-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RHUYT3MHf/d2Is0cYw6eq+682KRmN1hEctOFzFHxMZ+wHvGkgXOe04Oxxhv4KCx7 iUYpbMCS47+dQ4TCLGCYCA== 0000093469-96-000004.txt : 19960514 0000093469-96-000004.hdr.sgml : 19960514 ACCESSION NUMBER: 0000093469-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PITTWAY CORP /DE/ CENTRAL INDEX KEY: 0000093469 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 135616408 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04821 FILM NUMBER: 96561048 BUSINESS ADDRESS: STREET 1: 200 S WACKER DR STE 700 CITY: CHICAGO STATE: IL ZIP: 60606-5802 BUSINESS PHONE: 3128311070 MAIL ADDRESS: STREET 1: 200 S WACKER DR STE 700 CITY: CHICAGO STATE: IL ZIP: 60606-5802 FORMER COMPANY: FORMER CONFORMED NAME: STANDARD SHARES INC DATE OF NAME CHANGE: 19900321 FORMER COMPANY: FORMER CONFORMED NAME: STANDARD POWER & LIGHT CORP DATE OF NAME CHANGE: 19660905 10-Q 1 MARCH 31, 1996 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 1-4821 PITTWAY CORPORATION (Exact Name of Registrant as Specified in its Charter) DELAWARE 13-5616408 (State of Incorporation) (I.R.S. Employer Identification No.) 200 South Wacker Drive, Chicago, Illinois 60606-5802 (Address of Principal Executive Offices) (Zip Code) 312/831-1070 (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date (April 26, 1996). Common Stock 3,938,832 Class A Stock 16,973,313 PITTWAY CORPORATION AND SUBSIDIARIES FORM 10-Q QUARTER ENDED MARCH 31, 1996 INDEX PART I. FINANCIAL INFORMATION Page ITEM 1. Financial Statements Consolidated Statement of Income - Three Months Ended March 31, 1996 and 1995 3 Consolidated Balance Sheet - March 31, 1996 and December 31, 1995 4 - 5 Consolidated Statement of Cash Flows - Three Months Ended March 31, 1996 and 1995 6 Notes to Consolidated Financial Statements 7 - 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 - 11 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 11 - 12 ITEM 4. Submission of Matters to a Vote of Security Holders 13 ITEM 6. Exhibits and Reports on Form 8-K 14 SIGNATURES 14 2 PITTWAY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (Unaudited; Dollars in Thousands, Except Per Share Data) 1996 1995 NET SALES.................................. $257,477 $220,404 OPERATING EXPENSES: Cost of sales............................ 157,637 134,546 Selling, general and administrative...... 75,609 66,523 Depreciation and amortization............ 6,810 5,073 240,056 206,142 OPERATING INCOME........................... 17,421 14,262 OTHER INCOME (EXPENSE): Gain on sale of investment............... 13,162 Gain from stock offering of affiliate.... 23,432 Income from marketable securities, investments and other interest......... 833 258 Interest expense......................... (1,990) (961) Miscellaneous, net....................... 187 273 35,624 (430) INCOME BEFORE INCOME TAXES................. 53,045 13,832 INCOME TAXES............................... 19,757 5,112 NET INCOME................................. $ 33,288 $ 8,720 NET INCOME PER SHARE OF COMMON AND CLASS A STOCK ....................... $ 1.59 $ .42 CASH DIVIDENDS DECLARED PER SHARE: Common................................... $ .067 $ .067 Class A.................................. $ .083 $ .083 AVERAGE NUMBER OF SHARES OUTSTANDING (in thousands) .......................... 20,912 20,911 See accompanying notes. 3 PITTWAY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1996 AND DECEMBER 31, 1995 (Unaudited; Dollars in Thousands) March 31, December 31, 1996 1995 ASSETS CURRENT ASSETS: Cash and equivalents................... $ 47,002 $ 31,407 Marketable securities.................. 23,706 25,586 Accounts and notes receivable, less allowance for doubtful accounts of $9,039 and $8,493.................... 183,265 175,432 Inventories............................ 162,836 152,636 Future income tax benefits............. 18,182 16,996 Prepayments, deposits and other........ 13,052 11,929 448,043 413,986 PROPERTY, PLANT AND EQUIPMENT, at cost: Buildings.............................. 28,019 25,797 Machinery and equipment................ 196,992 190,780 225,011 216,577 Less: Accumulated depreciation......... (114,842) (109,021) 110,169 107,556 Land................................... 2,666 2,188 112,835 109,744 INVESTMENTS: Marketable securities.................. 136,482 20,000 Equity investment in affiliate......... 30,855 7,689 Leveraged leases....................... 20,911 21,046 Real estate and other ventures......... 34,704 33,874 222,952 82,609 OTHER ASSETS: Goodwill, less accumulated amortization of $8,102 and $8,432.... 53,596 48,714 Other intangibles, less accumulated amortization of $10,261 and $10,360.. 5,305 5,422 Notes receivable....................... 5,975 5,892 Miscellaneous.......................... 6,669 6,607 71,545 66,635 $855,375 $672,974 See accompanying notes. 4 PITTWAY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET MARCH 31, 1996 AND DECEMBER 31, 1995 (Unaudited; Dollars in Thousands) March 31, December 31, 1996 1995 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable........................... $ 32,744 $ 32,212 Long-term debt due within one year...... 3,239 3,788 Dividends payable....................... 1,732 1,766 Accounts payable........................ 74,308 68,700 Accrued expenses........................ 45,911 46,310 Income taxes payable.................... 19,239 5,644 Retirement and deferred compensation plans.................... 7,283 6,503 Unearned income......................... 3,291 3,185 187,747 168,108 LONG-TERM DEBT, less current maturities... 86,037 85,966 DEFERRED LIABILITIES: Income taxes............................ 101,075 46,920 Other................................... 12,408 8,954 113,483 55,874 STOCKHOLDERS' EQUITY: Preferred stock, none issued............ Common capital stock, $1 par value- Common stock.......................... 3,939 3,939 Class A stock......................... 16,973 16,973 Capital in excess of par value.......... 21,423 21,423 Retained earnings....................... 357,032 325,420 Cumulative marketable securities valuation adjustment.................. 71,603 (2,019) Cumulative foreign currency translation adjustment............................ (2,862) (2,710) 468,108 363,026 $855,375 $672,974 See accompanying notes. 5 PITTWAY CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited; Dollars in Thousands) NOTE 1. STOCK SPLIT In January 1996 the Board of Directors declared a 3-for-2 stock split in the form of a 50% stock dividend on the Company's Common and Class A stock, payable March 1, 1996 to stockholders of record on February 14, 1996. All share and per share data, as appropriate, reflect this split. NOTE 2. BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Pittway Corporation and its majority-owned subsidiaries (the "Company" or "Registrant"). Summarized financial information for the limited real estate partnership ventures and other affiliates is omitted because, when considered in the aggregate, they do not constitute a significant subsidiary. Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year classification. The accompanying consolidated financial statements are unaudited but reflect all adjustments of a normal recurring nature which are, in the opinion of management, necessary for a fair presentation of the financial statements contained herein. However, the financial statements and related notes do not include all disclosures normally provided in the Company's Annual Report on Form 10-K. Accordingly, these financial statements and related notes should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1995. NOTE 3. ACQUISITION During the first quarter of 1996, the Company acquired a foreign distributor of alarm systems for $2,682 cash and $2,494 payable over three years. The acquisition was accounted for as a purchase transaction in the consolidated financial statements from the date of acquisition. The impact on consolidated results of operations was not significant. NOTE 4. MARKETABLE SECURITIES Information about the Company's available-for-sale securities at March 31, 1996 and December 31, 1995 is as follows: 1996 1995 Current - Adjustable Rate Preferred Stocks - Aggregate cost $ 27,135 $ 28,952 Net unrealized holding loss (3,429) (3,366) Aggregate fair value $ 23,706 $ 25,586 7 1996 1995 Non-Current - USSB Common Stock - Aggregate cost $ 17,401 $ 20,000 Unrealized holding gain 119,081 101,280 Aggregate fair value $136,482 $121,280 In February 1996, the Company reduced its holdings in United States Satellite Broadcasting Company, Inc. (USSB) by selling 622,500 of its 4,789,875 shares in connection with an initial public offering of USSB's common stock. The sale of the shares resulted in an after-tax gain of $8,149, or $.39 per share. At December 31, 1995, prior to the initial public offering, the Company's investment in USSB was recorded at a cost of $20 million, or $4.175 per share. The $119,081 unrealized gain on the 4,167,375 shares of USSB common stock held at March 31, 1996 is included, net of $45,355 deferred taxes, in the cumulative marketable security valuation adjustment component of stockholders' equity. Realized gains and losses are based upon the specific identification method. Such gains and losses on the adjustable rate preferred stock, for the quarters ended March 31, 1996 and 1995 were not significant. NOTE 5. INVESTMENT IN AFFILIATE The investment in affiliate consists of the Company's interest in Cylink Corporation (Cylink), which is carried at equity. The carrying value of this investment was increased by $23,432 to reflect the increase in the Company's equity in Cylink's net book value as a result of an initial public offering in February 1996. The after-tax gain recorded on the increase in Cylink's equity was $14,507, or $.69 per share. The quoted market value of the Company's investment in Cylink was approximately $153 million at March 31, 1996. NOTE 6. INVENTORIES Inventories at March 31, 1996 and December 31, 1995 consist of the following: 1996 1995 Raw materials $ 36,967 $ 34,440 Work in process 17,930 18,654 Finished goods - Manufactured by the Company 59,306 55,523 Manufactured by others 49,783 45,007 Total 163,986 153,624 Less LIFO reserve (1,150) (988) $162,836 $152,636 8 NOTE 7. EARNINGS PER SHARE Net income per share of common capital stock is based on the combined weighted average number of Common and Class A shares outstanding during each period and does not include Class A shares issuable upon exercise of stock options because the dilutive effect is not significant. NOTE 8. LEGAL PROCEEDINGS In 1989 a judgment was entered against Saddlebrook Resorts, Inc. ("Saddlebrook"), a former subsidiary of the Company, in a lawsuit which arose out of the development of Saddlebrook's resort and a portion of the adjoining residential properties developed by the Company. The lawsuit alleged damage to plaintiffs' adjoining property caused by surface water effects from improvements to the properties. Damages of approximately $8 million were awarded to the plaintiffs and an injunction was entered requiring, among other things, that Saddlebrook work with local regulatory authorities to take corrective actions. In 1990 the trial court entered an order vacating the judgment and awarding a new trial. In December 1994, Saddlebrook's motion for summary judgment based on collateral estoppel was granted on the ground that plaintiffs' claims were fully retired and rejected in a related administrative proceeding. Plaintiffs' have appealed the trial court's decision granting summary judgment. The Company believes that the ultimate outcome of the aforementioned lawsuit will not have a material adverse effect on its financial statements. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF CONTINUING OPERATIONS Continued expansion within the alarm and other security products segment accounted for most of the overall sales growth of 17% for the first quarter of 1996 over the same period in 1995. Domestic sales increased 13% while international sales, representing 13% of total consolidated sales principally by the alarm segment, increased 55% reflecting further market penetration in the Company's European and other international operations. Gross profit increased 15% which is slightly below the sales increase reflecting the lower margins of the Company's distribution business relative to manufacturing margins. Selling, general and administrative expenses increased 14% in the first quarter of 1996, primarily due to increased costs associated with the expanded sales volume. Alarm product sales accounted for 82% of consolidated revenues in the first quarter of 1996 (78% in 1995) and increased 24%. These results reflect continuing gains in market share in key product areas and ongoing expansion in the worldwide alarm systems market. The Company's distribution business made significant gains by expanding its outlet network, internally and through an acquisition in the latter part of 1995, and capitalizing on the 1995 bankruptcy of a major competitor. Increases at the Company's 9 manufacturing units reflect continued acceptance of numerous new product offerings. Operating income for the segment increased 19% for the quarter primarily because of the expanded sales volume offset by an increase in depreciation expense from recent capital expenditures. Publishing sales for the quarter declined 8% while operating income increased 17%. Excluding the results of a conference and seminar business, which was sold in June of 1995, first quarter sales for the segment increased 5% and operating income increased 39% over the same period in 1995. The improved results reflect continuing efforts to build alternative revenue streams while reducing operating costs and improving operating efficiencies. Depreciation and amortization expense increased in the first quarter of 1996 over 1995 as a result of capital additions, principally in the alarm systems segment. Other income (expense) for the first quarter of 1996 included a pretax gain of $23,432 on the increase in the Company's Cylink investment, resulting from Cylink's initial public offering, and a pre-tax gain of $13,162 on the sale of 622,500 shares of USSB stock in connection with its initial public offering. Excluding these gains, other income was less favorable in the first quarter of 1996 principally due to higher interest expense associated with a net increase in working capital items. The effective tax rate rose slightly to 37.2% from 37.0% for the first quarter of 1996 versus 1995. ACCOUNTING CHANGE In October 1995 SFAS No. 123, "Accounting for Stock Based Compensation", was issued. The statement became effective for the 1996 fiscal year and establishes a fair value based method of accounting for employee stock based compensation plans and encourages adoption of that method. However, companies may elect to continue to apply the method prescribed under previously existing accounting rules, provided certain pro forma disclosures are made. The Company made such election and will provide the necessary disclosures in the December 31, 1996 year-end consolidated financial statements. FINANCIAL CONDITION The Company's financial condition remained strong in the first quarter of 1996. Management anticipates that