notice of such
alteration, amendment, repeal, or adoption of new By-Laws be contained in the
notice of such special meeting.
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CERTIFICATION
I, Tim D. Torno, Secretary of the Corporation, hereby certify that the
foregoing is a true, accurate and complete copy of the By-Laws of Ultrak, Inc.
adopted by its Board of Directors as of _____________, 1995.
_________________________
Tim D. Torno, Secretary
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ANNEX J
ARTICLE 113
DISSENTERS' RIGHTS
PART I
RIGHT OF DISSENT--PAYMENT FOR SHARES
7-113-101 DEFINITIONS.--For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares
held in a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a
dissenter before the corporate action, or the surviving or acquiring domestic
or foreign corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under section 7-113-102 and who exercises that right at
the time and in the manner required by part 2 of this article.
(4) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except to the extent that
exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at the legal rate
as specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent such owner is
recognized by the corporation as the shareholder as provided in section
7-107-204.
(7) "Shareholder" means either a record shareholder or a
beneficial shareholder.
7-113-102 RIGHT TO DISSENT.--(1) A shareholder, whether or
not entitled to vote, is entitled to dissent and obtain payment of the fair
value of his or her shares in the event of any of the following corporate
actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the articles of
incorporation, or
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(II) The corporation is a subsidiary that is merged with its parent
corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired.
(c) Consummation of a sale, lease, exchange, or other disposition
of all, or substantially all, of the property of the corporation for which a
shareholder vote is required under section 7-112-102(1); and
(d) Consummation of a sale, lease, exchange, or other disposition
of all, or substantially all, of the property of an entity controlled by the
corporation if the shareholders of the corporation were entitled to vote upon
the consent of the corporation to the disposition pursuant to section
7-112-102(2).
(2) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's shares in the
event of:
(a) An amendment to the articles of incorporation that materially
and adversely affects rights in respect of the shares because it:
(I) Alters or abolishes a preferential right of the shares; or
(II) Creates, alters, or abolishes a right in respect of redemption
of the shares, including a provision respecting a sinking fund for their
redemption or repurchase; or
(b) An amendment to the articles of incorporation that affects
rights in respect of the shares because it:
(I) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights; or
(II) Reduces the number of shares owned by the shareholder to a
fraction of a share or to scrip if the fractional share or scrip so created is
to be acquired for cash or the scrip is to be voided under section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the
fair value of the shareholder's shares in the event of any corporate action to
the extent provided by the bylaws or a resolution of the board of directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the corporate action
creating such entitlement unless the action is unlawful or fraudulent with
respect to the shareholder or the corporation.
7-113-103 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.--(1) A
record shareholder may assert dissenters' rights as to fewer than all the
shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and causes the corporation to receive written notice which states such
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dissent and the name, address, and federal taxpayer identification number, if
any, of each person on whose behalf the record shareholder asserts dissenters'
rights. The rights of a record shareholder under this subsection (1) are
determined as if the shares as to which the record shareholder dissents and the
other shares of the record shareholder were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to
the shares held on the beneficial shareholder's behalf only if;
(a) The beneficial shareholder causes the corporation to receive
the record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder
dissents with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must certify to the corporation
that the beneficial shareholder and the record shareholder or record
shareholders of all shares owned beneficially by the beneficial shareholder
have asserted, or will timely assert, dissenters' rights as to all such shares
as to which there is no limitation on the ability to exercise dissenters'
rights. Any such requirement shall be stated in the dissenters' notice given
pursuant to section 7-113-203.
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS.--(1) If a proposed
corporate action creating dissenters' rights under section 7-113-102 is
submitted to a vote at a shareholders' meeting, the notice of the meeting shall
be given to all shareholders, whether or not entitled to vote. The notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this article and shall be accompanied by a copy of this article
and the materials, if any, that under articles 101 to 117 of this title, are
required to be given to shareholders entitled to vote on the proposed action at
the meeting. Failure to give notice as provided by this subsection (1) to
shareholders not entitled to vote shall not affect any action taken at the
shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is authorized without a meeting of shareholders
pursuant to section 7-107-104, any written or oral solicitation of a
shareholder to execute a writing consenting to such action contemplated in
section 7-107-104 shall be accompanied or preceded by a written notice stating
that shareholders are or may be entitled to assert dissenters' rights under
this article, by a copy of this article, and by the materials, if any, that,
under articles 101 to 117 of this title, would have been required to be given
to shareholders entitled to vote on the proposed action if the proposed action
were submitted to a vote at a shareholders' meeting. Failure to give notice as
provided by this subsection (2) to shareholders not entitled to vote shall not
affect any action taken pursuant to section 7-107-104 for which the notice was
to have been given.