operations, borrowings and marketable securities will continue to be the primary source of funds needed to meet ongoing programs for capital expenditures, to finance acquisitions and investments and to pay dividends. In the first quarter of 1996, operating profits, before the gains on the sale of USSB stock and the increase in Cylink carrying value and depreciation and amortization, provided $17.4 million of net cash which was 10 partially used to finance the net increase in working capital items. The remaining $16.3 million of cash generated from operations, along with $12.4 million of net proceeds from the sale of USSB stock and other marketable securities, were partially used to fund $7.0 million in capital expenditures, the purchase of a foreign distributor for $2.7 million, $1.7 of dividends paid to stockholders, $1.5 million of net payments on borrowings and $.5 million of additional investments in affordable housing ventures. The remaining cash provided resulted in an increase in cash and cash equivalents to $47.0 million at March 31, 1996 versus $31.4 million at December 31, 1995. The Company continues to investigate investment opportunities for growth in related areas. Following our $.5 million investment in the first quarter of 1996, our remaining commitment in certain affordable housing ventures through 1997 is $2.2 million at March 31, 1996. The Company has real estate investments in various limited partnerships with interests in commercial rental properties which may be sold or turned over to lenders due to the present weak commercial real estate market. Such events have no effect on net income although they do have a negative impact on the Company's cash position because significant tax payments become due when the properties are sold or returned to the lenders. The Company has approximately $5 million accrued at March 31, 1996 to fully cover the remaining tax payments that would be due if all the properties are sold or returned to the lenders. In February 1996, the Company sold 622,500 shares of its investment in United States Satellite Broadcasting ("USSB") in connection with its initial public offering and realized net cash proceeds of $15.8 million or $10.7 million after taxes. The Company's remaining 4,167,375 USSB shares are recorded as a non-current investment in marketable securities. The Company intends to hold its existing investment in preferred stocks, USSB and Cylink although occasional sales of preferred and USSB stocks may be made selectively as conditions warrant. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On May 10, 1989, the Circuit Court of the Sixth Judicial Circuit in and for Pasco County, Florida, entered a judgment against Saddlebrook Resorts, Inc. ("Saddlebrook"), a former subsidiary of the Company, in a lawsuit which arose out of the development of Saddlebrook's resort and a portion of the adjoining residential properties developed by the Company. The lawsuit (James H. Porter and Martha Porter, Trustees, et al. vs. Saddlebrook Resorts, Inc. and The County of Pasco, Florida; Case No. CA83-1860), alleges damage to plaintiffs' adjoining property caused by surface water effects from improvements to the properties. Damages of approximately $8 million were awarded to the plaintiffs and an injunction was entered requiring, among other things, that Saddlebrook work with local regulatory 11 authorities to take corrective actions. Saddlebrook made two motions for a new trial, based on separate grounds. One such motion was granted on December 18, 1990. Such grant was appealed by the plaintiffs. The other such motion was denied on February 28, 1991. Saddlebrook appealed such denial. The appeals were consolidated, fully briefed and heard in February 1992. Saddlebrook received a favorable ruling on March 18, 1992, dismissing the judgment and remanding the case to the Circuit Court for a new trial. An agreed order has been entered by the Court preserving the substance of the injunction pending final disposition of this matter. As part of its plan to comply with the agreed order, Saddlebrook filed applications with the regulatory agency to undertake various remediation efforts. Plaintiffs, however, filed petitions for administrative review of the applications, which administrative hearing was concluded in February 1992. On March 31, 1992, the hearing officer issued a recommended order accepting Saddlebrook's expert's testimony. The agency's governing board was scheduled to consider this recommended order on April 28, 1992, however, shortly before the hearing, the plaintiffs voluntarily dismissed their petitions and withdrew their challenges to the staff's proposal to issue a permit. At the April 28, 1992 hearing the governing board closed its file on the matter and issued the permits. Saddlebrook appealed the board's refusal to issue a final order. On July 9, 1993 a decision was rendered for Saddlebrook remanding jurisdiction to the governing board for further proceedings, including entry of a final order which was issued on October 25, 1993. The plaintiffs appealed the Appellate Court decision to the Florida Supreme Court and appealed the issuance of the final order to the Second District Court of Appeals. The Florida Supreme Court heard the appeal on May 3, 1994 and denied plaintiffs' appeal. The other appeal was voluntarily dismissed by the plaintiffs on June 17, 1994. On remand to the trial court, Saddlebrook's motion for summary judgment, based on collateral estoppel on the ground that plaintiffs' claims were fully retried and rejected in a related administrative proceeding was granted on December 7, 1994. Plaintiffs filed for a rehearing which was denied. Plaintiffs have appealed the trial court's decision granting summary judgment. Until October 14, 1989, Saddlebrook disputed responsibility for ultimate liability and costs (including costs of corrective action). On that date, the Company and Saddlebrook entered into an agreement with regard to such matters. The agreement, as amended and restated on July 16, 1993, provides for the Company and Saddlebrook to split equally the costs of the defense of the litigation and the costs of certain related litigation and proceedings, the costs of the ultimate judgment, if any, and the costs of any mandated remedial work. Subject to certain conditions, the agreement permits Saddlebrook to obtain subordinated loans from the Company to enable Saddlebrook to pay its one-half of the costs of the latter two items. No loans have been made to date. The Company believes that the ultimate outcome of the aforementioned lawsuit will not have a material adverse effect on its financial statements. 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The annual meeting of stockholders was held on May 9, 1996 and the following actions were taken: (a) Management's slate of nominees for directors was unopposed and elected in its entirety. The results of the voting were as follows: Director For Withheld Broker Non-Votes Common Stock- S. Barrows 3,664,804 11,031 99,271 F. Conforti 3,664,579 11,256 99,271 L. Guthart 3,664,804 11,031 99,271 I. Harris 3,664,804 11,031 99,271 K. Harris 3,664,804 11,031 99,271 N. Harris 3,664,804 11,031 99,271 W. Harris 3,664,804 11,031 99,271 J. Kahn. Jr. 3,664,804 11,031 99,271 L. Mullin 3,664,804 11,031 99,271 Class A Stock- E. Barnett 14,735,298 89,870 617,400 E. Coolidge III 14,735,748 89,420 617,400 A. Downs 14,731,998 93,170 617,400 (b) The resolution to amend the Company's Restated Certificate of Incorporation to increase the number of authorized shares was approved. The results of the voting were as follows: For Against Abstentions Broker Non-Votes 5,060,142 88,013 10,197 161,011 (c) The 1996 Director Stock Option Plan was approved. The results of the voting were as follows: For Against Abstentions Broker Non-Votes 4,957,722 178,773 21,857 161,011 (d) The potential financial performance criteria established by the Compensation Committee for certain annual bonuses for the Company's chief executive officer was approved. The results of the voting were as follows: For Against Abstentions Broker Non-Votes 5,109,498 35,332 13,522 161,011 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. Number Description 3.1 Restated Certificate of Incorporation, as amended 3.2 Certificate of Amendment of Restated Certificate of Incorporation dated December 28, 1989 3.3 Certificate of Amendment to Restated Certificate of Incorporation dated May 9, 1996 27 Financial Data Schedule (submitted only in electronic format) (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PITTWAY CORPORATION (Registrant) By /s/ Paul R. Gauvreau Paul R. Gauvreau Financial Vice President and Treasurer (Duly Authorized Officer and Principal Financial Officer) Date: May 10, 1996 14 EX-3 2 EXHIBIT 3.1 - REST. CERT. INCORP. EXHIBIT 3.1 PITTWAY CORPORATION MARCH 31, 1996 FORM 10-K RESTATED CERTIFICATE OF INCORPORATION AS AMENDED OF STANDARD SHARES, INC. _________________ Standard Shares, Inc. (the 'Corporation') was originally incorporated as Standard Power and Light Corporation. The Corporation's original Certificate of Incorporation was filed with the Secretary of State of Delaware on June 20, 1925. This Restated Certificate of Incorporation was proposed to the stockholders of the Corporation by the Board of Directors on May 8, 1984 and duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of Delaware by an affirmative vote of the holders of two-thirds of all outstanding stock entitled to vote at the annual meeting of stockholders of the Corporation held in Chicago, Illinois on June 22, 1984. FIRST: The name of this Corporation is STANDARD SHARES, INC. SECOND: Its principal office in the State of Delaware is located at No. 100 West 10th Street, in the City of Wilmington, County of New Castle. The name and address of its resident agent is THE CORPORATION TRUST COMPANY, No. 100 West 10th Street, Wilmington, Delaware. THIRD: 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 the State of Delaware and to act as a statutory agent for other corporations. FOURTH: 1. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is eight million (8,000,000) shares of which two million (2,000,000) shares shall be designated Preferred Stock with no par value and six million (6,000,000) shares shall be designated Common Stock of the par value of One Dollar ($1.00) per share. The designations and powers, preferences and rights, and the qualifications, limitations or restrictions of the Preferred Stock and the Common Stock of the Corporation are set forth in the following provisions: 1 (I) Preferred Stock Shares of Preferred Stock may be issued from time to time in one or more series. All shares of any one series of Preferred Stock shall be identical in all respects except that shares of any one series issued at different times may differ as to the dates from which dividends thereon shall be cumulative. Subject to the Certificate of Incorporation, authority is expressly granted to the Board of Directors to authorize the issuance of one or more series of Preferred Stock, and to fix by resolution or resolutions providing for the issuance of each such series the voting powers, designations, preferences, and relative, participating, optional or other special rights, and qualifications, limitations or restrictions of such series, to the full extent now or hereafter permitted by law, including but not limited to the following: (1) The distinctive designations of such series and the number of shares which shall constitute such series, which number may be increased (except where otherwise provided by the Board of Directors in creating such series) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; (2) The dividend rights of such series (including, without limitation, the right, if any, of the holders of shares of such series to participate with the holders of the outstanding shares of Common Stock in any distribution of dividends in excess of the preferential dividend fixed for shares of such series and the terms and conditions of such participation), the extent, if any, to which such dividends shall be cumulative, the conditions upon which and/or the dates when such dividends shall be payable and the date from which dividends on cumulative series shall accrue and be cumulative; (3) Whether such series shall be redeemable and, if so, the terms and conditions of such redemption, including the time or times when and the price or prices at which shares of such series shall be redeemed, which price or prices may vary at different redemption dates or otherwise as permitted by law; (4) The rights of such series in the event of the voluntary or involuntary liquidation, merger, consolidation, dissolution, winding up or distribution or sale of the assets of the Corporation; (5) The terms and conditions, if any, upon which the shares of such series shall be convertible into or exchangeable for shares of any other series, class or classes, or any other securities, including without limitation provisions for the adjustment of the conversion rate in such events as the Board of Directors may determine; and (6) The voting powers, if any, of the holders of shares of such series which may, without limiting the generality of the foregoing, include (i) the right to more or less than one vote per share on any or all matters voted upon by the stockholders, or (ii) the right, 2 voting as a series by itself or with other series of Preferred Stock or all series of Preferred Stock as a class, to elect one or more directors of the Corporation if there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such other circumstances or on such particular matters as the Board of Directors may determine. (II) Common Stock (1) Subject to provisions of law and the preferences of the Preferred Stock and of any other stock ranking prior to the Common Stock as to dividends, and after the Corporation shall have complied with all requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts, the holders of shares of Common Stock shall be entitled to receive dividends at such times and in such amounts as may be determined by the Board of Directors. (2) Except as otherwise provided by law and in the Certificate of Incorporation or except as determined pursuant to authority of the Board of Directors as provided in this Article Fourth, all voting rights shall be vested exclusively in the holders of the outstanding shares of Common Stock and each such holder shall be entitled to one vote per share for all purposes for each share of Common Stock held of record by him. (3) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after payment or provi- sion for payment of the debts and other liabilities of the Corporation and the preferential amounts to which the holders of shares of any stock ranking prior to the Common Stock in distribution of assets shall be entitled upon liquidation, dissolution, or winding up of the Corporation, the holders of shares of Common Stock shall be entitled to share in the remaining assets of the Corporation according to their respective interests. 