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7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT.--(1) If a
proposed corporate action creating dissenters' rights under section 7-113-102
is submitted to a vote at a shareholders' meeting, a shareholder who wishes to
assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment for the
shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights
under section 7-113-102 is authorized without a meeting of shareholders
pursuant to section 7-107-104, a shareholder who wishes to assert dissenters'
rights shall not execute a writing consenting to the proposed corporate action.
(3) A shareholder who does not satisfy the requirements of
subsection (1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTERS' NOTICE.--(1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this
section shall be given no later than ten days after the effective date of the
corporate action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request
a dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103 (3),
if such requirement is imposed; and
(g) Be accompanied by a copy of this article.
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7-113-204 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who
is given a dissenters' notice pursuant to section 7-113-203 and who wishes to
assert dissenters' rights shall, in accordance with the terms of the
dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may
be the payment demand form contemplated in section 7-113-102(2)(d), duly
completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with
subsection (1) of this section retains all rights of a shareholder, except the
right to transfer the shares, until the effective date of the proposed
corporate action giving rise to the shareholder's exercise of dissenters'
rights and has only the right to receive payment for the shares after the
effective date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b),
the demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
Shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this
article.
7-113-205 UNCERTIFICATED SHARES.-- (1) Upon receipt of a
demand for payment under section 7-113-204 from a shareholder holding
uncertificated shares, and in lieu of the deposit of certificates representing
the shares, the corporation may restrict the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204
shall be applicable to shareholders who own uncertificated shares.
7-113-206 PAYMENT.--(1) Except as provided in section
7-113-208, upon the effective date of the corporate action creating dissenters'
rights under section 7-113-102 or upon receipt of a payment demand pursuant to
section 7-113-204, whichever is later, the corporation shall pay each dissenter
who complied with section 7-113-204, at the address stated in the payment
demand, or if no such address is stated in the payment demand, at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares, the amount the corporation
estimates to be the fair value of the dissenter's shares, plus accrued
interest.
(2) The payment made pursuant to subsection (1) of this section
shall be accompanied by:
(a) The corporation's balance sheet as of the end of its most
recent fiscal year or, if that is not available, the corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, and, if the corporation
customarily provides such statements to shareholders, a statement of changes in
shareholders' equity for that year and a statement of cash flow for that year,
which balance sheet and statements shall have been audited if the corporation
customarily provides audited financial statements to shareholders, as well as
the latest available financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
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(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7-113-209; and
(e) A copy of this article.
7-113-207 FAILURE TO TAKE ACTION.--(1) If the effective date
of the corporate action creating dissenters' rights under section 7-113-102
does not occur within sixty days after the date set by the corporation by which
the corporation must receive the payment demand as provided in section
7-113-203, the corporation shall return the deposited certificates and release
the transfer restrictions imposed on uncertificated shares.
(2) If the effective date of the corporate action creating
dissenters' rights under section 7-113-102 occurs more than sixty days after
the date set by the corporation by which the corporation must receive the
payment demand as provided in section 7-113-203, then the corporation shall
send a new dissenters' notice, as provided in section 7-113-203, and the
provisions of sections 7-113-204 to 7-113-209 shall again be applicable.
7-113-208 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--(1) The corporation may, in or
with the dissenters' notice given pursuant to section 7-113-203, state the date
of the first announcement to news media or to shareholders of the terms of the
proposed corporate action creating dissenters' rights under section 7-113-102
and state that the dissenter shall certify in writing, in or with the
dissenter's payment demand under section 7-113-204, whether or not the
dissenter (or the person on whose behalf dissenters' rights are asserted)
acquired beneficial ownership of the shares before that date. With respect to
any dissenter who does not so certify in writing, in or with the payment
demand, that the dissenter or the person on whose behalf the dissenter asserts
dissenters' rights acquired beneficial ownership of the shares before such
date, the corporation may, in lieu of making the payment provided in section
7-113-206, offer to make such payment if the dissenter agrees to accept it in
full satisfaction of the demand.
(2) An offer to make payment under subsection (1) of this section
shall include or be accompanied by the information required by section
7-113-206(2).
7-113-209 PROCEDURE IF DISSENTER IS DISSATISFIED WITH PAYMENT
OR OFFER.--(1) A dissenter may give notice to the corporation in writing of
the dissenter's estimate of the fair value of the dissenter's shares and of the
amount of interest due and may demand payment of such estimate, less any
payment made under section 7-113-206, or reject the corporation's offer under
section 7-113-208 and demand payment of the fair value of the shares and
interest due, if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the fair value of the
shares or that the interest due was incorrectly calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which the
corporation must receive the payment demand; or
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(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
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the dissenters, in amounts the court finds equitable, to the extent the court
finds the dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the requirements
of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in
favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by this article.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to said counsel reasonable fees to be paid out
of the amounts awarded to the dissenters who were benefitted.
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