2. Except as otherwise provided by law, the presence, in person or by proxy, of the holders of a majority of the shares of the stock of the Corporation issued, outstanding and entitled to vote thereat shall be requisite and shall constitute a quorum at any meeting of the stockholders. If at any meeting of stockholders there shall be less than a quorum so present, the stockholders present in person or by proxy and entitled to vote thereat, without further notice, may adjourn the meeting from time to time until a quorum shall be present, but no business shall be transacted at any such adjourned meeting except such as might have been lawfully transacted had the meeting not been adjourned. 3. The holders of certificates representing shares of common stock and common stock, Series B, of this Corporation heretofore authorized, issued and outstanding (old common stock and old common stock, Series B, respectively) shall have no rights under the old certificates of this Corporation except the right to receive, in lieu of such certificates, certificates for shares of 3 common stock, at the rate of one share of such common stock for each share of old common stock, and for each share of old common stock, Series B, and pending such receipt, the holders of old common stock and old common stock, Series B, shall have the rights to which they would be entitled upon receipt of such common stock of the Corporation. 4. Without the affirmative vote, or consent in writing, of the holders of at least two-thirds (2/3) of the full number of shares of common stock issued and outstanding, the Corporation shall not have power: (a) To liquidate, dissolve or wind up its affairs; (b) To merge or consolidate with any other corporation, association, trust, partnership or entity; or (c) To sell, exchange, assign, convey, transfer or in any other way dispose of all or substantially all of its property and assets, including its good will and its corporate franchises, in one transaction or in a series of related transactions. Notwithstanding the foregoing, no vote or consent of the stockholders of the Corporation shall be necessary to authorize a merger if (1) the Corporation is a constituent corporation which survives the merger, (2) the agreement of merger does not change the name or authorized shares of any class or otherwise amend the certificate of incorporation of the Corporation, and (3) the authorized unissued shares or the treasury shares of any class of the Corporation to be issued or delivered under the plan of merger do not exceed 15 per cent of the shares of the Corporation of the same class outstanding immediately prior to the effective date of the merger. Without the affirmative vote, or consent in writing, of the holders of at least two-thirds (2/3) of the full number of shares of common stock issued and outstanding, the Corporation shall not have the power to amend this Section 4 of this Article Fourth. FIFTH: This Corporation is to have perpetual existence. SIXTH: The following provisions are made for the management of the business and for the conduct of the affairs of the Corporation, including provisions creating, defining, limiting and regulating the powers of the Corporation, the directors and the stockholders, to wit: 1. Any contract or other transaction between the Corporation and one or more of its directors, or between the Corporation and any firm of which one or more of its directors are members or employees, or in which they are interested, or between the Corporation and any corporation or association of which one or more of its directors are shareholders, members, directors, officers, or employees, or in which they are interested, shall be valid for all purposes, notwithstanding the presence of such director or directors at the meeting of the Board of Directors of the Corporation which acts upon, or in reference to, such contract or transaction, if the fact of such interest shall be disclosed or known to the Board of Directors and the Board of Directors 4 shall, nevertheless, authorize, approve and ratify such contract or transaction by a vote of a majority of the directors present, such interested director or directors to be counted in determining whether a quorum is present, but not to be counted in calculating the majority necessary to carry such vote; and no director or directors having such adverse interest shall be liable to the Corporation or to any stockholder or creditor thereof, or to any other person, for any loss incurred by it under or by reason of such contract or transaction; nor shall any such director or directors be accountable for any gains or profits realized thereon; always provided, however, that such contract or transaction shall at the time at which it was entered into have been a reasonable one to have been entered into and shall have been upon terms that at the time were fair, and any such contract or transaction shall be prima facie presumed to have been a fair and reasonable one to have been entered into and upon terms that at the time were fair. This Section 1 of this Article Sixth shall not be construed to invalidate any contract or other transaction which would otherwise be valid under the common or statutory law applicable thereto. 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, suit or proceeding, whether civil, criminal, administrative or investigative (including any 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 to the fullest extent permitted by law. The indemnification provided by this Section shall not be deemed exclusive of any other rights to which any person may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue, as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, administrators and personal representatives of such a person. 3. Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement, and to any reorganization of this Corporation as a consequence of such 5 compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. 4. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, ( ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, ( iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation Law is amended, after approval by the stockholders of this provision, to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification SEVENTH: In furtherance and not in limitation of the powers conferred by statute, but subject in all respects to the provisions of the foregoing Articles Fourth and Sixth, the Board of Directors is expressly authorized: 1. To make, amend, alter, change, add to or repeal the By-Laws for the Corporation, without any action on the part of the stockholders; provided that no By-Law which is subject to the provision that the same may not be amended, altered, changed, added to or repealed without action on the part of the stockholders or some portion or percentage thereof, or action by some portion or percentage of the Board of Directors, may be amended, altered, changed, added to or repealed without such designated action on the part of such stockholders or by the Board of Directors. The By-Laws made by the directors may be amended, altered, changed, added to or repealed by the stockholders, subject to the foregoing provisions. 2. By the affirmative vote therefor of the majority of the full Board of Directors, to designate one or more committees, which, to the extent provided in said resolution or in the By-Laws of the Corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Signed and attested to on the 22nd day of June, 1984. ATTEST: _______________________________ President ___________________________ 6 EX-3 3 EXHIBIT 3.2 - CERT OF AMEND. 12/89 EXHIBIT 3.2 PITTWAY CORPORATION MARCH 31, 1996 FORM 10-Q CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF INCORPORATION OF STANDARD SHARES, INC. _________________ Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware _________________ WE, ___________________________, President, and _________________________, Secretary, of Standard Shares, Inc., a corporation existing under the laws of the State of Delaware (the "Corporation"), do hereby certify as follows: FIRST: That the Restated Certificate of Incorporation of said Corporation is amended as follows: By striking out the whole of Article FIRST thereof as it now exists and inserting in lieu and instead thereof a new Article FIRST, reading as follows: "FIRST: The name of this Corporation is PITTWAY CORPORATION." SECOND: That the Restated Certificate of Incorporation of said Corporation is further amended as follows: By striking out the whole of Article FOURTH thereof as it now exists and inserting in lieu and instead thereof a new Article FOURTH, reading as follows: "FOURTH: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is Fifty-Six Million (56,000,000) shares, of which Two Million (2,000,000) shares shall be designated Preferred Stock with no par value, Twenty-Four Million (24,000,000) shares shall be designated Class A Stock of the par value of $1.00 per share, and Thirty Million (30,000,000) shares shall be designated Common Stock of the par value of $1.00 per share. The Class A Stock and Common Stock are collectively hereinafter referred to as "Common Capital Stock." 1 The designations and powers, preferences and rights and the qualifications, limitations or restrictions of the Preferred Stock, Class A Stock and Common Stock are set forth in the following provisions. (I) Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series. Subject to the limitations prescribed by the General Corporation Law of Delaware and any limitations prescribed by the Certificate of Incorporation, authority is expressly granted to the Board of Directors to authorize the issuance of one or more series of Preferred Stock, and to fix by resolution or resolutions providing for the issuance of each such series the voting powers, designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, to the full extent now or hereafter permitted by law, provided, however, that the holders of the shares of Preferred Stock or of any series of Preferred Stock may not vote with the holders of the shares of Class A Stock for the election of the Directors whom the holders of Class A Stock voting as a class are entitled to elect pursuant to subparagraph (A) of paragraph 4 of Part II of this Article FOURTH. (II) Common Capital Stock. There shall be no differences in the voting powers, preferences, or other rights, or qualifications, limitations or restrictions thereof, of shares of Class A Stock from those of shares of Common Stock except as specifically hereinafter set forth in this Part II. Without limiting the generality of the foregoing, so long as any shares of Class A Stock are outstanding, in the event the Corporation engages in any merger or consolidation in which holders of Common Capital Stock receive any consideration, provision shall be made so that the holders of each class of Common Capital Stock receive the same consideration per share; provided, however, that if such merger or consolidation is a reincorporation in another jurisdiction, or is a merger of the Corporation with and into a wholly-owned subsidiary of the Corporation, the shares issued to the holders of the respective classes of Common Capital Stock may reflect the differences between such classes set forth in the Certificate of Incorporation or differences substantially equivalent thereto. (1) So long as any shares of Class A Stock are outstanding: (a) if any dividend or other distribution is declared on the Common Capital Stock which is payable in shares of (or in securities convertible into or exchangeable or exercisable for shares of), or in subscriptions or other rights to acquire shares of (or to acquire securities convertible into or exchangeable or exercisable for shares of), any class of Common Capital Stock, such dividend or distribution shall be declared in such manner as to be payable to the holders of Class A Stock in shares of (or in securities convertible into or exchangeable or exercisable for shares of), or in subscriptions or other rights to acquire shares of 2 (or to acquire securities convertible into or exchangeable or exercisable for shares of), Class A Stock and as to be payable to the holders of Common Stock at the same rate in shares of (or in securities convertible into or exchangeable or exercisable for shares of), or in subscriptions or other rights to acquire shares of (or to acquire securities convertible into or exchangeable or exercisable for shares of), Common Stock; and (b) if shares of the Common Capital Stock are combined or subdivided, such combination or subdivision shall be effected in such manner as to result in per share decreases or increases of Class A Stock and Common Stock which are identical. (2) So long as any shares of Class A Stock are outstanding, if any dividend or other distribution payable in cash (other than a dividend or distribution in connection with the liquidation or dissolution of the Corporation) is declared on the Common Capital Stock, such dividend or distribution shall be declared in such manner that the amount thereof per share of Class A Stock shall equal the amount thereof per share of Common Stock plus two and one-half (2.5) cents (provided that the aggregate excess of the dividends per share of Class A Stock declared during any calendar year over the dividends per share of Common Stock declared during such calendar year shall not exceed ten (10) cents); provided, however, that if a Valuation Deficiency (as hereinafter defined) shall occur, the additional amount per share of Class A Stock shall be increased from two and one-half (2.5) cents to twelve and one-half (12.5) cents for each dividend thereafter declared on the Common Capital Stock during any of the ten full calendar quarters immediately following the occurrence of the Valuation Deficiency. A "Valuation Deficiency" shall be deemed to have occurred if the average closing price of the Class A Stock for the American Stock Exchange Composite Transactions during the period (the "Reference Period") commencing on the day following the three month anniversary of the Effective Time (as hereinafter defined) and ending on the six month anniversary of the Effective Time shall be less than 90% of the average closing price of the Common Stock for such Composite Transactions during the Reference Period, except that no Valuation Deficiency shall be deemed to have occurred if such average closing price of the Class A Stock is at least equal to $30.15 (adjusted for any percentage change in the Standard & Poor's 500 Stocks Index during the period from March 15,1989 through the end of the Reference Period). In the event of any combination or subdivision (including by way of a stock dividend) of the Common Capital Stock, the monetary amounts set forth in this paragraph 2 shall be equitably adjusted by the Board of Directors. The "Effective Time" shall mean the Effective Time as defined in the Amended and Restated Merger Agreement and Plan of Reorganization dated as of October 11, 1989 between the Corporation and Pittway Corporation, a Pennsylvania corporation (the "Merger Agreement"). (3) Subject to the requirements of the business of the Corporation and to the fiduciary obligations of the Board of Directors: (a) a dividend of at least fifteen (15) cents per share of Common Stock (and thus a dividend of at least seventeen and one-half (17.5) cents per 3 share of Class A Stock) shall be declared during each of the eight full calendar quarters immediately following the Effective Time; and (b) in the event a Valuation Deficiency occurs, a dividend on the Common Capital Stock shall be declared during each of the ten full calendar quarters immediately following such occurrence. (4) Except as otherwise provided by the General Corporation Law of Delaware or in the Certificate of Incorporation, or except as determined by the Board of Directors pursuant to the authority of the Board of Directors as provided in Part I of this Article FOURTH, all voting rights shall be vested exclusively in the holders of the outstanding shares of Common Capital Stock, and the holders of the outstanding shares of Common Capital Stock shall be entitled to one (1) vote per share on all matters voted upon by the stockholders of the Corporation, except that: (A) Prior to the Change of Control Date, as defined in subparagraph (B) below, beginning with the first Annual or Special Meeting of Stockholders occurring after the Effective Time, the holders of the outstanding shares of Class A Stock voting as a class shall be entitled to elect such number of Directors, but not less than two, as shall equal 25% of the then total number of Directors constituting the full Board of Directors, for purposes of which such total number shall be deemed not to include the number of Directors, if any, which the holders of Preferred Stock or of any series of Preferred Stock voting as a class are then entitled to elect (such number of Directors to be elected by such Class A Stock to be rounded to the nearest larger whole number if such percentage does not equal a whole number); and the holders of the Common Stock voting as a class shall be entitled to elect the then remaining number of Directors; provided, however, that all Directors elected at any time when the outstanding shares of Common Stock amount to fewer than 12 1/2% of the outstanding shares of the Common Capital Stock, even though the Change of Control Date has not occurred, shall be elected by the vote of all Common Capital Stock voting as one class with one (1) vote per share and without distinction between the votes of Class A Stock and Common Stock. In the event any vacancy occurs in the Directors who shall have been, or are to be, elected by the holders of the Class A Stock or the Common Stock, as the case may be, such vacancy or vacancies may be filled, until the next meeting of the holders of the shares of such class, by the vote of a majority of the Directors who are then in office and who were elected by such class or, if only one such Director is then in office, by such Director. If any such vacancy is not so filled (or if the holders of the class which elected the Director or Directors who voted to fill such vacancy desire to remove or replace the Director elected to fill such vacancy), a special meeting of the holders of the shares of such class for the purpose of filling such vacancy (or removing or replacing the Director elected to fill such vacancy) may be called by the Chairman of the Board or President of the Corporation and shall be called by the Chairman of the Board or President of the Corporation within 30 days of receipt of written 4 request therefor by the holders of record of at least 25% of the outstanding shares of such class. The date on which any such special meeting so called shall be held shall be as soon as reasonably practicable following such call. Notwithstanding the provisions of this subparagraph (A), no special meeting of stockholders shall be required to be held during the 120-day period preceding the date fixed for the Annual Meeting of Stockholders. At any Special or Annual Meeting for the election of Directors by the holders of shares of Class A Stock or Common Stock, the presence, in person or by proxy, of the holders of more than 50% of the then outstanding shares of such class shall be required to constitute a quorum for the election of Directors by such class; in the absence of such a quorum, a majority of the holders of shares of the class present, in person or by proxy, shall have the power, without notice other than announcement of the adjournment at the meeting, to adjourn the meeting for the purpose of such election from time to time, until a quorum shall be present. For purposes of the provisions of this subparagraph (A), outstanding shares shall exclude shares of Common Capital Stock owned by the Corporation or by any other corporation a majority of the shares of which entitled to vote in the election of directors is owned, directly or indirectly, by the Corporation. (B) Prior to the Change of Control Date, except as provided in subparagraph (A) above as to election of Directors or as hereinafter provided in this subparagraph (B) or as may be required by the General Corporation Law of Delaware, the holders of shares of Common Stock shall be entitled to one (1) vote per share on all matters voted upon by the stockholders of the Corporation for each share of Common Stock held of record by each such holder and the holders of shares of Class A Stock shall be entitled to one-tenth (1/l0) of one (1) vote per share on all matters voted upon by the stockholders of the Corporation for each share of Class A Stock held of record by each such holder. The "Change of Control Date" shall be the first date after the Effective Time on which the shares of Harris Group Stock (as hereinafter defined) are entitled to cast fewer than 1,496,110 votes (counting the Class A Stock as entitled to cast one-tenth (1/l0) of one (1) vote per share for this purpose); provided, however, that no Change of Control Date shall occur as a result of a transaction following which the shares of Harris Group Stock are entitled to cast fewer than 1,496,110 votes but more than 1,458,707 votes (counting the Class A Stock as entitled to cast one-tenth (1/l0) of one (1) vote per share for these purposes) unless, within 90 days following such transaction, the shares of Harris Group Stock are not restored to a level entitled to cast at least 1,496,110 votes (in which event, the Change of Control Date shall be the date of such 90th day); provided, further, that no Change of Control Date shall occur as a result of a transaction (a "Successor Group Transaction") in which the beneficial ownership of Harris Group Stock entitled to cast at least 1,496,110 votes shall be transferred as an entirety to 5 a person or "group" (as such term is used in Section 13(d) of the Securities Exchange Act of 1934, as such Section is in effect and interpreted at the Effective Time) (such person or group being referred to as a "Successor Group") unless such Successor Group Transaction shall occur on or before, or pursuant to an agreement entered into on or before, the first anniversary of the date on which the Effective Time occurs and unless the Successor Group involved as a purchaser in such Successor Group Transaction shall not, by the three month anniversary of the date of such Successor Group Transaction, have offered to purchase for at least Equivalent Value (as hereinafter defined) all outstanding shares of Common Capital Stock other than those involved in such Successor Group Transaction (in which event, the Change of Control Date shall be the date of such three month anniversary). In the event of a Successor Group Transaction other than a Successor Group Transaction giving rise to the Change of Control Date, references in the definitions of "Harris Group Stock" and of "Equivalent Value" to the Harris Group shall thereafter refer to the Successor Group involved as a purchaser in such Successor Group Transaction, and Harris Group Stock shall include shares purchased in such Successor Group Transaction. In the event of any combination or subdivision (including by way of a stock dividend) of the Common Capital Stock, the numbers of votes set forth in the second preceding sentence shall be equitably adjusted by the Board of Directors. The "Harris Group" means Messrs. Irving B. Harris, Neison Harris, King Harris, William W. Harris and Sidney Barrows and their respective spouses, descendants and spouses of descendants , trustees of trusts established for the benefit of such persons, and executors of estates of such persons. "Spouses" includes widows and widowers until first remarried. "Harris Group Stock" means, at any point in time, shares of Common Capital Stock which, at such time, any member of the Harris Group, either alone or in combination with any other member or members of the Harris Group, directly or indirectly beneficially owns (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as such Rule is in effect and interpreted at the Effective Time), without taking into account any shares of Common Stock acquired by any member of the Harris Group subsequent to May 31, 1989 in excess of shares of Common Stock disposed of by members of the Harris Group subsequent to such date. "Equivalent Value" means the same type and amount per share of consideration paid to members of the Harris Group in the Successor Group Transaction and, in determining such amount per share of consideration, the aggregate amount paid to members of the Harris Group in the Successor Group Transaction for all shares of Common Capital Stock shall be divided by the total number of such shares. (C) On the Change of Control Date, the authorized shares of Class A Stock, both issued and unissued, shall automatically be changed into Common Stock on a share for share basis and shall be redesignated shares of Common Stock without any further action. 6 (D) Without the affirmative vote or consent in writing of the holders of shares of Common Capital Stock entitled to cast at least two-third (2/3) of the votes (counting the Class A Stock as entitled to cast one-tenth (1/l0) of one (1) vote per share for this purpose prior to the Change of Control Date) which the outstanding shares of Common Capital Stock are entitled to cast at the time, the Corporation shall not have the power: (i) To liquidate, dissolve or wind up its affairs; (ii) To merge or consolidate with or into any other corporation, association, trust, partnership or entity; or (iii) To sell, exchange, assign, convey, transfer or in any other way dispose of all or substantially all of its property and assets, including its good will and its corporate franchises, in one transaction or in a series of related transactions. Notwithstanding the foregoing, no vote or consent of the stockholders of the Corporation shall be necessary to authorize a merger if (1) the Corporation is a constituent corporation which survives the merger, (2) the agreement of merger does not change the name or authorized shares of any class or otherwise amend the Certificate of Incorporation, and (3) the authorized unissued shares or the treasury shares of common or capital Stock to be issued or delivered under the plan of merger do not exceed 15% of the shares of Common Capital Stock outstanding immediately prior to the effective date of the merger. (E) Without the affirmative vote or consent in writing of the holders of shares of Common Capital Stock entitled to cast at least two-thirds (2/3) of the votes (counting the Class A Stock as entitled to cast one-tenth (1/l0) of one (1) vote per share for this purpose prior to the Change of Control Date) which the outstanding shares of Common Capital Stock are entitled to cast at the time, the Corporation shall not have the power to amend Part I or Part 11 of this Article FOURTH." THIRD: That the Restated Certificate of Incorporation of said Corporation is further amended as follows: By inserting as a new Article EIGHTH the following: "EIGHTH: The number of Directors constituting the full Board of Directors shall be such number, not less than eight, fixed by, or in the manner provided in, the By-Laws. Without the affirmative vote or consent in writing of the holders of shares of Common Capital Stock entitled to cast at least two-thirds (2/3) of the votes (counting the Class A Stock as entitled to cast one-tenth (1/10) of one (1) vote per share for this purpose prior to the Change of Control Date) which the outstanding shares of Common Capital Stock are entitled to cast at the time, the Corporation shall not have the power to amend this Article EIGHTH." 7 FOURTH: That such amendments have been duly adopted in accordance with the provisions of the General Corporation Law of the State of Delaware by the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares entitled to vote thereon at a meeting of stockholders. IN WITNESS WHEREOF, we have signed this Certificate this 28th day of December, 1989. _____________________________ Vice President _____________________________ Secretary 8 EX-3 4 EXHIBIT 3.3 - CERT OF AMEND. 5/96 EXHIBIT 3.3 PITTWAY CORPORATION MARCH 31, 1996 FORM 10-Q CERTIFICATE OF AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION ******** In accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware ******** Pittway Corporation, a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, on March 12, 1996, at a meeting duly called and constituted, adopted the following resolutions proposing an amendment to the Company's Restated Certificate of Incorporation to increase the shares of capital stock which the Corporation has authority to issue and directing that such amendment be submitted to the stockholders for consideration at said corporation's 1996 annual meeting: RESOLVED, that in the opinion of the Board of Directors it is advisable that the Restated Certificate of Incorporation, as amended, of Pittway Corporation be further amended as follows: The first sentence of Article FOURTH shall be amended in its entirety to read as follows: The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is Eighty Million (80,000,000) shares, of which Two Million (2,000,000) shares shall be designated Preferred Stock with no par value, Thirty-Six Million (36,000,000) shares shall be designated Class A Stock of the par value of $1.00 per share, and Forty-Two Million (42,000,000) shares shall be designated Common Stock of the par value of $1.00 per share. FURTHER RESOLVED, that such amendment be submitted to the stockholders of Pittway Corporation for consideration at Pittway Corporation's 1996 annual meeting of stockholders. SECOND: That at the annual meeting of stockholders of said corporation held May 9, 1996, the aforesaid amendment was approved by vote of a majority of each of: (i) the votes which the outstanding Common Stock and Class A Stock were entitled to cast at such annual meeting, (ii) the outstanding Common Stock, voting as a class, and (iii) the outstanding Class A Stock, voting as a class. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, Pittway Corporation has caused this certificate to be signed by King Harris, its President, this 9th day of May, 1996. Pittway Corporation By_____________________ King Harris, President EX-27 5
5 1,000 YEAR DEC-31-1996 MAR-31-1996 47,002 23,706 192,304 9,039 162,836 448,043 227,677 114,842 855,375 187,747 86,037 20,912 0 0 447,196 855,375 257,477 257,477 157,637 157,637 6,810 1,168 1,990 53,045 19,757 33,288 0 0 0 33,288 1.59 1.59
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